CONSTRUCTION LAW REPORTS Fourth Series/Quatri`Eme S´Erie Recueil De Jurisprudence En Droit De La Construction

CONSTRUCTION LAW REPORTS Fourth Series/Quatri`eme s´erie Recueil de jurisprudence en droit de la construction

VOLUME 59 (Cited 59 C.L.R. (4th))

EDITOR-IN-CHIEF/REDACTEUR´ EN CHEF Harvey J. Kirsh, B.A., LL.B., LL.M. Toronto, Ontario

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THOMSON REUTERS CANADA, A DIVISION OF THOMSON REUTERS CANADA LIMITED One Corporate Plaza Customer Relations 2075 Kennedy Road Toronto 1-416-609-3800 Toronto, Ontario Elsewhere in Canada/U.S. 1-800-387-5164 M1T 3V4 Fax 1-416-298-5082 www.carswell.com Contact www.carswell.com/email Pillar Resource Services Inc. v. PrimeWest Energy Inc. 179

[Indexed as: Pillar Resource Services Inc. v. PrimeWest Energy Inc.] Pillar Resource Services Inc. (Respondent / Plaintiff / Defendant by Counterclaim) and PrimeWest Energy Inc., PrimeWest Gas Corp. and TAQA North Ltd. (Appellants / Defendants / Plaintiffs by Counterclaim) and Equinox Engineering Ltd. (Not a Party to the Appeal / Third Party by Counterclaim) Alberta Court of Appeal Docket: Calgary Appeal 1601-0082-AC 2017 ABCA 19 J.D. Bruce McDonald, Myra Bielby, Thomas W. Wakeling JJ.A. Heard: October 13, 2016 Judgment: January 20, 2017* Civil practice and procedure –––– Costs — Particular orders as to costs — Costs on solicitor and client basis — Grounds for awarding — Miscon- duct –––– Plaintiff was successful in litigation for breach of construction contract — Parties made submissions regarding costs — Plaintiff asserted defendants were guilty of misconduct prior to litigation and engaged in blameworthy conduct during trial — Plaintiff was awarded complete indemnification costs against defendants — Trial judge held that defendants’ conduct warranted award of solicitor-client costs — Defendants appealed — Appeal dismissed — Trial judge’s award of full-indemnity costs was reasonably based on, at least, last three of four reasons she gave for making that award — First of four reasons for making costs award, causing unnecessary delays in post-completion negotiation occurred shortly before issuance of statement of claim — Remaining three reasons given by trial judge all arose from misconduct that occurred during litigation, or after issuance of statement of claim — These three reasons would justify award of full indemnity costs without consideration of first reason, pre-litigation negotiation misconduct — Law does not permit trial judge to base award of full- indemnity costs on pre-litigation conduct alone, independent of any other circumstances — Such costs are exceptional and generally to be awarded for misconduct that arises during course of litigation only, save for certain exceptions, which do not include pre-litigation conduct in and of itself — Trial judge was nonetheless reasonable in considering pre-litigation misconduct described in first of her reasons because it gave context to subsequent acts of trial misconduct.

* A corrigendum issued by the court on February 2, 2017 has been incorporated herein. 180 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Civil practice and procedure –––– Costs — Particular orders as to costs — Costs on solicitor and client basis — Miscellaneous –––– Plaintiff was successful in litigation for breach of construction contract — Parties made submissions regarding costs — Plaintiff asserted defendants were guilty of misconduct prior to litigation and engaged in blameworthy conduct during trial — Third party was joined by reason of counterclaim — Counterclaim was dismissed — Parties made submissions regarding costs — Plaintiff was entitled to complete indemnification costs against defendants — Third party was entitled to costs against plaintiff — Defendants’ conduct warranted award of solicitor-client costs — Defendants were jointly and severally liable for costs — Plaintiff was awarded complete indemnification costs against defendants — Trial judge held that defendants made misleading requests for further information from plaintiff during post-completion negotiation, when clarification was not really issue, and it delayed in negotiations — Trial judge also found that defendants attempted to introduce additional evidence in its written argument after trial — Trial judge held that defendants’ refusal to admit facts that ultimately were not in issue unnecessarily lengthened trial time — Trial judge also found that there were unproven allegations of fraud that continued until trial, but were not addressed by defendants at trial — Defendants appealed — Appeal dismissed — Law does not permit trial judge to base award of full-indemnity costs on pre-litigation conduct alone, independent of any other circumstances — Such costs are exceptional and generally to be awarded for misconduct that arises during course of litigation only, save for certain exceptions, which do not include pre-litigation conduct in and of itself — Remaining three reasons given by trial judge all arose from misconduct that occurred during litigation, or after issuance of statement of claim — These three reasons justified award of full indemnity costs without consideration of first reason, pre-litigation negotiation misconduct. The plaintiff successfully bought an action for breach of a construction contract against the defendants. The plaintiff asserted that the defendants were guilty of misconduct prior to litigation; engaged in blameworthy conduct during the trial; called witnesses who provided misleading and disingenuous testimony; unduly prolonged the trial; and alleged fraud by the plaintiff that they failed to prove. Upon making submissions for costs, the plaintiff argued that the defendants’ conduct warranted award of solicitor-client costs. The defendants were found jointly and severally liable for costs on a solicitor- client basis. The first ground for making the costs award was that the defendants caused unnecessary delays in post-completion negotiation that occurred shortly before the issuance of the statement of claim. The other three grounds were the defendants’ attempt to introduce additional evidence in its written argument after trial; the additional trial time necessitated by one defendant’s refusal to admit facts that Pillar Resource Services Inc. v. PrimeWest Energy Inc. 181 ultimately were not in issue; and the unproven allegations of fraud that continued until trial, but were not addressed at trial. The defendants appealed. Held: The appeal was dismissed. Per Bielby J.A.: The first of the four reasons for making the costs award was causing unnecessary delays in post-completion negotiation that occurred shortly before the issuance of the statement of claim. This conduct was therefore “prelitigation” misconduct, by definition. The law does not permit the award of full indemnity costs for this type of conduct standing alone. That issue was irrelevant to this appeal, as the remaining three reasons given by the trial judge all arose from misconduct that occurred during litigation, or after the issuance of the statement of claim. No challenge was made to her findings of fact in this regard. These three reasons would justify an award of full indemnity costs without consideration of the first reason, pre-litigation negotiation misconduct. The principles established by the decision of the Supreme Court of Canada in Young v. Young are binding in relation to when an award of solicitor-client costs can reasonably be made. Justice McLachlin’s silence on the effect of pre-litigation misconduct should not be interpreted as an intention that full indemnity costs be awarded based on that misconduct alone, even where it is reprehensible, scandalous or outrageous. There is no authority from the SCC that deals directly with whether full indemnity costs should be awarded for pre-litigation conduct alone. The trial judge was nonetheless reasonable in considering the pre-litigation misconduct described in the first of her reasons because it gave context to the subsequent acts of trial misconduct. Attempts to negotiate in bad faith prior to the start of the lawsuit foreshadowed the defendants’ proceeding to require the plaintiff to prove facts that were not in dispute, and aggressively defending claims to which they ultimately offered no defence. Per Wakeling J.A. (concurring): In Young v. Young, the SCC intended both forms of misconduct – pre-litigation and litigation conduct – to serve as foundations for an indemnity costs award. Seven Canadian appellate courts have unequivocally opined that blameworthy pre-litigation conduct may justify an indemnity costs award. Section 21 of the Court of Queen’s Bench Act proclaims that “the costs of and incidental to any matter authorized to be taken before the Court ... are in the discretion of the Court ... and the Court ... may make any order relating to costs that is appropriate in the circumstances”. This section is drawn in the broadest terms and authorizes the Court to award costs based on a party’s blameworthy pre-litigation or litigation conduct. No provision in the Alberta Rules of Court denies the court the jurisdiction to use a substantial or full-indemnity costs order as a tool to express its strong disapproval of a party’s pre-litigation conduct. 182 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Statutory interpretation principles do not justify drawing a distinction between pre-litigation misconduct and litigation misconduct when assessing costs. It is an error to equate an indemnity costs order with punitive damages, which are penal in nature and have nothing to do with the amount of the successful party’s legal obligations to its counsel. However, a court may conclude that a party’s behavior is sufficient to trigger a full-indemnity costs order without meeting the level of egregiousness reserved for punitive damages. Costs awards that are the function of blameworthy litigation misconduct deliver a message to litigation lawyers that there are some litigation strategies that are so completely unacceptable that they will attract severe cost consequences. The trial judge erred in concluding that the defendants’ pre-litigation conduct constituted blameworthy conduct. The defendants were entitled to seek an explanation from the plaintiff as to why all the amounts they were asked to pay were reasonable and necessary for the completion of the project. Having determined that the trial judge’s assessment of the defendants’ pre-litigation conduct was not supportable and it not being clear from her reasons that she regarded the other aspects of the defendants’ misconduct as sufficient cause to justify her costs order, a fresh assessment had to be conducted of the defendants’ litigation conduct. The defendants’ decisions to allege in their pleadings, without any reasonable basis, that the plaintiff acted in a fraudulent manner and to force the plaintiff to prove facts that the defendants did not take issue with and, as a consequence, consume trial time for no good reason, would, by themselves, have been sufficient reason to order that defendant to fully indemnify the plaintiff for its trial costs. The defendants’ attempt to introduce expert evidence into its written argument was an additional reason that buttresses the conclusion that the defendants must fully indemnify the plaintiff for its costs in prosecuting its claim. Per McDonald J.A. (dissenting): Pre-litigation conduct in and of itself standing alone does not permit an award of solicitor-client costs. It therefore follows that if the three additional grounds listed by the trial judge in support of her award of solicitor-client costs were unsustainable, then that award could not stand. One ground was the defendants’ attempt to introduce additional evidence in its written argument after trial. Ultimately, this issue involved an admissibility ruling, and thus ought not to found an award of solicitor-client costs. Another ground was the additional time necessitated by the defendants’ refusal to admit facts that ultimately were not in issue. Failure to admit facts is a relevant consideration in awarding costs, but would rarely justify solicitor and client costs, at least beyond the costs of proving the disputed fact. Even if one were to construe the trial judge’s comments as suggesting a lack of merit on the part of the defendants’ defence, a lack of merit is not sufficient to justify an award of solicitor-client costs. Pillar Resource Services Inc. v. PrimeWest Energy Inc. 183

In justifying her award for solicitor-client costs, the trial judge asserted that the defendants had pled fraud. Having found fraud not to have been an issue in the merits decision, the trial judge erred in finding that it was in the costs decision. This ground was also without merit. The reasons advanced to justify an award of solicitor-client costs, which is recognized as an exceptional award, were, in this case, without merit. The appeal should have been allowed, the award of solicitor-client costs should have been set aside and instead, costs should have been awarded on the basis of Column 4 of Schedule C, except for those steps in the proceedings where costs had been previously decided prior to the commencement of trial. Cases considered by Myra Bielby J.A.: FIC Real Estate Fund Ltd. v. Phoenix Land Ventures Ltd. (2016), 2016 ABCA 303, 2016 CarswellAlta 1962, 91 C.P.C. (7th) 259, 21 E.T.R. (4th) 1, 42 Alta. L.R. (6th) 16, 403 D.L.R. (4th) 722 (Alta. C.A.) — considered Jackson v. Trimac Industries Ltd. (1993), 8 Alta. L.R. (3d) 403, 138 A.R. 161, [1993] 4 W.W.R. 670, 1993 CarswellAlta 310, [1993] A.J. No. 218 (Alta. Q.B.) — considered Sidorsky v. CFCN Communications Ltd. (1997), 1997 CarswellAlta 772, 53 Alta. L.R. (3d) 255, [1998] 2 W.W.R. 89, 206 A.R. 382, 156 W.A.C. 382, 15 C.P.C. (4th) 174, 40 C.C.L.T. (2d) 94, [1997] A.J. No. 880, 1997 ABCA 280 (Alta. C.A.) — considered Young v. Young (1993), [1993] 8 W.W.R. 513, 108 D.L.R. (4th) 193, 18 C.R.R. (2d) 41, [1993] 4 S.C.R. 3, 84 B.C.L.R. (2d) 1, 160 N.R. 1, 49 R.F.L. (3d) 117, 34 B.C.A.C. 161, 56 W.A.C. 161, [1993] R.D.F. 703, [1993] S.C.J. No. 112, 1993 CarswellBC 264, 1993 CarswellBC 1269, EYB 1993-67111 (S.C.C.) — followed

Cases considered by Thomas W. Wakeling J.A.: Access Mortgage Corp. (2004) Ltd. v. Arres Capital Inc. (2014), 2014 ABCA 280, 2014 CarswellAlta 1662, [2014] A.J. No. 1032, 584 A.R. 68, 623 W.A.C. 68 (Alta. C.A.) — considered Alberta (Provincial Court Judge) v. Alberta (Provincial Court Chief Judge) (1999), 1999 CarswellAlta 1286, 16 Admin. L.R. (3d) 242, [2000] 4 W.W.R. 92, 77 Alta. L.R. (3d) 208, 41 C.P.C. (4th) 136, (sub nom. Reilly v. Wachowich) 252 A.R. 293, 1999 ABQB 639 (Alta. Q.B.) — considered Alberta Treasury Branches v. 1401057 Alberta Ltd. (2013), 2013 ABQB 748, 2013 CarswellAlta 2719, [2014] 3 W.W.R. 180, 89 Alta. L.R. (5th) 185, 579 A.R. 152 (Alta. Q.B.) — referred to Ali v. Hartley Poynton Pty. Ltd. (2002), [2002] VSC 292 (Australia Vic. Sup. Ct.) — considered Alyeska Pipeline Service Co. v. Wilderness Society (1975), 421 U.S. 240 (U.S. Sup. Ct.) — referred to 184 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Anderson v. Lawrence (2013), 2013 NBQB 21, 2013 CarswellNB 4, 98 C.C.L.T. (3d) 251, 1032 A.P.R. 223, 398 N.B.R. (2d) 223 (N.B. Q.B.) — considered Anglo-Cyprian Trade Agencies Ltd. v. Paphos Wine Industries Ltd. (1951), [1951] W.N. 205, [1951] 1 All E.R. 873 (Eng. K.B.) — considered Animal Welfare International Inc. v. W3 International Media Ltd. (2016), 2016 BCCA 372, 2016 CarswellBC 2578, 90 C.P.C. (7th) 215, 90 B.C.L.R. (5th) 96 (B.C. C.A.) — considered Apotex Inc. v. Egis Pharmaceuticals (1991), 4 O.R. (3d) 321, 37 C.P.R. (3d) 335, [1991] O.J. No. 1232, 1991 CarswellOnt 3149 (Ont. S.C.J.) — considered Arcambel v. Wiseman (1796), 1 L.Ed. 613, 3 U.S. 306 (U.S. Sup. Ct.) — considered Australian Guarantee Corp. v. De Jager (1984), [1984] V.R. 483, [1984] Vic Rep 40 (Australia Vic. Sup. Ct.) — considered Baron v. Lovell (1999), [1999] C.P.L.R. 630 (Eng. & Wales C.A. (Civil)) — considered Baulderstone Hornibrook Engineering Pty. Ltd. v. Gordian Runoff Ltd. (No. 2) (2009), [2009] NSWCA 12 (New South Wales C.A.) — considered Beaver Lumber Co. v. 222044 Ontario Ltd. (1996), 5 C.P.C. (4th) 253, 1996 CarswellOnt 3570, [1996] O.J. No. 3294 (Ont. Gen. Div.) — considered Beier v. Proper Cat Construction Ltd. (2013), 2013 ABQB 351, 2013 Carswell- Alta 1141, 35 R.P.R. (5th) 105, 564 A.R. 357, [2013] A.J. No. 707 (Alta. Q.B.) — considered Bell v. School Board of Powhatan County (1963), 321 F.2d 494 (U.S. C.A. 4th Cir.) — considered Binnie v. Pacific Health Ltd. (2003), [2003] N.Z.C.A. 69 (New Zealand C.A.) — considered Bizon v. Bizon (2014), 2014 ABCA 174, 2014 CarswellAlta 812, [2014] 7 W.W.R. 713, 96 Alta. L.R. (5th) 337, 71 Admin. L.R. (5th) 133, 572 A.R. 49, 609 W.A.C. 49 (Alta. C.A.) — referred to Black v. Norris (2012), 2012 NBQB 387, 2012 CarswellNB 806, 1045 A.P.R. 22, 403 N.B.R. (2d) 22 (N.B. Q.B.) — considered Bonnes v. Long (1979), 599 F.2d 1316 (U.S. C.A. 4th Cir.) — considered Bostock v. Ramsey Urban DC (1900), [1900] 2 Q.B. 616 (Eng. C.A.) — considered Brace v. Snow (2012), 2012 NLCA 24, 2012 CarswellNfld 158, (sub nom. Snow v. Brace) 1000 A.P.R. 90, (sub nom. Snow v. Brace) 322 Nfld. & P.E.I.R. 90, [2012] N.J. No. 152 (N.L. C.A.) — considered Bradbury v. Westpac Banking Corp. (2009), [2009] 3 N.Z.L.R. 400, [2009] NZSC 234, [2009] NZCA 234 (New Zealand C.A.) — considered Pillar Resource Services Inc. v. PrimeWest Energy Inc. 185

