Strategic Acquisition Corp v Multus Investment Corporation, 2017 ABQB 297

Court of Queen’s Bench of Alberta Citation: Strategic Acquisition Corp v Multus Investment Corporation, 2017 ABQB 297 Date: 20170427 Docket: 1301 02303 Registry: Calgary Between: Strategic Acquisition Corp.

Plaintiff - and - Multus Investment Corporation, Qualia Real Estate Investment Fund V Limited Partnership, Starke Capital Corp., Starke Dominion Ltd., 1680472 Alberta Ltd., John/Jane Doe 1 Through 10, XYZ Corporation 5 Through 10, ABC Partnership or Limited Partnership 1 Through 10, Opal Investment Corporation, Franklin Building AAM GP Corp., Starke Franklin Industrial Ltd., Starke Plaza 14 Ltd., Paragon Capital Corporation, and S.A. Backlin Professional Corporation Defendants _______________________________________________________ Ruling on Costs of the Honourable Mr. Justice Bryan E.

Mahoney _______________________________________________________ [ 1 ] On February 21, 2013, the Plaintiff, Strategic Acquisition Corp. ("SAC"), filed a Statement of Claim for specific performance of a right of first refusal or damages in the alternative, among other relief, as against Multus Investment Corporation ("Multus"), Starke Capital, Starke Dominion Ltd. (together with Starke Capital, "Starke"), and others.

The subject of SAC's claim concerned the $30M sale of a Calgary commercial building from Multus to Starke. [ 2 ] In a Judgment pronounced on December 2, 2016, this Court granted SAC judgment against Multus in the amount of $5,000,000.00. Specific performance was denied and the purchaser Starke was found not liable to SAC. The Reasons granted leave for

the parties to speak to costs. The Judgment, which is under appeal, can be found at 2016 ABQB 681. [3] In this costs decision I will first deal with the costs claim of SAC against Multus and the Multus cross-claim for its costsagainst SAC. I will then deal with Starke's claim for costs against SAC. SAC’s Costs Claim Against Multus and Multus’ Cross-Claimfor Costs [4] In seeking costs, SAC submits that this is an appropriate case for this Court to apply a multiplier to Column 5 of

Schedule C,taking into account the factors identified in rule 10.33, including the complexity and result of the action, the importance of the issues tothe parties and the amount recovered. In particular, SAC seeks costs on three times Column 5 of

Schedule C, with a 35% inflation factorapplied plus disbursements and GST or a lump sum in the amount of $1.1 million. [5] In the alternative, SAC requests Column 5 costs with a 35% inflation factor applied. [6] In addition, SAC requests that it be awarded costs of this application, in the amount of $5,000 plus GST and disbursements. [7] Finally, with respect to pre-judgment interest, SAC has calculated this amount from the date on which the cause of actionarose to be $132,534.25 and claims for additional post-judgment interest on the judgment amount, in accordance with the JudgmentInterest Act, RSA 2000, c J-1. [8] Multus argues that having had the fraud allegation against it dismissed, it was successful on substantive aspects of the SACclaim.

In the result, Multus seeks an award of costs on the part of the action in which it was successful, namely the unproven claims offraud and the unsuccessful claim for specific performance.

Regarding the unproven allegations of fraud, Multus argues that those costsshould be awarded to Multus on a solicitor and client scale. [9] Multus submits that any costs award made against Multus in respect of the successful aspects of SAC's claim should be setoff with the costs Multus submits it is entitled to for those aspects of the case where SAC was unsuccessful. [10] This action was lengthy and complex involving thousands of pages of documents, many interlocutory steps, case managementand lengthy questioning with many undertakings. There were ten ordinary witnesses and six experts.

Also, the Defendants Multus andStarke changed counsel – Starke several times. [11] All parties made efforts to streamline the trial process including: i. Providing written opening statements; ii. Reaching an agreement as to exhibits that were provided to the Court in hard copy and electronically (a further 27 exhibits wereentered at trial); and, iii. Providing written closing arguments. [12] The trial was held from December 1 to December 17, with an adjournment to February 18, 2016, to provide time for writtenclosing arguments and further submissions as of that date.

At all times, the remaining parties to the action had at least two counsel withStarke having four counsel and an articling student present, SAC having three counsel, and an articling student present, and Multushaving two counsel present. [13] I agree with SAC's counsel’s submission, that while the litigation was complex, it was conducted expediently andcooperatively by all counsel. Although the issues were contentious, and at times disputes arose, all counsel conducted themselvescordially and professionally.

