Khalil v Durant, 2021 ABQB 424

Court of Queen’s Bench of Alberta Citation: Khalil v Durant, 2021 ABQB 424 Date: 20210531 Docket: 1001 12325 Registry: Calgary Between: Alex Khalil Plaintiff - and - Jo-Anne Durant Defendant _______________________________________________________ Reasons for Decision Concerning Costs of the Honourable Mr. Justice D.A. Labrenz _______________________________________________________ [1] In Khalil v Durant, 2021 ABQB 241 (the “Decision”), I assessed the damages payable to the Plaintiff, Alex Khalil, inrespect of a failed real estate transaction.

I invited the parties to provide written submissions on costs if they could not agree. Havingfailed to reach any agreement as to costs, each separately forwarded written submissions to my attention on April 28, 2021. Following hisrequest, I permitted Khalil to file a reply submission on April 29, 2021. It is fair to say that the acrimony between the parties, as evidentat trial, features prominently in these costs submissions as well. [2] The starting proposition is that the successful party is entitled to costs from the unsuccessful party: Rule 10.29(1).

Khalil, notsurprisingly, claims to have been the successful party and asserts that he is entitled to costs. The Defendant, Jo-Anne Durant, argues thatthe matter is more nuanced. [3] In the Decision, I characterized the outcome as one of mixed success. Ultimately, Khalil was awarded damages, butsubstantially less than what he had originally claimed. Durant argues in her costs submission that Khalil claimed in excess of $1 million.I agree with Khalil that this is not accurate. In his brief, Khalil claimed damages of $308,024.63 - $446,455.63. At trial, he reduced hisclaim by $55,000 to $253,024.63 - $391,455.63.

This reduction, notwithstanding, the $47,083.71 I awarded represents only a modestfraction of Khalil’s claim. [4] In the Decision, I noted that both parties devoted considerable time at trial to unpersuasive arguments. Perhaps for thisreason, Khalil cited Pauloski v Nascor Incorporated, 2002 ABQB 855 at para 9, wherein this Court cautioned against awarding costs ona split-issue basis: Similarly, only in the clearest of cases are costs awarded on a split-issue basis. In Baker v.

Volk (1995), (AB KB),170 A.R. 63 at paras. 8, 13 (Q.B.), MacKenzie J. held: A party is free to raise any issue it wishes, but if in a proper case it is unsuccessful in proving a particular question, then that party risksbearing the costs of trying that issue, particularly when it is not one that from an evidentiary basis is at all related to the rest of theaction... In coming to the conclusion that this is a proper case to award costs on a split-issue basis, I would emphasize that should be done only inthe clearest of cases.

In exercising its discretion to award costs, I do not think it desirable that courts engage in a hair-splitting analysis of

issues which arise during a trial, awarding costs on some issues to one party and on other issues to the other party. Generally, costs follow the event which I take to mean that the winner of the action recovers costs and the loser pays them. However, there may be cases, and I think this is one of them, where the factual and legal issues are so distinct that justice ay call for a separate award of costs depending on the success on those issues. [ 5 ] I do not propose to award costs on a split-issue basis. Khalil was successful, albeit modestly so, and will have an award of costs.

The issue of mixed success is relevant to the quantum of that costs awarded. [ 6 ] In that vein, Durant seeks costs in respect of Khalil’s application at the commencement of trial to strike portions of her amended statement of defence (an application that I denied), and for Khalil’s application to adjourn the proceedings to permit him to call other witnesses (none of which were helpful).

I am not prepared to award costs to Durant in respect of these matters, but I have taken this submission into account when determining the appropriate amount of costs to be awarded to Khalil. [ 7 ] The factors to be considered in making a costs award are well-known. Rule 10.33 provides as follows: 10.33(1) In making a costs award, the Court may consider all or any of the following: (

a) the result of the action and the degree of success of each party; (

b) the amount claimed and the amount recovered: (

c) the importance of the issues; (

d) the complexity of the action; (

e) the apportionment of liability; (

f) the conduct of a party that tended to shorten the action; (

g) any other matter related to the question of reasonable and proper costs that the Court considers appropriate.

