Yehya v Las Palmas Estate Homes Ltd, 2019 ABQB 981

Court of Queen’s Bench of Alberta Citation: Yehya v Las Palmas Estate Homes Ltd, 2019 ABQB 981 Date: 20191220 Docket: 1603 17916 Registry: Edmonton Between: Jaled Yehya and Jamie Yehya Plaintiffs/Applicants - and - Las Palmas Estate Homes Ltd and Ryan Thomas Defendants/Respondents _______________________________________________________ Ruling on an Application for Costs of the Honourable Mr. Justice Don J.

Manderscheid _______________________________________________________ Introduction [ 1 ] The Plaintiffs, Jamie Yehya and Jaled Yehya [Plaintiffs] brought a claim against the Defendants – Las Palmas Homes Ltd [Las Palmas] and Ryan Thomas [Thomas or the Defendant; (and collectively “the Defendants”)] for damages totalling approximately $903,098.84.

The Statement of Claim was filed on October 11, 2016, served on Las Palmas at its registered address on October 19, 2016; and after obtaining a substitutional service order from Master Wacowich, served the Statement of Claim on the Defendant (Thomas) on November 4, 2016 by e-mail. Thereafter, on November 29, 2016 the Defendant confirmed receipt of the Statement of Claim.

[ 2 ] On November 25, 2016, both Defendants were noted in default. [ 3 ] On December 12, 2016 the Defendant declared bankruptcy. [ 4 ] On December 14, 2016, a Default Judgment for $507,989.00 was issued in this matter by this Court, and signed on January 13, 2017. [ 5 ] On September 13, 2017, the Defendant (Thomas) was granted a discharge from bankruptcy. [ 6 ] On October 27, 2017, the Defendant filed an application for an Order setting aside the Default Judgment. On April 6, 2018, this Court heard the application and pronounced its judgment on May 4, 2018.

I found that the Defendant failed to satisfy the test for setting aside a Noting in Default and Default Judgment. I then ordered that the parties may speak to costs within sixty (60) days of the decision. [ 7 ] On May 31, 2018, the Defendant filed a Civil Notice of Appeal. Counsel for the Plaintiffs sought my permission to withhold from speaking to costs pursuant to the application heard before this Court until the conclusion of the Appeal.

This permission was granted. [ 8 ] On May 3, 2019, the Court of Appeal reversed the decision of the lower court and set aside the Default Judgment: Yehya v Thomas , 2019 ABCA 164 , 2019 CarswellAlta 818 [ Yehya ABCA ]. The Court concluded as follows (at para 13): The appeal is allowed and the default judgment is set aside as it applies to the appellant. It remains in effect as it applies to Las Palmas.

A discharge from bankruptcy does not release the bankrupt from, among other things, any debt or liability arising out of fraud or resulting from fraudulent misrepresentations: s 178(1)(d),(e) [of the Bankruptcy and Insolvency Act , RSC 1985, c B-3 ( BIA )]. The respondents’ statement of claim makes allegations against the appellant which may fall within s 178. Therefore, the respondents are at liberty to proceed with their application for an order that some of their claims against the appellant were not released by his bankruptcy.

In our view, the evidence filed by the appellant is sufficient to establish an arguable defence to those claims so he should be allowed to defend the respondents’ application.

Therefore, the noting in default is also set aside as it applies to the appellant. [ 9 ] The Court of Appeal’s Reasons and Judgment were silent as to costs. [ 10 ] Subsequently, the Defendant filed and served an Appointment for Assessment of Costs arising out of the Appeal on the Plaintiffs. [ 11 ] However, the Plaintiffs have brought the within application arguing that before the costs arising out of the Appeal can be addressed, the costs of the action arising out of all matters before the Appeal must be addressed. Issue [ 12 ] What costs are payable and when are they payable?

Parties’ Positions Quantum Plaintiffs [ 13 ] On January 12, 2017, pursuant to the Default Judgment that awarded solicitor-client costs and directed its assessment, Counsel for the Plaintiffs submitted to the Assessment Officer a Bill of Costs for Solicitor/Own Client Costs totalling $11,223.13. The Assessment Officer certified that the full amount be paid by the Defendant to the Plaintiffs.

