Uhl v Ostergaard, 2023 ABKB 614

Court of King’s Bench of Alberta Citation: Uhl v Ostergaard, 2023 ABKB 614 Date: 20231102 Docket: 2201 10395 Registry: Calgary Between: Richard Uhl and Daytona Ventures Inc. Applicant/Cross Respondent - and - Bording Ostergaard Respondent/Cross Applicant _______________________________________________________ Ruling on Costs of the Honourable Justice R.A. Neufeld _______________________________________________________ [ 1 ] On April 6, 2023, I issued my decision on competing applications for

summary judgment. This process was initiated by consent, as a way of bringing a long, bitter, and uneconomic litigation saga to a conclusion. I must now decide the issue of costs. [ 2 ] The underlying dispute concerns an Agreement entered into between two long time friends in 2015. Mr. Uhl needed financial assistance from Mr. Ostergaard to complete the purchase of a skid steer and tree spade (collectively referred to here as the “Skid Steer”). The price was $38,500. Mr. Uhl had put down a deposit of $12,500 but needed about $26,000 to close the deal. [ 3 ] Mr.

Ostergaard was not prepared to lend him the money but was prepared to take ownership of the Skid Steer by paying the cash to close and to allow Mr. Uhl to obtain ownership by working the $26,000 off. He would work on houses that Mr. Ostergaard was building. The first 16 hours per week would be credited toward the Skid Steer and he would be paid for hours worked over that minimum. [ 4 ] A contract was prepared by Mr. Ostergaard. It provided a remedy if the Agreement was terminated by either party prior to the Skid Steer being worked off. The Skid Steer would be sold. Mr.

Ostergaard’s investment less the value of the work credits to that

point would be repaid first. Mr. Uhl’s $12,000 deposit would be repaid second. The parties would split the remainder of the sale proceeds, if any. [ 5 ] In March 2018, Mr. Ostergaard terminated the Agreement for default, as was his right. Mr. Uhl was at that point approximately $4,000 short of earning transfer of ownership. [ 6 ] Mr. Uhl contended that he had in fact worked sufficient hours to demand ownership of the Skid Steer. He refused to deliver it up and the fight was on. [ 7 ] Mr. Ostergaard obtained a replevin order requiring its return, which was subsequently amended to allow Mr.

Uhl to keep possession but not use the Skid Steer pending resolution. [ 8 ] Under the Agreement, disputes were to be resolved by referring them to a lawyer - Keith Leslie - for adjudication. The successful party in the adjudication was to receive full indemnity costs. However, Mr. Leslie refused to become involved, citing a conflict. [ 9 ] After initial appearances before this court, and Mr. Uhl’s refusal to deliver possession of the Skid Steer, the parties were directed to proceed to arbitration, and did so at great expense. Both were represented by counsel. Mr.

Ostergaard’s fees and disbursements alone were $104,927.92. [ 10 ] Mr. Uhl was initially successful on the merits of the arbitration. However, after various potential calculation errors in the Arbitration Award were pointed out by counsel for Mr. Ostergaard, the Arbitrator decided that such errors (if any) would be considered as an “offset” in the second phase of the arbitration decision (the determination of costs). This was even though if the errors were corrected as proposed, a different outcome would have resulted in respect of whether Mr.

Uhl had earned sufficient credits to be entitled to ownership of the Skid Steer. [ 11 ] Upon further consideration, the Arbitrator accepted that he had miscalculated the work credits issue. Mr. Uhl had not worked off sufficient credits to be entitled to ownership of the Skid Steer. Nonetheless he still awarded over $100,000 in “costs “to Mr. Uhl. These “costs” included compensatory damages to both Mr.

