Ho v Lau, 2023 ABKB 15

Court of King’s Bench of Alberta Citation: Ho v Lau, 2023 ABKB 15 Date: 20230109 Docket: 2103 06917 Registry: Edmonton Between: Eddie C. Ho Applicant - and - Jessica Lau As Personal Representative of the Estate of Ricky Lau Respondent _______________________________________________________ Costs Endorsement of the Honourable Justice M. J. Lema _______________________________________________________ A.

Introduction [ 1 ] The estate of the now-deceased successful applicant seeks full-indemnity costs of the proceedings to determine entitlement to approximately $7,000,000 (net of taxes) held by a corporation in which the parties are shareholders. It asserts legal fees of $145,918.05 incurred by the applicant and seeks a further $35,000 in legal costs incurred by or on behalf of the liquidator of the corporation holding the disputed monies.

[2] In support of full-indemnity-level costs, it emphasizes its success in the proceedings, unproved allegations of dishonestymade against the applicant by the respondent estate, and an unaccepted settlement offer which it says should have been accepted. [3] Alternatively, the successful estate seeks partial indemnity at the 50 per cent level for its own and the liquidator’s solicitor-client costs i.e. approximately $90,000 collectively. [4] The unsuccessful respondent opposes both positions, calling instead for party-and-party costs under

Schedule C (column 5). [5] As explained below, I award costs under

Schedule C (column 5), with a multiplier of 2, and a “complex chambersapplication” adjustment. B. Background [6] The background is outlined in the main judgment: Ho v Lau, 2022 ABQB 535. C. Analysis Lack of merit typically not a factor in awarding solicitor-client costs [7] I reject this as a basis for awarding full-indemnity costs.

Per the Supreme Court of Canada in Young v Young, (SCC), [1993] 4 SCR 3 at 134: “… a lack of merit is not sufficient to justify an award of solicitor-client costs.” See also Reeder vWoodward, 2016 ABCA 91 at paras 31 and 32. [8] To the extent the applicant tries to characterize the respondent’s pursuit of unsuccessful arguments as litigation misconduct(with that as the basis for solicitor-client costs), I recognize that “maintain[ing] positions or bring[ing] applications that are patentlyindefensible – the likelihood they will succeed is very low” can amount to such misconduct: Pillar Resource Services Inc v PrimeWestEnergy Inc, 2017 ABCA 19 at paras 124(

g) and 126 (part of Wakeling JA’s concurring judgment). [9] Here is the catalogue of cases cited by Wakeling JA in support of that position (footnote 135): Olson v. New Home Certification Program, (AB KB), 69 A.R. 356, 372 (Q.B. 1986) (“The conduct of the defendantthat this court found particularly abhorrent and which should not be tolerated was the requirement imposed upon the plaintiff to provemajor structural defects and other facts that should have been admitted”); Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd., (AB KB), [1987] 2 W.W.R. 75, 80 & 81 (Alta.

Q.B. 1986) (the trial judge awarded full-indemnity costs to the plaintiff, inpart, because “it was apparent to me at the end of the trial that there was no serious issue of fact or law which required these lengthy,expensive proceedings ... [and that the defendants] were then contemptuous of the plaintiff in requiring the plaintiff to go to trialto get its money”); Shier v. Fiume, (ON SC), 6 O.R. 3d 759 (Gen. Div. 1991) (the Court ordered a party to pay fullindemnity costs because he knew his position was untenable); Noorani v.

Calver (No. 2), 2009 EWHC 592, ¶ 33 (the Court awardedthe defendant his costs on a full-indemnity basis because the plaintiff’s case was “hopeless ... from the outset [and] ... the claimantknew it”); Bossé v. Farm Credit Canada, 2014 NBCA 34; 419 N.B.R. 2d 1 (the Court dismissed the appeal and ordered the appellant topay costs on a solicitor-and-client basis because the grounds of appeal were frivolous); Bradbury v.

Westpac Banking Corp., [2009]NZCA 234, ¶ 24; [2009] 3 N.Z.L.R. 400, 409, 410 (“an indemnity award may be made where a party persists with what properconsideration would have shown was a hopeless case”) & ¶ 29 (an indemnity award may be granted if the payee’s misconduct “causesloss of time to the court and to other parties”); Baulderstone Hornibrook Engineering Pty. Ltd., v.

