EDMONTON REGIONAL AIRPORTS AUTHORITY, carrying on business as “Edmonton Airports” Plaintiff - v. -, 2003 ABQB 280

Edmonton Regional Airports Authority v. North West Geomatics Ltd., 2003 ABQB 280 Date: 2003 03 31 Action No. 9603 22081 IN THE COURT OF QUEEN'S BENCH OF ALBERTA JUDICIAL DISTRICT OF EDMONTON BETWEEN: EDMONTON REGIONAL AIRPORTS AUTHORITY, carrying on business as “Edmonton Airports” Plaintiff - and - NORTH WEST GEOMATICS LTD. Defendant AND BETWEEN: NORTH WEST ASSETS LTD., formerly NORTH WEST GEOMATICS LTD. Plaintiff by Counterclaim (Defendant) - and - EDMONTON REGIONAL AIRPORTS AUTHORITY, carrying on business as “Edmonton Airports” Defendant by Counterclaim (Plaintiff) - and - THE CITY OF EDMONTON Defendant by Counterclaim

_______________________________________________________ REASONS FOR JUDGMENT of the HONOURABLE MR. JUSTICE R. PAUL BELZIL _______________________________________________________ APPEARANCES: Larrie N. Boddy, Q.C. Greg K. Norman (Ogilvie LLP) For the Edmonton Regional Airports Authority Daniel W. Hagg, Q.C. (Bryan & Company) For the North West Assets Ltd. Roger Hofer (City of Edmonton Legal Department) For The City of Edmonton

Part I - Factual Background [ 1 ] Edmonton Regional Airports Authority brought action against North West Geomatics Ltd. for recovery of rental arrears of approximately $118,000.00 respecting a lease of premises located at the Edmonton Municipal Airport. The City of Edmonton was the original lessor and assigned its interest in the lease to ERAA. [ 2 ] North West Assets Ltd., the successor to North West Geomatics, counterclaimed for approximately $1.7 million exclusive of pre-judgment interest against the City and ERAA on the basis of an alleged derogation of leasehold grant and alleged tortious conspiracy.

The counterclaim was based on multiple heads of damages, all of which allegedly arose as a result of the decision to consolidate scheduled passenger service at the Edmonton International Airport on April 1 st , 1996. [ 3 ] The trial proceeded over 28 days and involved an enormous volume of documentary and oral evidence. Numerous experts testified. There was much conflict in the evidence. [ 4 ] In a lengthy Judgment, dated December 19 th , 2002, I allowed ERAA’s claim and dismissed the counterclaim in its entirety.

[ 5 ] This action was one of three actions brought against the City dealing with Municipal Airport issues. ERAA was a Defendant in two of the actions. This is the only action which went to trial as the others settled before trial. [ 6 ] A number of issues regarding costs are in dispute and were the subject of argument before me.

Part II - Should Double Costs Be Awarded In Accordance With

Part 12 Of The Alberta Rules Of Court? [ 7 ] On October 5 th , 2000 the Defendants by Counterclaim, jointly and severally, served on counsel for North West a document entitled “Offer of Judgment.” The Defendants by [ 8 ] Counterclaim, in accordance with

Part 12 of the Alberta Rules of Court, claim an entitlement to double taxable fees for all steps taken in the action after October 5 th , 2000.

North West takes the position that the Offer of Judgment is ambiguous and thus these parties have no entitlement to claim double costs after that date. [ 9 ] The Offer of Judgment reads as follows: OFFER OF JUDGMENT Pursuant to Rule 169(1) of the Alberta Rules of Court the Defendants by Counterclaim EDMONTON REGIONAL AIRPORTS AUTHORITY carrying on business as “Edmonton Airports” and THE CITY OF EDMONTON jointly and severally hereby offer judgment to the Plaintiff by Counterclaim, NORTH WEST ASSETS LTD. formerly North West Geomatics Ltd. as follows: 1.

The sum of $100,000.00 for damages, general and special, inclusive of pre-judgment interest pursuant to the Judgment Interest Act , R.S.A. 1980, c. J-0.5; and 2. Taxable costs and disbursements. Pursuant to Rule 169(3), if no acceptance has been filed, the Defendants by Counterclaim may, by serving notice of withdrawal upon the Plaintiff by Counterclaim, withdraw the offer at any time after 45 days from service of the offer.