Uhl and his company Daytona Ventures Inc (which was not a party to the contract), as well as punitive damages. [ 12 ] On review, Justice Hunt MacDonald of this court found that the arbitrator had breached procedural fairness and remitted the matter back to arbitration: Ostergaard v. Uhl, 2020 ABQB 789 Can LII. She suggested that the new arbitrator should be selected with a view to ensuring that accounting expertise would be brought to bear. [ 13 ] A new arbitrator was selected - this time a lawyer with expertise in construction disputes. [ 14 ] Mr.

Uhl wanted to proceed before that arbitrator as directed by the court, but a disagreement arose. Mr. Ostergaard understood that the arbitrator had agreed to allow a

summary judgment process to be used, which would avoid another protracted evidentiary proceeding. The arbitrator decided that a

summary judgment process was not needed after all as he considered arbitration to be essentially

summary in nature. [ 15 ] Mr. Ostergaard challenged the arbitrator’s decision, setting off a series of appearances before this court. Ultimately the parties agreed that the court should hear competing

summary judgment applications to bring the litigation to an end. I agreed to do so. [ 16 ] Although represented by counsel at the first arbitration, Mr. Uhl was by this time unrepresented. His application for

summary judgment sought a declaration of ownership of the Skid Steer. It also sought damages of $300,000 for loss of use of the Skid Steer since 2019, and $500,000 in punitive damages against Mr. Ostergaard for his abuse and manipulation of the court system. [ 17 ] Mr. Ostergaard sought rescission of the Agreement based on alleged fraud by Mr. Uhl. He said that Mr. Uhl had knowingly misrepresented in 2015 that if Mr. Ostergaard did not come to his aid, he would lose his deposit. On rescission, ownership of the Skid Steer would remain with Mr. Ostergaard. In the alternative, Mr.

Ostergaard sought damages of approximately $15,000 to $24,000 for alleged overcharges by Mr. Uhl while working for Mr. Ostergaard and to be declared owner of the Skid Steer. [ 18 ] An expert report was prepared by MNP on behalf of Mr. Ostergaard. It concluded, based on a review of billing records of Mr. Uhl and his company Daytona, that Mr. Uhl’s hours of work fell short of earning the credits needed to obtain ownership (by approximately $4,000). The shortfall was due to Mr.

Uhl choosing to charge an hourly rate for time worked that could have been credited toward the Skid Steer, and an intervening deal whereby a similar arrangement was reached for a half ton truck financed by Mr. Ostergaard, and which had to be paid off first. [ 19 ] Although ultimately arguing that the MNP report was irrelevant and obsolete, Mr. Uhl insisted that MNP should undertake a very comprehensive review of records. Mr.

Ostergaard states that this expanded review significantly increased the cost of MNP’s work - from $10,000 to over $30,000. [ 20 ] After hearing both applications I accepted the calculations prepared by MNP. I held that Mr. Uhl had not earned sufficient credits to entitle him to obtain ownership of the Skid Steer on termination of the Agreement. I also held that there was no basis for his claim for compensatory or punitive damages. His remedy, if any, was to be found in the Agreement itself. [ 21 ] Based on that finding, I concluded that ownership of the Skid Steer must remain with Mr.

Ostergaard as he had purchased it from its then owner in 2015. I found that there had been no fraud, and there was no basis for rescission. I also found that the overcharges by Mr. Uhl had been waived, as Mr., Ostergaard was aware of the changed billing practices, but continued to pay the invoices as submitted and to receive the benefit of Mr. Uhl’s work. As the Agreement had been terminated by Mr. Ostergaard, under its terms the Skid Steer was to be sold, with the proceeds distributed in accordance with the Agreement (subject to adjustments for costs as might be awarded).

Positions of the Parties [ 22 ] Mr. Ostergaard argues that he has been successful in defending his ownership of the Skid Steer, and Mr. Uhl’s $800,000 claim for compensatory and punitive damages. Under the Agreement he is entitled to be fully indemnified for his costs throughout this litigation, both in arbitration and the courts (except for the review application before Justice Hunt MacDonald in which it was ordered that the parties bear their own costs). These amount to $257,846.60. [ 23 ] Mr.

