956126 Alberta Ltd. Plaintiff - v. -, 2021 ABQB 121

Court of Queen’s Bench of Alberta Citation: 956126 Alberta Ltd v JMS Alberta Co Ltd, 2021 ABQB 121 Date: 20210217 Docket: 1403 01013 Registry: Edmonton Between: 956126 Alberta Ltd. Plaintiff - and - JMS Alberta Co Ltd. Defendant - and - JMS Alberta Co Ltd. and Myung Goan Kim Plaintiffs by Counterclaim - and - 956126 Alberta Ltd. and Jae Soo Doh Defendants by Counterclaim _______________________________________________________

Decision on Costs of the Honourable Mr. Justice K.S. Feth _______________________________________________________ [1] Judgment in this action was granted in favour of 956126 Alberta Ltd. (“956”) following a

Summary Trial: 2020 ABQB 718.The counterclaim against 956 and Jae Soo Doh (“Mr. Doh”) was dismissed. As the successful parties, 956 and Mr. Doh apply for costs,including on an enhanced scale because a Formal Offer to Settle was not accepted and allegations of deceit were not proven. General principles [2] A successful party is usually entitled to costs against the unsuccessful party, subject to the Court’s discretion: Rule 10.29 ofthe Alberta Rules of Court, Alta Reg 124/2010 (the “Rules”).

A trial judge’s discretion must be exercised judicially and in accordancewith established principles: Lameman v Alberta, 2011 ABQB 532 at para 6, leave to appeal refused, 2011 ABCA 724. [3] Where a party has been successful both in relation to the initial claim and a counterclaim, the general rule is that the costs ofthe counterclaim should reflect the amount by which the costs of the proceeding increased as a result of the counterclaim: Parrish &Heimbecker Ltd v All Peace Auctions Ltd, 2002 ABQB 602 at para 29 [Parrish]; Griffin v Corcoran, 2001 NSCA 73 at para 82[Griffin]; Limon v London Frozen Foods Ltd, (ON SC), [1964] 2 OR 235 (HCJ); Shillelagh Cabarets Ltd v Celona,[1980] BCJ No 1511 at paras 15 and 16 [Shillelagh]; Mark M.

Orkin, The Law of Costs, loose-leaf, 2nd ed (Toronto: Thomson Reuters,2019) explained at 2-156 [Orkin]. [4] Where the claim and the counterclaim overlap extensively and essentially deal with the same issues, and where thecounterclaim did not add appreciably to the length or complexity of the trial, it may be appropriate for the Court to exercise its discretionand award no costs with respect to the counterclaim: Griffin at paras 86, 88 and 90. [5] Costs of a counterclaim are additional costs and may include severable parts relating only to the counterclaim. However, theitems under

Schedule C are generally not apportioned between the claim and the counterclaim: W. Stevenson and J. Côté, CivilProcedure Encyclopedia, Vol 1 (Edmonton: Juriliber, 2003) at 15-15. The concerns are that the work done cannot be neatlycompartmentalized and the time and expense to separate the costs in this manner would be impractical and prohibitive: Murphy OilCanada Ltd v Predator Corporation Ltd, 2005 ABQB 134 at para 17. The appropriate column under

Schedule C and theapportionment of costs [6] 956 was awarded judgment against JMS Alberta Co Ltd. (“JMS”) for $134,060.75 plus interest. The final calculation ofinterest is not before me but the combination of the principal amount of the judgment and the interest is very likely below $200,000. Theappropriate column under

Schedule C of the Rules is determined by the quantum of damages plus prejudgment interest: Parrish at para11. Column 2 therefore applies to the initial claim. [7] JMS and Myung Goan Kim (“Mr. Kim”) brought the counterclaim against 956 and Mr. Doh seeking $650,000 plus interestand solicitor/client costs. 956 and Mr. Doh contend that the quantum sought in the counterclaim engages Column 4 of

Schedule C,which involves claims over $675,000 (effective May 1, 2020). On that basis, they request that all of the costs in the action be assessedusing that column. JMS and Mr. Kim submit that Column 2 remains operative. [8] In an action where the plaintiff has succeeded on the initial claim and successfully defended the counterclaim, the costs areusually calculated based on the amount of the judgment, although the trial judge maintains discretion to direct otherwise: Shillelagh atpara 16.