Brawley v. Marczynski (2002), [2002] 4 All E.R. 1067, [2002] EWCA Civ 1453, [2003] 3 Costs L.R. 325, [2003] C.P. Rep. 15 (Eng. & Wales C.A. (Civil)) — considered Burlington (City) v. Dague (1992), 505 U.S. 557, 112 S.Ct. 2638 (U.S. Sup. Ct.) — referred to Burridge v. Stafford (1999), [1999] 1 All E.R. 660, [2000] 1 W.L.R. 927, 149 N.L.J. 1474, [2001] 1 Costs L.R. 77 (Eng. & Wales C.A. (Civil)) — considered Byers v. Kidd (1906), 13 O.L.R. 396, 8 O.W.R. 759, 1906 CarswellOnt 630 (Ont. K.B.) — considered Cachia v. Hanes (1994), 179 C.L.R. 403, 23 N.S.W.L.R. 304 (Australia H.C.) — considered Calandra v. Henley (2009), 2009 YKCA 6, 2009 CarswellYukon 67, 271 B.C.A.C. 162, 458 W.A.C. 162 (Y.T. C.A.) — considered Campbell & Co. v. Pollak (1927), [1927] A.C. 732, [1927] All E.R. Rep. 1, 137 L.T. 656, 43 T.L.R. 495, 51 Sol. Jo. 450, 96 L.J.K.B. 1093 (U.K. H.L.) — considered Canada Deposit Insurance Corp. v. Canadian Commercial Bank (1987), 50 Alta. L.R. (2d) 1, [1987] 3 W.W.R. 160, 64 C.B.R. (N.S.) 9, 76 A.R. 271, 1987 CarswellAlta 314, [1987] A.J. No. 111 (Alta. Q.B.) — considered Canada Deposit Insurance Corp. v. Canadian Commercial Bank (1989), 68 Alta. L.R. (2d) 194, 61 D.L.R. (4th) 161, (sub nom. Canadian Commercial Bank (In Liquidation), Re) 98 A.R. 353, 76 C.B.R. (N.S.) 1, [1989] 6 W.W.R. 154, 1989 CarswellAlta 353, [1989] A.J. No. 561, 1989 ABCA 150 (Alta. C.A.) — considered Chaina v. Alvaro Homes Pty. Ltd. (2008), [2008] NSWCA 353 (New South Wales C.A.) — considered Chambers v. Nasco, Inc. (1991), 501 U.S. 32 (U.S. C.A. 5th Cir.) — considered Chaplin v. Sun Life Assurance Co. of Canada (2004), 2004 BCSC 116, 2004 CarswellBC 159, 7 C.C.L.I. (4th) 277, [2004] B.C.J. No. 146, 1 C.P.C. (6th) 271, [2005] I.L.R. l-4448 (B.C. S.C.) — considered Civil Service Co-operative Society v. General Steam Navigation Co. (1903), [1903] 2 K.B. 756 (Eng. K.B.) — considered Colborne Capital Corp. v. 542775 Alberta Ltd. (1999), [1999] A.J. No. 33, 228 A.R. 201, 188 W.A.C. 201, 1999 CarswellAlta 29, 45 B.L.R. (2d) 21, [1999] 8 W.W.R. 222, 69 Alta. L.R. (3d) 265, 1999 ABCA 14 (Alta. C.A.) — considered Colgate-Palmolive Co. v. Cussons Pty. Ltd. (1993), 46 F.C.R. 225, 1993 FCA 536 (Australia Fed. Ct.) — referred to College of Physicians & Surgeons (Alberta) v. H. (J.) (2009), 2009 ABQB 48, 2009 CarswellAlta 137, 3 Alta. L.R. (5th) 333, [2009] 7 W.W.R. 150, 468 A.R. 101 (Alta. Q.B.) — considered 186 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Cominco Ltd. v. Westinghouse Canada Ltd. (1980), 16 C.P.C. 19, 1980 Car- swellBC 517, [1980] B.C.J. No. 1353 (B.C. S.C.) — considered Commonwealth Bank of Australia v. Dalle Cort (2015), [2015] Que. S.C. 41 (Queensland S.C.) — considered Commonwealth of Australia v. Gretton (2008), [2008] NSWCA 117 (New South Wales C.A.) — considered Connecticut Nat. Bank v. Germain (1992), 503 U.S. 249 (U.S. C.A. 2nd Cir.) — considered Cooper v. Whittingham (1880), 15 Ch. D. 501 (Eng. Ch. Div.) — considered Cosgrove v. Chevron Queensland Ltd. (2000), [2000] QCA 157 (Queensland S.C.) — considered Cotterell v. Stratton (1972), (1872-73) L.R. 8 Ch. App. 295 (Eng. Ch. Div.) — considered Cummings v. Lewis (1992), 1992 FCA 334 (Australia Fed. Ct.) — considered Danoil Energy Ltd. v. Olson (1993), [1993] 7 W.W.R. 385, (sub nom. Olson v. Danoil Energy Ltd.) 109 Sask. R. 234, (sub nom. Olson v. Danoil Energy Ltd.) 42 W.A.C. 234, 1993 CarswellSask 344 (Sask. C.A.) — referred to Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 2009 Carswell- Ont 6185, [2009] O.J. No. 4236, 77 C.P.C. (6th) 1, 254 O.A.C. 356, (sub nom. Davies v. Clarington (Municipality)) 312 D.L.R. (4th) 278, 100 O.R. (3d) 66 (Ont. C.A.) — considered Davis v. Davis (1981), 9 Man. R. (2d) 236, 1981 CarswellMan 258, [1981] M.J. No. 320 (Man. Q.B.) — considered Dennis, Re (1987), 78 A.R. 81, 1987 CarswellAlta 436 (Alta. Surr. Ct.) — considered Dockside Brewing Co. v. Strata Plan LMS 3837 (2007), 2007 BCCA 183, 2007 CarswellBC 1618, (sub nom. Dockside Brewing Co. v. Strata Plan LMS 3837, Owners) 239 B.C.A.C. 33, (sub nom. Dockside Brewing Co. v. Strata Plan LMS 3837, Owners) 396 W.A.C. 33, 59 R.P.R. (4th) 12 (B.C. C.A.) — considered Dondi Properties Corp. v. Commerce Savings and Loan Association (1988), 121 F.R.D. 284 (U.S. Dist. Ct. N.D. Tex.) — considered Doré c. Québec (Tribunal des professions) (2012), 2012 SCC 12, 2012 Car- swellQue 2048, 2012 CarswellQue 2049, (sub nom. Doré v. Barreau du Québec) 343 D.L.R. (4th) 193, 34 Admin. L.R. (5th) 1, (sub nom. Doré v. Barreau du Québec) 428 N.R. 146, [2012] S.C.J. No. 12, [2012] A.C.S. No. 12, [2012] 1 S.C.R. 395, (sub nom. Doré v. Barreau du Québec) 255 C.R.R. (2d) 289 (S.C.C.) — considered Doucet v. Spielo Manufacturing Inc. (2011), 2011 NBCA 44, 2011 CarswellNB 227, 2011 CarswellNB 228, 332 D.L.R. (4th) 407, 4 C.P.C. (7th) 1, 83 B.L.R. (4th) 171, 91 C.C.E.L. (3d) 177, [2011] N.B.J. No. 153, 961 A.P.R. 1, 372 N.B.R. (2d) 1 (N.B. C.A.) — considered Pillar Resource Services Inc. v. PrimeWest Energy Inc. 187

Driffill v. McFall (1878), 42 U.C.Q.B. 597, 1878 CarswellOnt 162 (Ont. H.C.) — considered Dusik v. Newton (1984), 51 B.C.L.R. 217, 1984 CarswellBC 37, [1984] B.C.J. No. 3084 (B.C. S.C.) — considered E.M.I. Records Ltd. v. Ian Cameron Wallace Ltd. (1982), [1982] 2 All E.R. 980, [1982] 3 W.L.R. 245, [1983] Ch. 59 (Eng. Ch. Div.) — referred to Ed Miller Sales & Rentals Ltd. v. Caterpillar Tractor Co. (1998), 1998 CarswellAlta 368, 216 A.R. 304, 175 W.A.C. 304, 61 Alta. L.R. (3d) 256, [1998] 10 W.W.R. 736, [1998] A.J. No. 404, 1998 ABCA 118 (Alta. C.A.) — considered Edmanson v. Chelie (1914), 7 W.W.R. 96, 7 Sask. L.R. 34, 1914 CarswellSask 235, 29 W.L.R. 328 (Sask. S.C. en banc) — considered Ellis v. MacPherson (2005), 2005 PESCAD 19, 2005 CarswellPEI 53, 33 R.P.R. (4th) 39, 248 Nfld. & P.E.I.R. 123, 741 A.P.R. 123, 15 C.P.C. (6th) 253, [2005] P.E.I.J. No. 51 (P.E.I. C.A.) — considered Elmsdale Landscaping Ltd. v. Nova Scotia (Minister of Environment) (2010), 2010 NSSC 127, 2010 CarswellNS 200, 50 C.E.L.R. (3d) 154, 289 N.S.R. (2d) 366, 916 A.P.R. 366, 91 C.L.R. (3d) 318 (N.S. S.C.) — considered Entreprises Ludco ltée c. Canada (2001), 2001 SCC 62, 2001 CarswellNat 2017, 2001 CarswellNat 2018, (sub nom. Ludco Enterprises Ltd. v. R.) 2001 D.T.C. 5505 (Eng.), (sub nom. Ludco Enterprises Ltd. v. R.) 2001 D.T.C. 5518 (Fr.), [2001] S.C.J. No. 58, (sub nom. Ludco Enterprises Ltd. v. Can- ada) 204 D.L.R. (4th) 590, (sub nom. Ludco Enterprises Ltd. v. Minister of National Revenue) 275 N.R. 90, [2002] 1 C.T.C. 95, (sub nom. Ludco Enterprises Ltd. v. Canada) [2001] 2 S.C.R. 1082, REJB 2001-25873, 2001 CSC 62 (S.C.C.) — considered Estate of Urbach, Re (1999), 252 A.D.2d 318, 683 N.Y.S.2d 631 (U.S. N.Y.A.D. 3rd Dept.) — considered Evaskow v. B.B.F. (1969), 71 W.W.R. 565, 9 D.L.R. (3d) 715, 1969 Car- swellMan 80, 70 C.L.L.C. 14,007 (Man. C.A.) — considered Evergreen Building Ltd. v. IBI Leaseholds Ltd. (2009), 2009 BCCA 275, 2009 CarswellBC 1569, 80 R.P.R. (4th) 1, 93 B.C.L.R. (4th) 77, [2009] 10 W.W.R. 1, 271 B.C.A.C. 298, 458 W.A.C. 298 (B.C. C.A.) — considered Excelsior Commercial & Industrial Holdings Ltd. v. Salisbury Hammer Aspden & Johnson (2002), [2002] All E.R. (D) 39, [2002] EWCA Civ 879, [2002] C.P. Rep. 67 (Eng. & Wales C.A. (Civil)) — considered F.D. Rich Co. v. United States (1974), 417 U.S. 116 (U.S. Sup. Ct.) — referred to FIC Real Estate Fund Ltd. v. Phoenix Land Ventures Ltd. (2016), 2016 ABCA 303, 2016 CarswellAlta 1962, 91 C.P.C. (7th) 259, 21 E.T.R. (4th) 1, 42 Alta. L.R. (6th) 16, 403 D.L.R. (4th) 722 (Alta. C.A.) — considered Farm Credit Canada v. Bossé (2014), 2014 NBCA 34, 2014 CarswellNB 254, 2014 CarswellNB 255, (sub nom. Bossé v. Farm Credit Canada) 1090 188 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

A.P.R. 1, (sub nom. Boss´e v. Farm Credit Canada) 419 N.B.R. (2d) 1 (N.B. C.A.) — considered Fernandez v. Tan (2009), 2009 MBCA 113, 2009 CarswellMan 524 (Man. C.A.) — considered Ferris v. Rusnak (1984), 54 A.R. 319, 1984 CarswellAlta 340, [1982] A.J. No. 233 (Alta. Q.B.) — considered Fiege v. Cornwall General Hospital (1979), 30 O.R. (2d) 691, 117 D.L.R. (3d) 152, 4 L. Med. Q. 124, 1979 CarswellOnt 917 (Ont. H.C.) — considered Fleck v. Stewart (1991), 17 R.P.R. (2d) 132, 118 A.R. 345, 80 Alta. L.R. (2d) 334, 1991 CarswellAlta 93 (Alta. Q.B.) — considered Fleischmann Distilling Corp. v. Maier Brewing Co. (1967), 386 U.S. 714 (U.S. C.A. 9th Cir.) — considered Folsom v. Butte County Assoc. of Governments (1982), 32 Cal. 3d 668, 186 Cal. Rptr. 589, 652 P.2d 437 (U.S. Cal. Sup. Ct.) — considered Foulis v. Robinson (1978), 21 O.R. (2d) 769, 92 D.L.R. (3d) 134, 8 C.P.C. 198, 1978 CarswellOnt 466, [1978] O.J. No. 3596 (Ont. C.A.) — considered Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. (1988), 81 A.L.R. 397, [1988] FCA 364 (Australia Fed. Ct.) — considered Fox v. Vice (2011), 594 F.3d 423 (U.S. Sup. Ct.) — considered Germscheid v. Valois (1989), 34 C.P.C. (2d) 267, 68 O.R. (2d) 670, 1989 Cars- wellOnt 377, 68 O.R. (3d) 670 (Ont. H.C.) — considered Gerula v. Flores (1993), 16 C.P.C. (3d) 362, 1993 CarswellOnt 398, [1993] O.J. No. 210 (Ont. Gen. Div.) — considered Gerula v. Flores (1995), 126 D.L.R. (4th) 506, 83 O.A.C. 128, 1995 Carswell- Ont 1683, [1995] O.J. No. 2300 (Ont. C.A.) — considered Ghost Riders Farm Inc. v. Boyd Distributors Inc. (2016), 2016 ABCA 331, 2016 CarswellAlta 2044 (Alta. C.A.) — considered Gray v. Dougherty (1864), 25 Cal. 266 (U.S. Cal. Sup. Ct.) — considered Groia v. Law Society of Upper Canada (2016), 2016 ONCA 471, 2016 Cars- wellOnt 9453, 1 Admin. L.R. (6th) 175, 131 O.R. (3d) 1, 352 O.A.C. 210, 358 C.R.R. (2d) 1 (Ont. C.A.) — considered Hamilton v. Open Window Bakery Ltd. (2003), 2004 SCC 9, 2003 CarswellOnt 5591, 2003 CarswellOnt 5592, 40 B.L.R. (3d) 1, 235 D.L.R. (4th) 193, [2003] S.C.J. No. 72, 316 N.R. 265, 184 O.A.C. 209, 2004 C.L.L.C. 210- 025, 70 O.R. (3d) 255 (note), [2004] 1 S.C.R. 303, REJB 2004-54076, 70 O.R. (3d) 255, 2004 CSC 9 (S.C.C.) — considered Hardt v. Reliance Standard Life Insurance Co. (2010), 176 L.Ed.2d 998, 130 S.Ct. 2149, 560 U.S. 242 (U.S. Sup. Ct.) — considered Harnden v. Kosir (1995), 26 O.R. (3d) 588, 44 C.P.C. (3d) 34, 1995 Carswell- Ont 1330 (Ont. Gen. Div.) — considered Harnett v. Vise (1880), 5 Ex. D. 307, 43 L.T. 645 (Eng. C.A.) — considered Pillar Resource Services Inc. v. PrimeWest Energy Inc. 189

Harold v. Smith (1860), 157 E.R. 1229, 5 Hurl. & N. 381 (Eng. Exch.) — considered Harris v. Petherick (1879), 4 Q.B.D. 611 (Eng. C.A.) — considered Harrison v. Schipp (2001), [2001] NSWCA 13 (New South Wales C.A.) — considered Hill v. Church of Scientology of Toronto (1995), 30 C.R.R. (2d) 189, 25 C.C.L.T. (2d) 89, 184 N.R. 1, (sub nom. Manning v. Hill) 126 D.L.R. (4th) 129, 24 O.R. (3d) 865 (note), 84 O.A.C. 1, [1995] 2 S.C.R. 1130, 1995 Cars- wellOnt 396, 1995 CarswellOnt 534, [1995] S.C.J. No. 64, EYB 1995-68609 (S.C.C.) — considered Huck v. Robson (2002), [2002] EWCA Civ 398, [2002] 3 All E.R. 263, [2003] 1 W.L.R. 1340, [2003] 1 Costs L.R. 19 (Eng. & Wales C.A. (Civil)) — considered Hunt v. TD Securities Inc. (2003), 2003 CarswellOnt 3141, [2003] O.J. No. 3245, 175 O.A.C. 19, 229 D.L.R. (4th) 609, 36 B.L.R. (3d) 165, 66 O.R. (3d) 481, 39 C.P.C. (5th) 206 (Ont. C.A.) — distinguished Hypec Electronics Pty. Ltd. v. Mead (2004), 61 N.S.W.L.R. 169, [2004] NSWSC 731 (New South Wales S.C.) — considered Imperial Elevator & Lumber Co. v. Olive (1914), 6 W.W.R. 1104, 7 Sask. L.R. 35, 1914 CarswellSask 196, 28 W.L.R. 421 (Sask. S.C. [In Chambers]) — considered Jackson v. Trimac Industries Ltd. (1993), 8 Alta. L.R. (3d) 403, 138 A.R. 161, [1993] 4 W.W.R. 670, 1993 CarswellAlta 310, [1993] A.J. No. 218 (Alta. Q.B.) — considered Jackson v. Trimac Industries Ltd. (1994), 20 Alta. L.R. (3d) 117, [1994] 8 W.W.R. 237, 155 A.R. 42, 73 W.A.C. 42, 1994 CarswellAlta 135, [1994] A.J. No. 445, 1994 ABCA 199 (Alta. C.A.) — considered Jacobi v. Newell (County No. 4) (1994), 19 Alta. L.R. (3d) 394, 28 C.P.C. (3d) 349, (sub nom. Jacobi v. Board of Education of Aqueduct Roman Catholic Separate School District No. 374) 153 A.R. 241, 1994 CarswellAlta 123, [1994] A.J. No. 1063 (Alta. Q.B.) — considered Jones v. Curling (1884), 13 Q.B.D. 262 (Eng. Q.B.) — considered Jones v. McKie (1964), [1964] 2 All E.R. 842, [1964] 1 W.L.R. 960, 108 S.J. 442 (Eng. C.A.) — considered Kazakhstan Kagazy Plc v. Zhunus (2015), [2015] EWHC 404 (Eng. Comm. Ct.) — considered Kentucky Bar Ass’n v. Waller (1996), 929 S.W.2d 181 (U.S. Ky. S.C.) — considered Kepic v. Tecumseh Road Builders (1987), 18 C.C.E.L. 218, (sub nom. Kepic v. Tecumseh Road Builders, division of Countryside Farms Ltd.) 23 O.A.C. 72, 1987 CarswellOnt 917, [1987] O.J. No. 890 (Ont. C.A.) — considered Kerr v. Danier Leather Inc. (2007), 2007 SCC 44, 2007 CarswellOnt 6445, 2007 CarswellOnt 6446, 87 O.R. (3d) 398 (note), 36 B.L.R. (4th) 95, [2007] 190 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

