1348623 ALBERTA LTD., PLAINTIFF - v. -, 2016 SKQB 200

QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2016 SKQB 200 Date: 2016 06 08 Docket: QBG 1535 of 2009 Judicial Centre: Saskatoon BETWEEN: 1348623 ALBERTA LTD., PLAINTIFF - and - SUNIL CHOUBAL, SUJITA CHOUBAL, and ARLINGTON APARTMENTS LTD., DEFENDANTS - and – RICHARD JEANNEAU, PAUL BACON, RESCOM REALTY GROUP LTD., and RISA MANAGEMENT LTD., THIRD PARTY DEFENDANTS Counsel: No one appearing for the plaintiff Joel A. Hesje, Q.C. for the defendants Colin D. Clackson, Q.C. for the third party defendants ___________________________________________________________________________ JUDGMENT ON COSTS DANYLIUK J.

June 8, 2016 ___________________________________________________________________________ INTRODUCTION

[ 1 ] The defendants and third parties apply for costs following a judgment as to liability and damages rendered April 21, 2016 ( 2016 SKQB 129 ). In addition to the usual requests such as a determination of which column of the tariff applies, there is one somewhat unusual application. The third parties seek an order that their costs be awarded as against the plaintiff as opposed to the defendants. [ 2 ] For the reasons below, I find I am in agreement with the position put forth and that the third parties’ costs of this litigation ought to be awarded as against the plaintiff, as opposed to the defendants.

FACTS [ 3 ] I firstly note that following the trial, at some point, the plaintiff’s solicitors withdrew. Accordingly the plaintiff was unrepresented at this costs hearing. Saskatchewan’s Queen’s Bench Rules require a corporation to be represented by a lawyer. Mr. Shumlich, sole director and shareholder of the corporate plaintiff, was given leave to attend via telephone but not to make any submissions on costs. He did attend in that fashion. [ 4 ] The facts giving rise to this litigation are set out fully in my earlier judgment from trial, and need not be repeated here.

What is germane is a bit of procedural history. [ 5 ] Originally, the plaintiff named numerous defendants including those now named as third parties. After conducting questioning (examinations for discovery) the plaintiff made an arrangement to discontinue as to those parties, with each side bearing its own costs incurred to that point. Subsequently, some of those parties were returned to this action through the defendants’ third party claim, and participated to and including trial. [ 6 ] Through the course of the trial, the plaintiff pursued both the defendants and the third parties with vigour.

This is not a criticism; however, the plaintiff took issue with the position of the third parties throughout and particularly challenged Mr. Jeanneau on a number of issues. This is unlike some trials involving defendants and third parties, where there are almost two parallel cases being run within the same action. [ 7 ] Finally, counsel appearing on this application noted that there was an agreement on costs as between the defendants and third parties, as far as concerns the disposition of the $40,000.00 paid into court as security for costs.

The details of this agreement were not disclosed, nor do I need to know same to resolve the issues in this application. ISSUES [ 8 ] The issues in this application are: 1. Should the assessable costs of the third parties be awarded as against the defendants or as against the plaintiff? 2. What is the appropriate column on the tariff of costs on which to have the costs of this action assessed? 3. Were the second counsel of the defendants and third parties reasonably required, such that costs for their attendance ought to be awarded? 4.

What is the appropriate disposition of the $40,000.00 paid into court as security for costs?

Analysis 1. Should the assessable costs of the third parties be awarded as against the defendants or as against the plaintiff? [9] The position of the third parties (supported by the defendants) is that usually, their costs would lie against thedefendants as the parties bringing them into this action. The third parties submit that in the particular and somewhat unusualcircumstances of this action, the third parties’ costs should lie against the plaintiff.