Pursuant to Rule 174(1), if the Plaintiff by Counterclaim does not recover a sum greater than the amount of this offer, the Judge or the Court of Appeal shall, unless for special reason, award costs to the Defendants by Counterclaim for all steps in relation to that claim after the service of notice of this offer. Dated at the City of Edmonton, in the Province of Alberta, this _____ day of September, 2000. OGILVIE AND COMPANY PER:_______________________________ LARRIE N. BODDY, Q.C.

SOLICITORS FOR THE DEFENDANT BY COUNTERCLAIM EDMONTON REGIONAL AIRPORTS AUTHORITY carrying on business as “ Edmonton Airports ” REYNOLDS MIRTH RICHARDS & FARMER PER:_______________________________ CHERISSE KILLICK-DZENICK SOLICITORS FOR THE DEFENDANT BY COUNTERCLAIM THE CITY OF EDMONTON [ 10 ] Rules 169(1) and 174(1) of the Alberta Rules of Court are found in

Part 12, “Compromise Using Court Process,” and read as follows: Defendants offer of judgment 169(1) At any time before the commencement of trial, a defendant may serve upon the plaintiff an offer of judgment specifying the terms upon which he is willing to settle a claim, or, where there is more than one, any of them. Award of costs 174(1) Where a plaintiff does not (

a) with respect to the claim specified by a defendant in his payment into Court under Rule 166, recover a sum greater than the payment, including the amount of any counterclaim surrendered, or (

b) with respect to an offer of judgment made under Rule 169, recover a judgment greater than the judgment offered therein, The judge or the Court of Appeal shall, unless for special reason, award costs to the defendant for all steps in relation to that claim after the service of notice.

(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 ] North West argues that the Offer of Judgment is ambiguous in that no specific reference is made to each Defendant by

Counterclaim claiming double costs in the event the counterclaim was dismissed. [ 12 ] The Defendants by Counterclaim argue that the Offer of Judgment as drafted is not ambiguous and is sufficient to trigger an award of double costs after October 5, 2000. [ 13 ] Unquestionably,

Part 12 of the Alberta Rules of Court contains rules which are intended to encourage settlement between parties in civil actions by imposing punitive costs consequences. It is also unquestionable that these Rules, by their very wording, are designed to limit judicial discretion in terms of costs, but clearly, judicial discretion is not entirely eliminated. [ 14 ] A number of Courts have held that in order for parties to invoke the costs provision of

Part 12, it is necessary to trigger those Rules to ensure that they are contrasted from offers of settlement exchanged between counsel, which are common in litigation but which are not intended to trigger costs consequences. [ 15 ] Mason, J. in the case of Alberta (Treasury Branches) v. Floral Holdings Ltd. , [1990] A.J.

No. 1231 , in dealing with an offer to settle pursuant to Rule 170, said the following at paras. 12 to 14: 12 Further, to effect the application of the Rules, specific notice that the offer to settle is made pursuant to Rule 170 must be given if the plaintiff seeks to limit the Court’s general discretion to award costs by the provisions of Rule 174(2). That rule requires the Court to award double costs, unless a “special reason” permits the Court to order otherwise when the plaintiff recovers a sum equal to or greater than the amount of the terms of his Offer of Settlement made pursuant to

Section 170. See Whittle v. Davies (1987), 1987 ABCA 236 (CanLII) , 45 D.L.R. (4 th ) 331 at 334 and Rahmath v.

The Louisiana Land & Exploration Company et al. (Appeal No. 19853, Court of Appeal of Alberta). 13 Rule 174(2) reads as follows: “Rule 174(2) Where a plaintiff, with respect to the matters specified by him in his offer to settle under Rule 170, recovers a sum equal to or greater than the amount of his offer, the judge...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.” (my emphasis) 14 I read Rule 174(2) to mean the plaintiff must make and specify that his offer of settlement is made pursuant to the provisions of Rule 170 to make it applicable.