S.C.J. No. 44, 48 C.P.C. (6th) 205, 368 N.R. 204, 286 D.L.R. (4th) 601, 231 O.A.C. 348, [2007] 2 S.C.R. 331 (S.C.C.) — considered Kiam II v. MGN Ltd. (2002), [2002] 2 All E.R. 242, [2002] 1 W.L.R. 2810, [2002] EWCA Civ 66 (Eng. & Wales C.A. (Civil)) — considered King v. Gillard (1905), [1905] 2 Ch. 7 (Eng. C.A.) — considered Kuwait Asia Bank EC v. National Mutual Life Nominees Ltd. (1990), [1990] 3 All E.R. 404, [1990] 3 W.L.R. 297, [1991] 1 A.C. 187, [1990] 2 Lloyd’s Rep. 95, [1991] 3 N.Z.L.R. 457 (New Zealand P.C.) — considered Larter v. Solid Rock Free Lutheran Church of Camrose (2012), 2012 ABCA 292, 2012 CarswellAlta 2383 (Alta. C.A.) — considered Latoudis v. Casey (1990), 170 C.L.R. 534, [1990] H.C.A. 59 (Australia H.C.) — considered Lavoie v. Wills (2002), 2002 ABCA 240, 2002 CarswellAlta 1228, 312 A.R. 373, 281 W.A.C. 373, [2002] A.J. No. 1240 (Alta. C.A.) — considered Leenen v. Canadian Broadcasting Corp. (2001), 2001 CarswellOnt 2011, 6 C.C.L.T. (3d) 97, 54 O.R. (3d) 612, 147 O.A.C. 317, [2001] O.J. No. 2229, [2001] O.T.C. 262 (Ont. C.A.) — considered Levy v. Carol Management Corp. (1999), 260 A.D.2d 27, 698 N.Y.2d 226, 1999 N.Y. Slip Op. 09786 (U.S. N.Y.A.D. 1st Dept.) — considered M. (D.E.) v. M. (J.M.) (2011), 2011 PECA 16, 2011 CarswellPEI 44, 4 R.F.L. (7th) 1, 974 A.P.R. 262, 313 Nfld. & P.E.I.R. 262 (P.E.I. C.A.) — considered M. (W.A.) v. Alberta (Minister for Child, Youth and Family Enhancement Act) (2017), 2017 ABCA 14, 2017 CarswellAlta 38 (Alta. C.A.) — considered MacKinnon v. Ontario (Municipal Employees Retirement Board) (2007), 2007 ONCA 874, 2007 CarswellOnt 8041, 64 C.C.P.B. 1, 62 C.C.E.L. (3d) 191, 2008 C.E.B. & P.G.R. 8274 (headnote only), 88 O.R. (3d) 269, 232 O.A.C. 3, 288 D.L.R. (4th) 688, 42 B.L.R. (4th) 157, [2007] O.J. No. 4860 (Ont. C.A.) — considered Macfie v. Cater (1920), 48 O.L.R. 487, 57 D.L.R. 736, [1920] O.J. No. 71, 1920 CarswellOnt 153 (Ont. H.C.) — considered Macfie v. Cater (1921), 50 O.L.R. 452, 64 D.L.R. 511, 1921 CarswellOnt 162 (Ont. C.A.) — referred to Magee v. Ottawa Separate School Board (1962), [1962] O.W.N. 83, 32 D.L.R. (2d) 162, 1962 CarswellOnt 245 (Ont. H.C.) — considered Maple Leaf Lumber Co. v. Caldbick (1918), 14 O.W.N. 99 (Ont. C.A.) — considered Marchand (Litigation Guardian of) v. Public General Hospital Society of Chat- ham (2000), 2000 CarswellOnt 4362, 51 O.R. (3d) 97, 138 O.A.C. 201, [2000] O.J. No. 4428, 43 C.P.C. (5th) 65 (Ont. C.A.) — considered Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd. (1986), 48 Alta. L.R. (2d) 367, [1987] 2 W.W.R. 75, 1986 CarswellAlta 247, [1986] A.J. No. 1036 (Alta. Q.B.) — considered Pillar Resource Services Inc. v. PrimeWest Energy Inc. 191

Mayhew v. Adams (1930), [1930] 3 W.W.R. 539, 25 Sask. L.R. 204, [1931] 1 D.L.R. 611, 1930 CarswellSask 99, [1930] S.J. No. 53 (Sask. C.A.) — considered McCarthy v. Calgary Roman Catholic Separate School District No. 1 (1980), 30 A.R. 208, [1980] 5 W.W.R. 524, 17 C.P.C. 115, 1980 CarswellAlta 254, [1980] A.J. No. 55 (Alta. Q.B.) — considered McDonald Dure Lumber Co. v. Marston Holdings Ltd. (1976), 1976 Car- swellMan 131, 66 D.L.R. (3d) 375 (Man. C.A.) — considered McEnteggart v. Cataldo (1971), 451 F.2d 1109 (U.S. C.A. 1st Cir.) — considered McEvoy v. Ford Motor Co. (1990), 45 B.C.L.R. (2d) 363, 1990 CarswellBC 101 (B.C. S.C.) — considered McPhilemy v. Times Newspapers Ltd. (2001), [2001] 4 All E.R. 861, [2002] 1 W.L.R. 934, [2001] EWCA Civ 933, [2001] 2 Costs L.R. 295 (Eng. & Wales C.A. (Civil)) — considered Michael Wilson & Partners Ltd. v. Nicholls (2009), [2009] NSWSC 669 (New South Wales S.C.) — considered Montreal Trust Co. v. Tottrup (1990), 82 Alta. L.R. (2d) 363, 9 C.B.R. (3d) 220, 1990 CarswellAlta 262 (Alta. Q.B.) — considered Mortimer v. Cameron (1994), 19 M.P.L.R. (2d) 286, 17 O.R. (3d) 1, 68 O.A.C. 332, 111 D.L.R. (4th) 428, 1994 CarswellOnt 601, [1994] O.J. No. 277 (Ont. C.A.) — considered Myers v. Defries (1880), 5 Ex. D. 180 (Eng. Exch.) — considered Myers v. Elman (1939), [1940] A.C. 282, [1939] 4 All E.R. 484 (U.K. H.L.) — considered NMFM Property Pty. Ltd. v. Citibank Ltd. (2001), 109 F.C.R. 77, [2001] FCA 480 (Australia Fed. Ct.) — considered National Australia Bank Ltd. v. Petit-Breuilh (2000), [2000] VSC 291 (Australia Vic. Sup. Ct.) — considered Newfoundland Assn. of Provincial Court Judges v. Newfoundland (2000), 2000 NFCA 46, 2000 CarswellNfld 266, 191 D.L.R. (4th) 225, 50 C.P.C. (4th) 1, 27 Admin. L.R. (3d) 1, [2000] N.J. No. 258, 192 Nfld. & P.E.I.R. 183, 580 A.P.R. 183 (Nfld. C.A.) — considered Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC (November 23, 2010), Doc. 10-2327 (U.S. C.A. 7th Cir.) — considered Noorani v. Calver (2009), [2009] EWHC 592 (Eng. Q.B.) — considered Norberg v. Wynrib (1992), [1992] 4 W.W.R. 577, [1992] 2 S.C.R. 226, 92 D.L.R. (4th) 449, 12 C.C.L.T. (2d) 1, 9 B.C.A.C. 1, 19 W.A.C. 1, 138 N.R. 81, 68 B.C.L.R. (2d) 29, [1992] S.C.J. No. 60, 1992 CarswellBC 155, [1992] R.R.A. 668, 1992 CarswellBC 907, EYB 1992-67036 (S.C.C.) — considered Norbis v. Norbis (1986), 161 C.L.R. 513 (Australia H.C.) — considered Oelrichs v. Spain (1872), 82 U.S. 211 (U.S. Sup. Ct.) — considered 192 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Olson v. New Home Certification Program of Alberta (1986), 44 Alta. L.R. (2d) 207, 69 A.R. 356, 1986 CarswellAlta 64, [1986] A.J. No. 347 (Alta. Q.B.) — considered Oshlack v. Richmond River Council (1998), 193 C.L.R. 72, [1998] H.C.A. 11 (New South Wales S.C.) — considered Oversea-Chinese Banking Corp. Ltd. v. Malaysian Kuwaiti Investment Co. SDN BHD (2004), [2004] VSC 351 (Australia Vic. Sup. Ct.) — considered Oz Optics Ltd. v. Timbercon Inc. (2012), 2012 ONCA 735, 2012 CarswellOnt 13318 (Ont. C.A.) — considered P.C.R.Z. Investments Pty. Ltd. v. National Golf Holdings Ltd. (2002), [2002] VSCA 24 (Australia Vic. Sup. Ct.) — considered P.Simms v. Law Society (2005), [2005] EWCA Civ 849 (Eng. & Wales C.A. (Civil)) — referred to Pacific Mobile Corp. v. Hunter Douglas Canada Ltd. (1979), [1979] 1 S.C.R. 842, 26 N.R. 453, 1979 CarswellQue 166, 1979 CarswellQue 166F (S.C.C.) — considered Paper Reclaim Ltd. v. Aotearoa International Ltd. (2006), [2006] 3 N.Z.L.R. 188, 8 N.Z.B.L.C. 101,685, [2006] NZCA 27, 11 T.C.L.R. 544 (New Zea- land C.A.) — considered Pelley v. Pelley (2003), 2003 NLCA 6, 2003 CarswellNfld 11, 221 Nfld. & P.E.I.R. 1, 661 A.P.R. 1, [2003] N.J. No. 13 (N.L. C.A.) — considered Perry v. Heywood (1998), 1998 CarswellNfld 220, [1998] N.J. No. 251, 175 Nfld. & P.E.I.R. 253, 537 A.P.R. 253 (Nfld. C.A.) — considered Petrogas Processing Ltd. v. Westcoast Transmission Co. (1990), 73 Alta. L.R. (2d) 246, [1990] 4 W.W.R. 461, 105 A.R. 384, 1990 CarswellAlta 51, [1990] A.J. No. 317 (Alta. Q.B.) — considered Petrotrade Inc. v. Texaco Ltd. (2000), [2001] 4 All E.R. 853, [2002] 1 W.L.R. 947, [2000] C.L.C. 1341, [2000] EWCA Civ 512 (Eng. & Wales C.A. (Civil)) — referred to Polar Ice Express Inc. v. Arctic Glacier Inc. (2009), 2009 ABCA 20, 2009 CarswellAlta 25, 99 Alta. L.R. (4th) 203, 446 A.R. 295, 442 W.A.C. 295 (Alta. C.A.) — considered Prebble v. Huata (2005), [2005] 2 N.Z.L.R. 467, [2005] NZSC 18 (New Zea- land S.C.) — considered Professional Sign Crafters (1988) Ltd. v. Seitanidis (1998), 1998 CarswellAlta 874, [1998] A.J. No. 1055, 1998 ABCA 303 (Alta. C.A.) — considered R. v. Lyttle (2004), 2004 SCC 5, 2004 CarswellOnt 510, 2004 CarswellOnt 511, 17 C.R. (6th) 1, 180 C.C.C. (3d) 476, 316 N.R. 52, 235 D.L.R. (4th) 244, [2004] S.C.J. No. 8, 184 O.A.C. 1, 115 C.R.R. (2d) 172, 70 O.R. (3d) 256 (note), [2004] 1 S.C.R. 193, REJB 2004-53613 (S.C.C.) — considered R. v. Sellars (1980), [1980] 1 S.C.R. 527, 20 C.R. (3d) 381, 52 C.C.C. (2d) 345, 110 D.L.R. (3d) 629, 32 N.R. 70, 1980 CarswellQue 34, 1980 CarswellQue 118, [1980] S.C.J. No. 9 (S.C.C.) — considered Pillar Resource Services Inc. v. PrimeWest Energy Inc. 193