Gordian Runoff Ltd. (No. 2), [2009]NSWCA 12, ¶ 4 (Austl.) (“a party should pay costs on an indemnity ... basis when it appears that an action (here an appeal) has beencommenced or continued in circumstances where the moving party, properly advised, should have known that it had no chance ofsuccess”); Chaina v. Alvaro Homes Pty. Ltd., [2008] NSWCA 353, ¶ 111(Austl.) (the Court observed that “more recent case-lawgenerally shows a tendency to grant indemnity costs orders more readily than was the case in the past.

That may be seen to be an elementof a broader policy directed to litigation of cases where there are no reasonable prospects of success”); P.C.R.Z. Investments Pty. Ltd.v. National Golf Holdings Ltd., [2002] VSCA 24, n. 16-17 (Austl.) (the Court observed that “making assertions of facts which arepatently groundless” and adopting a position that is “patently hopeless” exposes the malefactor to an enhanced costsaward); Cosgrove & Anor v. Johns, [2000] QCA 157, ¶ 9 (Austl.) (a full-indemnity costs award may be appropriate if a party adopts anunsupportable position); Commonwealth Bank of Australia v.

Dalle Cort, 2015 QSC 41, ¶ 12 (Austl.) (the Court awarded costs againstthe defendants and counterclaimants because, in part, “they should have known that they had no real defence to CBA’s claim or anylegally sustainable counterclaim”); Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty Ltd., 81 Austl.L.R. 397, 401 (Fed. Ct. 1988) (“it is appropriate to consider awarding ... “indemnity” costs, whenever it appears that an action has beencommenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance ofsuccess.

In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because ofsome wilful disregard of the known facts or the clearly established law”); Colgate-Palmolive Co. v. Cussons Pty. Ltd., [1993] FCA536, ¶ 24; 46 F.C.R. 225, 233 (Austl.) (the Court stated that a full-indemnity costs award is warranted if a party engages in misconduct“that causes loss of time to the Court and to other parties”); Kuwait Asia Bank EC v.

National Mutual Life Nominees Ltd., [1991] 3N.Z.L.R. 457, 460 (C.A.) (“If a party has acted unreasonably – for instance by pursuing a wholly unmeritorious and hopeless claim ordefence – a more liberal award may well be made in the discretion of the Judge”) & 22 New York Codes, Rules and Regulations § 130-1.1(c)(1) (“conduct is frivolous if ... if it is completely without merit in law and cannot be supported by a reasonable argument foran extension, modification or reversal of existing law”). [emphasis added] [10] The present case does not match any of those sample cases. [11] I did not accept the Lau Estate’s arguments, but would not characterize them as “frivolous”, “hopeless”, or otherwise as fallingwithin the zone mapped by Wakeling JA in the above compendium.

[12] The estate placed too much emphasis on or mischaracterized the evidence of various third parties about what Ricky had ormay have told them about his investment activities (perceiving them as signalling Ricky ownership instead of (as I found) neutralstatements of investing activity by him albeit with corporate funds). [13] It also overemphasized Jessica Lau’s perception (“non-binding”) of the voluntary-disclosure representations of corporateownership of the investment-account monies. [14] But such over-emphases and mischaracterizations do not equate to baseless or hopeless claims or, in any case, claims of eithercharacter pursued knowing them to be such (as emphasized in some of the flagged cases in the above footnote).

Non-provision of tax returns and other financial information not litigation misconduct [15] I do not regard this as litigation misconduct either. [16] The Lau Estate faced the onus of proof I identified in the judgment (i.e. that of a party asserting ownership of funds in a thirdparty’s bank or investment account). [17] It chose not to provide evidence of Ricky’s tax returns or other financial documents that may have shed light on his ability (orotherwise) to make the, or any of the, claimed injections into the corporation’s investment account. [18] I do not characterize that strategic or tactical decision, in the circumstances here, as litigation misconduct. [19] In any case, it has already “paid the price” of that non-disclosure, with an adverse inference drawn against it (main judgmentat para 15).

Unproved allegations of dishonesty [20] I also reject this as a basis for such costs here. [21] While the respondent estate made various allegations of dishonesty against Mr. Ho, aiming to impeach his credibility, theentitlement to the investment-account monies did not turn in any way of evidence coming from Mr. Ho or require any analysis of hiscredibility. Instead, it turned on the fundamental absence of evidence from or on behalf of Mr.