This was before the Defendants sought to open up the Noting in Default and the Default Judgment. [ 14 ] The Plaintiffs now seek the payment of “thrown away” costs, arguing that they have continuously made efforts to advance this action efficiently.

However, the Defendant’s inaction until October 27, 2017 frustrated these efforts. [ 15 ] In support of their position, the Plaintiffs cite Morin v Enoch Cree Nation , 2019 ABQB 672 at para 19 , 2019 CarswellAlta 1902 [ Morin ], where the Court found that thrown away costs include steps taken by the Plaintiffs to note the individual Defendants in default, to obtain an Order for an assessment of damages, to obtain the Default Judgment against the individual Defendants, and to enforce the Default Judgment against the individual Defendants, plus reasonable disbursements. [ 16 ] They seek

Schedule C costs, under the Alberta Rules of Court , Alta Reg 124/2010 [ Rules of Court ], for all steps taken by the Plaintiffs prior to and leading up to the Defendant’s Appeal. Defendant

[17] The Defendant contends that since the rationale of thrown-away costs is to compensate wasted effort caused by the oppositeparty, the entry of an irregular default judgment does not attract thrown-away costs.

Fault cannot be attributed to the Defendant, and therationale for thrown-away costs disappears: Bouzari v Bahramani, 2013 ONSC 6007, 2013 CarswellOnt 13502. [18] Nonetheless, the Defendant (Thomas) concedes that only the Noting in Default was clearly a wasted effort attributable to himin this matter; alongside some parts of the preparation of the Default Judgment that occurred prior to the stay of proceedings under theBIA – i.e. the Defendant Thomas’s failure to respond to the Statement of Claim. [19] The Defendant submits that the issue of whether the Default Judgment is a thrown-away cost could be left to the AssessmentOfficer, who commonly makes such determinations.

Timing of Costs Payment Plaintiffs [20] The Plaintiffs argue that the action is far from over as the Court of Appeal’s decision did not consider the merits of thedefence in this case. The appellate Court simply determined that there was a procedural flaw as the Default Judgment was entered whilea stay of proceedings was in effect due to the Defendant’s bankruptcy.

As such, the Plaintiffs argue, there is a good chance that they willstill succeed in obtaining a judgment similar to the Default Judgment should this matter proceed to trial. [21] Given the provision of r 1.2, the Plaintiffs submit, the most cost effective way to address costs in this matter is to direct thatthey be payable in the cause and determined at the conclusion of this matter.

Defendant [22] In response, the Defendant argues that there appears to be no reason in this case to reserve costs to the trial judge since thereis no “positive misconduct” or any misconduct at all on his part. [23] He says that rather than reserving all or part of the costs question until later, a few decided cases have timed the payment ofcosts based on general considerations of access to justice: Tanner v Clark (2002), (ON SCDC), 164 OAC 228 (SCJ),aff’d (ON CA), 224 DLR (4th) 635 (Ont CA), leave to appeal to SCC refused 230 DLR (4th) vi. [24] The Defendant (Thomas) seeks the costs of the steps of the successful appeal, netted off by the payment of thrown-away costsof the Noting in Default, all to be assessed and payable forthwith after assessment.

He contends that postponing costs payments to himwould not be in the interests of access to justice.

Analysis Quantum Thrown Away Costs [25] The Plaintiffs have applied for thrown away costs of the steps they took at the trial court level prior to the Defendant’s appeal;and in the context of the countervailing success of the Defendant on appeal. [26] On the evidence before me, it is obvious that the Plaintiffs took some “wasted” steps and lawfully incurred thrown away costsdue to the fact the Defendant failed to file a Statement of Defence at a time period when the Defendant’s bankruptcy proceedings had notcommenced.

Specifically, it is evident that the Plaintiffs had taken steps to note the Defendant in default as well as made somepreparations and efforts toward the procurement of the Default Judgment that occurred prior to the stay of proceedings under the BIA:Morin at para 19. [27] During oral submissions, counsel for the Defendant also conceded that these wasted steps were taken and resulted in accruedthrown away costs by the Plaintiffs.