Cost Principles [14] The successful party to an application is entitled to a costs award against the unsuccessful party, subject to the Court's generaldiscretion: Alberta Rules of Court, AR 124/2010 [Rules], r 10.29 and r 10.31. The Court's discretion is not absolute. It must be exercised"judicially and in accordance with established principles": Lameman v Alberta, 2011 ABQB 532 at para 6; Kent v Law Society of Alberta,2015 ABQB 432 at para 18. The parties disagree on how the Court should exercise its discretion in this case to arrive at an appropriatecosts award.

It has long been established that it is within this Court's inherent jurisdiction and discretion to award costs in accordancewith established principles. [15] In Jacobi v Newell No. 4 (County) (1994), (AB KB), 153 AR 241 (QB) at para 27 [Jacobi], O'Leary Jwrote: A trial judge has a wide discretion when awarding costs among parties to litigation, provided that the discretion is exercised judicially,that is, by the application of established principles: Jackson and Parkview Holdings Ltd. v. Trimac Industries Ltd. (1993) (AB KB), 138 A.R. 161 (Q.B.).

In exercising that discretion, a trial judge must keep in mind the purpose of an award of costs andthe policy considerations involved in setting the level of recovery. These matters were summarized by McDonald, J. in Reese v. Alberta(1992), (AB KB), 5 Alta. L.R. (3d) 40 (Q.B.), at p. 44: While the allocation of costs of a lawsuit is always in the discretion of the court, the exercise of that discretion must be consistent with

established principles and practice. It is traditionally accepted in Canada's common law provinces that as a general rule the successfulparty recovers its costs from the unsuccessful party. However, such recovery is normally on a party-and-party basis. That is, the costsrecoverable are those fees fixed for the steps in the proceeding by a

schedule of fees (Sched. C. in Alberta's Rules of Court), plusreasonable disbursements. It is not intended that the successful party receive full indemnification of those fees and disbursements whichit would be charged by its counsel. In England the degree of indemnification appears to be considerably higher than is found in Canada.In almost all jurisdictions of the United States of America the rule is that no costs are recoverable by the successful party. The Canadian practice reflects an attempt to balance two conflicting interests.

On the one hand, it is argued that if a party is successfuland there are no circumstances constituting blameworthiness in the conduct of the litigation by that party, it is unfair to require thesuccessful party to bear any costs incurred by his counsel in prosecuting or defending the action. On the other hand, it is argued that ifthe unsuccessful party is required to bear all the costs of the successful party, citizens will be unduly hesitant to sue to assert their rights(even valid ones) or to defend their rights when sued.

The partial indemnity practice as it exists in Canada is a compromise intended togive some scope in practice for each of the conflicting policy considerations. In Jacobi, O'Leary J went on to state at para 30: Costs on an indemnification basis should be awarded only in rare and exceptional cases: Canada Deposit Insurance Corp. v. CanadianCommercial Bank (1987), (AB KB), 50 Alta. L.R. (2d) 1, 76 A.R. 271 (Q.B.). In Jackson et al v.

Trimac IndustriesLtd., et al, supra, Hutchinson J. said at p. 172: In order for costs to be awarded on an indemnity basis or even on a solicitor-client basis, as opposed to a party-party basis, the court mustconclude that the case fits within the parameters of a rare and exceptional or unusual case. [16] When awarding costs, rule 10.31 directs a court to take into account the factors specified in rule 10.33, which include: i. the result of the action and the degree of success of each party; ii. the amount claimed and recovered; iii. the importance of the issues; iv. the complexity of the action; v. the conduct of the parties; and, vi. any other matter related to the question of reasonable and proper costs that the court considers appropriate. [17] In addition, the Court must always be mindful of the purposes that costs orders serve.

As Perell J. summarized in 394Lakeshore Oakville Holdings Inc. v.

Misek, 2010 ONSC 7238 para 10: Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for thecosts of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) todiscourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of theproceedings; and (5) to encourage settlements. [18] Costs awards are discretionary and may be made based on

Schedule C, however, party-party costs are designed to besomewhere around half a reasonable legal bill or a little under: Hill v Hill, 2013 ABCA 313 at para 11. Ultimately, in determining anamount for costs, the overriding principles are fairness and reasonableness. In assessing what is fair and reasonable, the court does notengage in a robotic exercise, but takes a contextual approach, applying the principles and factors discussed above to settle on a figure thatis fair and reasonable, all material things considered.