Raybestos-Manhattan, Inc. v. Friedman (1981), 156 Ga. App. 880, 275 S.E.2d 817 (U.S. Ga. Ct. App.) — considered Reeder v. Woodward (2016), 2016 ABCA 91, 2016 CarswellAlta 589, 67 R.P.R. (5th) 14, 37 Alta. L.R. (6th) 36, 616 A.R. 255, 672 W.A.C. 255 (Alta. C.A.) — considered Reese v. Alberta (1992), 5 Alta. L.R. (3d) 40, [1993] 1 W.W.R. 450, 9 C.E.L.R. (N.S.) 65, (sub nom. Reese v. Alberta (Minister of Forestry, Lands & Wild- life)) 133 A.R. 127, 13 C.P.C. (3d) 323, 11 Admin. L.R. (2d) 265n, 1992 CarswellAlta 138, [1992] A.J. No. 745 (Alta. Q.B.) — referred to Reid Minty v. Taylor (2001), [2002] 2 All E.R. 150, [2002] 1 W.L.R. 2800, [2002] E.M.L.R. 19, [2001] EWCA Civ 1723, [2002] 1 Costs L.R. 180, [2002] C.P. Rep. 12 (Eng. & Wales C.A. (Civil)) — considered Ridehalgh v. Horsefield (1994), [1994] 3 All E.R. 848, [1994] B.C.C. 390, [1994] Ch. 205, [1994] 2 F.L.R. 194, [1994] Fam. Law 560, [1994] 3 W.L.R. 462, [1994] E.G. 15, [1994] EWCA Civ 40, [1955-95] P.N.L.R. 636, [1997] Costs L.R. 268 (Eng. & Wales C.A. (Civil)) — considered Ritter v. Godfrey (1919), [1920] 2 K.B. 47, [1919] All E.R. 714, [1918-1919] All E.R. Rep. 714 (Eng. C.A.) — considered Scherer v. Counting Instruments Ltd. (1977), [1986] 1 W.L.R. 615 (Eng. & Wales C.A. (Civil)) — referred to Seitz, Re (1974), 6 O.R. (2d) 460, 53 D.L.R. (3d) 223, 1974 CarswellOnt 877 (Ont. H.C.) — considered Shier v. Fiume (1991), 6 O.R. (3d) 759, [1991] O.J. No. 2367, 1991 CarswellOnt 1068 (Ont. Gen. Div.) — considered Sidorsky v. CFCN Communications Ltd. (1997), 1997 CarswellAlta 772, 53 Alta. L.R. (3d) 255, [1998] 2 W.W.R. 89, 206 A.R. 382, 156 W.A.C. 382, 15 C.P.C. (4th) 174, 40 C.C.L.T. (2d) 94, [1997] A.J. No. 880, 1997 ABCA 280 (Alta. C.A.) — referred to Siemens v. Bawolin (2002), 2002 SKCA 84, 2002 CarswellSask 448, 219 Sask. R. 282, 272 W.A.C. 282, [2002] 11 W.W.R. 246, 46 E.T.R. (2d) 254, [2002] S.J. No. 398 (Sask. C.A.) — considered Simpson, Ex parte (1809), 33 E.R. 834, 15 Ves. Jr. 476 (Eng. Ch. Div.) — considered Slawik v. State (1984), 480 A.2d 636 (U.S. Del. S.C.) — considered State Line Democrat v. Keosauqua Independent (1913), 161 Iowa 566, 143 N.W. 409 (U.S. Iowa S.C.) — considered Stiles v. British Columbia (Workers’ Compensation Board) (1989), 38 B.C.L.R. (2d) 307, 39 C.P.C. (2d) 74, 1989 CarswellBC 134, [1989] B.C.J. No. 1450 (B.C. C.A.) — considered Stout v. Track (2015), 2015 ABCA 10, 2015 CarswellAlta 160, 62 C.P.C. (7th) 260, 599 A.R. 98, 643 W.A.C. 98, 9 Alta. L.R. (6th) 341 (Alta. C.A.) — considered 194 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Sturrock v. Ancona Petroleums Ltd. (1990), 75 Alta. L.R. (2d) 216, 111 A.R. 86, 1990 CarswellAlta 132, [1990] A.J. No. 738 (Alta. Q.B.) — considered Sun Life Assurance Co. of Canada v. Ritchie (2000), 2000 BCCA 231, 2000 CarswellBC 713, 184 D.L.R. (4th) 635, 76 B.C.L.R. (3d) 93, 31 R.P.R. (3d) 200, [2000] 6 W.W.R. 480, 136 B.C.A.C. 215, 222 W.A.C. 215 (B.C. C.A.) — considered T. (E.) v. Rocky Mountain Play Therapy Institute Inc. (2016), 2016 ABCA 320, 2016 CarswellAlta 2055 (Alta. C.A.) — referred to T. (F.) v. Alberta Children’s Guardian (1987), 55 Alta. L.R. (2d) 103, 10 R.F.L. (3d) 182, 83 A.R. 374, 1987 CarswellAlta 211 (Alta. Q.B.) — considered Tree Savers International Ltd. v. Savoy (1992), 84 Alta. L.R. (2d) 384, 39 C.C.E.L. 253, [1992] 2 W.W.R. 470, 40 C.P.R. (3d) 173, 87 D.L.R. (4th) 202, 120 A.R. 368, 8 W.A.C. 368, 1992 CarswellAlta 220, [1992] A.J. No. 61, 1992 ABCA 34 (Alta. C.A.) — considered Union Carbide Canada Ltd. v. Vanderkop (1976), 1 C.P.C. 114, 1976 Carswell- Ont 272, [1976] O.J. No. 1447 (Ont. H.C.) — considered Unique Concepts, Inc. v. Brown (1987), 115 F.R.D. 292 (U.S. Dist. Ct. S.D. N.Y.) — considered Vanderclay Development Co. v. Inducon Engineering Ltd. (1968), [1969] 1 O.R. 41, 1 D.L.R. (3d) 337, 1968 CarswellOnt 695, [1968] O.J. No. 1268 (Ont. H.C.) — considered Vaughan v. Atkinson (1962), 369 U.S. 527 (U.S. Sup. Ct.) — considered Vogel v. Brazeau (Municipal District) No. 77 (1996), 32 M.P.L.R. (2d) 195, 183 A.R. 121, 1996 CarswellAlta 270, (sub nom. Vogel v. Brazeau No. T1 (Municipal District)) [1996] A.J. No. 319 (Alta. Q.B.) — considered Vriend v. Alberta (1996), 40 Alta. L.R. (3d) 352, [1996] 8 W.W.R. 405, 184 A.R. 351, 122 W.A.C. 351, 141 D.L.R. (4th) 44, 2 C.P.C. (4th) 111, 1996 CarswellAlta 612, [1996] A.J. No. 643 (Alta. C.A.) — considered Walsh v. Mobil Oil Canada (2008), 2008 ABCA 268, 2008 CarswellAlta 1168, 2008 C.L.L.C. 230-033, 94 Alta. L.R. (4th) 209, 296 D.L.R. (4th) 178, [2008] 11 W.W.R. 205, 69 C.C.E.L. (3d) 1, [2008] A.J. No. 830, 440 A.R. 199, 438 W.A.C. 199, 64 C.H.R.R. D/84 (Alta. C.A.) — considered Watson v. Holyoake (1986), 15 C.P.C. (2d) 262, 1986 CarswellOnt 501, [1986] O.J. No. 541, [1986] O.J. No. 2313 (Ont. H.C.) — considered Wenden v. Trikha (1992), 1 Alta. L.R. (3d) 283, 124 A.R. 1, 6 C.P.C. (3d) 15, 1992 CarswellAlta 20, [1992] A.J. No. 217 (Alta. Q.B.) — considered Whiten v. Pilot Insurance Co. (2002), 2002 SCC 18, 2002 CarswellOnt 537, 2002 CarswellOnt 538, [2002] I.L.R. I-4048, 20 B.L.R. (3d) 165, [2002] S.C.J. No. 19, 209 D.L.R. (4th) 257, 283 N.R. 1, 35 C.C.L.I. (3d) 1, 156 O.A.C. 201, [2002] 1 S.C.R. 595, REJB 2002-28036, 58 O.R. (3d) 480 (note), 2002 CSC 18 (S.C.C.) — considered Williams v. Steinwand (2015), 2015 NWTSC 3, 2015 CarswellNWT 9 (N.W.T. S.C.) — considered Pillar Resource Services Inc. v. PrimeWest Energy Inc. 195

Winnipeg Mortgage Holdings Ltd. v. Allard (1980), 20 B.C.L.R. 179, 1980 Car- swellBC 87, [1980] B.C.J. No. 1596 (B.C. S.C.) — considered Woodley v. Yellowknife Education District No. 1 (2000), 2000 NWTSC 7, 2000 CarswellNWT 5, 22 Admin. L.R. (3d) 237, [2000] N.W.T.J. No. 8 (N.W.T. S.C.) — considered World Printing & Publishing Co. v. Vancouver Printing & Publishing Co. (1907), 13 B.C.R. 220, 1907 CarswellBC 106 (B.C. C.A.) — considered Young v. Young (1990), 50 B.C.L.R. (2d) 1, 75 D.L.R. (4th) 46, 29 R.F.L. (3d) 113, 1990 CarswellBC 223, [1990] B.C.J. No. 2254 (B.C. C.A.) — considered Young v. Young (1993), [1993] 8 W.W.R. 513, 108 D.L.R. (4th) 193, 18 C.R.R. (2d) 41, [1993] 4 S.C.R. 3, 84 B.C.L.R. (2d) 1, 160 N.R. 1, 49 R.F.L. (3d) 117, 34 B.C.A.C. 161, 56 W.A.C. 161, [1993] R.D.F. 703, [1993] S.C.J. No. 112, 1993 CarswellBC 264, 1993 CarswellBC 1269, EYB 1993-67111 (S.C.C.) — considered 150 Centreville LLC v. Lin Associates Architects, PC (2013), 963 N.Y.2d 819, 39 Misc. 3d 513, 2013 N.Y. Slip Op. 23038 (U.S. Dist. Ct. S.D. N.Y.) — considered 155569 Canada Ltd. v. 248524 Alberta Ltd. (1999), 251 A.R. 393, 1999 ABQB 682, 1999 CarswellAlta 1461 (Alta. Q.B.) — considered

Cases considered by J.D. Bruce McDonald J.A. (dissenting): Colborne Capital Corp. v. 542775 Alberta Ltd. (1999), [1999] A.J. No. 33, 228 A.R. 201, 188 W.A.C. 201, 1999 CarswellAlta 29, 45 B.L.R. (2d) 21, [1999] 8 W.W.R. 222, 69 Alta. L.R. (3d) 265, 1999 ABCA 14 (Alta. C.A.) — referred to in a minority or dissenting opinion FIC Real Estate Fund Ltd. v. Phoenix Land Ventures Ltd. (2016), 2016 ABCA 303, 2016 CarswellAlta 1962, 91 C.P.C. (7th) 259, 21 E.T.R. (4th) 1, 42 Alta. L.R. (6th) 16, 403 D.L.R. (4th) 722 (Alta. C.A.) — considered in a minority or dissenting opinion Hamilton v. Open Window Bakery Ltd. (2003), 2004 SCC 9, 2003 CarswellOnt 5591, 2003 CarswellOnt 5592, 40 B.L.R. (3d) 1, 235 D.L.R. (4th) 193, [2003] S.C.J. No. 72, 316 N.R. 265, 184 O.A.C. 209, 2004 C.L.L.C. 210- 025, 70 O.R. (3d) 255 (note), [2004] 1 S.C.R. 303, REJB 2004-54076, 70 O.R. (3d) 255, 2004 CSC 9 (S.C.C.) — referred to in a minority or dissenting opinion Reeder v. Woodward (2016), 2016 ABCA 91, 2016 CarswellAlta 589, 67 R.P.R. (5th) 14, 37 Alta. L.R. (6th) 36, 616 A.R. 255, 672 W.A.C. 255 (Alta. C.A.) — referred to in a minority or dissenting opinion Sidorsky v. CFCN Communications Ltd. (1997), 1997 CarswellAlta 772, 53 Alta. L.R. (3d) 255, [1998] 2 W.W.R. 89, 206 A.R. 382, 156 W.A.C. 382, 15 C.P.C. (4th) 174, 40 C.C.L.T. (2d) 94, [1997] A.J. No. 880, 1997 ABCA 280 (Alta. C.A.) — referred to in a minority or dissenting opinion 196 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Young v. Young (1993), [1993] 8 W.W.R. 513, 108 D.L.R. (4th) 193, 18 C.R.R. (2d) 41, [1993] 4 S.C.R. 3, 84 B.C.L.R. (2d) 1, 160 N.R. 1, 49 R.F.L. (3d) 117, 34 B.C.A.C. 161, 56 W.A.C. 161, [1993] R.D.F. 703, [1993] S.C.J. No. 112, 1993 CarswellBC 264, 1993 CarswellBC 1269, EYB 1993-67111 (S.C.C.) — referred to in a minority or dissenting opinion Statutes considered by Thomas W. Wakeling J.A.: Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11 Generally — referred to Child, Youth and Family Enhancement Act, R.S.A. 2000, c. C-12 Generally — referred to Civil Rights Act, 1964, 42 U.S.C. 21 s. 1988(b) — referred to Code of Civil Procedure, California s. 128.5(a) — considered s. 1021.5 — considered Court of Appeal Act, R.S.A. 2000, c. C-30 s. 12 — considered Court of Appeal Act, R.S.B.C. 1996, c. 77 s. 23 — considered Court of Queen’s Bench Act, R.S.A. 2000, c. C-31 Generally — referred to s. 21 — considered Court of Queen’s Bench Act, S.M. 1988-89, c. 4 s. 96(1) — considered Courts of Justice Act, R.S.O. 1990, c. C.43 s. 131(1) — considered Federal Court of Australia Act 1976, No. 156, 1976 s. 43(2) — considered Judicature Act, S.P.E.I. 2008, c. 20 s. 60 — considered Supreme Court Act, R.S.C. 1985, c. S-26 s. 47 — considered Supreme Court Act, R.S.Y. 2002, c. 211 s. 4(2) — considered Supreme Court Act 1986, No. 110 (Vic) 1986 s. 24(1) — considered Supreme Court of Judicature Act, 1875 (38 & 39 Vict.), c. 77 Generally — referred to Rules considered by Thomas W. Wakeling J.A.: Alberta Rules of Court, Alta. Reg. 124/2010 Generally — referred to Pillar Resource Services Inc. v. PrimeWest Energy Inc. 197

R. 1.1(2) — considered R. 1.2 — considered R. 1.2(1) — considered R. 1.2(2)(a) — considered R. 1.2(2)(b) — considered R. 1.2(2)(d) — considered R. 1.2(2)(e) — considered R. 1.2(3) — considered R. 1.2(3)(a) — referred to R. 1.2(3)(a) — considered R. 1.2(3)(c) — considered R. 1.2(3)(d) — considered R. 6.37(1) — considered R. 6.37(3) — considered R. 6.37(6) — considered R. 10.31 — considered R. 10.31(1) — considered R. 10.31(1)(b) — considered R. 10.31(1)(b)(i) — considered R. 10.33(1)(a) — considered R. 10.33(1)(g) — considered R. 10.33(2)(a) — considered R. 10.33(2)(b) — considered R. 10.33(2)(g) — considered Civil Procedure Rules, N.S. Civ. Pro. Rules 2009 R. 77.02(1) — considered Civil Procedure Rules 1998, S.I. 1998, No. 3132 Generally — referred to R. 44.2(1) — considered R. 44.2(2)(a) — considered R. 44.2(4) — considered R. 44.2(5) — considered R. 44.3 — considered R. 44.3(1) — referred to R. 44.4 — considered Court of Appeal (Civil) Rules 2005, SR 2005/69 R. 53 — considered R. 53E(3) — considered District Courts Rules 2014, LI 2014/179 R. 14.6(4) — considered Federal Courts Rules, SOR/98-106 R. 400(1) — considered 198 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Federal Rules of Civil Procedure, 28 U.S.C., Appendix R. 54(d)(1) — considered High Court Rules 2004, 2004, No. 304 R. 50.1 — considered High Court Rules 2016, LI 2016/225 R. 14.1 — considered R. 14.2(a) — considered R. 14.2(f) — considered R. 14.6(4) — considered New York Codes, Rules and Regulations, NYCRR R. 130-1.1(a) — considered R. 130-1.1(b) — considered R. 130-1.1(c)(1) — considered R. 130-1.1(c)(3) — considered Queen’s Bench Rules, Sask. Q.B. Rules 2013 R. 11-1(1) — considered R. 11-1(2)(a) — considered Rules of Civil Procedure, R.R.O. 1990, Reg. 194 R. 57.01 — considered R. 57.01(2) — considered Rules of Civil Procedure, SCO 1959 (Alas.) R. 82(a) — considered Rules of Court, N.B. Reg. 82-73 R. 59.01 — referred to R. 59.01(1) — considered Rules of the Supreme Court 1971, W.A. 1971 R. 1(1) — considered Rules of the Supreme Court, 1883, 1883 R. 1 — considered Rules of the Supreme Court, 1965, S.I. 1965, No. 1776 R. 2(4) — referred to Rules of the Supreme Court, 1986, S.N. 1986, c. 42, Sched. D R. 55.02(1) — considered Rules of the Supreme Court of the Northwest Territories, N.W.T. Reg. R-010-96 R. 206 — considered Supreme Court (General Civil Procedure) Rules 2015, S.R. No. 103/2015 (Vict.) R. 63.03(1) — considered Supreme Court Civil Rules, B.C. Reg. 168/2009 R. 14-1(9) — considered Supreme Court Civil Rules 2006, 2006 (S. Aust.) R. 264(1) — considered R. 264(5)(b) — considered Pillar Resource Services Inc. v. PrimeWest Energy Inc. 199

Supreme Court Rules 2000, S.R. 2000, No. 8 (Tas.) R. 839(d) — considered Supreme Court Rules 2004, SR 2004/199 R. 44(1) — considered Supreme Court Rules 2009, 2009, No. 1603 R. 46(1) — considered Uniform Civil Procedure Rules 1999, Qld. 1999 R. 681(1) — considered R. 703(1) — considered Uniform Civil Procedure Rules 2005, 2005, No. 418 (NSW) R. 42.1 — considered R. 42.2 — considered Tariffs considered by Myra Bielby J.A.: Alberta Rules of Court, Alta. Reg. 124/2010 Sched. C — referred to

Tariffs considered by J.D. Bruce McDonald J.A. (dissenting): Alberta Rules of Court, Alta. Reg. 124/2010 Sched. C, Tariff of Costs, column 4 — referred to Words and phrases considered: blameworthy conduct It is beyond doubt that the manner in which the litigation is conducted may constitute blameworthy conduct. ... At an abstract level, parties whose litigation conduct, viewed as a whole, demonstrates blatant disregard for their obligations under the Alberta Rules of Court [Alta. Reg. 124/2010] and court orders, and the rights of other parties or undermines the integrity of the trial process engage in blameworthy litigation conduct. ... Blameworthy litigation conduct may either be the proper characterization of a pattern of misconduct that occurred at one or more stages of the litigation spectrum — pleadings, discoveries, applications or trials — or, if the misconduct is sufficiently egregious, a single act — alleging in argument, either written or oral or both, without foundation, that the adjudicator and opposing counsel are corrupt — may be sufficient. fraud “Fraud” is defined by Webster’s Third New International Dictionary this way: “an intentional misrepresentation . . . for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right”. 200 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

punitive damages It is an error to equate an indemnity costs order with punitive damages. The latter are penal in nature and have nothing to do with the amount of the successful party’s legal obligations to its counsel.

APPEAL from judgment reported at Pillar Resource Services Inc. v. PrimeWest Energy Inc. (2016), 2016 ABQB 120, 2016 CarswellAlta 424, 52 C.L.R. (4th) 37 (Alta. Q.B.), awarding costs against defendant on solicitor-client basis.

J.P. Gruber, A.E. Stead, for Respondent G.S. Solomon, Q.C., M.O. Ho, for Appellants

Myra Bielby J.A.: [FOOTNOTES TO FOLLOW THE DECISION.]