Lau i.e. showing that he had contributedthe investment-account monies or even the seed money for them. [22] In other words, these allegations were not tested, as in considered and rejected. Instead, they were aimed at what proved to beirrelevant matters e.g. whether Mr. Ho was aware of the corporation’s investment account or even of Mr. Lau’s (possible) claim that hewas investing personal monies via that account, the level of involvement of Mr. Ho in the corporation’s annual accounting exercises orwhether he wrongfully extracted monies from the corporation.

Nothing in the entitlement tug-of-war turned on any of these aspects. [23] While irrelevant allegations of wrongdoing may anchor or support entitlement to solicitor-client costs, the context is alwayskey. Per the Supreme Court of Canada in Hamilton v Open Window Bakery Ltd, 2004 SCC 9: In Young v. Young, (SCC), [1993] 4 S.C.R. 3, at p. 134, McLachlin J. (as she then was) for a majority of this Court heldthat solicitor-and-client costs “are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on thepart of one of the parties”.

An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not leadinexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all suchattempts will be correctly considered to amount to “reprehensible, scandalous or outrageous conduct”. … [para 26] [emphasisadded [24] See also the analysis of McCarthy J. in Bacanora Minerals Ltd v Orr-Ewing (Estate), 2022 ABQB 270 (paras 62-71),particularly: … This is not an instance in which [a fraudulent misrepresentation] allegation was found to be baseless.

Rather, it is an instance wherethe allegation remains untested in law, meaning the Court can make no finding as to whether or not the allegation wasimproperly pled.

As such, I decline to award full indemnity costs based upon the allegations of fraud contained in Bacanora’sstatement of claim. [para 70] [emphasis added] [25] And also Bowness Real Estate Corp v AXA Pacific Insurance Company, 2020 ABQB 379 (Ho J. as she then was) at paras10-12. [26] In contrast, where fraud allegations were the “heart of the matter”, requiring extensive and additional trial time to consider andultimately discount, and increased costs were awarded as a result, see Kenny J.’s decision in Conway v Zinkhofer, 2007 ABQB 2(affirmed 2008 ABCA 392) at paras 16-31. [27] In the present case, the respondent anchored each of its allegations in some evidence, albeit (as noted) I did not have toconsider the sufficiency or credibility of that evidence. [28] I do not find that these allegations were made in bad faith or that they otherwise reflect “reprehensible, scandalous oroutrageous conduct” on the part of the respondent. [29] The respondent was unsuccessful in linking its allegations to the entitlement issue. [30] But that failure, on its own, does not shift the allegations into the offensive zone.

[ 31 ] In the end, we have shown-to-be-irrelevant, and thus untested, allegations of dishonesty raised non-maliciously. [ 32 ] One measure of the peripheral, perhaps even trifling, nature of the allegations is the amount of commentary devoted to them by the applicant in its application brief, limited to the following: The [respondent’s brief and affidavits] contain … a disheartening amount of gratuitous, nasty disparagement of Mr.

Ho. … [part of para 22] As noted above, the [respondent] has elected to lace its brief with gratuitous, outrageous and completely meritless allegations of “gross negligence” and “fraud.” …[para 80] [ 33 ] Effectively, the applicant was content to characterize the allegations as irrelevant and not engage further. [ 34 ] It was correct to do so.

However, the ease with which it effectively dispatched the allegations undercuts its claim to solicitor- client-level costs on this account. [ 35 ] In the end, the allegations, while presumably upsetting to the applicant, did not consume any material time or effort during the application or require any in-depth review or analysis in the judgment. As well, no evidence showed any prejudice to the applicant via the allegations.

Non-impact of asserted settlement offer [ 36 ] Same for a settlement offer referred to by the applicant but not included with its costs submissions. [ 37 ] As the respondent also observed: While informal offers can result in enhanced costs, certain criteria must still be considered, particularly whether a compromise was proposed or a waiver of costs was included, neither of which was mentioned at all in the January 25, 2022 email referenced by the Corporation. [footnotes omitted] [ 38 ] In any case, it is not apparent that the offer (effectively that the respondent abandon its personal-ownership claim) was a “genuine offer of compromise” within the meaning of the Alberta case law on settlement offers.

Absence of bill of costs or other evidence of actual costs precludes solicitor-client-costs award [ 39 ] As noted, the applicant asserted legal costs incurred by it of $145,918.05, plus a further $35,000 incurred by the corporation’s liquidator.