That makes eminent good sense. Not every offer of settlement made by a plaintiff is an offer under Rules 170 and 174. Often a plaintiff will make an offer of settlement in which he does not threaten double costs for purposes of negotiating a settlement. The Applicant’s contention that it is not necessary to specify the offer is made pursuant to Rule 170 would make Rule 170 applicable to all settlement proposals unless otherwise specified. That, to me, is untenable. Practical common sense dictates otherwise. [ 16 ] Clark, J., in the case of Elliott v. Hill Bros.

Expressways Ltd. (1999), 1999 ABQB 259 (CanLII) , 240 A.R. 371 , noted that rules can be triggered by way of correspondence between counsel, and said the following at paras. 7 and 8: 7 It is clear that where a settlement offer is made under Rule 170(1) “...to effect the application of the Rule, specific notice that the offer to settle is made pursuant to Rule 170 must be given if the plaintiff seeks to limit the court’s general discretion to award costs by the provision of Rule 174(2).” See Alberta Treasury Branches v. Floral Holdings Ltd. (1990), 1990 CanLII 5505 (AB KB) , 73 Alta L.R. (2d) 283 (Alta.

Q.B.) , per Mason J. 8 The same reasoning would apply with respect to a settlement proposal made by a defendant under Rule 169(1). In this case, a party defendant indicated that he was willing to accept a discontinuance without cost. I have not been provided with a copy of the correspondence between counsel but am advised during the course of argument that there is no reference to the Rules of Court generally or to a specific Rule.

If the correspondence between the parties indicated that the offer to settle was made pursuant to Rule 169(1), the court’s general discretion to award costs is limited by the provision of Rule 174(1.1) and the cost to which the defendant is entitled shall

“...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.” [ 17 ] In the case of Peter Pond Holdings Ltd. v. Shragge (2002), 2002 ABQB 746 (CanLII) , 3 Alta. L.R. (4d) 344; [2002] A.J. No. 1012 , Read, J. said the following at paras. 7 to 13: 7 The Plaintiff said in oral argument that it did not matter whether or not the Rules were specifically referenced in an offer as they had the same effect regardless. With respect, I do not agree with this submission.

The provisions of the Rules of Court which deal with offers were enacted to promote settlement. They are worded so as to limit the discretion of the judge when they operate and specifically set out the double costs penalty the Court is to order “unless for special reason.” 8 In the course of 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. 9 Here, however, it is clear that the reference to Rule 170 rather than Rule 169 was simply 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. 12 I have considered as well in reaching my conclusion the general purpose of the settlement rules. In Whittle v. Davies (1987), 1987 ABCA 236 (CanLII) , 104 A.R. 336 (C.A.), Stevenson, J.A. 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.” 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 benefitting 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. [ 18 ] These three cases stand for the proposition that in order to invoke the costs provisions of the Alberta Rules of Court it is

necessary for a party to make reference to the fact that the costs provisions of the Rules are being invoked. [ 19 ] This is not to say, however, that there is any authority for the proposition that any particular form of offer must be used, and, indeed, correspondence between counsel to this effect may be effective to trigger the cost provisions provided it is clear that the Rules of Court are being invoked in terms of making an offer. [ 20 ] Counsel for North West argues that the Offer of Judgment served in this case is ambiguous in that no reference is made to the fact that each Defendant by Counterclaim would seek to recover double costs. [ 21 ] There is no authority that an Offer of Judgment under

Part 12 of the Alberta Rules of Court in order to be valid must set out the consequences to an adverse party in not accepting an offer. There is no obligation on any party to educate an opposing party as to the effect of the Rules of Court which are available for all to read. [ 22 ] Accordingly, an Offer of Judgment need not set out the consequences of not accepting the offer. [ 23 ] In my view, this argument misapprehends the scheme set out in the Rules of Court dealing with Offers of Judgment.

The Rules are designed such that once an Offer of Judgment has been served, certain automatic costs consequences follow unless the Court, “for special reason,” decides on a different costs order. [ 24 ] The issue then becomes, on these facts, is there any “special reason” established? [ 25 ] Counsel for North West argues that a special reason can be found in the fact that there were two Defendants by Counterclaim who had some commonality of interest. I do not accept this argument.