1 I agree with the decision of Justice Wakeling to the effect this appeal must be dismissed. The trial judge’s award of full-indemnity costs was reasonably based on, at least, the last three of the four reasons she gave for making that award. I respectfully disagree that the law permits a trial judge to base an award of full-indemnity costs on pre-litigation conduct alone, independent of any other circumstances. Such costs are exceptional and generally to be awarded for misconduct that arises during the course of the litigation only, save for certain exceptions which do not include pre-litigation conduct in and of itself. 2 I accept the facts as stated in Justice Wakeling’s decision. For ease of reference, I repeat that at the conclusion of a lengthy trial, in a separate written costs decision, the trial judge awarded the plaintiff/respondent, Pillar Resource Services Inc., full-indemnity costs because of the following misconduct on the part of the defendants/appellants: [22] I find that the following conduct of ...[PrimeWest], when viewed as a whole, warrants the exceptionaindemnity costs be awl relief of an award of solicitor-clients costs, subject to assessment and disbursements, including expert fees and the expenses of having Messrs. Guenther and Milliner give evidence. a) [PrimeWest’s] misleading requests for further information from Pillar during post-completion negotiation, when clarification was not really an issue, and its delays in such negotiation; b) [PrimeWest’s] attempt to introduce additional evidence in its written argument after trial; Pillar Resource Services Inc. v. PrimeWest Energy Inc. Myra Bielby J.A. 201

c) the additional trial time necessitated by ...[PrimeWest’s] refusal to admit facts that ultimately were not in issue; d) the unproven allegations of fraud that continued until trial, but were not addressed by ... [PrimeWest] at trial. [23] The defendants are jointly and severally liable for these costs. [24] I am persuaded by these factors taken together that this is a case where justice can only be done by a complete indemnification of the successful plaintiff’s costs. In the present climate of expensive litigation and scarce judicial resources, [PrimeWest’s] efforts to delay the trial and prolong its length must be denounced and deterred. 3 The first of the four reasons for making the costs award, causing unnecessary delays in post-completion negotiation occurred shortly before the issuance of the statement of claim. This conduct is therefore “prelitigation” misconduct, by definition. I must disagree with Justice Wakel- ing’s conclusion that the law permits the award of full indemnity costs for this type of conduct standing alone. That issue is irrelevant to this appeal in any event, as the remaining three reasons given by Justice Ro- maine all arise from misconduct which occurred during litigation, or after the issuance of the statement of claim. No challenge is made to her findings of fact in this regard. These three reasons would justify an award of full indemnity costs without consideration of the first reason, pre-litigation negotiation misconduct. 4 The issue is not whether a judge has discretion to make an order of full indemnity against any of the parties to litigation. The issue is how and when that discretion should be exercised. 5 We are bound by the principles established by the decision of the Su- preme Court of Canada in Young v. Young, [1993] 4 S.C.R. 3, 108 D.L.R. (4th) 193 (S.C.C.) in relation to when an award of solicitor-client costs can reasonably be made. That decision did not arise from a trial judgment making such an award based on pre-litigation misconduct alone, nor did the Court expressly address the effect of pre-litigation misconduct in and of itself. In that case, the trial judge had ordered solicitor- client costs on the basis that the respondent’s custody claim had “little merit”, but also on the basis that he attempted to mislead the Court and was recalcitrant on matters of custody and maintenance that resulted in generating unnecessary court proceedings. The British Columbia Court of Appeal upheld the portion of that award relating to four days of trial time and four further days of interlocutory proceedings dealing with fi- 202 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

nancial issues, based on the husband’s non-disclosure of financial information. 6 In upholding the Court of Appeal’s decision, Justice McLachlin (as she then was) in separate reasons concurring in the result stated at p 134: The Court of Appeal’s order was based on the following principles, with which I agree. Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties, accordingly, the fact that an application has little merit is no basis of awarding solicitor-client costs; nor is the fact that part of the cost of the litigation may have been paid by others... 7 Justice McLachlin’s silence on the effect of pre-litigation misconduct should not be interpreted as an intention that full indemnity costs be awarded based on that misconduct alone, even where it is reprehensible, scandalous or outrageous. Those were not the facts before her; she did not need to interpret the law that might arise on such facts, to do so would have been obiter at best. There is no authority from the Supreme Court of Canada that deals directly with whether full indemnity costs should be awarded for pre-litigation conduct alone. 8 There is authority from this Court, which binds me in the absence of an application for reconsideration, which states the contrary. In Sidorsky v. CFCN Communications Ltd., 1997 ABCA 280 (Alta. C.A.) the Court stated: [28] Costs are discretionary and as a general rule, a departure from party and party costs should only occur in rare and exceptional circumstances. Examples of such circumstances, outlined in Jackson v. Trimac Industries Ltd. (1993), 138 A.R. 161 at 172 (QB), include: 1. circumstances constituting blameworthiness in the conduct of the litigation by that party (Reese et al. v. Alberta (Minister of Forestry, Lands and Wildlife) et al., 1992 CanLII 2825 (AB QB), [1992] AJ No 745, 5 Alta LR (3d) 40 (QB)); 2. cases in which justice can only be done by a complete indemnification for costs (Foulis et al. v. Robinson; Gore Mutual Inc Co, Third Party, 1978 CanLII 1307 (ON CA), [1978] OJ No 3596, 21 OR (2d) 769 (CA)); 3. where there is evidence that the plaintiff did something to hinder, delay or confuse the litigation, where there was no serious issue of fact or law which required these lengthy, expensive proceedings, where the positively misconducting party was “contemptuous” of the aggrieved party in forcing Pillar Resource Services Inc. v. PrimeWest Energy Inc. Myra Bielby J.A. 203

that aggrieved party to exhaust legal proceedings to obtain that which was obviously his (Max Sonnenberg Inc v. Stew- art, Smith (Canada) Ltd, 1986 CanLII 1771 (AB QB), [1986] AJ No 1036, 48 Alta LR (2d) 367 (QB)); 4. an attempt to deceive the court and defeat justice, an attempt to delay, deceive and defeat justice, a requirement imposed on the plaintiff to prove facts that should have been admitted, thus prolonging the trial, unnecessary adjournments, concealing material documents from the plaintiffs and failing to produce material documents in a timely fashion (Olson v. New Home Certification Program of Alberta, 1986 CanLII 1640 (AB QB), [1986] AJ No 347, 44 Alta LR (2d) 207 (QB)); 5. where the defendants were guilty of positive misconduct, where others should be deterred from like conduct and the defendants should be penalized beyond the ordinary order of costs (Dusik v. Newton (1984), 51 BCLR 217,1984 CanLII 690 (BC SC), 1984 CanLII 690 (SC)); 6. defendants found to be acting fraudulently and in breach of trust (Davis v. Davis, [1981] MJ No 320, 9 Man R (2d) 236 (QB); 7. the defendants’ fraudulent conduct in inducing a breach of contract and in presenting a deceptive statement of accounts to the court at trial (Kepic v. Tecumseh Road Builder et al., [1987] OJ No 890, 23 OAC. 72); 8. fraudulent conduct (Sturrock v. Ancona Petroleums Ltd, 1990 CanLII 5563 (AB QB), [1990] AJ No 738, 111 AR 86 (QB)); and 9. an attempt to delay or hinder proceedings, an attempt to deceive or defeat justice, fraud or untrue or scandalous charges (Pharand Ski Corp v. Alberta, 1991 CanLII 5931 (AB QB), [1991] AJ No 902, 83 Alta LR (2d) 152 (QB)). 9 No authority has been offered which expressly deals with the issue of whether full indemnity costs may reasonably be awarded based on prelitigation misconduct alone. None have been offered which expressly address whether the “rare and exceptional circumstances” described by this Court in Sidorsky which justify an award of full indemnity costs include pre-litigation conduct without more. 10 Justice Wakeling is incorrect, at para 75 of his reasons for decision, to the extent he interprets the majority decision in FIC Real Estate Fund Ltd. v. Phoenix Land Ventures Ltd., 2016 ABCA 303 (Alta. C.A.) as authority that pre-litigation misconduct may, on its own, form a reasonable 204 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

basis for an award of full-indemnity costs. In that case, the majority upheld such an award on the basis of litigation misconduct alone, in the form of significant adverse credibility findings against the two principal witnesses who testified at trial for Phoenix. It observes at para 17, that FIC’s counsel did not attempt to justify the award by the existence of significant pre-litigation misconduct although significant adverse findings in this regard, including that which could be viewed as being akin to fraud, were made by the trial judge. 11 The last three reasons for the costs award made by the trial judge on this appeal fall within the following examples of circumstances where full indemnity costs may be awarded in variation of the expectation that only partial indemnity costs be awarded to a successful litigant, as established in Schedule C of the Alberta Rules of Court, Alta Reg 124/2010. Those examples are as listed in Jackson v. Trimac Industries Ltd. [1993 CarswellAlta 310 (Alta. Q.B.)] at para 28: 1) blameworthiness in the conduct of the litigation; 3) absence of a serious issue of fact or law which required the lengthy, expensive trial proceedings; and, 4) requiring the plaintiff to prove facts that should have been admitted, thus prolonging the trial. 12 Justice Romaine was nonetheless reasonable in considering the prelitigation misconduct described in the first of her reasons because it gave context to the subsequent acts of trial misconduct. Attempts to negotiate in bad faith prior to the start of the lawsuit foreshadowed the appellants proceeding to require the plaintiff to prove facts that were not in dispute, and aggressively defending claims to which it ultimately offered no defence. 13 Fraudulent conduct falls within the seventh and eighth examples offered in Trimac Industries. While the trial judge found fraudulent intent, an apparent contradiction arises between paragraph 160 of her merits decision in which she states that no allegations of fraud were advanced and paragraph 18 of her subsequent costs decision in which she concludes that the appellants made unproven allegations of fraud. An examination of the statement of claim and trial transcript reveals that any error must be in relation to her comments in the merits decision, which is not the subject of this appeal, and thus does not undermine or impugn her subsequent conclusion that fraud was alleged but ultimately unproven, although not in those express terms. It therefore has no effect on this appeal. The statement of claim alleges facts which would constitute fraud if proven, while the trial transcript shows the respondent’s accounting wit- Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 205

ness to have been pressed in a manner relevant only if the appellants were attempting to uncover facts to support fraud yet they did not then proceed to argue that fraud had been made out. 14 During case management of this litigation prior to trial, costs awards were made in relation to three separate interim applications. While Jus- tice Romaine did not expressly address those costs awards in her costs decision, it must be interpreted so as to exclude the litigation steps and events embraced by those separate costs awards from which no appeal has been taken and which thus remain standing. 15 The appeal is dismissed. Messrs. Solomon, Q.C. and Ho, of Jensen Shawa Solomon Duguid Hawkes LLP, appellants’ appeal counsel, were not appellants’ trial counsel. Lawyers from another firm acted for the appellants at trial.

Thomas W. Wakeling J.A. (concurring): I. Introduction 16 The appellants appeal an order making them responsible for the respondent’s costs on a solicitor-client or full-indemnity basis.1 This will be a substantial obligation. The trial alone lasted fourteen days.

II. Questions Presented 17 Justice Romaine ordered the appellants to fully indemnify the respondent for the costs the respondent incurred in prosecuting its action for unpaid amounts on what she determined was a cost-plus-construction contract. She did so because the appellants purposely delayed payment for as long as possible, attempted to introduce additional evidence in the guise of argument after trial, consumed unnecessary trial time because of their let-the-plaintiff-prove-its-case litigation strategy and alleged fraud on the part of the respondent without any basis, an allegation that was not withdrawn until after the trial started. 18 Did the trial judge err in ordering the appellants to fully indemnify the respondent for its legal costs?

III. Brief Answers 19 Justice Romaine did not err in ordering the appellants to pay full- indemnity costs. 206 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

20 In Canada, a superior court, on account of blameworthy prelitigation or litigation conduct, may order the unsuccessful party to substantially or fully indemnify the successful party. 21 I am completely satisfied that the appellants’ litigation conduct2 was blameworthy and warranted a full-indemnity costs order. 22 Even though the appellants never challenged at trial any aspect of the respondent’s accounts, including third-party expenditures, they forced the respondent to prove the bases of its claims. This tactic probably increased trial time by close to 400%. 23 The appellants’ litigation strategy — make the other side prove its case — is not consistent with the duty imposed on them by r. 1(2) of the Alberta Rules of Court.3 After the respondent had completed the work the appellants assigned to it and the parties met to discuss the respondent’s accounts, the appellants should have been in a position to determine that their obligation to Pillar Resource far exceeded what the appellants had paid. They were obliged to “identify ... the real issues in dispute and facilitate the quickest means of resolving the claim at the least expense”.4 24 In the new litigation era that commenced on November 1, 2010 — the date the new Alberta Rules of Court came into force — a party that needlessly wastes the resources of other litigants and the publicly funded court system by forcing the plaintiff to prove its case when the defendant does not intend to contest any part of it can have severe costs consequences. 25 Litigation is not an activity that should be undertaken for an illegiti- mate purpose. It is not a sport. It is designed to resolve, as quickly and inexpensively as possible, disputes that the parties themselves cannot settle. 26 The trial judge was also entitled to react negatively to the appellants’ attempt to camouflage new evidence by inserting it as an addendum to its trial brief. The evidence and argument phases of a trial serve completely different purposes and should not be used inappropriately. 27 As well, Justice Romaine justifiably imposed the contested costs sanction as a consequence of the appellants alleging in their defence that “by intentionally or negligently inflating their [sic] costs in order to claim a higher mark-up account”, a position not abandoned until one of the appellants’ trial witnesses expressly denied that they were alleging fraud. Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 207

IV. Statement of Facts A. The Contract Between Pillar Resource and PrimeWest 28 PrimeWest Energy Inc. and PrimeWest Gas Corp.5 owned and operated a sour gas processing plant near Grande Prairie, Alberta. 29 Sometime before 2004 the appellants decided to increase the capacity and throughput of the plant. 30 PrimeWest retained Equinox Engineering Ltd. as the project engi- neer. Equinox Engineering had a special expertise in the use of biological sulphur recovery technology that PrimeWest wished to incorporate into their plant. 31 Equinox Engineering, having worked with Pillar Resource Services Inc. before, recommended that PrimeWest utilize Pillar Resource for a substantial component of the construction project. 32 Pillar Resource offered to undertake the project work in a January 21, 2004 letter. It proposed a “reimbursable cost plus fixed markup” contract.6 The fixed markup was fifteen percent and applied to labour, material and rentals, regardless of the source. 33 Equinox Engineering notified Pillar Resource on January 30, 2004 that Pillar Resource had a contract with PrimeWest to “do the work necessary to incorporate ... [high and low pressure skids and a bioreactor] into the existing plant, to provide pilings and foundations for the skids and a secondary containment dyke and liner system”.7 34 Justice Romaine concluded that “the contract between Pillar and PrimeWest was formed on January 30, 2004, [and] that it was a reimbursable, cost-plus fixed mark-up contract”.8

B. Pillar Resource’s Work Under the Contract 35 Within a matter of days of being retained, Pillar Resource submitted to Equinox Engineering a very preliminary cost estimate of $391,357.30. According to the trial judge,9 [m]any of the costs estimates bear the notation “not enough information at this time”. Some of them assumed that PrimeWest would be supplying material. The cost schedule incorporated various assump- tions. ... [18] [Pillar Resource’s letter] ... assumed a certain number of pilings and ... that the dyke would have certain measurements. ... [The estimate] did not include a cost estimate for the hauling or setting of the 208 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

two main skids or the large bio-tank “as there is not enough information at this time to make a reasonable estimate”. ... [19] [Pillar Resource’s] letter also indicated that ... [the estimate did not include] a cost for the supply of piping material ... or a cost for the insulation or “utilidor” as more detail was required for a reasonable estimate. Mr. Dobberthein [of Pillar Resource] testified that the drawings he was provided did not provide enough detail to prepare a proper estimate, as they were basically just a plot plan. 36 Weeks passed on this fast-track project without Equinox Engineering producing the detailed drawings that Pillar Resource asked for. 37 On March 15, 2004, Equinox Engineering delivered “issued for construction drawings” to Pillar Resource and insisted that the latter provide the former with a revised schedule and cost estimates.10 38 Pillar Resource responded quickly. On March 18, 2004, it provided Equinox Engineering with a second costs estimate. The new costs estimate, excluding Pillar Resource’s fifteen percent markup, was $500,540.51. This document, as the trial judge found, clearly stated that this estimate was incomplete and could not be relied upon as Pillar Re- source’s estimate of project costs:11 The estimate again noted that a number of items were “best guess at this time”, and some sub-trade estimates were marked as “supplied by PrimeWest”. ... [T]here was still no detail available for items like the culverts for the sulphur loading areas, the walkways, stairs and door landings. [38] ... [R]educing the estimated weld inches from 1500 as set out in the preliminary estimate to 1100 would reduce manpower requirements in the estimate by eight days ...... [42] Mr. Dobberthein [of Pillar Resource] noted that, at this point, the project still lacked a number of the details that were necessary to do a proper estimate, but he was trying to respond to pressure from Equinox. From this point on, the time schedule kept sliding and the work required of Pillar kept changing. The scope of work became a moving target, and [Pillar Resource] did not prepare another estimate. 39 At a March 25, 2004 meeting, Pillar Resource advised PrimeWest and Equinox Engineering that the March 18, 2004 estimate for $500,541.51 was “preliminary, as there continued to be insufficient detail for a complete estimate”.12 Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 209

40 The scope of Pillar Resource’s work changed dramatically over time.13 Equinox Engineering regularly asked Pillar Resource to undertake more tasks and assume responsibility for ever-more complicated components.14 41 Pillar Resource’s work force arrived at the site on March 29, 2004. 42 As soon as Pillar Resource commenced work at the site, it provided PrimeWest with daily tickets that recorded Pillar Resource’s manpower and most third-party costs.15 This data should have allowed PrimeWest to track a substantial part of Pillar Resource’s project costs on a daily basis.16 43 The trial judge held that Pillar Resource did what it promised to do when it promised to do it and that PrimeWest was more than satisfied with Pillar Resource’s work until Pillar Resource sued the appellants for breach of contract.17 44 At an August 24, 2004 meeting senior representatives of PrimeWest informed their Pillar Resource counterparts, according to the trial judge, that18 PrimeWest was very happy with Pillar’s work, given the amount of work to be done on a very tight schedule and that they were happy with Pillar’s flexibility in addressing project issues and scope changes. PrimeWest was happy with the quality of the work. Nothing appears to have been done by Pillar that was not required and PrimeWest was pleased with the crew performance and experience. 45 Pillar Resource left the site on June 1, 2004.

