Alberta – court gives effect to parties’ agreement for recovery of costs for court litigation to enforce award – #077

In Extreme Excavating & Backhoe Services Ltd v. Scott, 2018 ABQB 414, Mr. Justice Wayne N. Renke gave effect to the parties’ agreement allowing one party to recover costs on a solicitor-client basis but for only the court litigation identified in the agreement.  That party successfully defended an appeal of an award and successfully applied to enforce that same award.  He was limited to recovering costs according to the court’s tariff on the appeal of the award but allowed recovery on solicitor-client basis, subject to an assessment, for its enforcement.  The result underlines the importance of identifying which post-award litigation will merit a more robust cost-recovery, if any, and using the necessary wording to give effect to that recovery. 

The costs decision followed Renke J.’s earlier decision, Extreme Excavating & Backhoe Services Ltd v. Scott, 2018 ABQB 102, in which he dismissed an appeal under section 44(5) of the Arbitration Act, RSA 2000, c A-43 from an August 29 2016  final award.  The parties’ arbitration clause limited any appeals to questions of law. At the end of his reasons, Renke J. invited submissions on costs, delivered approximately 30 days after his decision and limited to three pages maximum.

The parties’ dispute related to a Share Purchase Agreement (“SPA”) which contained not only an arbitration agreement but also specific terms for the payment of costs.  The arbitrator issued a November 30, 2016 supplementary award determining responsibility for certain fees and costs of the arbitration.  Neither party challenged that supplementary award.

The parties’ SPA at article 10.3, reproduced in full in the reasons at para. 4, provided a list of events for which one party, the Purchaser, would hold the other, the Vendor, harmless from certain costs and expenses, including legal fees on a solicitor and client basis.  The wording of the recovery was limited though to those “incidental to or in respect of the foregoing”.  The list of the “foregoing” did not include an appeal of the final award.  Renke J. denied recovery on the basis of the particular wording in article 10.3.

Renke J. did point to the courts’ willingness to indemnify on the basis of a contract providing a different scale of costs.  He referred to a series of cases in which the courts signalled that willingness: Vallieres v Vozniak, 2014 ABCA 384 at para 7;  SA Refueling Ltd v Northern Lights (County) (Municipal District of Northern Lights No 22), 2016 ABQB 592; at para 52; Valard Construction Ltd v Bird Construction Company, 2015 ABQB 141 at para 91; Royal Bank of Canada v Learmonth, 2014 ABQB 756 at para 20; Alberta Treasury Branches v 1401057 Alberta Ltd. (Katch 22), 2013 ABQB 748 at para 35.  The latter case provides a sampling of the wording used by parties to give effect to a costs-consequence.  The sampling is prefaced by the court’s observation: “Contracts may contemplate the existence of litigation between the parties and allocate the burdens associated with it, including provisions obligating the payment of legal costs at stipulated levels under specified circumstances.

See also : Trinier v Shurnaik, 2011 ABCA 314 at paras 39-42, 68 Alta LR (5th) 400; 515 AR 148; Collins v Collin, 2005 ABCA 98 at para. 15, 363 AR 229.  In the latter, the court stated that costs awards are discretionary but the court is prepared to give effect to the parties’ agreement.

Such agreements ought to be enforced unless, as observed in Alberta Treasury Branches v. 1401057 Alberta Ltd. (Katch 22), there is “a compelling reason not to do so” which include “overly aggressive conduct, inequitable conduct, and oppressive or other vexatious or improper conduct”.  In addition, the courts do look at the level of success, applying a scale to recovery depending on the extent to which the successful party obtained what it had sought.

Renke J. then considered whether a successful party could recover solicitor-client costs on a non-contractual basis.  He agreed that the recovery was possible but was subject to the court’s discretion which itself was “informed” by the court’s rules of procedure.  Again, given that Plaintiff did not engage in conduct warranting solicitor-client costs, Renke J. declined to consider the non-contractual recovery of solicitor-client costs.

The successful Defendants costs recovery was subject to the court’s application of the tariff.  Renke J. undertook a familiar review of the considerations developed for Alberta’s tariff and issued a decision applicable to the parties’ situation.  He did caution against revisiting any decisions taken in the arbitration including the unchallenged supplementary award on costs.

Renke J.’s analysis for the non-contractual recovery of solicitor-client costs applied equally to Defendant’s claim for separate costs for having had to apply for enforcement of the final award. As with his analysis on costs sought by Defendant regarding Plaintiff’s appeal of the final award, Renke J. found not conduct justifying solicitor-client costs.  As before, Renke J. limited recovery to a consideration of the tariff.

Renke J. did agree that Defendant was entitled to rely on article 10.3 of the SPA to recover costs on a solicitor-client basis for his application to enforce the final award.  Doing so fell within the terms of article 10.3, unlike Defendant’s costs incurred for resisting Plaintiff’s appeal of the award.

The file did not contain sufficient evidence for Renke J. to determine which steps taken by Defendant should be compensated and he referred the parties to an assessment.

Renke J. concluded that, among other things, Defendant was entitled to (a) costs for the appeal, assessed on a party-party basis under Column 5 of Schedule C (with no multiplier) and those costs would be determined by an assessment; and, (b) costs on a solicitor-client basis. But not on a full indemnity basis, for the legal expenses incurred to bring the application for judgment and to effect the consent order or orders relating to that application, also subject to determination by an assessment to determine the steps essential to the application for judgment.