Fraud Allegations [19] Multus submits that despite the straight-forward issues to be determined in the litigation relating to the language of the right offirst refusal (“ROFR”) and the changed terms of the Purchase Sale Agreement (“PSA”) on closing, SAC advanced and persisted with aseries of unsuccessful fraud allegations, so should be required to pay solicitor-client costs to Multus. [20] Multus argues that SAC's allegations of fraud turned what would have been a simple contract dispute between SAC andMultus, interpreting the words of the ROFR and the PSA into a three week trial, dominated by the fraud allegations.

It submits that theallegations of fraud implicated Starke and required many additional witnesses, including Mr. Forigo, Mr. Wallach, Ms. Kowalchuk, Mr.Elliot, and Mr.

Harrison. [21] Multus submits that Courts emphasize two criteria when considering whether to award full indemnity costs for unsuccessfulfraud claims: 1) whether the allegations were unfounded and 2) whether the plaintiff should have known that they would likely beunsuccessful based on the material evidence before trial: Hamilton v Open Window Bakery Ltd., 2004 SCC 9 [Hamilton]. [22] Multus states that the jurisprudence is clear that where these criteria are present, a court may sanction such conduct by anaward of full indemnity costs to the defendants.

It asks for an award of its solicitor-client costs, to be fixed in the sum of $2,000,000.00. [23] Unfounded allegations of fraud typically attract an award of costs on a substantial indemnity scale. In Young v. Young, (SCC), [1993] 4 SCR 3, at para 251 McLachlin J. (as she then was) for a majority of the Supreme Court of Canada, held thatsolicitor-and-client costs "are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the partof one of the parties".

[ 24 ] The Supreme Court of Canada set out the principles governing awards of substantial indemnity (solicitor-client) costs in Hamilton , supra , at para 26 : ...An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to "reprehensible, scandalous or outrageous conduct". However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception.

When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor-and-client scale are appropriate: see, generally, M.M.

Orkin, The Law of Costs (2nd ed. (loose-leaf)), at para. 219. [ 25 ] While there is discretion in the court to award costs on a full indemnity scale, Hamilton and Young find that such awards should be reserved for the most egregious cases where, for example, the court is punishing a litigant for falsifying documents submitted to the court, or intentionally making false allegations of fraud. No defendant subject to such "reprehensible, scandalous or outrageous conduct" should be put to any expense whatsoever in defending such claims.

On the other hand, lack of merit is not a proper basis for solicitor-client costs: Young , at para 251 . [ 26 ] Where the allegations of fraud have some circumstantial plausibility with some basis on the facts alleged, in general terms, the plaintiff's conduct cannot then be described as "reprehensible, scandalous or outrageous." The fact finding exercise at the trial of this action involved credibility findings based on ordinary and expert testimony, document and records review and previous sworn questioning, all within an adversarial forum.

Inferences from some of the evidence had to be made and those inferences, on balance, in the end, did not favour SAC.

It could be said that had the land sale transaction between Multus and Starke been better documented and in not such a rush to close it is unlikely the allegations of complicity and fraud would have had less, if any, traction. [ 27 ] I found no conduct such as non-disclosure or fraudulent creation of documents, repeated lying under oath, deceit with the court, a reckless attack on a person's character, needlessly adding parties or artful ligation tactics that meets the test of reprehensible, scandalous or outrageous conduct. [ 28 ] On the principles set out by the Supreme Court of Canada, this is a case to apply a multiplier to

Schedule C but not a case where the extraordinary remedy of solicitor-client costs should be awarded to Multus or Starke. Specific Performance Action [ 29 ] Multus submits that in pursuing the claim for specific performance, SAC overly complicated the issues, requiring expert evidence and significant cross-examinations in pre-trial steps and at trial. SAC further claimed substantial damages against Multus, including an accounting, a tracing, and a disgorgement of benefits.

All of these claims were unsuccessful. [ 30 ] In the result, Multus submits that the claim for specific performance required substantial evidence to be led, expert reports to be undertaken and lengthy cross examinations. Since SAC was unsuccessful on these significant claims, Multus asks this Court to award costs to it on a full indemnity solicitor-client basis. [ 31 ] In

summary, Multus argues that based upon its substantial degree of success at trial in defending the fraud allegations and specific performance claim, it is entitled to an award of costs. Multus cites Rule 10.31(3) (

c) of the Alberta Rules of Court which provides that: In making a costs award under subrule (1)(a), the Court may order any one or more of the following: ... (

c) one party to pay another party all or part of the reasonable and proper costs with respect to a particular issue, application or proceeding or part of an action; [ 32 ] Multus submits that it was substantially successful at trial, in negating the fraud allegations and refuting the claim for specific performance, thus it should be awarded full costs on those issues. Ruling: The Costs Award Between SAC and Multus [ 33 ] I find that SAC is the successful party and is entitled to costs.