C. Pillar Resource’s Invoices and PrimeWest’s Payments 46 Pillar Resource submitted invoices totaling $1,801,278.13. The first invoice was delivered May 6, 2004. It was for $460,580.60.19 By the end of April 2004, Pillar Resource’s costs were in the vicinity of $500,000.20 This meant that the appellants’ costs were higher — the markup and taxes. 47 The trial judge concluded that the respondent’s invoices and daily tickets provided the appellants with the information they needed to moni- tor project costs on a daily basis:21 The first invoice was issued slightly over a month after work commenced, not an unreasonable period of time, particularly given that the daily tickets provided PrimeWest with the ability to track costs other than third-party costs and provided some information even on those. It is noteworthy that more than two-thirds of the ultimate 210 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

amount of third-party costs could have been identified from information provided on Pillar’s daily tickets. There was no contractual obligation or request from PrimeWest to provide earlier or more frequent invoices. 48 Nonetheless, PrimeWest informed Pillar Resource in a September 22, 2004 letter that PrimeWest was only prepared to pay $488,316.78 plus GST for a total of $522,498.95.22 A cheque for this amount came with the letter. 49 At an October 27, 2004 meeting attended by senior representatives of the appellants and the respondent,23 Mr. Miller conceded that the appellants had made up their minds not to pay anything more.24 50 Justice Romaine provided this assessment of PrimeWest’s conduct following Pillar Resource’s completion of its contract work:25 Mr. Miller testified that during these post-completion meetings, he was “trying to understand” Pillar’s invoices and why they differed from the initial estimates. This is disingenuous and not credible. Mr. Miller clearly did not want to pay Pillar’s costs for a project that had gone badly off budget for PrimeWest, primarily due to poor communication and reporting among Mr. Eidt, the Equinox personnel and Mr. Miller. Mr. Miller conceded that he understood the Pillar contract to be a reimbursable contract, with a fixed mark-up and that he knew the Bug Skid project was a fast-track project with the inherent risk of a reimbursable contract where the scope and details of the project were not clear before start-up. He also conceded that after the first six to eight weeks after start-up, when it became apparent to him that there was not a steady stream of communication, he took steps to become more personally involved. It is clear that Mr. Miller had failed to deliver a functioning project within budget, and was attempting to negotiate down Pillar’s invoices as a result. 51 On June 1, 2007, PrimeWest paid Pillar Resource an additional $423,828.73 to bring the total payments to $946,327.68. This payment reduced the outstanding invoices to $854,950.45 plus interest.26

D. Pillar Resource’s Action Against the Appellants 52 On November 15, 2004, Pillar Resource commenced an action against PrimeWest Energy Inc. and PrimeWest Gas Corp. for the amounts unpaid under the reimbursable-cost-plus contract and accrued interest. 53 On December 21, 2004, PrimeWest Energy Inc. filed a statement of defence and counterclaim. Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 211

54 Each party subsequently amended their pleadings. 55 After a fourteen-day trial, Justice Romaine filed reasons for judgment.27 She found in favour of Pillar Resource and gave it judgment for breach of contract in the amount of $852,036.73 plus prejudgment interest. The appellants do not appeal this part of the trial judgment. 56 Justice Romaine awarded the respondent full-indemnity costs. She stated her reasons in the following passage:28 [22] I find that the following conduct of ... [PrimeWest], when viewed as a whole, warrants the exceptional relief of an award of solicitor - client costs, subject to assessment and disbursements, including expert fees and the expenses of having Messrs. Guenther and Milliner give evidence. a) [PrimeWest’s] ... misleading requests for further information from Pillar during post-completion negotiation, when clarification was not really an issue, and its delays in such negotiation; b) [PrimeWest’s] ... attempt to introduce additional evidence in its written argument after trial; c) the additional trial time necessitated by ... [PrimeWest’s] refusal to admit facts that ultimately were not in issue; d) the unproven allegations of fraud that continued until trial, but were not addressed by ... [PrimeWest] at trial...... [24] I am persuaded by these factors taken together that this is a case where justice can only be done by a complete indemnification of the successful plaintiff’s costs. In the present climate of expensive litigation and scarce judicial resources, [PrimeWest’s] ... efforts to delay the trial and prolong its length must be denounced and deterred.

V. Applicable Provisions of the Court of Queen’s Bench Act and the Alberta Rules of Court 57 Section 21 of the Court of Queen’s Bench Act29 is as follows: 21 Subject to an express provision to the contrary in any enactment, the costs of and incidental to any matter authorized to be taken before the Court or a judge are in the discretion of the Court or judge and the Court or judge may make any order relating to costs that is appropriate in the circumstances. 212 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

58 Parts of rr. 1.2, 6.37, 10.31 and 10.32 of the Alberta Rules of Court30 are set out below: 1.2(1) The purpose of these rules is to provide a means by which claims can be fairly and justly resolved in or by a court process in a timely and cost-effective way. (2) In particular, these rules are intended to be used (a) to identify the real issues in dispute, (b) to facilitate the quickest means of resolving a claim at the least expense, ..... (e) to provide an effective, efficient and credible system of remedies and sanctions to enforce these rules and orders and judgments. (3) To achieve the purpose and intention of these rules the parties must, jointly and individually during an action, (a) identify or make an application to identify the real issues in dispute and facilitate the quickest means of resolving the claim at the least expense, ..... (c) refrain from ... taking proceedings that do not further the purpose and intention of these rules, and (d) when using publicly funded Court resources, use them effectively...... 6.37(1) A party may, by notice in Form 33, call on any other party to admit for the purposes of ... [a] trial, either or both of the following: (a) any fact stated in the notice, including any fact in respect of a record; (b) any written opinion included in or attached to the notice, which must state the facts on which the opinion is based...... (3) Each of the matters for which an admission is requested is presumed to be admitted unless, within 20 days after the date of service of the notice to admit, the party to whom the notice is addressed serves on the party requesting the admission a statement that (a) denies the fact or the opinion, or both ... and sets out in detail the reasons why the fact cannot be admitted or the opinion cannot be admitted, as the case requires, or Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 213

(b) sets out an objection on the ground that some or all of the matters for which admissions are requested are, in whole or in part, (i) privileged, or (ii) irrelevant, improper or unnecessary...... (6) A party may amend or withdraw an admission or denial made under this rule only (a) with the Court’s permission, or (b) by agreement of the parties...... 10.31(1) After considering the matters described in rule 10.33 ... the Court may order one party to pay to another party, as a costs award, one or a combination of the following: ..... (b) any amount that the Court considers to be appropriate in the circumstances, including, without limitation, (i) an indemnity to a party for that party’s lawyer’s charges, or (ii) a lump sum instead of or in addition to assessed costs...... 10.33(1) In making a costs award, the Court may consider all or any of the following: (a) the result of the action and the degree of success of each party; ..... (g) any other matter related to the question of reasonable and proper costs that the Court considers appropriate. (2) In deciding whether to impose, deny or vary an amount in a costs award, the Court may consider all or any of the following: (a) the conduct of a party that was unnecessary or that unnecessarily lengthened or delayed the action or any stage or step of the action; (b) a party’s denial of or refusal to admit anything that should have been admitted; 214 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

..... (g) whether a party has engaged in misconduct.

VI. Analysis A. Principles Governing Costs Awards 59 There are several principles that govern costs awards.31

1. Costs Awards Are the Product of Rational Deliberation 60 First, the Court of Queen’s Bench of Alberta is responsible for settling the amount of costs, including lawyer’s fees, payable by one litigant to another in a proceeding before the Court.32 61 Second, the Court of Queen’s Bench has a discretion to order a party to pay another party’s lawyer’s fees and related costs, if there is no express provision in an enactment to the contrary.33 62 All Canadian superior courts have similar jurisdictions.34 So do Cana- dian appellate courts.35 All English superior courts have also had this responsibility since 1875.36 Australian37 and New Zealand38 courts of this nature are responsible for costs awards. Some American courts, federal and state, — in stipulated cases — have jurisdiction to order a party to pay an adversary’s attorney’s fees.39 63 Third, “a court, in exercising its discretion, must act in a principled manner. A cost inquiry must be conducted within a logical framework. The absence of such a framework introduces arbitrariness and uncer- tainty.”40 It is the responsibility of appellate courts to construct a logical framework.41 This opinion pursues this object. 64 Fourth, in Canada,42 England,43 New Zealand44 and Australia45 the successful party is usually entitled to an order that obliges the unsuccessful party to pay it a sum in recognition of the fact that the prevailing party has incurred legal fees and other expenses to protect its interests. This principle has ancient roots. “The first statute which gave the plaintiff his costs, and the one on which the whole law on the subject was based until 1875, was the Statute of Gloucester [6 Edw. 1, c.1]”.46 In most American jurisdictions litigants are responsible for their own lawyer’s fees regardless of the outcome of the action.47 This is called the “American rule”.48 65 But there may be circumstances that make it appropriate to deny the successful party its costs.49 Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 215

66 Fifth, cost orders are made to indemnify the successful party for a portion of its lawyer’s fees.50 This has been a central feature of the common law for over 700 years. “It has not been doubted since 1278, when the Statute of Gloucester introduced the notion of costs to the common law, that costs are awarded by way of indemnity ... for professional legal costs actually incurred in the conduct of litigation”.51 They are not granted as a sanction for the purpose of punishing past misconduct and altering the future behaviour of the litigants or the community subject to the court’s jurisdiction.52 67 Sixth, now and for some time almost all costs orders amount to only a partial indemnity of the payee’s obligation to its lawyer.53 A payment under a typical costs order covers only a small portion of the recipient’s counsel’s fees. This is and has been the Canadian,54 English,55 Austra- lian56 and New Zealand57 experience. 68 Seventh, in exceptional cases a court will direct the payor to pay a sum that substantially or fully indemnifies the payee for its lawyer’s fees and other costs of litigation. An order of this nature — under Canadian,58 English,59 New Zealand,60 Australian,61 and American62 law — usually manifests judicial criticism of the payor’s conduct.63 But its primary purpose remains compensatory, and not punitive, in nature.64 Of course, no costs award makes the payee whole. Left uncompensated is the stress, inconvenience and distraction litigation causes.65 69 Eighth, a party ordered to indemnify another party for its litigation costs is responsible for those acts that increase the likelihood that the purpose of the retainer will be achieved and are not unnecessary.66

B. Blameworthy Conduct Justifies Extraordinary Costs Awards 70 Exceptional circumstances that justify a substantial or full-indemnity costs order include67 blameworthy conduct on the part of the payor. This is the law even in the United States.68 71 And what are the benchmarks of blameworthy conduct for the purpose of assessing costs? 72 It is beyond doubt that the manner in which the litigation is conducted may constitute blameworthy conduct.69 We are not aware of any Cana- dian, English, New Zealand or Australia judgment that has questioned this proposition. 73 In addition, case law in Canada70 and other common law jurisdic- tions71 strongly supports the proposition that the acts or omissions on 216 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

which a suit is based also may justify an enhanced costs order. But there are some courts that disagree.72

1. Prelitigation Misconduct a. Alberta Jurisprudence 74 Panels of this Court have expressed different opinions on whether prelitigation misconduct may justify full-indemnity costs orders.73 75 In 2016 Justices Bielby and Schutz opined in FIC Real Estate Fund Ltd. v. Phoenix Land Ventures Ltd.74 that prelitigation misconduct may be the basis for a full-indemnity costs award. They relied on Sidorsky v. CFCN Communications Ltd.,75 a 1997 decision of this Court that advanced several examples of prelitigation conduct that warranted an enhanced costs award. 76 In the last ten years two other panels — Polar Ice Express Inc. v. Arctic Glacier Inc.76 and Walsh v. Mobil Oil Canada77 — either im- pliedly or expressly opined that only litigation misconduct may attract a full-indemnity costs order. 77 The Polar Ice Express Inc. v. Arctic Glacier Inc. panel said this:78 The trial judge said that he was giving [solicitor-client costs] for the appellant’s bad pre-suit conduct, and he relied upon Young v. Young, [1993] 4 S.C.R. 3.... In our view, that case is virtually diametrically opposed to that proposition, especially if one looks at the Court of Appeal decision .... If that case leaves any doubt on the subject .... other binding authorities hold that in general solicitor-client costs for misconduct must relate to conduct during the suit, not the pre-suit conduct sued over. 78 The Court appears to have concluded that the following paragraphs from Young v. Young79 supports its position: The Court of Appeal’s [cost] order was based on the following principles, with which I agree. Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. Accordingly, the fact that an application has little merit is no basis for awarding solicitor-client costs; nor is the fact that the cost of the litigation may have been paid for by others. The Court of Appeal meticulously considered all the proceedings in the light of these principles to arrive at its conclusion that only partial solicitor-client costs were justified. Finding no error in the reasoning or conclusion of the Court of Ap- peal on this question, I conclude that its order for costs should re- Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 217

main, save to the extent different conclusions on the merits in this Court require that an adjustment be made. 79 I fail to see how this passage supports the claim made by the Polar Ice Express panel that the Supreme Court held in Young v. Young that only litigation misconduct warrants a solicitor-client costs award. 80 In Young v. Young80 the Supreme Court stated that “[s]olicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties”. Nothing in this sentence suggests that blameworthy prelitigation conduct of a party cannot be “reprehensible, scandalous or outrageous conduct”. Nor is there a plausible reading of this sentence that supports the view that litigation misconduct cannot be “reprehensible, scandalous or outrageous conduct”. Without a doubt, the Supreme Court intended both forms of misconduct to serve as foundations for an indemnity costs award.81 81 Had Justice McLachlin, as she then was, who was writing for all but one of the seven-member Court on this point,82 intended to narrowly de- fine misconduct and include only litigation misconduct, she would have said so. 82 Seven Canadian appellate courts — British Columbia, Saskatchewan, Manitoba, Ontario, Prince Edward Island, Newfoundland and Yukon — have unequivocally opined that blameworthy prelitigation conduct may justify an indemnity costs award.83 Superior courts in the other provinces and territories have come to the same conclusion.84 83 Given that Justice McLachlin relied heavily on Justice Cumming’s Young v. Young judgment in the British Columbia Court of Appeal,85 it merits study. 84 Justice Cumming’s judgment gave prominence to Justice Hinds’ opinion in McEvoy v. Ford Motor Co. [1990 CarswellBC 101 (B.C. S.C.)] the key parts of which are set out below:86 The principles to be applied with respect to an award of solicitor- and-client costs have been considered in British Columbia .... In Stiles v. B.C. (W.C.B.)... Lambert J.A. reviewed ... some of the more recent cases which dealt with solicitor-and-client costs. What he said commencing at p. 310 bears repeating: ..... The principle which guides the decision to award solicitor-and-client costs in a contested matter where there is no fund in issue and ... the parties have not agreed on solici- 218 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

tor-and-client costs in advance, is that solicitor-and-client costs should not be awarded unless there is some form of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, which makes such costs desirable as a form of chastisement. ... After reading ... Stiles... and the British Columbia authorities referred to by counsel ..., I conclude that solicitor-and-client costs should be awarded only in exceptional cases where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties deserving of chastisement. 85 Justice Hinds’ opinion on this question is unmistakable.87 Either reprehensible prelitigation or litigation conduct may be the basis for a solicitor-client costs award. 86 As one would expect, given that Justice Hinds’ formulation is the law in Canada, it is still applied in British Columbia.88 The British Columbia Court of Appeal, in Dockside Brewing Co. v. Strata Plan LMS 3837,89 said this: “The authorities do not establish any rigid rule that would prohibit an award of special costs where pre-litigation conduct is ‘reprehensible’ and warrants rebuke. As Lambert, J.A. noted ... however, ‘special costs are usually awarded only in relation to misconduct during the course of the litigation itself’”. 87 The Polar Ice Express panel also stated that Tree Savers International Ltd. v. Savoy90 is “binding [authority for the proposition] ... that in general solicitor-client costs for misconduct must relate to conduct during the suit, not the pre-suit conduct sued over”.91 My colleagues sin- gled out this passage from Tree Savers International, part of which reads as follows: “The respondents sought solicitor-client costs. They are normally awarded for misconduct in the suit, or because contracted for, and are not normally used as additional or exemplary damages. The lack of forthrightness and disposal of some documents by some of the defendant appellants are not to be commended. But we will not award solicitor- client costs where the trial judge, who observed these witnesses, did not”.92 88 Three observations may be advanced. First, this decision predates the Supreme Court of Canada’s Young v. Young decision. In our opinion, Young v. Young clearly stands for the proposition that blameworthy litigation or prelitigation conduct may attract full-indemnity costs. Second, the cited passage simply says that “normally” — most of the time — trial misconduct is the explanation for an enhanced costs award. This may well be the case. We have not checked to see which rationale for an in- Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 219

demnity costs order is most prevalent. The Tree Saver panel opinion does not preclude attaching costs consequences to prelitigation misconduct when it occurs. Third, the Tree Saver panel provides no authority for the statement that prelitigation conduct may not be the basis for a full-indemnity costs award. It cited no authority in the costs portion of its judgment. 89 Polar Ice Express also favourably cited Sidorsky v. CFCN Communications Ltd.93 But we read Sidorsky as authority for the proposition that prelitigation misconduct may warrant a full-indemnity costs award. Sidorsky expressly states that “a departure from party and party costs should only occur in rare and exceptional cases” and that “[e]xamples of [rare and exceptional] ... circumstances [are] outlined in Jackson v. Trimac Industries Ltd.”.94 As already noted, Jackson v. Trimac Industries Ltd.95 lists several examples of prelitigation misconduct that merit the award of full-indemnity costs. And Justice Hutchin- son, the trial judge in Jackson v. Trimac Industries Ltd.96 awarded the plaintiff full-indemnity costs on account of the defendant’s prelitigation misconduct: Where the positive misconduct of the party which gives rise to the action is so blatant and is calculated to deliberately harm the other party, then despite the technically proper conduct of the legal proceedings, the very fact that the action must be brought by the injured party to gain what was rightfully his in the face of an unreasonable denial is in itself positive misconduct deserving of indemnification whether punitive damages are awarded or not...... I find that this lengthy trial came about as a result of the fault of one man within the Trimac organization, the man who held the ultimate power and who refused to recognize a commitment which he had personally given to the plaintiff Jackson. ... I find JR’s conduct to have been calculated to force Jackson to exhaust the legal proceedings to obtain that which was obviously his. 90 While it is true that the Court of Appeal in Sidorsky v. CFCN Communications Ltd. set aside the trial judge’s order directing, the plaintiff to pay the defendant’s costs on a “solicitor-client” basis, it did so because the plaintiff’s prelitigation conduct that the trial judge relied on to justify an enhanced costs award did not affect the defendants. If the plaintiff landowner had deceived the occupants of his trailer park, as the defendant broadcaster maintained in its coverage, this did not adversely affect the interests of the broadcaster defendant who reported the plain- 220 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