Ostergaard contends that even if there was no contractual right to full indemnity costs, he would be entitled to such costs because of Mr. Uhl’s unreasonable positions and offensive behavior toward Mr. Ostergaard, opposing counsel and his firm, and the court. He says that he has always been prepared to resolve these issues on a reasonable basis, and in fact made a settlement proposal to Mr. Uhl in January of 2021 that was substantially the same as the ultimate decision of this court.

In it he offered to accept uncontested ownership of the Skid Steer in return for waiving any cost claim. [ 24 ] At the hearing of the

summary judgment applications the parties were cautioned that non-compliance with the court’s decision (that the Skid Steer be returned and sold) would be subject of sanctions. Following the decision, Mr. Uhl was defiant. It was only when an application was made for a finding of contempt of court, accompanied by the very significant cost claim that Mr. Uhl’s behavior improved, no doubt assisted by his retention of counsel. [ 25 ] Mr. Uhl’s counsel was granted leave to file a supplemental response to the costs claim. They did so. Mr.

Uhl now argues that if costs are awarded, they should relate only to the proceedings before this court (not the previous arbitration) and should be based on Column 1. This would amount to approximately $8,000. He also asks that such a cost award be allowed to be paid by instalments as he has no money. He urges me to take into consideration the imbalance of power between the parties, and his disadvantage in being self- represented. Assessment [ 26 ] In awarding costs, the court is called upon to exercise discretion.

Nonetheless that is done within the framework of the Alberta Rules of Court (“ARC”) and case authority. Among other factors, the court should consider the relative success of the parties, the complexity of the litigation, offers of settlement, and any litigation misconduct. The court may order, among other things, that the unsuccessful party pay all or a part of the other party’s costs, with or without reference to

Schedule C, a multiple of

Schedule C costs, a percentage indemnity, or a lump sum: Rule 10.31 (3) and (1). [ 27 ] Where a contract provides for indemnification for costs of enforcement, such costs are available notwithstanding the usual rule that full indemnity costs are only to be granted in exceptional circumstances. [ 28 ] As discussed earlier this case involved years of litigation over what ought to have been a relatively straightforward dispute. [ 29 ] The Agreement (which was drafted by Mr.

Ostergaard) provides that “Rick agrees to reimburse Bording for any and all costs that may be incurred by Bording to execute or enforce this agreement....” [ 30 ] It goes on to provide for dispute resolution: “In the case of any unresolvable disagreement between Rick and Bording as to the

interpretation and exercising of any rights, or fulfilment of any obligations of either party under this agreement, both Rick and Bording agree to be bound by the adjudication and decision of Keith Leslie of Leslie Law of Edmonton AB with the costs of any adjudication to be borne fully by the unsuccessful party to the adjudication.” [ 31 ] In advancing his claim for full indemnity costs (at all levels) Mr. Ostergaard relies in part on contractual entitlement pursuant to these provisions. [ 32 ] I do not accept that this is a clear case of contractual entitlement to such costs.

The dispute resolution procedure contemplated was straightforward. The disagreement would be referred to a specific lawyer who would make a final and binding adjudication. The cost of adjudication would have consisted of that lawyer’s fees and the unsuccessful party would have to pay those fees. That is a far cry from being responsible to pay full indemnity costs for almost five years of litigation before two arbitrators and the Courts after Mr.

Leslie refused to accept the task of adjudicating the disagreement. [ 33 ] In determining the availability and quantum of costs, it is therefore more appropriate to apply the basic principles set out in the ARC and case law: the degree of success of each party, settlement offers made, litigation misconduct, and any other factors considered relevant. These factors must be considered against the backdrop of a highly unusual litigation history. [ 34 ] There is no question that Mr. Ostergaard was more successful at the

summary judgment proceeding than Mr. Uhl. He was declared to be the rightful owner of the Skid Steer - the fulcrum issue in dispute between two very determined litigants. He was also successful in defending the $800,000 claim for damages advanced by Mr. Uhl. [ 35 ] Mr. Uhl lost on those issues but was successful in defeating the allegation of fraud made against him by Mr.