Clearly, both the City and ERAA were exposed jointly and severally to the full amount of the counterclaim and while they had some overlapping interests, they are separate and distinct legal entities. [ 26 ] There is a clear reference to Rule 169(1) and a clear reference that the offer was being made by the City and ERAA jointly and severally. [ 27 ] At all times throughout this action the City and ERAA had separate counsel, and I do not accept that there is any merit to the argument that these parties at any time agreed to waive expressly or impliedly their individual right to claim double costs in the event that the counterclaim against them was dismissed. [ 28 ] Moreover, if the Offer of Judgment does not mean that the City and ERAA were seeking double costs if the counterclaim was dismissed, the question then arises, why bother serving an Offer of Judgment pursuant to Rule 169 at all? [ 29 ] Counsel for North West conceded that if the counterclaim were dismissed, the City and ERAA would be entitled, in the normal course, to recover costs.

Therefore, if North West’s argument is correct, the Offer of Judgment as served would have no costs impact in circumstances wherein the counterclaim was dismissed entirely. [ 30 ] The City and ERAA, throughout the litigation and throughout trial, resisted the counterclaim completely and at no time conceded that the counterclaim had any legal merit whatsoever. [ 31 ] Thus, it is impossible to accept that the City and ERAA, having expressly referred to Rule 169 in the Offer of Judgment, did not intend to claim the benefits of double costs in the event that they were successful in having the counterclaim dismissed entirely.

[ 32 ] In argument, counsel for North West submitted that Watson, J.’s decision in Garand v. Mutual of Omaha Insurance Co. , [2001] ABQB 964 is authority for the proposition that exposure to double costs should be mentioned in an Offer of Judgment. [ 33 ] The Garand case dealt with an unrepresented plaintiff who received an Offer of Judgment and a covering letter which estimated the plaintiff’s exposure to costs.

Watson, J. held that the offer was not sufficient to trigger double costs as the letter created ambiguity and confusion in the mind of the plaintiff as to what his cost exposure would be if he did not accept the offer. [ 34 ] The facts in Garand bear no similarity to this case wherein North West was represented by experienced counsel throughout and there was no correspondence accompanying the Offer of Judgment which can be pointed to as creating any alleged ambiguity. [ 35 ] It was then argued that ambiguity flows from the use of the word “costs” in the Offer of Judgment in that no reference is made to double costs.

I have already noted that there is no authority supporting this proposition and it is clear from the Rules that “costs” may well refer to double costs in some circumstances. [ 36 ] It is completely incongruous, in my view, for a party to sue multiple parties and then argue, in an attempt to resist costs, that these parties do not each have a right to claim costs to the fullest extent allowed by law, including double costs where appropriate. [ 37 ] No justiciable reason has been presented for not allowing double costs under these circumstances, and this conclusion is consistent with a number of Court of Appeal decisions which have directed Trial Judges to apply the cost provisions in the Rules of Court rigorously. [ 38 ] The Alberta Court of Appeal, in discussing the impact of awarding double costs, has made it clear that these costs rules can only be applied where there was a genuine offer of compromise, but where there is such a genuine offer, the Court is obligated to award double costs, absent special reason.

The following passages appear in the case of Meyer v. Partec Lavalin Inc. , [2002] ABCA 114, paras. 7 and 8: 7 Pursuant to Rule 174(1.1), the Court is obligated to award double costs, absent special reason, when a claim has been dismissed in its entirety... 8 On several occasions, this Court has held that, in order for the sanctions under these costs rules to apply, the offer must be a genuine offer of compromise: see Loyer v. Capital Jeep Eagle Ltd. (1996), 1996 ABCA 140 (CanLII) , 40 Alta. L.R. (3d) 186 (Alta. C.A.) at para. 8 ; Labbee v. Peters (2000), 2000 ABCA 176 (CanLII) , 261 A.R. 141 (Alta.

C.A.) At para. 13 ... [ 39 ] It is noteworthy that the Court of Appeal in the Meyer decision made no reference to any requirement that exposure to double costs be mentioned in the offer. Rather, the Court focussed on the issue of whether or not the offer was a genuine offer of compromise. [ 40 ] I conclude that the Offer of Judgment in this case was a genuine, unambiguous offer of compromise which North West chose not to accept. It must bear the costs consequences for not doing so. The City and ERAA are each entitled to double taxable fees for all steps in the action after October 5 th , 2000 based on Column 5 of

Schedule C.

