Alberta – Successful enforcement of right to arbitrate attracts triple “tariff” costs  – #659

In Barrel Oil Corp v. Cenovus Energy Inc., 2022 ABQB 488, Justice M.H. Hollins granted a Respondent who successfully defended an application to stay an arbitration the Respondent had commenced, triple “tariff” costs, equating to just over 40% of the Respondent’s out of pocket costs. The Court rejected the Respondent’s plea of full indemnity costs, finding they were inappropriate in this case.

In this case, Cenovus Energy Inc. (“Cenovus”) commenced an arbitration to determine a contractual dispute with its joint venture partner Barrel Oil Corp. (“Barrel”). Barrel brought and lost an application to stay the arbitration. Thus, the Court had to determine the costs to which Cenovus was entitled.

Cenovus sought full indemnity costs of $52,838.71 or alternatively 65% of that amount. Barrel contended that Cenovus’ costs should be calculated on the basis of the Schedule C tariff (party and party costs) of recoverable fees in the Alberta Rules of Court, Alta Reg 124/2010 (which would have amounted to approximately $10,930) (the “Schedule C Costs”).

As a starting point, the Court confirmed that those costs are discretionary and that there is no need to default to Schedule C Costs (see McAllister v. Calgary (City), 2021 ABCA 25 at para. 27). Justice Hollins also noted that while Cenovus was entitled to costs as the successful party, this did not automatically entitle it to full or near indemnity costs. He accepted that there were no factors justifying this cost enhancement; namely, the legal issues were not overly complex and there was no litigation misconduct by Barrel.

Justice Hollins held that it was reasonable and proper to make a costs award with reference to Schedule C, but to adjust the column and multiples to better reflect the application before him. For instance, Justice Hollins found that it was inappropriate to award column 1 costs (i.e. for claims up to $50,000), recognizing that significant amounts were at stake in the determination of the underlying issues in the arbitration. He found that column 5 costs (i.e. for claims over $1.5 million) times three was more appropriate. In so finding, Justice Hollins observed that this scale of costs also recognized that Barrel’s “obstruction to the arbitration was poorly conceived“, and that the ultimate amount equated to just over 40% of Cenovus’ out-of-pocket costs (para 9).

Contributor’s note:

In Alberta, Rule 10.31 of the Rules of Court, grants the Court significant discretion in awarding costs. The Court can, among other things, order a party to pay costs with or without reference to the Schedule C tariff, order a party pay multiples or a fraction of an amount set out in any column of Schedule C, or order a percentage of assessed costs. In result, this case is consistent with a body of case law in Alberta that, for litigated matters, the application of party and party costs (i.e. Schedule C Costs) should normally represent 40-50% recovery of actual costs by the successful party (see McAllister v. Calgary (City), 2021 ABCA 25 at para. 41-51). In this case, Justice Hollins awarded three times column 5 of Schedule C costs, which he recognized was also just over 40% of the successful party’s actual costs. However, if this represents an application of the “normal rule”, then there arguably was not any enhanced costs granted to reflect the finding that Barrel’s obstruction of the arbitration was poorly conceived.