tiff’s alleged misdeeds. This was obviously an irrelevant fact, a point the panel emphatically made in the following passage:97 [T]he trial judge erred ... in considering the plaintiff’s conduct towards the tenants (who were not parties to the litigation). Mr. Sidor- sky’s treatment of his tenants may result in independent actions for damages being brought by the tenants themselves, but it should form no basis for awarding such costs to the respondents. Similarly, ... the trial judge considered Mr. Sidorsky’s actions in relation to several tenants and unrelated broadcasters. Again, these people are not parties to the action. In our view, these factors are not proper considerations in assessing an award of solicitor-client costs to these respondents. 91 The Polar Ice Express panel also opined that Professional Sign Crafters (1988) Ltd. v. Seitanidis98 is authority for the view that full- indemnity costs may not be awarded as a consequence of prelitigation misconduct. Again, we cannot agree. Professional Sign Crafter assumed that prelitigation misconduct may trigger a full-indemnity costs award. The Professional Sign Crafter panel simply concluded that there was no prelitigation misconduct:99 The trial judge said that he was ordering ... solicitor/client costs because of the outrageous, blatant and inappropriate conduct of the appellant .... He did not elaborate on the specific acts which he was describing by those words. But reading his judgment as a whole, it is clear that he could not have been referring to post-pleading conduct, since in his reasons for judgment he said he did not know the history of the file. Therefore, the conduct on which he focussed was the conduct resulting in the lawsuit to begin with. There is nothing, in our view, in Stanley’s conduct in initiating the proceedings and his conduct thereafter that comes within the class of a rare and exceptional case warranting solicitor/client costs. 92 The Polar Ice Express opinion also relied on the Supreme Court of Canada’s Entreprises Ludco lt´ee c. Canada100 decision. I do not find this case to be helpful. At issue was the validity of Revenue Canada’s decision that taxpayers could not make the deductions they claimed. The Su- preme Court sided with the taxpayers. But it rejected their request for “special costs”. The Court concluded that Revenue Canada did not act improperly. It did not indicate whether this was an assessment of prelitigation or litigation misconduct. The Court said this: “In general, special costs ought to be awarded only on the grounds of misconduct connected with the litigation or other exceptional circumstances”.101 Is prelitigation conduct not “connected with the litigation”?102 If not, is it not captured Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 221

by the phrase “other exceptional circumstances”? If the sentence under review does refer to litigation misconduct, the phrase “in general”, supports the view that it does not preclude prelitigation misconduct. In any event, the Supreme Court of Canada made no mention of Young v. Young. The likelihood that the Supreme Court intended to revisit the issue decided by Young v. Young without reference to Young v. Young or any other policy questions that are engaged by this question is extremely low. There are many other superior court judgments that, pre and post Young v. Young, have granted full-indemnity costs against unsuccessful parties whose prelitigation conduct was blameworthy.103 93 The majority of the panel hearing Walsh v. Mobil Oil Canada104 accepted the appellant’s argument that “the conduct must have occurred during the course of the litigation” and stated, without explanation, that “the reviewing judge erred in principle in awarding [full indemnity] costs based on Mobil’s pre-litigation conduct”. This disposition is inconsistent with Young v. Young.105

b. There Is No Valid Reason To Distinguish Between Prelitigation and Litigation Misconduct i. Statutory Interpretation 94 Section 21 of the Court of Queen’s Bench Act106 proclaims that “the costs of and incidental to any matter authorized to be taken before the Court ... are in the discretion of the Court ... and the Court ... may make any order relating to costs that is appropriate in the circumstances”. This section is drawn in the broadest terms and authorizes the Court to award costs based on a party’s blameworthy prelitigation or litigation conduct.107 No provision in the Alberta Rules of Court108 denies the court the jurisdiction to use a substantial or full-indemnity costs order as a tool to express its strong disapproval of a party’s prelitigation conduct109 and order a party to fully or substantially reimburse an adversary whose interests were harmed by blameworthy prelitigation conduct. 95 The text of these statutory standards supports enhanced costs orders for both prelitigation and litigation misconduct. 96 Statutory interpretation principles do not justify drawing a distinction between prelitigation misconduct and litigation misconduct when assessing costs.110

ii. There Are No Adverse Practical Consequences 97 Nor are there any practical reasons111 to do so. 222 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

98 In order to appreciate the impact costs have on litigants and the greater community one must understand how potential and actual costs obligations affect the behaviour of members of the community who may come into contact with the civil justice system. 99 Competent counsel retained by a client who has a dispute with another or anticipates that one may materialize and is considering commencing an action or who has been sued or anticipates being sued will deliver several key messages to the client. First, the lawyer will want the client to understand that there is always a risk that a court may not grant the client the relief that the client seeks.112 Second, the experienced lawyer will emphasize that litigation is invariably expensive.113 The lawyer will also ensure that the client understands that the client must pay him or her no matter what the outcome.114 In addition, the lawyer will advise the client that a court has jurisdiction to order the unsuccessful party to pay some or all of the legal expenses the adversary incurs. This may be a very substantial burden.115 100 There are very few clients who have sufficient resources that they are able to make decisions about litigation without regard to the financial aspects of available options. Most clients do not have the luxury of adopting a strategy to establish a principle or to punish an adversary. 101 The course a prudent client adopts will be affected by the fact that litigation is expensive and the outcome may be difficult to predict. That a court may order the client to pay the adversary’s legal costs complicates things. 102 These factors may cause a client to seek accommodation and decline to initiate litigation or be predisposed to settle suits commenced against it if the likelihood of ultimate success is not high enough to satisfy the client’s risk tolerance and the financial consequences of defeat are too onerous. 103 It is obvious that the magnitude of the possible obligation to indemnify an adversary for its legal costs is an important consideration for the vast majority of litigants or potential litigants. As the quantum of the potential costs burden escalates, so must the likelihood that the court will validate the client’s position increase in order to justify a decision to proceed with litigation and not pursue alternate dispute resolution options, such as settlement. In other words, there is a direct correlation between the magnitude of the costs burden, the merits of the client’s case and the client’s propensity to participate in the civil justice system. Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 223

104 Courts must take this into account when formulating the principles that govern the quantum of costs.116 105 It is safe to predict that as the cost burden and the risk of loss rise, the likelihood that a person will adopt a strategy that gives a civil court a prominent role in dispute resolution will diminish. Those deterred are most likely to be those with the least resources. The size of the pool of potential litigants may be directly affected by the wealth of a disputant. 106 At the same time, even with the knowledge that the potential cost of litigation may shrink the size of the pool of persons willing to litigate, courts accept that it is generally fair117 to relieve the successful party of the burden to pay all its legal costs associated with advancing a meritorious position. A party whose position the court has vindicated and who has expended its resources to protect its legal interests is entitled to transfer some of those costs to its adversary whose intransigence has caused the successful party to expend its resources on lawyer and litigation-related service providers.118 “If the litigation had not been brought or defended by the unsuccessful party the successful party would not have incurred the expense which it did”.119 107 For hundreds of years courts have adjudged that the unsuccessful party should make a reasonable contribution120 to reduce the financial burden that the successful party has incurred because the former has failed to foresee that a court would not recognize its position as more meritorious than the latter’s. They do this aware of its likely impact on future disputants. 108 What constitutes a reasonable contribution on the part of the unsuccessful party who has not engaged in either prelitigation or litigation misconduct will be influenced by the answer to this question: what potential burden will cause a reasonable person of average means121 to abandon a defensible legal position — prospects of success are forty percent or more122 — on a controversy objectively assessed to be of significance to the person — because the costs associated with the risk of failure — up to sixty percent — are too great to justify submitting the dispute for adjudication under the protocols utilized by our civil justice system. Surely the law ought not to ignore cost consequences so onerous that they will deter a reasonable person of average means from seeking judicial vindi- cation of a defensible legal position of a controversy significant to the person. 109 Historically, courts have concluded that a relatively modest contribution from the vanquished litigant is reasonable.123 This means that the 224 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

victor remains responsible for a greater proportion of its legal costs than the adversary and that the latter is solely responsible for its own legal costs and a modest portion of the victor’s. Suppose that A and B, the two litigants, each spent $X on legal fees and disbursements. A wins. B loses. The court issues a costs order requiring B to pay A a sum that equals $.4X. In the end A, the victor, pays $.6X in legal fees and disbursements to his or her lawyer to acquire $Y in damages; B, the vanquished, pays A $Y for damages and $.4X to reimburse A for part of A’s legal costs. In addition, B had to pay his or her own lawyer $X.124 110 But the key point is this: the contribution the law compels the unsuccessful party to make to the successful party must not be so onerous as to be the principal reason why a reasonable person of average means with a defensible legal position decides not to submit the difference for determination by our civil justice system. 111 One of the messages this modest loser-pay transfer system sends to the greater community is that litigation is expensive and that it may be desirable to find other methodologies — such as mediation — to resolve differences. This is not a bad message. While our civil justice system is a hallmark of a democratic state committed to the rule of law, it is not the ideal mechanism for the resolution of every dispute. 112 It is within this analytical framework that one considers the wisdom of attaching significant and elevated costs consequences to blameworthy behaviour of a party that shows blatant disregard of an adversary’s legal interests. 113 Will the prospects of a costs award on a substantial or full-indemnity basis cause a reasonable person of average means with a defensible legal position not to submit a dispute for judicial resolution? 114 The answer is no. 115 Awards of this magnitude are extremely rare. While I am not aware of any empirical data, I am convinced that the likelihood that extraordinary cost orders will have any adverse impact on the target audience is close to zero. 116 I am satisfied that indemnity orders based on the payor’s blameworthy conduct — whether it consists of prelitigation or litigation misconduct — will not cause reasonable persons of average means to decline to submit a defensible legal position on an issue of importance to them to our civil justice system. Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 225

117 But I do believe that extraordinary costs awards attributable to blameworthy conduct do have a positive effect on the community. 118 They send an unequivocal message that there will be severe costs consequences for those who blatantly disregard the legal interests of others whether they do so during the course of litigation or in the acts or omissions that are the subject of the action. 119 Persons in positions similar to that of prior payors of substantial or full-indemnity costs awards will be put on notice that similar behaviour on their part may be costly. This may cause them to alter their business model and delete or alter the criticized practices. This is a positive development. If the explanation for the extraordinary costs award is litigation misconduct, a person may wish to think twice about the wisdom of re- taining counsel who is reputed to be an in-close broken-bottle fighter. Decreased demand for lawyers who are architects of litigation misconduct would be another positive development. It may cause this small band of litigation warriors to abandon offensive tactics that have no place in the toolboxes of today’s top-tier litigators. 120 That statutes, rules of court and case law in other common law jurisdictions with shared values have declined to distinguish between blameworthy prelitigation and litigation conduct gives me reason to believe that I have not overlooked something of importance before concluding that there is no practical reason to treat the two types of blameworthy conduct differently.

c. Relevant Prelitigation Misconduct 121 Having explained why prelitigation misconduct may justify an indemnity costs award, I will discuss in more detail some of the issues raised by the focus on prelitigation misconduct. 122 Parties whose prelitigation acts demonstrate blatant disregard for the rights of an adversary engage in blameworthy prelitigation conduct.125 Only prelitigation conduct that is the basis of the action may be considered.126 This is easy to illustrate. Suppose that A sues B Bank for wrongful dismissal. B Bank defends alleging that A engaged in misconduct — assaulted C, a customer — that warranted the summary dismissal of A. A succeeds. A called C to testify. C testified that he was very unhappy with B Bank and admitted that he assaulted A. The court concludes that C assaulted A. A seeks full-indemnity costs because C’s evidence disclosed that B Bank engaged in misleading advertising. B Bank’s misleading ad- vertisements did not adversely affect A’s interests. Because B Bank’s 226 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

misleading advertising had no bearing on the assessment of whether B Bank had cause to terminate A’s employment without reasonable notice or pay in lieu of reasonable notice, the court cannot take into account B Bank’s misleading advertising when assessing A’s requests for enhanced costs.127

2. Litigation Misconduct 123 At an abstract level, parties whose litigation conduct, viewed as a whole, demonstrates blatant disregard for their obligations under the Al- berta Rules of Court128 and court orders, and the rights of other parties or undermines the integrity of the trial process engage in blameworthy litigation conduct.129 124 More particularly, a party that (a) alleges fraud, without any reasonable basis,130 (b) fails to observe time lines imposed by the Alberta Rules of Court and court orders, (c) seeks adjournments for no valid reason and otherwise unreasonably delays the litigation process,131 (d) files material just before hearings in order to deny an adversary the right to cross-examine the affiant or otherwise properly respond to other documents,132 (e) misleads the court — consistently misrepresents the facts or law,133 (f) conceals, destroys or fabricates evidence or otherwise thwarts the purpose of the discovery process,134 (g) maintains positions or brings applications that are patently in- defensible — the likelihood they will succeed is very low,135 (h) presents dishonest witnesses,136 (i) behaves in an uncivil manner137 or (j) engages in other misconduct that undermines the integrity of the trial process138 commits acts that may be characterized, either individually or collectively, as blameworthy litigation misconduct. 125 Blameworthy litigation conduct may either be the proper characterization of a pattern of misconduct that occurred at one or more stages of the litigation spectrum — pleadings, discoveries, applications or trials — or, if the misconduct is sufficiently egregious, a single act — alleging in Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 227

argument, either written or oral or both, without foundation, that the adjudicator and opposing counsel are corrupt139 — may be sufficient. This last example is sufficiently egregious because the attack undermines essential attributes of our justice system.140 The public and the parties accept decisions of judges because the judges are perceived to be impartial and competent. Challenges to the integrity of counsel must also be noted. Counsel are officers of the court and play an important role in the delivery of justice. An unjustifiable attack on judges and legal counsel imper- ils the judicial system’s capacity to fairly try disputes.141 126 On these occasions, courts order the party responsible for blameworthy conduct to pay the payee an amount that is intended to reduce the victorious party’s out-of-pocket legal costs to close to zero or relieve the unsuccessful party of costs obligations.142 While orders of this nature express the court’s strong disapproval of the payor’s conduct, they should not be regarded as penal in nature. They simply make the payee whole in one limited respect — the pocketbook.