Part III - Claim For Costs For Second Counsel [ 41 ] All parties to this action had second counsel throughout the trial. North West disputes the entitlement of the City and ERAA to claim second counsel fees under

Schedule C. [ 42 ] North West argues that there was a significant identity of interest between these parties, and thus second counsel fees should not be allowed for both the City and ERAA.

[ 43 ] I accept that there was some overlapping interest between the City and ERAA given that ERAA assumed a lease from the City. The evidence also disclosed that ERAA assumed responsibility for the Municipal Airport which previously had been owned and operated by the City. [ 44 ] Throughout this litigation, the City and ERAA had separate counsel and at no time was it indicated that they would be represented by the same counsel.

It is significant that the City and ERAA were alleged in the counterclaim to be co-conspirators, and, clearly, North West was pursuing the counterclaim against the City and ERAA jointly and severally. [ 45 ] As well, the City and ERAA are separate and distinct legal entities, and given that the City is a municipal corporation and ERAA a not-for-profit statutory airport operating authority, significant issues arise from this difference in legal status. [ 46 ] A trial of this magnitude would be an enormous undertaking for any lawyer and thus it was entirely appropriate for each side to have second counsel throughout the trial.

Veit, J., in the case of Kassam v. Dragish , 1991 CanLII 13058 (AB KB) , [1991] A.J. No. 623 , dealt with the issue of the appropriateness of second counsel, and said the following at paras. 13 through 15: 13 ...In Alberta, the money value of a case is a weighty factor in determining if second counsel fee should be allowed. 14 In addition, the trial Judge should consider not only the complexity of the trial issues, but also all other factors which, in a specific case, are relevant to the issue of what is a “reasonable and proper” charge for barristers and solicitors: R. 600(1)(a)(i).

It may be that the conduct of the other parties in the matter of additional counsel is an indication of how complex those parties considered the trial issues; this comparison will not, however, be relevant in all situations. In my view, the case does not have to be exceptionally complex or weighty before a second counsel fee is awarded. 15 It appears to me that the Court should err if at all on the side of generosity in allowing second counsel fees, since party-and-party costs provide their own form of check and balance in this matter.

Party-and-party costs will result in reimbursement for only a fraction of the cost of having a second counsel at trial; therefore, most parties will probably consider carefully whether they wish to bear that expense. [ 47 ] Bearing in mind the principles in the Kassam decision, and bearing in mind that there was some overlap, but also bearing in mind that it was appropriate and necessary to have second counsel, the most equitable solution would be to allow the City and ERAA to each claim 50 percent of the second counsel fees set out in Column 5 of

Schedule C. [ 48 ] In reaching this conclusion, I am mindful of the double costs issue, with the result that with the doubling of taxable fees, the City and ERAA will each be able to claim one set of second counsel fees under Column 5.

Part IV - Document Discovery [ 49 ] The City and ERAA take the position that this was an extremely document intensive case and thus they should be awarded a higher amount for document discovery than ordinarily provided for in

Schedule C. [ 50 ] Note 1 to

Schedule C reads as follows: Judges or Masters may award higher or multiple of columns in document intensive cases, and Judges, Masters or Taxing Officers may award fractions of columns in cases where a few documents are relevant or one party does not have to either produce or review a significant number of documents.

[ 51 ] It is uncontroverted that this was an extremely document intensive case. The City filed an Affidavit of Documents and five supplemental Affidavits. The City at one point was a Defendant in three actions whereas ERAA was defending two actions. [ 52 ] Counsel for the City argues that significant re-examination of documents was required as a result of production of documentation through North West which originated with other sources including a former City employee, Mr.

Milburn, who testified at trial. [ 53 ] It is the City’s position that it had to review its documentation again as a result of this disclosure in order to ensure that it was producing all producible documents in the litigation. [ 54 ] The evidence at trial established that as a result of the City owning and operating the Municipal Airport dating back to the 1920s, there was a huge volume of documentation available and an enormous task involved in reviewing this documentation. [ 55 ] While ERAA’s involvement with the Municipal Airport was of much shorter duration, when ERAA commenced operating the Municipal Airport it took over substantial documentation from the City of Edmonton. [ 56 ] Counsel for North West argues that it was not the fault of North West that documentation was obtained from other sources, which I accept.