He stated, inter alia, that: ...the way that’s done now is not to say that all of those steps up to and including the application itself are payable, but only the ones thatmay have been wasted, and in this case that would have been, on the rationale of the Court of Appeal, only the noting in default. I also, as I say, think that there could be an argument that because the noting in default went, they were induced to enter the defaultjudgment, so that possibly the default judgment is also thrown-away costs, but the costs of the application are not (emphasis added).

Transcript of Proceedings, November 19, 2019 at 6/3-10. [28] I agree with the Plaintiffs that, generally, the case law and the Rules of Court suggest that despite their failure at the appeal ofthis Court’s decision, they are entitled to thrown away costs arising out of steps – considered as “wasted” – that were taken prior to theappeal as a result of the Defendant’s failure to file a Statement of Defence. [29] Based on the concession of the Defendant, and the existing jurisprudence, I find that the Plaintiffs in this case are entitled tothrown away costs.

[ 30 ] Consequently, I hold that the extent of thrown-away costs payable shall include any and all actions taken by the Plaintiffs, prior to the stay of proceedings under the BIA , that were considered as “wasted” due to the fact that the Defendants did not file a Statement of Defence.

Appeal Costs [ 31 ] Regarding the Defendant’s entitlement to appeal costs and the quantum, I note that the Alberta Court of Appeal concluded that while the default judgment remains in effect for Las Palmas – the second Defendant in this matter – the “evidence filed by the appellant is sufficient to establish an arguable defence to those claims so he should be allowed to defend the respondents’ application ”: Yehya ABCA at para 13 ( emphasis added ). [ 32 ] In the same vein, the appellate Court further held that, the Plaintiffs’ “statement of claim makes allegations against the [Defendant] which may fall within s 178 [of the BIA ]”: Ibid .

That

section provides that a discharge from bankruptcy does not release the bankrupt from, among other things, any debt or liability arising out of fraud or resulting from fraudulent misrepresentations [ 33 ] It is also important to observe that the Court of Appeal determined that the Plaintiffs “are at liberty to proceed with their application for an order that some of their claims against the appellant were not released by his bankruptcy”: Ibid . [ 34 ] As such, it appears that, at this point, this matter is likely proceeding to full trial if the Plaintiffs seek to follow up on the allegations in their Statement of Claim that may fall within the provisions of s 178 of the BIA .

The ultimate result of that potential trial is obviously unknown to this Court. [ 35 ] In any event, the present reality is that the Defendant’s appeal was allowed by the Court of Appeal. [ 36 ] While the Defendant has been effectively successful in setting aside the Default Judgment on appeal, the Court of Appeal did not address the issue of appeal costs or quantum in its Yehya ABCA decision. [ 37 ] The Court of Appeal has, however, commented on the legal implication of such silence on costs issue.

In Saskatchewan Power Corporation v Alberta (Utilities Commission) , 2015 ABCA 281 at para 10 , 607 AR 29, the Court said, inter alia : Reasons for judgment of the Court of Appeal will not make any specific direction about costs unless an exception is to be made to the presumption in rule 14.88(1) that the successful party is entitled to costs of the appeal. Any request for a specific direction as to costs must be made within two months of the pronouncement of the decision.

Referencing, “The Information Note associated with r 14.88.” [ 38 ] The presumption in r 14.88(1) is that: “Unless otherwise ordered, the successful party in an appeal or an application is entitled to a costs award against the unsuccessful party.” This

section also makes the “provisions of

Part 10, Division 2 and

Schedule C” applicable to appeals: Alberta Rules of Court , r 14.88(2). [ 39 ] Consequently, based on the provisions of the Rules of Court and the caselaw, I conclude that the Defendant being the successful party on appeal is entitled to costs of the appeal payable by the Plaintiffs. [ 40 ] This takes me to the next line of inquiry: When are these accrued costs – i.e. the Plaintiffs’ thrown away costs and the Defendant’s appeal costs – payable?