Nevertheless, I accept Multus submission that it was successful along with Starke in defending against the fraud allegations and the claim for specific performance. [ 34 ] In Stewart Estate v TAQA North Ltd , 2016 ABCA 144 , [ Stewart ] at paras 17-18 , the Court of Appeal stated that courts generally rely upon the considerations under rule 10.33.

At paras 24-25, the court explained that when determining whether a multiplier should be applied, Alberta courts have awarded a multiplier of the tariffs in Column 5 in three circumstances: i. when the complexity of the action warrants it; ii. when the amount in dispute significantly exceeds the $1.5 million threshold for Column 5; or iii. when the conduct of one of the parties warranted a multiplier. [ 35 ] The first two circumstances have application in this case, the third does not.

[ 36 ] The complexity of the action and the amount in dispute warrant the application of a multiplier to Column 5. [ 37 ] In Stewart at para 26 , the Court of Appeal points out that since costs awards are discretionary there is little uniformity upon which a multiplier is awarded or declined. It is highly dependent on the uniqueness of each case. [ 38 ] In this case, the trial was heard over 14 court days, with detailed expert testimony, multiple fact witnesses and voluminous documentation and other records.

The fact finding requirements, the complexity of the issues and the need to provide in-depth legal analysis resulted in written reasons that were 38 pages, containing 239 paragraphs. [ 39 ] Having regard to the factors in rule 10.33 and the Court Appeal's direction in Stewart , I would have awarded to SAC party and party costs at the enhanced rate of 3 times column 5. However, given the success of Multus in defending the fraud and specific performance claim, I award costs at 2 times column 5.

An Inflation Factor [ 40 ] SAC submits that this Court should exercise its discretion to further increase the costs award for inflation. [ 41 ] SAC submits that the Court of Appeal has recently held that in 2015 the cost of living had increased by 39% since

Schedule C was introduced in 1998 and that the re-enactment of

Schedule C in 2010 does not limit a trial judge's discretion to set the quantum of costs: RVB Managements Ltd v Rocky Mountain House (Town) , 2015 ABCA 304 at paras 7 and 11 . [ 42 ] In this case, where a multiplier to Column 5 has been awarded, and keeping in mind that a costs award is not intended to completely indemnify the successful party, the discretionary application of a per-centage inflation factor is not appropriate. I agree with the analysis of Justice Park in Bowman v Ralph's Arctic Cat Sales & Services Ltd , 2012 ABQB 205 at para 30 , that the tariffs in

Schedule C were stated by legislation in 1998 and re-stated without variation in 2010. If the tariffs need to be adjusted to account for inflation, I agree with Justice Park that there is a mechanism available for such adjustments through legislation to amend the Alberta Rules of Court as opposed to discretionary, conflicting and perhaps arbitrary decisions by the judiciary. [ 43 ] In addition, Bowman referred to the reasoning of Belzil, J. in Brooks v Stefura , 1998 ABQB 557 at para 19 , reversed on the other grounds, where the court noted the various tariff items in

Schedule C are completed over the course of the litigation and it would pose a problem to award the same inflationary increase to all the items on the basis those steps took place on the same day. Second Counsel Fees [ 44 ] I agree this is an appropriate case to award second counsel fees. As set out above, this case was complex, required extensive research and all parties had at least two counsel present.

As for any claim for third counsel fees, considering the length of trial and the complexity of this case as compared to those rare cases where third party counsel costs have been awarded, this is not an appropriate case to award third counsel fees to any of the parties. [ 45 ] In Alberta Productions Corp v Canada Lands Company CLC Ltd , 2004 ABCA 25 [ Alberta Productions ] at para 2 , 2004 CarswellAlta 57 the Court of Appeal set out the factors to consider in granting second counsel fees: i. the general importance of the issue or issues to the parties or to others; ii. the value of the case; iii. the complexity and scope of the issues; iv. the size of the trial record, the manner in which opposing counsel conducts the case; and v. whether second counsel addressed the court. [ 46 ] I find that a second counsel fee was reasonably incurred by SAC and is payable by Multus having regard to the factors identified by the Court of Appeal in Alberta Productions .

The issues at trial in this case were of significant importance to the parties. The value of the case was in the millions of dollars. Complex legal issues were argued over the course of a two-week trial, with six expert witnesses, ten lay witnesses and extensive written argument and second counsel addressed the court on a number of occasions. All parties at trial retained second counsel which, in my view, further justifies an award of second counsel fees to the successful party.

