ERNIE HOLMBERG Plaintiff - v. -, 2003 ABQB 272

Holmberg v. Pluto Investments Ltd., 2003 ABQB 272 Date: 2003 03 21 Action No. 0103-13263 IN THE COURT OF QUEEN'S BENCH OF ALBERTA JUDICIAL DISTRICT OF EDMONTON BETWEEN: ERNIE HOLMBERG Plaintiff - and - PLUTO INVESTMENTS LTD. Defendant _______________________________________________________ RULINGS ON COSTS of the HONOURABLE MR. JUSTICE J. B. DEA _______________________________________________________ APPEARANCES: Robert P. James, Ms. Lynn Michele Angotti (Parlee McLaws LLP) For the Plaintiff Theodore D. Bossé, Q.C. (Ogilvie LLP) For the Defendant

[ 1 ] In February of this year, I rendered judgment in favour of the Plaintiff in this wrongful dismissal case. Subsequently, the parties appeared before me to resolve issues of costs. [ 2 ] The main issue arises out of the fact that the Plaintiff, prior to trial, offered to settle the action with the Defendant for less than the amount awarded by me at trial. In his Bill of Costs, the Plaintiff claims some double costs as provided by Rule 174(4) of the Alberta Rules of Court . The Defendant resists this claim and argues that the Offer of Settlement is not adequate to trigger the applicability of Rule 174(4).

There is also a dispute over the entitlement of second counsel fees for the Plaintiff. [ 3 ] The Rules governing Compromise Using Court Process set forth in

Part 12 of the Alberta Rules of Court as relevant are as follows: 170.

(1) At any time after the issuance of the statement of claim but before the commencement of the trial, the plaintiff may serve on the defendant an offer specifying the terms under which the plaintiff is willing to settle the plaintiff’s claim or, if more than one claim is made, any one or more of the plaintiff’s claims. 174.

(2) Where a plaintiff, with respect to the matters specified by him in his offer to settle under Rule 170, recovers a judgment equal to or greater than the judgment offered, the judge or the Court of Appeal shall, unless for special reason, award the plaintiff double the amount of costs (excluding disbursements) he would otherwise have recovered for all steps in relation to the claim after the service of the offer. [ 4 ] The Offer of Settlement served on the Defendant is in the following form: TAKE NOTICE that pursuant to Rule 170, and

Part 12, of the Alberta Rules of Court , the Plaintiff hereby offers to settle the within action on the following basis: 1. The Defendant will pay to the Plaintiff the amount of $32,499.99, representing three months of the Plaintiff’s regular employment remuneration. 2. The Defendant will pay to the Plaintiff interest on the said sum of $32,499.99 pursuant to the Judgment Interest Act , R.S.A. 1980, c.J-0.5, as amended. 3. The Defendant will pay to the Plaintiff his taxable costs of this action.

AND FURTHER TAKE NOTICE that this offer will cease to have effect and will be withdrawn pursuant to Rule 170(5) after 45 days from the service of same, which withdrawal will come into effect automatically and without further notice. [ 5 ] In general, costs at trial fall within the discretion of the Court.

Rule 601(1) provides as relevant: Notwithstanding anything in Rules 602 to 612, but subject to any Rule expressly requiring costs to be ordered, the costs of all parties to any proceedings (including third parties), the amount of costs and the party by whom or the fund or estate or portion of an estate (if any) out of which they are to be paid are in the discretion of the Court, . . . .

[ 6 ] Where

Part 12 of the Alberta Rules of Court is involved, an exception to the discretionary Rule established by Rule 601(1) is seen. By Rule 174, the Court is required, as indicated, to order double costs unless a “special reason” exists to deny such a sanction. In commenting on Rule 174(2), supra , the Court of Appeal in Forster v. MacDonald , (1995), 1995 ABCA 431 (CanLII) , A.J. No. 1063 at paragraph 5 said: We emphasize the word “shall”. We cannot see any facts here which even approach “special circumstances”. Rule 174(2) is not to be frittered away, for its whole purpose is to encourage settlement.