Timing of Costs Payment Thrown Away Costs [ 41 ] The default payment principle under the Rules of Court , r 10.29(1) is: A successful party to an application, a proceeding or an action is entitled to a costs award against the unsuccessful party, and the unsuccessful party must pay the costs forthwith , notwithstanding the final determination of the application, proceeding or action ... ( emphasis added ). [ 42 ] In S(VA) v Grace , 2014 ABQB 268 at para 12 , 2014 CarswellAlta 726, Veit J wrote that “thrown-away costs are, by their very nature, costs which should not have had to be incurred; it doesn’t matter if the party who has wasted money on those steps eventually wins or loses the lawsuit.

Therefore, there is no point in waiting to pay for those costs until the final result of the lawsuit is known.” This reasoning was adopted in Palmer v Acciona Infrastructures Canada Inc , 2017 ABQB 143 at para 31 , 2017 CarswellAlta 342 (“it is often appropriate that thrown away costs be payable forthwith”) [ Acciona Infrastructures ].

See also BAC Trailer Ltd v Parkland Chip Products , 2009 ABQB 533 at para 24 , 2009 CarswellAlta 1460; Elash v Paton , 2009 ABQB 346 at para 19 , 2009 CarswellAlta 813. [ 43 ] I endorse the reasoning in S(VA) v Grace and Acciona Infrastructures . [ 44 ] I find that, in the circumstances of the present matter, including the absence of any evidence to suggest that payment of these costs would affect the Defendant’s continuation of his defence, it is appropriate that the thrown away costs incurred by the Plaintiffs be paid forthwith by the Defendant Thomas. [ 45 ] This does not end the analysis.

Appeal Costs [ 46 ] Although the Court of Appeal’s decision did not deal with costs nor award any, as indicated earlier, the presumptive general rule is that the successful party is entitled to costs forthwith: Rules of Court , rr 10.29 and 14.88. [ 47 ] Rule 10.29(1) explicitly prescribes, inter alia , that: “A successful party to an application, a proceeding or an action is entitled to a costs award against the unsuccessful party, and the unsuccessful party must pay the costs forthwith , notwithstanding the final determination of the application, proceeding or action”. [ 48 ] In effect, both the thrown away costs to the Plaintiffs and the appeal costs to the Defendant who was the effectively successful party on appeal are payable forthwith. [ 49 ] The granting of costs is an inherently discretionary matter on the Court’s part.

However, this is subject to the proviso that such discretion is exercised in a principled and rational manner: Blaze Energy Ltd v Imperial Oil Resources , 2014 ABQB 509 at para 66 , 2014 CarswellAlta 1498.

As well, the non-exhaustive list of factors that are enumerated in r 10.33 provides guidance in the exercise of this discretion: Orbis Engineering Field Services v Taifa Engineering Ltd , 2019 ABQB 592 at para 5 , 2019 CarswellAlta 1577. [ 50 ] Based on the foregoing, and in particular, the list of factors enumerated in r 10.33 as applied to the facts and circumstances of the within Action, I agree with the perspective of Justice Veit in VAS v Grace , 2014 ABQB 150 at para 42 , aff’d 2016 ABCA 45 , where she concluded that there is “no [discernible] principled reason to indemnify a litigant for legal costs even before a final decision on success has been made ” [ emphasis added ].

Conclusion [ 51 ] In the result, I declare and order that: i. Thrown away costs, based on Column 4 of

Schedule C, for Plaintiffs actions prior to December 12, 2016 – when the Defendant Thomas declared bankruptcy – are payable forthwith; ii. Appeal costs, based on the provisions of rr 10.29(1) and 14.88 of the Alberta Rules of Court , are payable to the Defendant forthwith; and iii. Given that the costs in (

i) and (ii) above are both equally payable forthwith, they shall be set-off against each other; and payable in the cause as determined by the trial judge. [ 52 ] Each party shall bear their own costs of this Application. Heard on the 19 th day of November, 2019. Dated at the City of Edmonton, Alberta this 20 th day of December, 2019. Don J. Manderscheid J.C.Q.B.A. Appearances: A Poburan Ogilvie LLP for the Plaintiffs S Brownlee Stewart Brownlee Law

for the Defendants