Expert Fees [ 47 ] SAC submits that it reasonably and properly incurred expert fees in the action and asks that this Court order that they be included in an award of costs.

SAC argues that each expert reported and testified about issues in dispute and all experts on one side were matched by a counterpart on the other. [ 48 ] Under rule 10.31(2)(d), costs do not include the fees add other charges of an expert for assisting in the conduct of a trial unless ordered by the Court. [ 49 ] In determining whether to allow expert costs, this Court examines, at the time such costs were incurred, whether the expenditure was reasonable: Seidel v Kerr , 2004 ABCA 157 at para 15 .

[ 50 ] The fact that a trial judge does not accept an expert's opinion is not enough to deny the expert's fee as a disbursement. In Nexxtep Resources Ltd v Talisman Energy Inc , 2012 ABQB 708 at paras 38-40 , this Court held the fact that an expert's evidence was not referred to in his reasons or that the expert did not testify but his or her report was referred to, or that some were found not particularly helpful, was not determinative and allowed the amounts claimed for expert fees.

The Nexxtep proposition is consistent with the overall test of whether the expert costs incurred were reasonable at the time they were incurred. What is reasonable depends on the facts of the particular case. [ 51 ] I find the fact that SAC engaged three experts was reasonable and ought to be allowed.

I agree that these experts (1) had expertise in the areas that they provided evidence on; (2) their evidence was relevant to the issues in dispute; and (3) their evidence was considered by the Court and, to varying degrees was of some assistance to the Court. [ 52 ] When reviewing expert fees charged I take into consideration: (1) the witness's area of expertise; (2) the education and training required to provide the expert insight that is sought; (3) the prevailing rates of other comparably respected available experts; (4) the nature, quality and complexity of the documentary and testimony responses provided; (5) fees traditionally charged by the expert on related matters; and (6) any other factor likely to be of assistance to the court in balancing the interests implicated. [ 53 ] As for the amounts each expert claims, I find that SAC is entitled to the fees charged by their experts, Mr.

Hofer and Mr. Blyth, at the amounts claimed in SAC's draft Bill of Costs in its brief filed February 7, 2017. As for Mr. Williams’ fees, I find the amount claimed as unreasonable with no compelling evidence as to why the fees are 2.5 times higher than those of Starke's expert, Mr. White. A reasonable fee for Mr. Williams, comparable to that of Mr. White, is set at $140,000.00. [ 54 ] SAC says it engaged certain experts when assessing and developing the theory of the case, including Read Jones Christoffersen and Cushman & Wakefield.

This claim for expert fees is denied because there is no sufficient evidence before me that such expert advice was necessarily and reasonably incurred at the time it was made within the course of this action. Enhanced Costs for Written Submissions at Trial [ 55 ] SAC and each of the Defendants Multus and Starke submitted a detailed opening statement and closing argument. These were well-written and researched and helpful to the Court in this complex case. SAC is entitled to costs from Multus for both the opening and closing statements.

Costs for Starke's Contested Post-Trial Applications [ 56 ] SAC argues it was the successful party on the two contested applications brought by Starke after judgment for discharge of the ROFR caveat and CLP. Accordingly, SAC should be entitled to costs. This cost claim is not payable by Multus but will be dealt with later in these reasons when addressing Starke's costs claim.

Pre-Judgment and Post-Judgment Interest [ 57 ] SAC is entitled to pre-judgment interest, under the Judgment Interest Act as of the date the cause of action arose. [ 58 ] The Judgment Interest Act at s 2(1) provides: Where a person obtains a judgment for the payment of money or a judgment that money is owing, the court shall award interest in accordance with this Part from the date the cause of action arose to the date of the judgment. [ 59 ] This is subject to exceptions in section 2(2), none of which apply.

Subsection 2(3) of the Judgment Interest Act recognizes that the Court may refuse to award interest or award interest for a period other than the period provided or at a different rate, if it considers it just to do so having regard to changes in market interest rates, the circumstances of the case, or the conduct of the action. [ 60 ] In 321665 Alberta Ltd. v ExxonMobil Canada Ltd. , 2012 ABQB 76 , this Court set out a number of helpful factors in determining whether a party should be deprived of pre-judgment interest. I consider the following factors to be important here: i.

The complexity of the action: This action was complex in terms of the law at issue and the facts to be found. Six experts wrote lengthy reports and testified. Two of the experts were senior counsel who specialized in real estate transactions. ii. Changes in counsel: Counsel for the Multus changed firms. And counsel for Starke changed firms four times during the course of the proceeding. iii. Case Management: The case was in Case Management which expedited the time to trial. iv. There was lengthy questioning of witnesses and many undertakings to answer. v.