The last thing that our crowded courts need is uneconomical litigation, such as trials or appeals where the difference between the parties’ positions is small, even negative. [ 7 ] In addressing the general purpose of the Rules respecting Compromise Using Court Process (Part 12), the Court of Appeal in Whittle v. Davies , (1987), 1987 ABCA 236 (CanLII) , 104 A.R. 336 stated that: [t]he Rule is designed to ensure that a plaintiff does not carry forward litigation which results in recovering less than the defendant would have voluntarily paid.

That object can best be achieved by the maintenance of an effective sanction. [ 8 ] In the case at bar, the Formal Offer of Settlement is unequivocal and clear and references

Part 12 of the Alberta Rules of Court in addition to Rule 170, the Rule under which the Plaintiff offered to settle. Unless special reasons exist for not awarding double costs, the Court is required by Rule 174(2) to do just that. [ 9 ] Here, the Defendant relies on comments in Garand v. Mutual of Omaha Insurance Co. , (2001), A.J. No. 1431 and the case much relied upon by the plaintiff in Peter Pond Holdings Ltd. v. Phil Shragge , (2002), A.B.Q.B. 746. [ 10 ] In Garand , supra , the defendant offered to settle the lawsuit for $40,000.00 and referred to Rule 174(1).

In his covering letter to the plaintiff, the defendant went into some detail to explain to the plaintiff the costs consequence of the plaintiff failing to recover a judgment against the defendant in excess of the $40,000.00. The defendant went so far as to estimate that the costs that the plaintiff would have to pay would be between $30,000.00 and $60,000.00. Clearly, the defendant was contemplating that the plaintiff would recover something in his lawsuit. In fact, the Court dismissed entirely the plaintiff’s claim.

That contingency is addressed by Rule 174(1.1): When costs are payable to the defendant under subrule (1) and the action is dismissed entirely, those costs shall, unless for special reason, be double the amount of costs (excluding disbursements) the defendant would otherwise have recovered for all steps in relation to the defence after the service of the notice of payment or the offer. [ 11 ] While Rule 174(1) requires a Court to award costs to the defendant when the plaintiff fails to recover judgment in excess of the offer, Rule 174(1.1) requires that those costs be doubled when the plaintiff’s claim is dismissed entirely. [ 12 ] In end result, the Trial Judge in Garand , supra , says at paragraphs 56 and 57: 56.

Therefore, I find that while the Plaintiff’s reply to the proposal of settlement clearly states that he understood the repercussions of rejecting the offer, I find that the repercussions he was referring to were those detailed in Rule 174(1), not Rule 174(1.1). Furthermore, I find that he would understand his risks in terms of costs awarded against him to be in the area of not more than $60,000.00. 57. No special reasons exist in this case to prevent the application of Rule 174(1) against the Plaintiff.

However, considering all the circumstances, I find that a special reason exists to prevent the application of Rule 174(1.1) against the Plaintiff. [ 13 ] The Defendant also refers me to paragraphs 51 and 52 of Garand , supra , where the Court says:

51. That having been said, I would apply in part the approach taken as to Rule 174 by the courts in Laframboise , 1991 CanLII 5880 (AB KB) , 81 Alta. L.R. (2nd) 285 at 286 and Madge , 2000 ABQB 156 (CanLII) , 259 A.R. 351 . Because 174 is punitive in nature, it seems to me that an offer of settlement must be clear. Moreover, it is not just the offer itself that must be clear, but also the effect of rejecting that offer. This principle should apply equally between represented and self-represented litigants. 52.

In this case, I would consolidate the latter two objections of the Plaintiff into the single proposition that when an Offer of Judgment is made with the intent of demanding double costs, the fact of double costs risk should be mentioned. . . . [ 14 ] The Defendant argues in this case, as in Garand , supra , that the specific Rule that triggers double costs, i.e. 174(2), is not mentioned, and he argues that the offer is accordingly inadequate to invoke that Rule or, in any case, constitutes a “special reason” for declining to grant double costs. [ 15 ] The Defendant also refers me to paragraph 8 of Peter Pond Holdings Ltd. , supra , where Read, J. says: In the course of a lawsuit, many offers are made on a without prejudice basis in an effort to reach settlement.