By the same token, I also accept that as a result of other documentation becoming available from sources which were not originally apparent to the litigants, the City and ERAA were forced to re-do a significant amount of work with documents which necessitated even more work than would customarily be the case with a document intensive case.

Moreover, the City and ERAA had a legal obligation to ensure that production of all producible documents had been made. [ 57 ] I do accept that there was some overlap in document production between the City and ERAA and among the various actions. [ 58 ] The City and ERAA claim that triple the usual fees under Column 5 should be awarded. [ 59 ] Bearing in mind all of the foregoing considerations, I award the City and ERAA double the taxable fees under

Schedule C for document production.

Part V - Oral Discovery [ 60 ] As noted above, the City was involved in defending three actions arising out of the consolidation issue whereas ERAA was involved in defending two actions. [ 61 ] Item 5 of

Schedule C of the Rules of Court dealing with oral discovery contains the following notation: “When attending counsel is acting for neither witness nor examining party- 50 percent of these amounts.” [ 62 ] It is the City’s position that in calculating costs in respect to oral discoveries, the City’s costs in respect to discovery of persons other than Mr. Fred Welter, North West’s officer, should be divided by the number of actions being actively pursued against the City at that time.

Discoveries up to the end of November 1998 occurred when only two actions were being pursued and thus the City argues that discovery costs are properly divided by two. Between November 23 rd , 1998 and June 2000, when one of the actions settled, the City’s costs for discoveries of persons other than Mr. Welter are properly to be divided by three. Thereafter, the costs of discoveries are to be divided by two to reflect two extant actions. [ 63 ] ERAA takes the same position and also argues that it should be entitled to recover full costs of examining and attending on

examinations for discovery of Welter. [ 64 ] In my view, the positions adopted by the City and ERAA are entirely in accordance with the notation under Item 5 of

Schedule C and reflect the reality that Welter was the critical witness for North West, and to avoid duplication, it was necessary for counsel for the City and ERAA to be present during all examinations for discovery of Welter. Thus, the City and ERAA can claim these costs under Column 5 on the basis they have suggested.

Part VI - Disbursements For Experts [ 65 ] Rule 600(1)(

a) reads as follows: “Costs” includes all the reasonable and proper expenses which any party has paid or becomes liable to pay for the purpose of carrying on or appearing as party to any proceeding... [ 66 ] The City and ERAA called a number of experts at trial and disbursements are now being claimed for these experts in excess of $130,000.00.

North West agues that these amounts are excessive and that the City and ERAA should have cooperated in the presentation of expert evidence on the issue of damages which would have had the effect of reducing expert expenses significantly. [ 67 ] ERAA and the City take the position that although there was some overlap in their interests, they were separate and distinct Defendants in the Counterclaim and that they were under no obligation to retain common experts or take common approaches to the issues of damages and liability. [ 68 ] It cannot be overlooked that the counterclaim in part alleged a tortious conspiracy between the City and ERAA.

Had they adopted a common approach to liability and damages, including the retaining of common experts, they may well have been met with an argument by North West that such cooperation was corroborative of an ongoing tortious conspiracy. [ 69 ] Any allegation of conspiracy is very serious. It has long been recognized that parties to an alleged conspiracy are entitled to retain separate counsel. [ 70 ] In the case of Nichols Gravel Ltd. v. Delhi (Township) , [1997] O.J.

No. 969 , Ontario Court of Justice (General Division), the following passage appears in para. 5: 5 When serious charges such as conspiracy and other wrongdoing are made which reflect on the character of the individual defendants, they are entitled to make separate defences, to employ separate solicitors, and to be allowed their separate costs if they succeed... [ 71 ] While the City and ERAA are not individuals, in my view the same principle applies to public bodies as clearly an allegation of tortious conspiracy, if proven, would have serious ramifications beyond monetary exposure in damages. [ 72 ] There is no authority in support of the proposition that Defendants have any obligation to take a common approach to issues of liability or damages and no authority in support of the proposition that they have any obligation to retain common experts.

While this option is certainly open to Defendants, the City and ERAA were fully entitled to retain their own experts. [ 73 ] The expert evidence at trial conflicted in a number of respects, not only between North West and the Defendants by Counterclaim but between the City and ERAA a well. In my Judgment following trial I preferred the evidence of certain experts and gave reasons for doing so.