In my view, where the facts and legal issues of the claim and the counterclaim substantially overlap, the amount of the judgmentgenerally provides a better indication of the complexity and legal expense associated with the proceedings than the amount claimed. Thejudgment reflects the Court’s evaluation of the competing claims and a determination of the real interests that were at stake. [9] The pleadings in this action, and the evidence and arguments at trial, demonstrate that the initial claim and the counterclaimarise from the same fact pattern, transaction, and issues.

The allegations and defences are intrinsically and inexorably interconnected. [10] The claim and counterclaim proceeded concurrently. As noted in the costs submissions on behalf of JMS and Mr. Kim, boththe claim and the counterclaim involved the same chronology and litigation steps, with the same litigation representatives. However, Inote that the counterclaim advanced some discrete heads of damages and an unjust enrichment claim that significantly complicated theproceeding. [11] A draft Bill of Costs submitted by 956 and Mr.

Doh does not expressly address the amount by which the counterclaimincreased the costs of the proceedings. Mr. Doh was the principal of 956 throughout, so his participation as a party in the counterclaimdid not add markedly to the length or complexity of the proceeding or to the overall expense. [12] In the circumstances of this case, I am satisfied that Column 2 fairly reflects the complexity, legal expense, and true measureof the financial interests raised by the claim and the counterclaim.

[ 13 ] Based on the

Summary Trial record and the litigation steps described in the draft Bill of Costs, I estimate that 25% of the costs of the action are properly attributed to the counterclaim. I therefore set the costs of the counterclaim as 25% of the fees, disbursements and GST of the action. The parties liable for costs [ 14 ] Mr. Doh and 956 ask that costs of the action be awarded against JMS and Mr. Kim jointly and severally. JMS and Mr. Kim contend that only JMS is the judgment debtor and that costs should not be granted against Mr.

Kim. [ 15 ] Unless the Court exercises its discretion and orders otherwise, the usual rule is that unsuccessful plaintiffs should be jointly and severally liable for costs: Zubick v Alberta Teachers’ Association , 2008 ABQB 241 at paras 20-21 [ Zubick ], aff’d by 2008 ABCA 136 ; Kent v MacDonald , 2020 ABQB 29 at para 9 ; Daniels v Westfair Foods Ltd , 2006 ABQB 878 at para 3 ; Ontario v Rothmans Inc , 2013 ONCA 353 at paras 143-150 ; Wadden v BMO Nesbitt Burns , 2015 NSCA 48 at para 131 ; Giles v Westminster Savings Credit Union , 2010 BCCA 282 at paras 96-99 ; Orkin at 2-97.

The decision to order otherwise must be exercised judicially: Zubick at para 23 . [ 16 ] On February 1, 2019, 956 discontinued the claim against Mr. Kim on a without costs basis. I therefore find that Mr. Kim should not be jointly and severally liable as a defendant for the costs of the initial action. [ 17 ] Mr. Kim nevertheless remained a Plaintiff by Counterclaim. The alleged deceit concerned representations and information provided by Mr. Doh to Mr. Kim personally before JMS became involved in the real estate transaction. Mr. Kim was therefore a necessary party to the counterclaim.

He was the directing mind of JMS and facilitated the proceeding. The counterclaim had the potential to personally reward Mr. Kim. [ 18 ] JMS and Mr. Kim jointly advanced and failed to succeed on the counterclaim. I find that the fair and just outcome is that they be jointly and severally liable for all costs associated with it. Formal Offer to Settle [ 19 ] On April 12, 2018, Mr. Doh and 956 served a Formal Offer to Settle on Mr. Kim and JMS to resolve both the claim and the counterclaim. The Offer contemplated a payment from Mr. Doh and 956 to JMS and Mr. Kim of $70,000.