However it is only offers made under the Rules that invoke the particular results set out in Rule 174. Thus, I have concluded that unless it is made clear to the receiver in the offer that the other side is invoking the penalty provisions of Rule 174, it would be unfair to that party if it were later invoked. [ 16 ] The foregoing citations are presented in support of the Defendant’s argument that the particular

section must be referenced in order to invoke the double costs sanction. [ 17 ] With respect, I am not able to accept this argument. [ 18 ] In Peter Pond Holdings Ltd. , supra , the Trial Judge dealt with a situation where the defendant’s lawyer in naming a Rule in his Offer of Settlement named Rule 170 rather than Rule 169. The Court points out that Rule 170 deals with offers by the plaintiff and it is Rule 169 that deals with offers by a defendant. She concludes by saying that the reference to Rule 170 was a simple mistake. She goes on in paragraphs 9, 10 and 11 to say: 9.

Here, however, it is clear that the reference to Rule 170 rather than Rule 169 wassimply a mistake made by the lawyer for the Defendant. It must therefore have been clear to the Plaintiff when he received this offer that the Defendant was seeking to invoke the penalty provisions of Rule 174 notwithstanding that he also made an error in quoting these. I have concluded therefore that the Defendant here has made sufficient reference to the Rules to justify application of the penalty provisions set out in Rule 174 unless there is some special reason for not doing so. 10.

In reaching this conclusion, I have considered this Court’s decision in the Floral Holdings case and particularly Mason, J.‘s conclusion there that offers must specify that they are being made pursuant to Rule 170 in order to qualify as offers made under the Rules. The Floral Holdings case is however, distinguishable from the situation here.

In Floral Holdings the offer made absolutely no reference to the Rules of Court and after a careful reading of this case, I have concluded that the statement about the necessity of referencing the Rule stemmed from the Court’s concern there that formal offers made under the Rules be distinguished from other more informal offers made in the course of a lawsuit where there is no mention of and no intention to invoke the Rules. 11. Although it was not cited to me by either side, I note that the Floral Holdings case was referred to in Elliot v. Hill Bros. Expressways Ltd. , [1999], A. J. No. 378 (Q.

B.) , where Clark, J. stated that the successful defendant there could only recover double costs if there had been a specific mention of the Rules. He concluded that because there was no reference in the settlement correspondence between the parties to the Rules of Court generally, or to a specific Rule, that the Court’s general discretion to award costs was not there limited by Rule 174. I have concluded that this case, as well, stands only for the proposition that a successful party cannot invoke the costs penalties set out in the Rules unless it has made specific reference to the Rules in its offer.

[ 19 ] Read, J. in Peter Pond Holdings Ltd. , supra , then concludes in paragraph 13: Clearly the purpose of the settlement rules is to promote realistic settlement offers, and to avoid unnecessary litigation. The costs sanction set out in these Rules helps achieve this purpose by encouraging parties to seriously consider offers made under the Rules. Obviously, this purpose can only be achieved where the offer makes it clear to the receiving party that the Rules are being invoked. However, I cannot see that the addition of extra and technical hurdles to the Rules will aid in achieving their basic purpose.

Denying a successful party his costs where, like here, a clerical error has resulted in a failure to correctly identify the particular Rule being invoked is, in my view, a technical defect only and I decline to find that the error should operate to deny the successful Defendant here from benefiting from the cost provisions of Rule 174. There is no value in turning this process into a highly technical one as long as it is clear from the fact of the settlement offer that it is a formal offer under the Rules of Court.