Expert reports: There were six expert reports and six expert witnesses to brief for trial. vi. There is no evidence of conscious delay in the prosecution of the action and no parties are alleging any specific prejudice. In fact, as stated earlier, parties and counsel conducted themselves professionally throughout. [ 61 ] Accordingly, I find that pre-judgment interest is to be calculated on the $5,000,000 in general damages awarded from December 21, 2011 to the date of decision on December 2, 2016. SAC has calculated that interest at $132,534.25. Unless that calculation

is inaccurate, Multus is ordered to pay that amount to SAC. [ 62 ] SAC is entitled to post-judgment interest under s 6(1) on the amount of judgment and any costs awarded, at the rates prescribed under s 4(3) of the Judgment Interest Act . Costs of this Application between SAC and Multus [ 63 ] Considering that neither SAC nor Multus can be said to have "won" this contested costs application and that there is mixed success, each party will bear their own costs. Costs Payable Following the Determination of the Appeal [ 64 ] On December 22, 2016, SAC filed a Notice of Appeal with respect to the Reasons.

Multus filed a Notice of Appeal on January 3, 2017. These appeals have been scheduled to be heard together on May 19, 2017. [ 65 ] In light of the pending expedited appeals, I agree with SAC's submission that costs are payable immediately following the resolution of the appeals. The Court has discretion to deviate from ordering costs payable forthwith. While Alberta is a "pay as you go" jurisdiction, it makes sense to deviate away from the "costs payable forthwith" approach when there is a pending appeal, particularly one that is expedited. As well, some parties may choose to appeal the costs award.

Starke’s Costs Claim Against SAC [ 66 ] Starke argues that because SAC advanced and persisted with a series of fraud allegations, and failed to prove a single allegation at trial, SAC should be required to pay solicitor-client costs to the Starke. [ 67 ] Starke submits that Courts emphasize two criteria when considering whether to award full indemnity costs for unsuccessful fraud claims: (1) whether the allegations were unfounded and (2) whether the plaintiff should have known they would likely be unsuccessful based on the material evidence available before trial.

Courts will also consider whether, in pursuing the fraud claim, the plaintiff has attacked the reputation of professionals through allegations of fraud or dishonesty. [ 68 ] According to Starke, all of these elements are present in this case. Starke submits that SAC was entirely unsuccessful in its fraud allegations, had access to material evidence showing there was no fraud, and attacked the reputations of professionals like Mr. Forigo, Mr. Harrison, Ms. Kowalchuk, Mr. Robertson, and Mr. O'Brien, Q.C.

The jurisprudence is clear that where these elements are present, a court may sanction and deter such conduct by an award of full indemnity to the defendant. As such, Starke argues this court should award it fixed costs in the sum of $2,000,000.00. Authorities cited by Starke are Hamilton , supra; Nature Conservancy of Canada v Waterton Land Trust Ltd. , 2016 ABQB 65 ; Botan Law Office v St. Amand , 2012 ABQB 260 , affirmed 2013 ABCA 227 . [ 69 ] Starke argues that after document disclosure and questioning SAC ought to have concluded that its fraud action would fail.

Furthermore, Starke states that SAC's main witness, Mr. Mamdani, stated that the evidence of fraud was speculative and based on assumptions. Also, the failed SAC complaint to the Law Society of Alberta against Multus' lawyer should have further informed SAC of the futility of its fraud claim.

Aggravating the harm of the fraud allegations, Starke submits that the attack on the reputations of business people and professionals who were part of the sale of the commercial property, alleging they were complicit in the fraud scheme, is a further reason for solicitor and client costs. [ 70 ] Under the sub-title "Fraud Allegations" above, I have addressed the principles the Supreme Court of Canada has set out that govern awards of substantial indemnity costs.

I have to accept the principle that an unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and- client costs, since not all such attempts will be correctly considered to amount to "reprehensible, scandalous or outrageous conduct". [ 71 ] The discussion and principles set out above also apply to Starke's claim. I repeat that this is not a case where the extraordinary remedy of solicitor-client costs should be awarded to Multus or Starke. It is a case where a multiplier of

Schedule C is applicable. [ 72 ] The Cost Principles set out in paragraphs 14 to 18 apply to Starke's claim like they do to SAC and Multus. SAC Wants Multus to Pay Costs to Starke - Sanderson or Bullock Order [ 73 ] SAC submits that a Sanderson order requiring Multus to pay Starke's costs is appropriate because of the actions of Starke and Multus in renewing the VTB Mortgage.