Both the claim and the counterclaim would have been discontinued on a without costs basis. [ 20 ] The Formal Offer complied with the requirements under Rule 4.24. No issue arises about the Offer being a genuine compromise. The Offer was not accepted. [ 21 ] In accordance with Rule 4.29, Mr. Doh and 956 are entitled to double costs for all steps taken in relation to the claim and the counterclaim after service of the Offer. No “special circumstances” as contemplated by Rule 4.29(4)(

e) have been identified. [ 22 ] Mr. Doh and 956 shall have double costs for all steps in the action after April 12, 2018. Enhanced costs due to allegations of deceit [ 23 ] Mr. Doh and 956 seek enhanced costs because JMS and Mr. Kim alleged, but failed to prove, that Mr. Doh and 956 engaged in deceitful conduct by misstating or failing to disclose information relevant to the commercial real estate transaction at issue. They seek a multiplier of 1.25 for all of the fee costs under

Schedule C. [ 24 ] Where unsubstantiated allegations of fraud, deceit, or dishonest conduct are made in a Statement of Claim, increased costs may be awarded: Thompson v Procrane Inc , 2016 ABCA 71 at paras 15-17 [ Thompson ]; Myers v Alanridge Homes Ltd , 2019 ABQB 65 at para 18 ; Bizon v Bizon , 2012 ABQB 605 at para 21 ; R & S Industries Inc v Hildebrand Industries Ltd , 2002 ABQB 1107 ; Khamo v Daved , 1998 ABQB 832 at para 24 .

The Court discourages unfounded allegations of this nature and may award enhanced costs to penalize the accuser’s conduct, even where no evidence is provided that the defending party suffered actual prejudice or embarrassment: Thompson at para 16 . [ 25 ] Enhanced costs for failure to prove allegations of fraud or dishonesty are generally awarded only where “reprehensible, scandalous or outrageous conduct” is shown on the part of one of the parties: Hamilton v Open Window Bakery Ltd , 2004 SCC 9 at para 26 . [ 26 ] The Alberta Court of Appeal explained the proper approach in Abt Estate v Ryan , 2020 ABCA 133 at para 59 [ Abt ] , referring to Strategic Acquisition Corp v Multus Investment Corp , 2017 ABQB 297 at paras 25-26 , varied but affirmed as to costs, 2018 ABCA 63 at para 20 : ... enhanced costs for failure to prove fraud ... 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....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”. [ 27 ] The Court of Appeal in Abt at para 61 confirmed that the analytical framework for unfounded allegations of fraud invites a trial judge to analyze: 1. the nature of the allegation made, and whether the particular circumstances of the party against whom the allegation was made

were such as to make the implication of the allegation more serious; 2. what, if any, information supportive of the allegation was known to the party making the allegation; 3. the strength and reliability of that information as it was known, or should have been known, by the party making the allegation; 4. the steps taken by the party making the allegation to verify the information upon which the allegation was based; 5. when the information was made known to the party making the allegation, whether additional information subsequently became known and whether the allegation was modified, or withdrawn to reflect the new information; 6. the timeliness of any such modification or withdrawal; and 7. whether the party making the allegation knew, or should have reasonably known, the allegation’s implications for the party against whom it was made... [ 28 ] JMS defended the initial claim, in part, by alleging that 956 engaged in “willful deceit.” The counterclaim alleged that the real estate transaction was the result of “deceit” by both 956 and Mr.

Doh. Fraud was not expressly pleaded, although that was the implication of the deceit allegation. [ 29 ] The allegation was primarily that 956 and Mr. Doh knowingly withheld relevant information during the negotiations leading up to the transaction and mischaracterized the extent of some hydrocarbon contamination.