Where it is clear that the offeree was not confused and knew that the other party was invoking the Rules of Court, that should be sufficient to trigger the application of Rule 174. [ 20 ] Garand , supra , was not discussed in Peter Pond Holdings Ltd. , supra , but the principles applied in Peter Pond Holdings Ltd. , supra , in distinguishing Floral Holdings , supra , and Elliot v. Hill Bros. Expressways Ltd. , supra , apply as well to Garand , supra . What is needed is a settlement offer that is a formal offer under the Alberta Rules of Court .

Such an offer will indicate to the recipient of the offer that the Compromise Using Court Process Rules are being invoked. Reference to particular Rules will be a helpful way of accomplishing the purpose, but no particular form is required. In like manner, while the recipient of the offer needs to know the consequences of a formal offer under the Rules, no particular wording or form is needed to accomplish this.

When the recipient has notice that the settlement offer is a formal offer under the Rules, he has notice of the consequences and nothing further need be done. [ 21 ] The operation of the compromise Rules, of course, remains subject to “special reasons”.

In the case at bar, “special reasons” were argued but no special reason was cited nor does one appear. [ 22 ] Because the offer in the case at bar was clear and unequivocal and invoked the compromise Rules in the Alberta Rules of Court , the concerns of Garand , supra , and the other cases referred to therein on issues of specificity of Rule number or knowledge of the offeree of cost consequences, are not raised. But even if they were, the judgment in Peter Pond Holdings Ltd. , supra , is to be preferred and would resolve the issue.

SECOND COUNSEL FEE [ 23 ] An award of second counsel fees lies entirely within the discretion of the Court (see s.26(

b) of

Schedule C of the Alberta Rules of Court ). [ 24 ] This was a short trial consisting of three days of evidence and an hour or so of argument. This case in the law of wrongful dismissal was not complex. It was basically fact driven. I have no doubt that the second counsel assisted her Principal in the preparation of the case and at trial but it would be wrong to suggest that the Principal could not have conducted the case without second counsel or even that it would have imposed legal difficulties on him to do so. [ 25 ] Counsel have referred me to several cases, including Kassam v.

Dragish , (1991), 1991 CanLII 13058 (AB KB) , A.J. No. 623 per Veit, J. and Viridian Inc. v.

Dresser Canada Inc. , (1998), A.B.C.A. 275. [ 26 ] Both cases inform me on this topic, but were cited to me in support of the proposition that a client would not agree to pay for a second counsel where one was not really required because the party/party costs allowed to a successful litigant are only a fraction of the client’s actual cost. [ 27 ] The cost structure in Canada is said to be a compromise between the American system (no costs) and the British system (indemnity) and so to say that party/party costs do not repay the legal fees incurred by a successful litigant is not to condemn our system as much as it is to describe it. [ 28 ] Even if the test for second counsel fees were connected to the belief of the client that two counsel were needed in order to successfully prosecute his claim, there was no suggestion in the hearing before me that the client had, in fact, been asked to make such a

decision or weighed the additional expense against the possibility of an award of costs. In the circumstances, and bearing in mind that this case was neither complex nor weighty, nor did it involve great issues or sums of money, I must decline the Plaintiff’s application. [ 29 ] The Defendant then asks that instead of remitting the Bill of Costs to the Taxing Officer, that I simply fix a lump sum award. I declined his request.

With my rulings on double costs and the second counsel costs, the parties should be able to resolve the bill between themselves without reference to a Taxing Officer but if I am wrong in that, the matter is best dealt with by the Taxing Officer. [ 30 ] Finally, the Defendant argued that each side should bear its own costs on these appearances respecting the Bill of Costs presented by the Plaintiff. He pointed out that success had been mixed. Notwithstanding this, I declined that request. The issue of double costs was seriously disputed and argued by the parties.

The issue of second counsel was raised but not pursued with much vigour. [ 31 ] In the circumstances, the Plaintiff is entitled to his costs for these appearances. HEARD on the 13 th day of March, 2003. DATED at Edmonton, Alberta this 21st day of March, 2003. __________________________ J.C.Q.B.A.