The third parties’ argument is akin, but not identical,to the seeking of a Bullock or Sanderson order. [10] This court enjoys a plenary jurisdiction as to costs. Rule 11-1 confirms the inherent jurisdiction of the court todeal with cost matters arising out of its own processes. Indeed, Rule 11-1(3)(

a) indicates the court may deal with costs with or withoutregard to the tariff established to deal with same. Rule 11-1(4) contains a non-exhaustive list of criteria which the court “may” consider,which include the result of the proceeding, the amounts claimed and the amounts recovered, the importance of the issues, and thecomplexity of the proceedings. Rule 11-4 allows the court to give directions to the assessment officer.

Rule 11-7 provides that costs mustfollow the event subject to subrule (2), which is not applicable here. [11] Counsel for the third parties argues that in tripartite litigation such as this, the so-called ordinary rule that thecosts of the third parties lie against the defendants and not the plaintiff is not absolute, and may yield where the circumstances require it.I agree. [12] The underlying premise for this general rule respecting third parties’ costs is that it was the defendants thatdragged them into the litigation, not the plaintiff, and that it was the defendants that desired the third parties to be parties to the action inthe first place.

That rule is summarized in Mark M. Orkin, The Law of Costs, 2d ed (Aurora, Ont.: Canada Law Book, 1987), para 209.7: The discretion of the court to award costs against an unsuccessful litigant extends as well to third parties. Thus, a plaintiff whose actionhas been dismissed may be ordered to pay the costs of the third party in addition to those of the defendant, depending on thecircumstances of the case.

The usual rule is that the unsuccessful plaintiff will not be charged with the costs of the third party on thereasoning that the plaintiff did not sue the third party, did not want him or her in the case and was not responsible for joining the thirdparty.

Depending on the facts of the case, however, fairness may require that an unsuccessful plaintiff bear a successful third party’scosts. [13] This principle has been considered in numerous cases, including Fink v Bourassa, (SK KB),[1974] 2 WWR 84 (Sask QB); First National Properties Ltd. v Northland Road Services Ltd., 2008 BCSC 894; and Guarantee Companyof North America v Resource Funding Ltd., (ONSC). [14] That general rule remains true in many cases, perhaps even most cases - but not here.

Fairness dictates that theplaintiff bears the third parties’ costs. [15] In support of the ability to award third parties’ costs against the plaintiff, counsel for the third parties citesMilina v Bartsch (1985), (BC SC), 63 BCLR 122 (QL). There, Justice McLachlin (as she then was) cited the principleof general application, but at paras. 3 to 5 found there were exceptions: [3] The award of costs is in the discretion of the court.

That discretion is to be exercised in accordance with the rules of practice and theparticular circumstances of the case. [4] The normal rule is that a plaintiff who is unsuccessful against the defendant will not be charged with the costs of the third party. Theplaintiff did not sue the third party, did not want him in the case and was not responsible for joining him.

In these circumstances it hasbeen thought to be unfair to visit the third party’s costs on the plaintiff: … . [5] There may be situations where, on the peculiar facts of the case, fairness requires that an unsuccessful plaintiff bear a successful thirdparty’s costs. Courts have held that such an order may be appropriate where one or more of the following situations was present: 1. Where the main issue litigated was between the plaintiff and the third party: Coast Crane Co. v. Dom. Bridge Co. (1961), 1961

389 (BC SC), 29 D.L.R. (2d) 383 (B.C.S.C.); Credit Fonder Franco-Can. v. Bennett (1964), (BC CA), 47W.W.R. 369, 44 D.L.R. (2d) 186 (B.C.C.A.). 2. Where the third party was brought or kept in the matter by reason of the act or neglect of the plaintiff: Coast Crane Co. v. Dom.Bridge Co., supra. 3. Where the case involves a string of contracts in substantially the same terms for the sale of goods: R. D. Bristowe Ltd. v. Bennett &White Const. Co., supra. 4.

Where the third party proceedings follow naturally and inevitably upon the institution of plaintiff’s action, in the sense that thedefendant had no real alternative but to join the third party: Credit Fancier Franco-Can. v. Bennett, supra. [16] Initially, courts reviewing this case sought to determine if the situation at hand fell within one of the fourexceptions contemplated in Milina. But it has since been held, correctly I think, that the circumstances set out in Milina do not amount toa comprehensive list.