The allegations did not involve egregious accusations such as falsifying documents, expressly lying, or orchestrating a complex deception. [ 30 ] The Statement of Defence to the Counterclaim pleaded that the “allegation of deceit and fraudulent misrepresentation is wholly without merit and should warrant solicitor/client costs as against the Plaintiffs by Counterclaim.” JMS and Mr. Kim were therefore on notice that pursuing the allegation might invite an enhanced award of costs, if not substantiated. [ 31 ] The evidentiary record at the

Summary Trial noted that Mr. Doh is a respected and senior member of the Korean-Canadian community in Alberta. However, nothing before me indicates that the deceit allegations were disseminated within that community or more generally. Nothing demonstrates actual prejudice to Mr. Doh, including embarrassment or reputational harm. [ 32 ] The allegation of deceit was based largely on circumstantial evidence. I find that the allegation, while unproven, had some plausible foundation and was not made in bad faith. [ 33 ] Mr.

Kim and JMS took steps to verify the allegation through discovery and the testimony of a realtor. I rejected the realtor’s evidence at trial on a material point, but that does not invite fault against Mr. Kim and JMS. [ 34 ] A proper canvassing of the allegation did not preclude advancing the assertion at trial. [ 35 ] I conclude that the allegation of deceit, while unfounded, was not egregious conduct that might be described as “reprehensible, scandalous or outrageous.” This situation is not appropriate for enhanced costs based on an unproven allegation of deceit or fraud.

I decline to augment the costs award on that ground. Calculation of costs [ 36 ] Mr. Doh and 956 request that the Court grant an all-inclusive lump sum for costs, including fees, disbursements, and GST. Their draft Bill of Costs identifies the specific fee items and disbursements for which they seek costs. [ 37 ] JMS and Mr. Kim have countered with a draft Bill of Costs calculated under Column 2. No issue is raised about the items in

Schedule C for which fees are claimed, although the computations differ because of the column used and the absence of any double costs after April 12, 2018. JMS and Mr. Kim do not contest the calculation of the disbursements, which is $9,753. GST is not claimed on the disbursements. [ 38 ] As the parties agree about the fee items, the proper calculation of the fees is readily ascertainable. Utilizing Column 2 of

Schedule C, the fees prior to April 12, 2018 total $10,500. Doubled fees after April 12, 2018 are $32,600. The aggregate is $43,100. GST on the aggregate amount, calculated at 5%, is $2,155. [ 39 ] The total costs payable to Mr. Doh and 956 are as follows: Fees: $43,100 Disbursements: $9,753 GST: $2,155 Total: $55,008 [ 40 ] Three-quarters of that total is attributed to the initial claim, being $41,256. JMS is liable for those costs. [ 41 ] One-quarter of the total is attributed to the counterclaim, being $13,752. JMS and Mr. Kim are jointly and severally liable for those costs.

[ 42 ] Mr. Doh and 956 provided a draft Formal Judgment for my approval, which includes provisions addressing the payment of pre-judgment interest and the discharge of a Vendor’s Lien Caveat and a Certificate of Lis Pendens registered against the property in question. JMS and Mr. Kim did not address the contents of that draft Judgment. They are hereby given 7 days to raise any remaining concerns about the contents. [ 43 ] The parties are also given 7 days to notify me if the calculations in these Reasons contain any arithmetic errors. [ 44 ] Counsel for Mr.

Doh and 956 is invited to forward to me a revised draft of the Formal Judgment incorporating my decision on costs. Written Submissions received on the 12 th and 26 th days of January 2021. Dated at the City of Edmonton, Alberta this 17 th day of February, 2021. K.S. Feth J.C.Q.B.A. Sid J. Kobewka Kobewka Stark for the Plaintiff/Defendants by Counterclaim Felipe Paredes-Canevari Reliance Legal Group LLP for the Defendant/Plaintiffs by Counterclaim