(2) In deciding whether to impose, deny or vary an amount in a costs award, the Court may consider all or any of the following: (

a) the conduct of a party that was unnecessary or that unnecessarily lengthened or delayed the action or any stage or step of the action; (

b) a party’s denial of or refusal to admit anything that should have been admitted; (

c) whether a party started separate actions for claims that should have been filed in one action or whether a party unnecessarily separated that party’s defence from that of another party; (

d) whether any application, proceeding or step in an action was unnecessary, improper or a mistake; (

e) an irregularity in a commencement document, pleading, affidavit, notice prescribed form or document; (

f) a contravention of or non-compliance with these rules or an order; (

g) whether a party has engaged in misconduct. [ 8 ] In his initial submission, Khalil “requests costs based on two separate calculations, both on a substantial indemnity basis.” For the first portion of the trial, he seeks 60% of his “first counsel fees” reduced, he says, from 80% “in light of the comments in the Decision” – presumably referring to my conclusion that there was mixed success. For the balance of the trial, he seeks 80% of his legal fees. [ 9 ] I see no basis upon which Khalil could successfully claim such a high percentage indemnity.

In McAllister v Calgary (City) , 2021 ABCA 25 at para 51 , the Court of Appeal confirmed that, in the absence of misconduct, party-party costs reflect a lesser percentage: As a general principle, we see no reason to depart from the 40-50% level of indemnification approved by this Court in Weatherford CA and Hill v Hill .

It provides a reasonable guideline upon which the level of indemnification implied by the phrase “reasonable and proper costs” may be measured under the Rules. [ 10 ] While the Court of Appeal certainly left open the possibility of higher or lower levels of indemnification, Khalil does not make clear argument as to why a higher percentage is appropriate here. Certainly, the high rate of indemnification that he seeks is not supported by either his degree of success, or the amount he ultimately recovered in relation to his initial claim, as provided for in Rule 10.33(1)(

a) and (b). [ 11 ] Alternatively, Khalil estimates his

Schedule C costs to be $28,387.50, leaving aside any doubling to be discussed, infra . [ 12 ] Durant asserts that the amount I awarded to Khalil in the Decision puts his claim as to damages squarely within the jurisdiction of the Provincial Court. She cites Rule 10.42(2)(a), which limits the costs available to 75% of

Schedule C costs on Column 1. I agree with Khalil that Durant’s submission in this regard is erroneous. While the amount payable by Durant to Kahlil pursuant to my Decision is $47,083.75, I assessed the damages payable to Khalil at $67,262.50, which exceeds the Provincial Court’s jurisdiction. Durant’s liability to Khalil was reduced below that threshold only by virtue of the contribution that I considered appropriate from the realtors.

[ 13 ] Durant also argues that because of “his relative lack of success, the quantum of the judgment obtained and the suspicious nature of some of his evidence”, the costs awarded to Khalil should be limited to half of his

Schedule C costs. [ 14 ] Each party accuses the other of being obstructionist. Khalil asserts that Durant refused to consider settlement and that his attempts were met with “multiple vexatious court applications intended to avoid his

summary judgment applications.” He says that he had no option but to go to trial. For her part, Durant argues that Khalil failed to disclose relevant documents and that she had no choice but to refuse to accede to his “grossly inflated claims.” [ 15 ] As I noted in my Decision, both parties spent unnecessary trial time on futile arguments that lengthened the proceedings as contemplated by Rule 10.33(2)(a). Both parties also made cost submissions attempting to distance themselves from the full extent of this wastage.

Durant correctly points out that her unsuccessful arguments did not require additional witnesses; however, not inconsiderable time was spent by her making those unsuccessful arguments, and by myself when addressing those arguments in the Decision. Beyond that consideration, Durant’s cross examination on these unsuccessful arguments, prolonged the duration of the damages trial. [ 16 ] Khalil argues as follows in his submission: The Court may be justifiably critical of the quantum of recovery sought by Mr.

Khalil at trial but when one considers the efforts required to get to trial, and the specious arguments presented by Ms. Durant to avoid any financial responsibility despite already being found in breach of contract, Mr. Khalil’s strategy at trial was perhaps understandable. ... The only reason that this matter went to trial was Ms. Durant. As much as Mr. Khalil made aggressive claims at trial, some of which in retrospect he should have abandoned ...extra trial time required by Mr. Khalil’s damages claims, which Mr. Khalil submits was minimal. [ 17 ] I disagree.