As was stated in Guarantee Company of North America v Resource Funding Ltd., at para 6: … One must be careful, however, not to treat the statement of Justice McLachlin as a code encompassing the only situations in which aplaintiff may be ordered to pay the costs of a third party. I do not think that she intended to do that and certainly she did not say so.Justice McLachlin was describing situations in the past in which such costs order was made. … . [17] From the jurisprudence, it is clear that whether an unsuccessful plaintiff should pay a third party’s costs willdepend on the exact circumstances of that case.

The discretion to order such costs exists, but it must be exercised judicially. [18] In the Guarantee case, the plaintiffs were ordered to pay the costs of the third parties. The circumstances therewere similar to those in this case. [19] On the facts before me and having regard to the manner in which this action was conducted and the trial wasrun, I conclude that the plaintiff must pay the costs of the third parties.

Certainly, the first and fourth criteria cited in Milina are engaged. [20] The main issues involved not only a dispute between the plaintiff and defendants but also with the third parties.There were no doubt issues (such as a lack of privity) which impelled the plaintiff to discontinue against certain parties. But taken as awhole, there can be no doubt of the third parties’ integral involvement in the central matters in issue in this case. The main issues litigatedwere actually between the plaintiff and both the defendants and the third parties.

To succeed against the defendants it was at least highlyadvisable, and was likely imperative, for the plaintiff to show wrongful acts or omissions on the part of the third parties who were actingin an agency capacity with respect to the defendants. [21] As well, the third party proceeding flowed naturally (and inevitably) from the plaintiff’s commencement oflitigation. Once the plaintiff chose to release the third parties as party defendants, the defendants were in a practical sense compelled toadd them as third parties.

The third parties brought no application nor did they make any protest about this manoeuver, likely becausethey recognized that their participation in this action was inevitable. As Michael Corleone said in The Godfather,

Part III: “Just when Ithought I was out . . . they pull me back in.” [22] Also, given what the plaintiff was obliged to prove (and failed to prove) to succeed in this action, the presence ofthe third parties was inevitable. See Lucky Trading Co. Lucky Snow Enterprises (Canada) Ltd v Icicle Seafood, Inc.,(BCSC); Berg v Elkousy Construction Co.

Ltd., 2005 BCSC 1012; Lawrence v City of Prince Rupert, 2003 BCSC 1278; GreaterToronto Airports Authority Association Inc. v Foster Wheeler Limited, 2011 ONSC 3377; and Sanofi Pasteur Limited v UPS SCS Inc.,2015 ONCA 88, 124 OR (3d) 81. [23] Therefore there will be an order that the plaintiff is liable for the costs of the third parties, to be assessed. I leaveit to the assessment officer to determine the date from which such costs accrue, given the agreement to discontinue and forego costs afterquestioning. 2.

What is the appropriate column on the tariff of costs on which to have the costs of this action assessed?

[ 24 ] Defendants’ counsel suggests this was a lengthy and complex proceeding, such that column 3 of the tariff was appropriate. Under the current tariff (which is relatively new) column 1 is the default position. A party may justify an award and assessment on one of the higher columns. The onus is on the party seeking costs on the higher column to justify same. [ 25 ] In the “preamble” to

Schedule I, “B”, the general Queen’s Bench tariff, it is indicated that “The appropriate column is based upon the complexity of the matter. Column 1 represents the least complex matter and Column 3 represents the most complex matter. The parties may agree upon the column to be applied failing which this must be decided by the Court.” [ 26 ] These revised tariff provisions have received relatively little judicial

interpretation as yet. The new tariff represents a fundamental change in the approach to costs, in that the amount in issue is not determinative of the column to be used to assess those costs. Complexity is the key. [ 27 ] Some guidance can be gleaned from other jurisdictions, although the tariff systems are different from that in Saskatchewan. The Federal Court’s Tariff “B” has five columns.