However, neither provided a bill of costs, statements of account or other evidence of the claimed costs. [ 40 ] The respondent observed: It is inappropriate to grant any form of indemnity costs [i.e. full or percentage-of] when [we have] been unable to assess the reasonableness of the same as the Corporation has not provided a proposed Bill of Costs nor any supporting documentation to [us]. [ 41 ] I take the respondent’s point here and adopt the following analysis from McAllister v Calgary (City) , 2021 ABCA 25 on the reasonableness dimension, which I find applies equally to a claim of full (i.e. not only a percentage of) solicitor-client costs: If the option of awarding costs as a percentage of assessed costs is chosen, the assessment of the costs may require a consideration of what is a reasonable amount which ought to have been charged for the services the successful party’s lawyer rendered and that may require reference to the considerations set forth in Rule 10.2(1) which go into the determination of what constitutes a reasonable charge (the Rule is reproduced at paragraph 47 herein).

If a trial judge chooses to award a percentage of the assessed costs pursuant to Rule 10.31(3)(

d) to the successful party, then what is being considered are the “reasonable and proper costs that a party incurred” under Rule 10.31(1)(a). In order to determine whether the costs incurred are reasonable and proper, they must be assessed , either by the party opposite, or by the judge or by an assessment officer. If it is the trial judge, then he or she should consider the reasonableness of both the legal services performed and the amounts charged for those services. Reasonable costs reasonably incurred is what the percentage must be based on.

The incurring of the cost must be reasonable and the amount of the cost incurred must also be reasonable . As indicated above, the assessment may also be undertaken by the party opposite or, if the parties cannot reach an agreement on costs, the trial judge may direct an assessment of the legal costs by an assessment officer, pursuant to Rule 10.34. Rule 10.31(3)(

d) contemplates such an assessment when it speaks of one party being ordered to pay the other “a percentage of assessed costs” …. [para 46] [underlined emphasis in original] [bolded emphasis added] [ 42 ] Where a party seeks solicitor-client costs or a subset of such costs (gauged, for example, as a percentage of the total actual costs incurred), it has a practical onus to provide statements of account or other evidence of its legal costs to enable such scrutiny i.e. not simply assert a figure: see also Kissel v Rocky View (County) , 2020 ABQB 570 (Eamon

J) at paras 27 , 28, 34 and 51, particularly para 34: Some case law, decided before the tariff was amended in March 2020 [1] , holds that costs should aim to indemnify a successful party for about 30, 40, or 50% of their actual costs, and therefore a party’s actual legal fees can be used to cross-check the result of applying

Schedule “C”. Because there is a distinction between solicitor and client costs, and solicitor and own client costs ( Luft v Taylor, Zinkhofer & Conway , 2017 ABCA 228 at paras 77-78 ), that approach would require evidence that a party’s legal bill is reasonable and necessarily or prudently incurred to advance the issues in the action. If the reasonableness of an account is challenged, evidence of the accounts is required ( GO Community Centre v Clark Builders and Stantec Consulting Ltd , 2020 ABQB 203 at para 162 ). The Applicants did not provide any evidence concerning their accounts, so I do not have the benefit of a cross- check. [Eamon J. ended up awarding costs anchored on

Schedule C: para 51.]

[ 43 ] And Diallo v Canada (Public Safety and Emergency Preparedness) , 2010 FC 965 (Lemieux J.) at para 33 (“ … If he is seeking solicitor-client costs … I have no evidence before me to justify the amounts indicated”). [ 44 ] In JWS v CJS , 2022 ABCA 63 , the Court of Appeal affirmed a lump-sum award of costs “approximat[ing] the solicitor-client costs incurred” where no bill of costs had been prepared or other costs accounting provided.

However, the Court was able to perform its own assessment of the reasonableness of the claimed costs and, in any case, the appellant did not actually challenge the quantum of those costs: … The mother’s counsel is a senior practitioner, and we are satisfied that the amounts she put forward were reasonable in the circumstances. We note that the father has not suggested otherwise.

We also agree with the costs judge that this is an exceptional case and that sending the invoices for assessment would unnecessarily delay conclusion of this matter. [para 43] [ 45 ] I am not in a position to make a similar pronouncement here, and the respondent has not acknowledged the claimed costs as reasonable. [ 46 ] As well, while I imposed a two-page limit on the parties’ costs submissions (main judgment, para 137), both parties obviously understood that to refer to the core submissions, with both providing extensive supporting documents, which could have (in the applicant’s case) included copies of its accounts or other evidence of the claimed legal costs.