In the alternative, SAC seeks a Bullock order permitting SAC to claim as against Multus the costs to be paid to Starke. [ 74 ] In Alberta, the courts have articulated a three stage test for determining whether a costs recovery order - either a Bullock or a Sanderson order - is appropriate: (1) was it reasonable for the plaintiff to add the successful defendant to the litigation; (2) was it reasonable for the plaintiff to keep the successful defendant in the litigation; and (3) is it fair and just to require the unsuccessful defendant to pay the costs of the successful defendant: Gladue v Alberta (Attorney General), 2011 ABQB 535 at para 39 . [ 75 ] I accept Starke’s submission that Sanderson and Bullock orders prevent an unjust costs award against the plaintiff.

This

typically arises when, a plaintiff, through no fault of its own, must bring in additional defendants because the initial defendant has tried toshift the blame to another defendant and the plaintiff has no way to know which defendant was truly at fault. Anderson v L.J. Ryder-Investments Ltd., 2002 ABCA 38 at paras 19 and 22. [76] In such situations, where the plaintiff is effectively forced to bring in a second defendant, courts have found that the costsconsequences should fall on the defendant who forced the plaintiff’s hand.

I find on the evidence this is not the situation in this case. [77] The threshold issue that a court must consider in granting a Sanderson or Bullock order is whether, in the circumstances of thecase, it was reasonable for the plaintiff to join the successful defendants. However, "reasonable" has a particular connotation for suchorders.

In Bullock, the Court made clear that the joining of the defendant to the claim had to be caused by the actions of the otherdefendant: The common sense underlying this order is clear, because the learned judge when he made it had before him evidence that, owing to theattitude taken up by the General Omnibus Company, it was reasonable for the plaintiff to join the other defendants: Bullock v LondonGeneral Omnibus Co. (1906), [1907] 1 KB 264 (Eng CA), as cited by Allen (Next Friend of) v University Hospitals Board,·2000 ABQB965 at para 7. [78] Recently in 0915406 B.C. Ltd v. 0834618 B.C.

Ltd, 2013 BCSC 1529 at para 32; (see also Gladue at para 42) Fisher Jconfirmed this approach: In determining whether it was reasonable for the plaintiffs to have proceeded against the successful defendant, the unsuccessfuldefendant must have done something which caused the other to be brought into the litigation. Often this occurs where the unsuccessfuldefendant blames the successful defendant such that both must be parties to the action, but this is not always the case. [79] I agree with Starke's submission that Multus did nothing to cause SAC to add Starke.

Starke was added by SAC to advance itsunsuccessful specific performance claim. This became abundantly clear at trial, as explained by SAC’s counsel at page 582, lines 2-4and 12-29 of the transcript: But here in this case, My Lord, there's no such attempt by defendant 1 to say defendant 2 did something wrong, or vice versa. Multusdoesn't say Starke did something wrong; Starke doesn't say that Multus did something wrong. In fact, it's very much to the contrary. So what Multus is saying is quite to the contrary of what you see in these other cases where one defendant is pointing the finger at theother.

Multus is saying, Starke has nothing to do with this, it's all our fault, if it's anyone's fault at all. So there's no adversity in interest inthe pleadings. If you were to review Starke's amended statement of defence, Starke says exactly the same thing. Paragraph 5 of their amendedstatement of defence says, "and any obligations arising between SAC and Multus." Paragraph 10, "These defendants did not participatein the decision to refrain from registering the Multus mortgage," et cetera, et cetera.

And this continues, My Lord - sorry, I forgot to noteto you the absence of any actual pleading between the parties. [80] Starke did not try to shift the blame to Multus nor Multus to Starke such that SAC did not know who was at fault. These werenot cut throat defences between the Defendants.

SAC cannot satisfy the requirements for a Sanderson or Bullock order. [81] In Ed Miller Sales & Rentals v Caterpillar Tractor Co. (1994), (AB KB), 170 AR 341 (QB) this courtdiscussed the appropriateness of a Bullock order at para 28: However, a Bullock order is inappropriate when distinct causes of action are alleged against defendants. This is reflected in LordGoddard C.J.'s statement in Mulready v. J.H. & W.

Bell Ltd., [1953] 2 All E.R. 215 (C.A.), at p. 219: A Bullock order is appropriate where a plaintiff is in doubt as to which of two persons is responsible for the act or acts of negligencewhich caused his injury, the most common instance being, of course, where a third person is injured in a collision between two vehiclesand where the accident is, therefore, caused by the negligence of one or the other, or both.