To determine which column is applicable factors to be considered include the result of the proceedings, the importance and complexity of the issues, the amount of work, any conduct of a party that tended to shorten or unnecessarily lengthen the duration of the proceedings, and whether any step in the proceeding was improper or unnecessary. For example, see Porto Seguro Companhia de Seguros Gerais v Belcan SA, 2001 FCT 1286 , 214 FTR 291 . I find these factors are germane when Saskatchewan’s current Rules and tariff are being considered. [ 28 ] There is no “magic” rule to apply to determine costs.

As stated in Northland Material Handling Inc. v Parkland (County), 2012 ABQB 586 at para 26 , 77 Alta LR (5 th ) 150 : “Rather than one principle, the weight of the case law establishes that the facts and circumstances of each particular case must be assessed to determine whether a higher column or a multiple of a column is appropriate in that case”. I agree. [ 29 ] Factors to be considered were also reviewed in the context of a complex judicial review application in Lum v Alberta Dental Association and College , 2015 ABQB 276 . These included: (

a) Difficulty and complexity of the case. This included the number and difficulty of the issues; whether arguments were novel or raised settled law; and whether anything took the case into the realm of “out of the ordinary”. (

b) Importance of the case to the parties and to the community at large. (

c) Whether the case was lengthy. (

d) Positions, relationships and conduct. This involves both the parties and their counsel. It involves the conduct leading up to the litigation, and conduct of the litigant and his or her counsel during the litigation. [ 30 ] Our Queen’s Bench Rules list some factors to consider in deciding what cost award to make. There is no corresponding list to determine which column of the tariff to use once that cost order is made.

The tariff itself clearly imports complexity as the dominant consideration in selection of a column. [ 31 ] Distilling the cases and considering the nature of our Rules and tariff, it strikes me that in determining on which column party-and-party costs ought to be awarded, the following factors should be considered: (

a) Complexity of the case. This would include several sub-considerations, such as the complexity and number of any issues of fact, law and evidence; the nature and number of witnesses and exhibits; whether novel or intricate points of law were raised; whether the case was markedly out of the ordinary; and the cooperation (or lack thereof) of counsel and/or the parties in streamlining the case. All of these bear on overall complexity, which the tariff itself highlights as the overarching consideration in determining the appropriate column.

(

b) Importance of the case. Litigation is virtually always important to the parties involved. Consideration of that aspect of this criterion will seldom be overly helpful, much less determinative. However, consideration of the impact of the case to the community at large as well as the legal community will be of some importance. For example, a case may have important repercussions to policy and procedure within government or regulatory organizations. It may deal with how ordinary citizens may comport themselves within our society. As well, there may be importance to the matter in advancing the state of the law in a given area. The more such factors pertain, the more complex the case is. (

c) The duration and conduct of the proceedings. A trial may be long because it is complicated with many issues of fact and law, or it just may be long because there is substantial history to cover. Length alone cannot determine complexity, but in an age where judicial economy is assiduously pursued a long case may be indicative of complexity. As well, the manner in which the proceedings were conducted by counsel and/or the parties can complicate or simplify matters. Steps taken which shorten or lengthen (or simplify or complicate) the proceedings may affect complexity for the purpose of the application of the tariff. (

d) The urgency of the matter. This may not apply to trials but there are numerous complex applications which are also urgent. Injunctions, receiverships and bankruptcies, Anton Piller and Mareva orders – these are but a few of the types of cases where counsel must “drop everything” and devote an intense effort to putting together comprehensive material in what is usually an extremely tight time frame. In the appropriate case this could push a matter toward more complexity and even into Column 3. (

e) The amount at issue. This court has moved away from an assessment of the amount of the claim or award as determining which tariff column is used. Rather, complexity is now the measure. Nevertheless the amount involved may play a role in determining the overall complexity of a particular matter. There can be an interplay between the amount involved and the concept of proportionality, which is set out in the Foundational Rules. (

f) Whether experts were involved. Expert witnesses almost inevitably increase the preparation time of counsel, whether one is calling or responding to an expert witness. Again, merely because an expert witness testifies does not mean a case is complex but it is at least an indicator of some degree of complexity. (

