Dec 5, 2016

Summary of Mikkelsen v Truman Development Corporation

Mikkelsen v Truman Development Corporation, 2016 ABQB 255 (CanLII)

The parties were involved in a dispute over the proposed development of the Plaintiffs’ farmland. The Trial Decision concluded that there was no binding agreement between the parties. Based on this conclusion, the Court granted much of the relief sought by the Plaintiffs but the results were mixed. Some of the Defendant’s claims in its Counterclaim were granted. The Plaintiffs sought full indemnity Costs or, alternatively, a lump sum award of $300,000, which represented approximately 60% of the actual amount they paid as legal fees and disbursements. The Defendant argued that the parties should bear their own Costs.

The Plaintiffs argued that they were the successful party, and that the Court’s Judgment at Trial was equal to the Formal Offer made by the Plaintiffs prior to Trial. The Plaintiffs further argued that the Defendant engaged in misconduct, including improperly denying Discovery records, changing evidence given under oath after hearing the Plaintiffs’ case at Trial, forcing the Plaintiffs to prove facts that should have been admitted, and forcing the Plaintiffs to exhaust legal proceedings to obtain that which was obviously theirs. The Defendant argued that the Plaintiffs did not meet or exceed the Formal Offer, and they were not wholly successful at Trial. The Defendant indicated that the Plaintiffs were ordered to make partial payments to the Defendant for pre-development Costs pursuant to the Counterclaim.

Justice Erb held that, pursuant to Rule 10.29 and case law arising out of that Rule, Costs generally follow the ultimate result, but are not usually apportioned on an issue-by-issue or claim-by-claim basis, as it is rare for a successful party to succeed on each item claimed. Overall, the Plaintiffs succeeded on the most important issue between the parties; the Defendant’s success was “minimal” for the purpose of determining Costs.

Justice Erb considered Rule 10.31(6), noting that Costs are discretionary, and subject to specific requirements in the Rules. Specifically, pursuant to Rule 10.31(6)(b), the Court has the ability to award Costs on an indemnity or a lump sum basis. Pursuant to Rule 10.33(1)(a), (b), and (g), the Court may take into account factors including the result of the Action and each party’s degree of success, the amount claimed and the amount recovered, and any other matter the Court considers appropriate. Further, pursuant to Rule 10.33(2)(a), (b), (f) and (g), the Court may also consider the conduct of a party that unnecessarily lengthened or delayed the Action, a party’s denial of or refusal to admit facts that should have been admitted, a contravention of or non-compliance with the Rules or an Order, and a party’s engagement in misconduct. Erb J., referring to prior leading authority, held that the Court has jurisdiction to award Costs on a higher scale than provided for in Schedule C, but that solicitor and client Costs are only awarded in “rare and exceptional” circumstances. With respect to solicitor client Costs, Erb J. noted that enhanced Costs may also be appropriate for the purpose of satisfying the objectives of deterrence and punishment. Justice Erb considered that the Defendant’s witness’s testimony was not credible and contained many inconsistencies, the unnecessary expenses incurred by the Plaintiffs, and the settlement offer. Justice Erb concluded that the circumstances of this case supported a Costs award beyond the usual party and party amount.

With respect to the Formal Offer, Erb J. stated that, under Rule 4.29(1), a Plaintiff is normally entitled to double Costs if the Plaintiff makes a Formal Offer that was not accepted and subsequently obtains a Judgment or Order that is equal to or more favourable than the Offer. However, in accordance with Rule 4.29(4)(a), this general principle does not apply if Costs were awarded on an indemnity or lump sum basis under Rule 10.31(1)(b). Justice Erb held that the Offer in this case was as favourable as the Judgment in the main Action, but did not address the Defendant’s Counterclaim. As a result, Rule 4.29(1) was not triggered in this case; however, it was open to the Court to consider, as a factor in determining Costs, a Formal Offer that fell “marginally short” of the Judgment, as long as it was a legitimate attempt to settle the issues in dispute.

Erb J. observed that, while the Schedule C amounts were inadequate, this was not a case that required full indemnity for the Plaintiffs’ Costs. Her Ladyship stated that there are numerous options available, including adjusting Schedule C amounts in various ways, as long as the final total is reasonable. Ultimately, Justice Erb held it was reasonable to award a lump sum Costs award pursuant to Rule 10.31(1)(b)(ii). The Plaintiffs were awarded $300,000, which was discounted by $100,000 because the Plaintiffs alleged but failed to prove fraud against the Defendant.