It does not appear to us that it is an appropriateorder to make where a plaintiff is alleging perfectly independent causes of action against two defendants where the breaches of dutyalleged are in no way connected the one with the other. [82] SAC's counsel, stated at trial, (page 582, lines 12-29) this was not the case here: So, the starting point, there's no third party notice. It's a very strange situation. You've got SAC claiming as against two groups ofdefendants at this stage, Multus and Starke.

SAC claims against Multus: breach of contract, breach of the ROFR, breach of thesettlement agreement, breach of the trust conditions. And as against Multus, that- or as against Starke, that they -- specific performance,in essence. So there's no commonality in anything as between these defendants. (Emphasis added). [83] In cases with more than one defendant where the plaintiff (SAC) succeeds against one defendant (Multus), but not the other(Starke), the common practice is for the unsuccessful defendant (Multus) to pay the plaintiff's (SAC'

s) costs and the plaintiff (SAC) topay the successful defendant's (Starke'

s) costs. Sanderson and Bullock orders are an exception to this general rule: Mark M. Orkin, TheLaw of Costs, 2d ed., looseleaf (Aurora, Ont: Canada Law Book, 1987) at p 2-108, as cited in Moore v Wienecke, 2008 ONCA 162 atpara 37. [84] In the absence of special circumstances, I decline to make a Sanderson or Bullock costs order. SAC as the party that initiatedproceedings, must bear the primary risk of meeting Starke’s costs against whom it was eventually unsuccessful.

The fact that the conductof the defendants was related is in itself insufficient; such circumstances exist in most cases where more than one defendant is properlyjoined by a plaintiff: Times Square Holdings Ltd. v Shimizu, 2001 BCCA 667 at para 10.

Ruling: Starke's Costs Claim Against SAC [ 85 ] Having regard to the factors in rule 10.33, and the Court Appeal's direction in Stewart , and the success Starke had in defending aggressive allegations of fraud and specific performance, I award to Starke party and party costs at the enhanced rate of 3 times column 5. [ 86 ] Starke has not claimed an inflation factor. [ 87 ] Second counsel fees are allowed. Third counsel fees are denied for reasons discussed above. [ 88 ] Starke's expert fees are approved for Mr. White, Mr. Lipmann and Mr.

Raby at the amounts set out in Starke's draft Bill of Costs. [ 89 ] Starke submitted a detailed written opening statement and closing argument. As stated earlier, each party filed these well- researched and well-written briefs that were helpful to the Court in this complex case. Starke is entitled to costs from SAC for the written opening and closing statements. [ 90 ] SAC argues it was the successful party on the two contested post-trial applications it brought after judgment for discharge of the ROFR caveat and CLP. Starke was successful in the application regarding the Postponement of Encumbrances .

These applications flowed from the trial judgment and the court was asked to make a ruling. Accordingly, SAC should be entitled to its costs for the two contested applications with briefs and Starke for its success on one application with briefs. SAC can deduct $3,000 from the amount payable to Starke for costs. I make no costs ruling for matters before Justice Kent or Justice Eidsvik. [ 91 ] Starke is not entitled to costs from SAC for matters dealing with the Paragon

summary dismissal application, which was other litigation. [ 92 ] Starke has asked this court to make a lump sum costs order. I understand how a lump sum would help eliminate further haggling over

Schedule C items. To accommodate Starke's proposal and to help reduce further costs, I direct that if the parties cannot agree on a final lump sum amount, after reviewing the opponent's draft Bill of Costs, each party can, within 30 days of the date of this costs ruling or appeal ruling, send their draft Bill of Costs to me for a lump sum ruling.

Failing agreement and then failing to submit a draft Bill of Costs within 30 days may result in the Court approving the amounts in the Bill of Cost properly submitted. [ 93 ] Considering that neither Starke nor SAC can be said to have "won" this contested costs application and that there is mixed success each party will bear its own costs. [ 94 ] Costs, for the reasons stated above are payable following the resolution of the appeals. Heard on the 24 th day of February, 2017. Dated at the City of Calgary, Alberta this 27 th day of April, 2017. Bryan E. Mahoney J.C.Q.B.A. Appearances: S.S.

Smyth, Q.C. and Kelli McAllister for the Plaintiff Clive O. Llewellyn for the Defendant, Multus Investment Corporation Douglas A. McGillivray, Q.C. and Robert Martz for the Defendants, Starke Capital Corp.

and Starke Dominion Ltd.