g) Parity and expectations. While each case is different, the court should consider comparable awards and make the appropriate adjustments. This should have the effect of avoiding inconsistency amongst cost awards. Reasonable consistency will lead to litigants and their counsel being able to form reasonable expectations as to the potential cost consequences of litigation in a given range of circumstances. (

h) Access to justice. There is an inherent tension between a cost award which operates (in whole or in part) as an indemnity, and the objective of promoting access to justice. There is a balance to be struck, and achieving same will sometimes be difficult. If the effect of an established range of cost awards in a province is to discourage frivolous and baseless litigation, so be it. But if the effect is to prevent or deter reasonable and meritorious claims from being brought, that is something to be considered at a policy level. (

i) Discretion and reasonableness. While an examination of the tariff award on the three available columns should be performed, overall it does not strike me as reviewable error that the judge awarding costs take a wide perspective of the proceedings and determine if the overall award is fair and reasonable in the circumstances. (

j) Any other relevant matter. This list is not exhaustive. Factors can arise which cannot presently be anticipated. This last criterion recognizes the wide discretion this court enjoys as to costs. [ 32 ] In applying the relevant criteria to the case at bar, I conclude this matter was moderately complex. It was not in the category of most complex litigation, which is what Column 3 is reserved for. As previously stated, the

preamble to the tariff states, inter alia , “Column 3 represents the most complex matter ” [emphasis added]. [ 33 ] There were several legal issues that needed to be addressed, but the law regarding at least some of those was well-settled. Complex issues of evidence arose, particularly as to the ability of the expert to testify in the fashion proposed by the plaintiff. Again, this was not a straightforward, fact-based trial that would fall into Column 1, but was not “the most complex matter”.

[ 34 ] I would also assess the importance of the case as moderate. Obviously to the named parties it was of paramount importance. But to the broader community and the legal community, it was not of high importance. [ 35 ] This was a two-week civil trial, which is relatively lengthy. However, counsel for all sides were highly competent, organized, and well-prepared. Binders of documents and exhibits were prepared. Briefs were filed. All counsel took steps to ensure that this trial ran as efficiently as possible. What could have been an even more time-consuming matter was reduced through counsel’s efforts.

Again, I assess this factor as moderate in nature. [ 36 ] There was no particular urgency to this matter and this factor does not affect my assessment of which column to use. [ 37 ] The plaintiff’s claim was for a significant amount. In its final trial submissions the plaintiff characterized its claim as being worth over $1.7 million. However, in these particular circumstances that did not add substantial complexity to the claim or lengthen the proceedings. Comparatively little time was spent on damages, with the bulk of the trial (and submissions) directed toward liability.

This is not a criticism; it is a fact. [ 38 ] Expert reports and witnesses were involved. By the very nature of expert witnesses the complexity of a matter is increased. Here, this was compounded by the fact that there was a genuine and complex dispute over the scope of the expert’s testimony. This is a factor that added complexity to the trial. [ 39 ] In terms of parity and expectations, there are at present comparatively few cases interpreting the new tariff. But there can be no doubt that this was somewhat complex commercial litigation.

It seems to me that the parties, having good counsel, would all have reasonable expectations and foreknowledge that if they were unsuccessful in this litigation they would be exposed to a significant cost award – not the highest award, but one which would be far more than nominal. If nothing else, the $40,000.00 posted as security for costs would highlight this fact. It would not be beyond a client’s reasonable expectations in the context of this case that a cost award in excess of Column 1 would be granted.

I do think it would be beyond those reasonable expectations that a cost award on Column 3, reflecting the most complex case, would be granted. [ 40 ] The criterion of access to justice does not play a significant role here. This was commercial litigation. The plaintiff is a company financed by investors who (from the one that testified) seem relatively sophisticated and in possession of significant financial resources.