[ 74 ] In my view, nothing turns on the fact that there was conflicting evidence before me as that is frequently the case, and the judge is then called upon to make conclusions for reasons grounded in the evidence and in law. [ 75 ] In the case of Petrogas Processing Ltd. v. Westcoat Transmission Co., 1990 CanLII 12300 (AB CJ) , [1990] A.J.

No. 317 , O’Leary, J., as he then was, said the following on the issue of the reasonableness of disbursements at p. 9: When considering the reasonableness or otherwise of an expenditure made by the defendant I must view the matter through the eyes of the defendant and in light of the problem facing it when the expenditure was made. The test of reasonableness is not, in my opinion, entirely based on the importance of the expenditure to success at trial. Hindsight may show that some liabilities assumed were, in the end, of little or no benefit.

The question is wh ether the expense was reasonable and proper in the light of the circumstances which existed at the time it was incurred. The issues raised from time to time by the pleadings and by discovery and production are significant circumstances. The magnitude of the expenditure in relation to the amount at risk in the proceedings is another important consideration.

In all cases the party taxing costs has the burden of showing that both the nature of the expense and its amount were reasonable and proper in the circumstances. [ 76 ] The Alberta Court of Appeal, in the decision of Monashee Petroleums Ltd. v. Pan Cana Resources Ltd. , 1988 ABCA 62 (CanLII) , [1988] 85 A.R. 183 at p. 193 said the following: ...It has always been the rule that expenditures for witnesses are based on what seemed reasonable at the time, not on hindsight about witnesses who in the event turned out later to be unnecessary.

Costs are for proper expenses, and expenses are incurred by ordinary mortals, not by prophets. [ 77 ] It cannot be overlooked in determining the reasonableness of disbursements claimed that there were multiple heads of damages being claimed including the difficult areas of the valuation of leasehold premises and loss of rental value, two areas which all witnesses conceded are difficult, with no absolutes. [ 78 ] I conclude that the City and ERAA are entitled to claim these expert disbursements.

Part VII - Other Disbursements [ 79 ] The City seeks to recover disbursements it incurred in conjunction with two former employees of the City who testified at trial, Mr. Milburn and Ms. Alston. Both had left the employ of the City prior to examinations for discovery and trial.

Neither was prepared to cooperate with the City by way of attending for briefing or reviewing records prior to giving evidence unless paid the usual rate earned for their occupations. [ 80 ] Respecting Alston, the City claims an expenditure of $150.00, together with G.S.T., paid to her in exchange for her agreement to attend briefings by counsel prior to examinations for discovery, review of City documents prior to examinations for discovery, and attendance at examinations for discovery.

The amount of $150.00, together with G.S.T., represents one-half of the amount paid to her, and the City claims this one-half amount on the basis that at the time of examinations for discovery there were two actions against the City extant. [ 81 ] Respecting Milburn, the City seeks recovery of the sum of $741.00 paid to him in exchange for his agreement to attend briefings by counsel prior to examinations for discovery, preparation for examinations for discovery by way of review of City documents and his diaries, and, as well, attendance at examinations for discovery.

As there were two actions against the City extant at the time, the sum claim represents one-half of the total amount of $1,482.00 paid to Milburn in connection with examinations for discovery. [ 82 ] As well, the City seeks recovery of the amount of $1,812.00 paid to Milburn in exchange for his agreement to attend

briefings by counsel prior to trial, preparation for trial by way of review of his diaries and City documents, as well as his attendance at trial. [ 83 ] I accept the City’s submissions in that clearly if these amounts have not been paid, neither Milburn or Alston would have cooperated and thus these were expenditures which had to be incurred by the City. [ 84 ] I am prepared to accept the balance of the non-expert disbursements claimed by ERAA and the City, including file retrieval expenses.

Part VIII - Costs of Pre-Trial Applications [ 85 ] On October 19 th , 2000, Lefsrud, J. heard an application to remove from the record counsel for North West. The application was dismissed, with costs in the cause. North West concedes that ERAA and the City are entitled to costs of this application. [ 86 ] On October 23 rd , 2000, MacCallum, J. granted a Consent Order adjourning the trial on the basis of further disclosure of documentation.