Ostergaard, and (but for the obligation to pay costs) would have shared in the proceeds of sale of the Skid Steer as ordered by the court and in accordance with the formula set out in the Agreement. [ 36 ] From a procedural perspective this was a complex and very unusual case. The costs claimed by Mr. Ostergaard were incurred in two distinct phases of litigation. The first was a very lengthy and contentious arbitration before Mr. Tywoniuk (and preceding morning Chambers applications dealing with ownership of the Skid Steer). Mr. Ostergaard seeks reimbursement of legal fees of $104,927.92 for this phase.

[ 37 ] In granting Mr. Ostergaard’s challenge to the arbitrator’s decision, Justice Hunt MacDonald directed that each party bear their own costs of the review. This was in part because through no fault of either party the decision of the arbitrator was so highly flawed that it was unfair for either party to bear the other’s costs- in whole or in part: para 80 [ 38 ] I have a similar view. The first arbitration was an unfortunate misadventure. Neither party is at fault for that process and its result. The parties should bear their own costs. [ 39 ] The ensuing phase of the litigation is a different matter.

I find that that Mr. Uhl and his company Daytona Ventures Inc should jointly and severally bear the costs of the

summary judgment proceedings (including the court applications leading up to it) on a solicitor client basis. There are two reasons for this, aside from Mr. Ostergaard’s relative success. [ 40 ] First, Mr. Uhl had the opportunity to avoid liability for such costs by accepting the settlement offer made to him on January 16, 2021. Mr. Ostergaard offered to waive any claim for costs in return for delivery of the Skid Steer and acknowledgment of ownership, free and clear of any claim. This was a completely reasonable offer but was rejected. In contrast, Mr.

Uhl demanded over $1,000,000 to resolve the claim (as well as ownership of the Skid Steer). [ 41 ] Second, the behavior displayed by Mr. Uhl during the

summary judgment proceedings, preceding court appearances, and dealings with opposing counsel, MNP and the court was nothing short of reprehensible. Following the

summary judgment decision, Mr. Uhl sent letters to the Chief Justice, MNP LLP, the Alberta Ombudsman and others complaining of the decision. He referred to the court as a “kangaroo court.” He called Mr. Ostergaard, his lawyers and MNP “corrupt”. He accused MNP of presenting a “fraudulent” and “cooked” report. He made insulting and derogatory comments about the personal appearance of the opposing party and counsel, and harassed law firm staff by email. In defiance of the court, he refused to deliver up the Skid Steer until an application for contempt of court was made. [ 42 ] While I have sympathy for the Mr.

Uhl in terms of the toll this litigation took on his physical and mental health, this repeatedly unacceptable behavior must have cost consequences. [ 43 ] Having regard to these factors, I find that solicitor client costs (including taxable disbursements) are appropriate in this case, commencing from the granting of the application to review and set aside the first arbitration decision. Mr.

Uhl and his company Daytona Ventures Inc. will be jointly and severally liable for these costs, which shall be paid within ninety days of assessment. [ 44 ] The quantum of solicitor client costs (including Burnet Duckworth and Palmer fees and disbursements) will be assessed by the assessment officer. Mr. Uhl will also be responsible for the MNP expert fees of $31,657.04. Heard on the 12 th day of June 2023 with written submissions thereafter. Dated at the City of Calgary, Alberta this 2nd day of November 2023. . R.A. Neufeld J.C.K.B.A. Appearances: Justin E.

Okerman, Dentons LLP For the Applicant/Cross Respondent Trevor McDonald, Burnet, Duckworth & Palmer LLP for the Respondent/Cross Applicant