A Column 2 cost award in this context will not have an untoward or inordinate chilling effect on these litigants, or potential future litigants raising similar issues in a similar setting. [ 41 ] There are no other relevant factors to consider here, save the last. Ultimately this court has a discretion, which I acknowledge must be exercised judicially. I have looked at the potential costs incurred under the three available columns and Column 2 is not unreasonable or unfair.

I do believe awarding costs on Column 3 would bear those attributes. [ 42 ] As a result I determine that Column 2 of the tariff is appropriate, and so order. 3. Were the second counsel of the defendants and third parties reasonably required, such that costs for their attendance ought to be awarded? [ 43 ] I have no difficulty with the defendants and third parties engaging second counsel for the preparation and conduct of this matter. There were significant legal issues to research. Many would have been known in advance but some only emerged in the course of the trial.

There were substantial document and information management aspects to the trial. The stakes were high – close to two million dollars was being claimed. As well, the plaintiff had two trial counsel plus an advisor of sorts, Mr. Mandeep Shergill. The presence of second counsel at no time struck me as untoward. The contribution of second counsel for all parties to the efficient conduct of this trial was obvious.

I am satisfied the presence of second counsel was reasonably necessary to properly present this case. [ 44 ] I have considered all the material facts and circumstances of the instant case in light of The Queen’s Bench Rules and relevant case law, including: Hill v Arcola School Division No. 72 , 2002 SKQB 156 , 218 Sask R 82 ; Lac La Ronge Indian

Band v Dallas Contracting Ltd., 2002 SKQB 407, 228 Sask R 46; and Dun-Rite Plumbing & Heating Ltd. v Walbaum, 2009 SKQB 384,348 Sask R 243. [45] Also see Electronic Superstore Ltd. v Geransky Brothers Construction Ltd. (1991), (SK KB),90 Sask R 150 (QB), per Baynton J. at page 159: …

Schedule I of the Tariff of Costs makes provision for second counsel in important cases. Although all cases are presumably importantto each litigant and counsel, the determining factor is whether the presence at the trial of second counsel is reasonably required.

Thisinvolves a consideration of the importance of the issues at stake, the amount of risk, the complexity of the evidence, the length of thetrial, and like factors. … [46] In short, I have no hesitation in ordering that second counsel was reasonably necessary and that costs for thosecounsel should be awarded for both the defendants and the third parties. 4. What is the appropriate disposition of the $40,000.00 paid into court as security for costs? [47] I am urged by counsel for the defendants to release the $40,000.00 paid in as security for costs now.

I amassured that the assessed costs will certainly exceed that sum and that there is no risk in having that money paid out of court. [48] While in no way do I doubt counsel, I am cautious. I cannot predict with certainty what the assessment will be,or whether any party will take any issue with same.

Given the length of time this action took to wind its way to a conclusion, I cannotfind the defendants or third parties would be prejudiced if the money stays put. [49] I am therefore ordering that the $40,000.00 remain in court until such time as the assessment process has beencompleted, and any reviews or appeals and/or the time limits therefor have been conducted or those time limits expired. At that point thefunds can be paid to the solicitors for the defendants, who will have to deal with the third parties as to any agreement as to costs that theyhave reached.

Conclusion [50] Accordingly, I make the following order: 1. The plaintiff is ordered to pay the assessable costs of the defendants and the third parties. 2. The defendants are collectively entitled to one set of assessable costs. 3. The third parties are collectively entitled to one set of assessable costs. 4. All costs shall be assessed using Column 2 of the Queen’s Bench Tariff of Costs. 5. The defendants and the third parties are each collectively entitled to claim costs for second counsel.

6. The $40,000.00 paid into court by the plaintiff as security for the costs of this action shall remain in court until such time as the assessment process has been completed, and any reviews or appeals and/or the time limits therefor have been conducted or those time limits expired. At that point the funds can be paid to the solicitors for the defendants. 7. The defendants and third parties are each entitled to the costs of the within application, on the same basis. [ 51 ] My thanks to counsel for their submissions and assistance with respect to resolving the matter of costs. ________________________________ J. R.W. DANYLIUK