Para. 2 of the Order reads as follows: Costs of the adjournment may be spoken to in the future on the application of any party. [ 87 ] ERAA and the City argue that the adjournment was necessitated by the fact that Milburn had turned over to former Municipal Airport tenants a number of boxes of documents which he had retained after he left the City’s employ. As well, there was production of documentation from other sources which came into the possession of North West.

ERAA and the City argue that as a result of this late production of documentation it was necessary for them to re-review their files to ensure that all producible documents had been in fact produced. [ 88 ] While no fault can be attributed to North West and its counsel for the fact of this production from individuals not under their control, it certainly cannot be argued that these individuals were under the control of the City or ERAA.

They had no alternative but to apply for the adjournment as it would have been extremely imprudent for them to have proceeded to trial without the benefit of reviewing the new documentation and then re-reviewing their own files.

As noted above, the City and ERAA had a legal obligation to re-review production once additional documentation had been produced. [ 89 ] ERAA and the City are entitled to costs of this adjournment application. [ 90 ] On September 27 th , 2002, after I was assigned to hear the trial of this action, I convened a conference call with counsel to deal with an unforeseen scheduling conflict which had arisen in my sitting schedule. There will be no costs payable for this conference call. [ 91 ] This action was in case management before trial. The City and ERAA are entitled to claim under Item 9 of

Schedule C their attendances for each case management attendance and pre-trial conference.

Part IX - Goods and Services Tax [ 92 ] ERAA is not advancing any claim for G.S.T. [ 93 ] The City is advancing a claim for G.S.T. on fees and disbursements.

[ 94 ] Recently, the Alberta Rules of Court were amended to provide that “unless otherwise ordered by the Court, a party entitled to costs is entitled to recover the Goods and Services Tax on those costs. This amendment became effective February 26 th , 2003 and thus does not apply to costs in these proceedings except for steps taken after February 26 th , 2003. [ 95 ] Prior to the enactment of this amendment there was conflicting judicial authority in Alberta on the issue of whether or not G.S.T. was recoverable, although the Court of Appeal in the case of Huet v. Lynch , 2001 ABCA 37 (CanLII) , [2001] A.J.

No. 145 (C.A.) allowed full recovery of G.S.T. on costs. [ 96 ] I conclude that the City is entitled to recovery of G.S.T. [ 97 ] The City is not exempt from payment of G.S.T. and is not eligible, as a municipality, for G.S.T. input tax credits. It does receive a municipal rebate on G.S.T. paid by the City directly to service providers in the amount of 57.14 percent of G.S.T. paid. The municipal rebate on G.S.T. is recoverable by the City only in respect to services billed directly to the City by the supplier of those services and not in respect to G.S.T. paid by the City’s outside counsel as agent for the City.

The City, therefore, takes the position that G.S.T. payable on fees and on any disbursements paid directly to the City’s outside counsel should be reduced by 57.14 percent to reflect the municipal rebate, but disbursements incurred by the City’s outside counsel as agent for the City should be subject to G.S.T. at the full rate of 7 percent. [ 98 ] I accept the City’s argument on G.S.T. which clearly had the effect of allowing a claim only for any net G.S.T. liability which the City incurs.

Part X - Costs Of Written Argument [ 99 ] Item 12 of

Schedule C permits a successful party to claim costs of submitting written argument at the request of the Trial Judge or where allowed. I requested written argument dealing with the issues of liability and damages. The arguments submitted by all parties were detailed and of excellent quality. I have no hesitation in allowing this costs claim for both the City and ERAA.

Part XI - Costs Of This Application [ 100 ] Costs of this action were originally spoken to on January 23 rd , 2003. Counsel prepared written arguments and argued the matter before me for approximately one and one-half hours on March 25 th . Again, the arguments by all parties were detailed and of excellent quality. [ 101 ] The January 21 st , 2003 appearance will be treated as a contested application under

Schedule C. I award costs to the City and ERAA for the cost of arguing this costs application on the basis of a contested Special Chambers application when brief required under

Schedule C, Item 8, for one-half day. HEARD on the 25 th day of March, 2003. DATED at Edmonton, Alberta this 31 st day of March, 2003. __________________________ J.C.Q.B.A.