The better part of a day was devoted to the evidence of Mr. Proudfoot and Mr. Gill, neither of whom I found helpful. Additional time was spent on evidence from Khalil in respect of issues that had little chance of success. However frustrated Khalil was that Durant was not receptive to settlement, he is not entitled to adopt a “strategy” that unnecessarily prolongs proceedings and wastes scarce judicial resources. His having done so, must be accounted for in any costs award. [ 18 ] There are two other relevant factual points.

First, as I noted in the Decision, two other parties (the realtors) to this lawsuit ceased to be part of the proceedings by virtue of a Pierringer agreement that they independently entered into with Khalil. Durant now asserts that this agreement should be disclosed to her “to avoid any overcompensation to [Khalil] of his court costs”. Khalil indicated in his reply costs submission that he is prepared to disclose the agreement following finalization of costs but prior to any payment by Durant.

I will deal with the third parties later in these Reasons. [ 19 ] Second, on November 25, 2019, Khalil made a formal offer to settle for $50,000 “inclusive of pre-judgment interest, taxable costs and disbursements”.

Durant made no mention of this offer in her written submissions as to costs, but it is clear that the amount of damages I awarded to Khalil, even reduced by the contribution by the realtors, exceeds this offer. [ 20 ] Rule 4.29 deals with formal offers to settle and provides, in part, as follows: 4.29(1) Subject to subrule (4), if a plaintiff makes a formal offer to settle that is not accepted and subsequently obtains a judgment or order in the action that is equal to or more favourable to the plaintiff than the offer, the plaintiff is entitled to double the costs to which the plaintiff would otherwise have been entitled under rule 10.31(1)(

a) or 10.32 for all steps taken in relation to the action or claim after service of the offer, excluding disbursements. ...

(4) This rule does not apply (

a) if costs are awarded under rule 10.31(1)(b). [ 21 ] Therefore, if I decide to award costs under Rule 10.31(1)(a), Khalil would be entitled to have that award doubled. I note that the Court of Appeal in McAllister at para 30 confirmed that a costs award under Rule 10.31(1)(

a) may be calculated with reference to any of the Rule 10.31(3) options, including

Schedule C, or a percentage indemnity. If instead, however, costs are awarded under Rule 10.31(1)(b), the Rule 4.29 doubling does not apply. [ 22 ] All of the foregoing forms the necessary background as to the appropriate amount of costs to be awarded to Khalil. [ 23 ] I have considered the Bill of Costs provided by Khalil. As noted above, he calculates his

Schedule C costs under Column 1 at $28,387.50 without doubling. In my view, some of the items claimed in the Bill of Costs are excessive in light of the fruitless arguments and unnecessary trial time, as well as the modest recovery. [ 24 ] In these circumstances, it is appropriate to exercise my discretion to award costs as a lump sum under Rule 10.31(1)(b)(ii). I conclude that $12,500 is a reasonable amount for legal fees. In arriving at this figure, I have considered, inter alia , the costs attributable to the third-party realtors settled by virtue of the Pierringer agreement.

In my view, $12,500 is an appropriate amount of legal fees to directly attribute to Durant herself. [ 25 ] The remaining question concerns the effect of Khalil’s formal offer to settle. While Rule 4.29 does not mandate the doubling of a lump-sum costs award under Rule 10.31(1)(b)(ii), an offer to settle may be relevant to the costs recoverable, even in those circumstances where Rule 4.29 is inapplicable. See, for example, Jones v Gerosa , 2016 ABQB 614 . [ 26 ] It is clear that Durant should have accepted Khalil’s formal offer. Had she done so, much time and expense would have been

spared. As a consequence, I consider it appropriate to exercise my discretion to double the lump sum for legal fees. Consequently, I award Khalil $25,000 for legal fees. [ 27 ] I have reviewed the disbursements set out in Khalil’s Bill of Costs and conclude that they are reasonable. Therefore, I award $1,753.45 (GST applicable) and $1,800.00 (GST exempt) for a total of $3,553.45 in disbursements. [ 28 ] In the result, Khalil is awarded costs of $25,000 and disbursements of $3,553,45, plus GST as applicable. Dated at the City of Calgary, Alberta this 31st day of May, 2021. D.A. Labrenz J.C.Q.B.A.

Appearances: Michael D. Aasen McLennan Ross LLP for the Plaintiff Alex Khalil Aidan D. Henderson Bishop & McKenzie LLP for the Defendant Joanne Durant