And the applicant did not inquire about the scope of the permitted supporting documents. [ 47 ] Such evidence would have given the respondent an opportunity to examine and, as appropriate, object to the claimed costs and then (as necessary) allowed me or, as necessary, the assessment officer, to gauge the reasonableness of those costs. [ 48 ] For examples of litigants requesting solicitor-client costs and at the same time providing copies of the underlying statements of account, see McGhee v Qureshi , 2020 ONSC 8009 (Kiteley J.) (para 2 ) and Mazhar v Farooqi , 2020 ONSC 3490 (Pinto J.) at para 84 (appeal dismissed 2021 ONCA 355 ). [ 49 ] I recognize that one option here is providing the applicant with an opportunity now to provide its accounts or other evidence of its legal costs, with the respondent then called on to advise whether it accepts those costs as reasonable (both the work done and the associated expenses) and, if not, either assess the costs myself or direct an assessment: see, for example, Poitras v First National Financial GP Corporation , 2010 ABPC 46 (Young PCJ) at paras 6 and 7 . [ 50 ] But (per para 137 of the main judgment), I directed a

summary costs process i.e. submissions from each side and then a decision on costs. In theory that might have required a review of costs reasonableness by the Assessment Officer.

But not a multi-stage process from the start i.e. with the applicant first staking a claim to an amount, the respondent either acquiescing or objecting to that amount, (if the latter) the applicant then providing its accounts or other evidence of its costs, the respondent providing its position on the claimed amount in light of that evidence, and (as necessary) an assessment. [ 51 ] In this case, the applicant had a practical obligation to put its best foot forward and thus, when requesting solicitor-client costs or alternatively a subset based on them, provide its accounts or other evidence of its legal costs as part of its overall costs submission.

D.

Conclusion [ 52 ] So what costs are payable? [ 53 ] Here are the key factors: • the amount at stake was considerable: approximately $3.5 million (net of taxes) i.e. with the $7 million (net) either going entirely to the respondent or, if the applicant prevailed (as it did), the parties sharing the $7 million i.e. as 50 per cent shareholders of the corporation; • this was a special chambers application, argued in one afternoon; • the respondent raised many legal arguments in their brief, but the applicant was able to address most of them summarily in its brief, concentrating on the central points of the absence of proof of personal ownership and the impact of the voluntary-disclosure agreement with CRA; • while the supporting materials were somewhat extensive (collectively four or five large binders), most of them were simply context or provided for greater certainty; and • overall-complexity-wise, in the constellation of applications and trials, this application is akin to the proceeding in Blaze Energy Ltd v Imperial Oil Resources , 2014 ABQB 509 (costs decision of Schutz J. as she then was) i.e. a high-stakes but highly concentrated, focused and short proceeding, built on a relatively narrow documentary foundation (see paras 66-85). [ 54 ] The respondent acknowledged that

Schedule C’s column 5 (“over $2 million”) would apply here. [ 55 ] In all the circumstances here, the appropriate costs outcome is an award of

Schedule C costs, on column 5, with a multiplier of 2, with the contested-application element tagged to item 20 (“appearance to argue before Appeal Court”), permitted for “complex chambers applications”, per item 8(1). [ 56 ] If the parties are unable to agree on the applicable

Schedule C elements, they can submit maximum-1.5-page letters with their respective positions by January 16, 2023, and I will settle the dispute.

E. Closing note re claim for liquidator’s costs [ 57 ] As noted, the applicant also sought costs of $35,000 on behalf of the liquidator. [ 58 ] All aside from the absence of a bill of costs or other supporting evidence for its costs claim, the liquidator did not submit a brief or, as I recall, take a position in this tug-of-war. [ 59 ] More fundamentally, this request is premature.

As I see it, the liquidator’s costs of participating in the application and any associated lead-up work should be made at the conclusion of the liquidator’s work i.e. as part of its end-of-liquidation reporting and request for court approval of its overall fees and disbursements. Heard by way of written submissions received on the 30 th day of September, 2022 and 24 th day of October, 2022. Dated at Edmonton, Alberta this 9 th day of January, 2023. M. J. Lema J.C.K.B.A. Appearances: Alison Archer Bennett Jones LLP for the Applicant Soheel S. Hussein Bryan & Company for the Respondent