C. The Different Function of Punitive Damages and Indemnity Costs Orders 127 It is an error to equate an indemnity costs order with punitive damages. The latter are penal in nature143 and have nothing to do with the amount of the successful party’s legal obligations to its counsel. Justice Cory explained the function of punitive damages in Hill v. Church of Scientology of Toronto:144 Punitive damages may be awarded in situations where the defendant’s misconduct is so malicious, oppressive and high-handed that it offends the court’s sense of decency. Punitive damages bear no relation to what the plaintiff should receive by way of compensation. Their aim is not to compensate the plaintiff, but rather to punish the defendant. It is the means by which the jury or judge expresses its outrage at the egregious conduct of the defendant. They are in the nature of a fine which is meant to act as a deterrent to the defendant and to others from acting in this manner. 128 The fact that a full-indemnity costs award based on specified forms of misconduct may cause others to think twice before adopting a similar strategy145 does not change the fundamental nature of a full-indemnity costs award. 129 There is probably a strong likelihood that a party who is the beneficiary of a punitive damages order will also be the payee under a full-indemnity costs award. A party that has engaged in misconduct of a nature 228 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

that justifies a punitive damages sanction has most likely acted in a sufficiently offensive manner to warrant a full-indemnity costs order.146 But the reverse is not true. A court may conclude that a party’s behavior is sufficient to trigger a full-indemnity costs order without meeting the level of egregiousness reserved for punitive damages.147 130 Costs awards that are the function of blameworthy litigation misconduct deliver a message to lawyers who engage in litigation and are primarily responsible for litigation strategy and its execution. They fore- warn barristers that there are some litigation strategies that are so completely unacceptable that they will attract severe cost consequences.148

D. Application of Costs Principles to This Appeal 131 Justice Romaine understood that she was responsible for settling the costs issue and that she must exercise her discretion in accord with established principles. 132 The trial judge appreciated that a costs award that compelled the appellants to fully indemnify the respondent would be appropriate only in “rare and exceptional” circumstances. 133 Her conclusion that the appellants must fully indemnify the respondent for its costs is not plainly wrong.149 Indeed, this is a clear case for a full-indemnity costs award. 134 Justice Romaine’s determination was based principally on her assessment of the appellants’ litigation conduct. Even though the appellants had no grounds to challenge any aspect of the respondent’s account on the basis that the work performed or third-party expenses incurred were unnecessary to the completion of the project and must have known this no later than shortly after the conclusion of questioning,150 they never informed the respondent that this no longer was a divisive issue and, by their silence, forced the respondent to spend approximately eleven days proving facts that the appellants never intended to contest. Litigation is not a game.151 135 The trial judge recognized that the appellants’ insistence that the respondent prove its case — that the services and materials for which it billed were necessary to the completion of the appellants’ project — when the appellants had no intention of contesting the necessity of any cost for which Pillar Resource sought reimbursement harmed not only the respondent but the greater community served by our publicly funded court system. The harm caused the respondent is obvious. It had to pay Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 229

its legal team and ask witnesses to participate in the trial for no good reason. And the deleterious consequences of the appellants’ trial strategy for the community is equally apparent. Other disputants who were on the runway waiting for their opportunity to have their trial take off were forced to endure longer delays than was necessary. 136 While there may have been a period when a litigant was entitled to adopt a trial strategy that compelled the other party to prove its case, without attracting costs consequences, that era has passed.152 The foun- dational rules unequivocally reject the legitimacy of the tactics of the in- close broken-bottle-fighter model of advocacy.153 Rule 1.2(3) of the Al- berta Rules of Court compels the parties to “identify ... the real issues in dispute and facilitate the quickest means of resolving the claim at the least expense”. 137 Had the appellants informed the respondent that there was only one issue that divided them — was the construction contract a reimbursable- cost-plus contract or something else — the trial would not have utilized fourteen days. We suspect, as counsel for the respondent confirmed during oral argument, that three days would have been more than enough to resolve this relatively straight-forward issue. 138 Mr. Solomon, appellant’s counsel, emphasized the fact that the respondent never served the appellants with a notice to admit facts. Mr. Gruber, respondent’s counsel, acknowledged that this was an option open to him.154 But the respondent decided not to do so. The appellants’ post assignment conduct evidenced an intractable position and no doubt led the respondent to conclude that the time required to prepare a notice to admit facts could be better spent on other trial preparation activities.155 Senior representatives of Pillar Resource had devoted large chunks of time to explaining to Mr. Miller of PrimeWest all of the costs for which Pillar Resource sought reimbursement and how these activities were for the benefit of the project — all without success. Mr. Miller was adamant that PrimeWest would not pay Pillar Resource another cent. 139 Following this theme, the appellants also could have argued that the respondent could have applied for summary judgment.156 This would have forced the appellants’ hand. They would have had to put their best case forward or face the consequences.157 140 I am satisfied that the respondent’s decision not to serve the appellants with a notice to admit facts or take any other step that could have expedited the resolution of this action does not relieve the appellants of their obligation under r. 1.2(3) to identify the real issues in dispute and 230 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

under r. 1.2(d) “to communicate honestly, openly and in a timely way”.158 Once questioning was complete and the appellants were in a position to evaluate whether all of the billed costs contributed to the project, they should have notified the respondent within a reasonable period of time that they admitted that all the costs covered by the respondent’s accounts are the appellants’ responsibility if the court rejects their argument that the agreement binding both parties was not a reimbursable- cost-plus contract.159 141 Had the appellants done this they would have had to carefully consider whether their claim that their contract with Pillar Resource was something other than a reimbursable-cost-plus construction contract had any merit. 142 Had they focused on the only real issue that divided then, the two parties may have been able to resolve their differences.160 From our van- tage point, the appellants’ position was difficult to defend. Mr. Miller must be a capable business leader or he would not have occupied the senior position he held. He acknowledged at trial that an owner who engages a contractor on a reimbursable-cost-plus construction contract bears the burden of unanticipated costs. If the appellants had valued cost certainty more than expedition, they never would have entered into a reimbursable-cost-plus construction contract with Pillar Resource. All the evidence inexorably leads to the conclusion that Mr. Miller and his colleagues were willing to assume the risk of higher-than-anticipated costs in return for an expedited construction schedule. They must have concluded that the benefits associated with increased throughput at an early date would exceed the burden associated with the risks inherent in a reimbursement-cost-plus construction contract. 143 I am also satisfied that the trial judge was justifiably troubled by PrimeWest’s attempt to pass off expert evidence as argument. Had PrimeWest wanted the trial judge to take this information into account they should have led it through an expert. 144 Justice Romaine’s conclusion that the appellants pled fraud is not only reasonable but indisputably correct. “Fraud” is defined by Web- ster’s Third New International Dictionary161 this way: “an intentional misrepresentation ... for the purpose of inducing another in reliance upon Pillar Resource Services Inc. v. PrimeWest Energy Inc. Wakeling J.A. 231

it to part with some valuable thing belonging to him or to surrender a legal right”. Here is the pleading: 15. ... [T]he Plaintiff committed substantial breaches of the Contract by [...] (e) ... intentionally ... inflating their costs in order to claim to a higher mark-up amount. 145 A contractor bound by a reimbursable-cost-plus contract who knows that it has claimed costs that are not attributable to the proper execution of the contract commits a fraudulent act. Suppose that in the early spring A retains B to replace the concrete surrounding her pool. A wants this work done immediately because she wants the pool deck to be the plat- form for her daughter’s summer outdoor wedding. B is unwilling to do the work for a fixed price because he does not know whether any of the outdoor water, electrical and gas lines are under the concrete and what other complications — pool leaks — may be encountered. When B completed similar projects on a fixed price basis he did not make enough profit. But B is willing to do the work right away and bump other customers if A agrees to pay him on a cost-plus twenty-five percent basis. B tells A that he can only guess as to what the all-in cost may be - $50,000. The project goes very well. B is able to remove the concrete without damaging A’s pool and garden and there are no surprises under the concrete. There are no lines of any kind to complicate the work. B’s costs are $30,000. On this basis A’s obligation to B is $37,500. B adds to his costs C’s concrete charges for another small project B retained C to do, along with the rebar for two other fixed price projects B had on the go for D and E. These additional charges add another $10,000 to B’s costs and another $12,500 to A’s bill. B sends A a bill for $50,000, enclosing his claimed costs. B has engaged in fraud at A’s expense. 146 The appellants have claimed that Pillar Resource engaged in fraud. 147 I cannot agree with the trial judge’s conclusion that the appellants’ prelitigation conduct constituted blameworthy conduct. The appellants were entitled to seek an explanation from the respondent as to why all the amounts they were asked to pay were reasonable and necessary for the completion of the project. 148 Having determined that the trial judge’s assessment of the appellants’ prelitigation conduct is not supportable and it not being clear from her reasons that she regarded the other aspects of the appellants’ misconduct as sufficient cause to justify her costs order, I must conduct my own assessment of the appellants’ litigation conduct. 232 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

149 The appellants’ decisions to allege in their pleadings, without any reasonable basis, that Pillar Resource acted in a fraudulent manner162 and to force Pillar Resource to prove facts that PrimeWest did not take issue with163 and, as a consequence, consume trial time for no good reason, would, by themselves, have been sufficient reason to order PrimeWest to fully indemnify Pillar Resource for its trial costs.164 I also hold that the appellants’ attempt to introduce expert evidence into its written argument was an additional reason that buttresses the conclusion that the appellants must fully indemnify Pillar Resource for its costs in prosecuting its claim. 150 I agree with my colleagues that the interlocutory costs orders, which were not appealed, remain standing.

VII. Conclusion 151 This appeal is dismissed. 152 I acknowledge counsel’s excellent written and oral arguments.

J.D. Bruce McDonald J.A. (dissenting): VIII. Introduction 153 I have read both the Memorandum of Judgment of my colleague Mr. Justice Wakeling and the Memorandum of Judgment of my colleague Madam Justice Bielby. I agree with the facts as set forth in Mr. Justice Wakeling’s Memorandum. I also agree with my colleague Madam Jus- tice Bielby that the law does not permit a trial judge to base an award of solicitor-client costs on pre-litigation conduct alone, independent of any other circumstances. I further support the comments in paragraph 14 of her Memorandum of Judgment with respect to the interlocutory costs in question. 154 Other than the foregoing, however, I am unable to agree with my colleagues and for the reasons set out below, I would have allowed the appeal.

II. Standard of Review 155 A court should set aside a costs award on appeal only if the trial judge has made an error in principle or if the costs award is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303 (S.C.C.) at para 27. Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 233

III. Analysis 156 In coming to her decision to award the respondents solicitor-client costs, the trial judge summarized her reasons as follows: [22] I find that the following conduct of Primewest, when viewed as a whole, warrants the exceptional relief of an award of solicitor-client costs, subject to assessment and disbursements, including expert fees and the expenses of having Messrs. Guenther and Milliner give evidence. a) Primewest’s misleading requests for further information from Pillar during post-completion negotiation, when clarification was not really an issue, and its delays in such negotiation; b) Primewest’s attempt to introduce additional evidence in its written argument after trial; c) the additional trial time necessitated by the [sic] Primewest’s refusal to admit facts that ultimately were not in issue; d) the unproven allegations of fraud that continued until trial, but were not addressed by Primewest at trial. 157 Significantly, in awarding solicitor-client costs, the trial judge did not base her decision on the lack of credibility of the appellants’ main witness at trial. Indeed she specifically rejected that as a basis to award solicitor-client costs in this case as her reasons make clear: [5] Pillar submits that Primewest’s witnesses provided misleading and disingenuous testimony in an attempt to buttress an untenable theory of the case. [6] It is true that in my judgment, I found the testimony of Primewest’s main witness, Mr. Miller, not to be credible. This lack of credibility has already had its effect in the trial findings of fact in Pillar’s favour. It should not also serve as a rationale for a more severe costs award. 158 As stated above, I agree with Madam Justice Bielby’s analysis and conclusion that pre-litigation conduct in and of itself standing alone does not permit an award of solicitor-client costs and I further agree with her statement that this court’s decision in FIC Real Estate Fund Ltd. v. Phoenix Land Ventures Ltd. [2016 CarswellAlta 1962 (Alta. C.A.)] is not authority that it can. See also Colborne Capital Corp. v. 542775 Alberta Ltd., 1999 ABCA 14, 228 A.R. 201 (Alta. C.A.) at para 292; Sidorsky v. CFCN Communications Ltd., 1997 ABCA 280, 206 A.R. 382 (Alta. C.A.) at paras 34-36 and 39. 234 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

159 It therefore follows that if the three additional grounds listed by the trial judge (namely b - d above) in support of her award of solicitor-client costs are unsustainable, then that award cannot stand. I will now analyze in turn the three further grounds.

• The appellant’s attempt to introduce additional evidence in its written argument after trial. 160 The respondent argued that some of the appendices included in the appellants’ final written argument contained expert evidence, which had not been entered at trial. For its part, the appellants argued that these appendices were simply a summary of existing evidence. The appellants’ argument was rejected by the trial judge who concluded that it was essentially expert evidence without having been tendered by an expert in the proper manner at trial. 161 Interestingly, the trial judge downplayed the importance of this factor as paragraph 10 of her Costs Decision makes clear: [10] Pillar also refers to Primewest’s attempt to improperly introduce appendices to its written argument that should properly have been evidence during the trial. Despite Primewest’s attempt to reargue the nature of these appendices in its costs submission, Pillar is correct that these appendices included evidence improperly sought to be entered after the trial was over. I did not rely on the appendices in making my decision. Thus, the attempt was thwarted at that stage, and the process was not subverted. (emphasis added) 162 Ultimately, this issue involves an admissibility ruling. I agree with counsel for the appellants that an admissibility ruling ought not to found an award of solicitor-client costs. The additional costs of this evidentiary dispute were nominal at best. This ground is without merit.

• The additional time necessitated by the appellant’s refusal to admit facts that ultimately were not in issue 163 With respect to this ground advanced in support of an award of solicitor-client costs, it is instructive to bear in mind that there was both an Agreed Statement of Facts entered at trial, together with 79 exhibits that were entered by consent. On the other hand, the respondents never filed a Notice to Admit. Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 235

164 It is trite law that an award of solicitor-client costs is an extraordinary remedy and is generally reserved for cases of serious litigation misconduct: Reeder v. Woodward, 2016 ABCA 91 (Alta. C.A.) at para 30. 165 In Reeder v. Woodward, at the conclusion of his oral reasons in an action involving a claim for adverse possession, the trial judge in a very summary fashion stated: 35. Given the conduct of the Defendants in this action I am satisfied that the Plaintiffs are entitled to their costs on a solicitor and client basis excepting the preparation and the attendances at the summary judgment application. 166 There being no further reasons advanced by the trial judge in Reeder v. Woodward to support of his award of solicitor-client costs, on appeal, counsel was required to justify this award. The respondents argued, inter alia, that the appellants had failed to admit facts contained in a Notice to Admit which lengthened the trial. 167 As pointed out by this court in Reeder v. Woodward at para 33, “Fail- ure to admit facts is a relevant consideration in awarding costs, but a failure to admit facts would rarely justify solicitor and client costs, at least beyond the costs of proving the disputed fact”. This reasoning applies with even greater force and effect in the case at bar since the respondent at no time ever prepared a Notice to Admit for service upon the appellants. The rule providing for a Notice to Admit is an important and useful rule and its use should be encouraged. Specifically in the case at bar, counsel for the respondent at trial should have employed a Notice to Admit with respect to the disputed invoices. 168 Finally, even if one were to construe the trial judge’s comments as suggesting a lack of merit on the part of the appellants’ defence, a lack of merit is not sufficient to justify an award of solicitor-client costs: Young v. Young, [1993] 4 S.C.R. 3 (S.C.C.) at 134. 169 Therefore this ground cannot justify an award of solicitor-client costs.

• Unproven allegations of fraud that continued until trial but were not addressed by the appellant at trial 170 In justifying her award for solicitor-client costs, the trial judge in the decision under appeal asserted that the appellants had pled fraud. This was based in part upon para 15(d) of the Amended Statement of Claim: (15) PEI states, and the fact is, that the Plaintiff committed substantial breaches of the Contract by: ... 236 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

d) by intentionally or negligently inflating their costs in order to claim a higher mark-up amount. 171 This ground is puzzling in light of the comments contained at paragraph 160 of the Merits Decision165 where the trial judge expressly stated: [160] PrimeWest submits that the packing slips would be critical evidence that would go a long way to proving reliability. The packing slips, of course, are also hearsay evidence, and would require evidence from the third-party packing the materials in order to become direct evidence. To require this degree of evidence to a standard business practice on a large project involving many suppliers would be to complicate this kind of litigation beyond reason particularly where there are no allegation of inaccuracy or fraud. The impracticabil- ity of this requirement illustrates the root of the common law exception. (emphasis added) 172 Three comments are in order here. First, to constitute an allegation of fraud, a pleading need not literally employ the word “fraud”. Second, there is a significant difference between the situation where a pleading contains what arguably is an allegation of fraud that was never pursued on the one hand, with a claim of fraud that was pursued without success to the end of trial. Third and most importantly, having previously found in the Merits Decision that there was no fraud alleged by the appellants, the trial judge cannot now take a contrary position when deciding costs. 173 Trial counsel for the appellants had made it clear with his submissions at trial that fraud was not an issue as the following statement makes clear: My Lady, I wish to make it clear, at this point, that the defendants are not alleging that Pillar committed fraud. It’s not in our pleadings. We’re not suggesting they committed fraud. What we are requiring Pillar to do is prove their case, and that has been the situation from day one. (trial transcript p 442) 174 Subsequently, counsel further clarified his position as the following two excerpts illustrate: They destroyed — and I — I say destroyed intentionally because it was an intentional act, but that’s not to suggest they were committing a fraud or something of that nature. (trial transcript p 449) Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 237

Later on: So in summary, My Lady, it’s submitted that in the circumstances of this case, where really critical evidence has been destroyed, albeit not suggesting fraud or intentional destruction to — to hid something, the fact is it’s gone, and where they now want to rely on it as if it was there, that in the circumstances that’s not appropriate, and they should be required to meet the usual requirements of adducing evidence; that is, called the makers of documents to give evidence of, in this case, quantities, costs, delivery to site. (trial transcript p 455-456) 175 To reiterate, having found fraud not to have been an issue in the Mer- its Decision, the trial judge erred in finding that it was in the Costs Deci- sion. This ground is also without merit.

IV. Conclusion 176 A trial judge possesses a wide discretion when it comes to awarding costs. That said, in the case at bar, there is simply not “enough meat on the bone” to produce a proper broth, especially when determining what is recognized as an exceptional award. In my view, the reasons advanced to justify an award of solicitor-client costs in this case are without merit. 177 Accordingly, I would have allowed the appeal, set aside the award of solicitor-client costs and instead have awarded costs on the basis of Col- umn 4 of Schedule C, except for those steps in the proceedings where costs had been previously decided prior to the commencement of trial. As noted in para 15 above, Messrs. Solomon, Q.C. and Ho of Jensen Shawa Solomon Duguid Hawkes LLP, appellants’ appeal counsel, were not appellants’ trial counsel. Lawyers from another firm acted for the appellants at trial. Appeal dismissed.

Footnotes

1 A court that intends by its order to compel a party to indemnify another party for its litigation costs should say so in plain English. Rule 10.31(1)(b)(i) of the Alberta Rules of Court, Alta. Reg. 124/2010 expressly states that a court may order one party to pay “an indemnity to ... [another party] for that party’s lawyer’s charges”. E.g., Bizon v. Bizon, 2014 ABCA 174 (Alta. C.A.), ¶ 86; [2014] 7 W.W.R. 713 (Alta. C.A.), 792 (“The appellant must pay the costs of the respondents on a full-indemnity basis”) & T. (E.) v. Rocky Mountain Play Therapy Institute Inc., 2016 ABCA 320 (Alta. C.A.), 238 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

¶ 19 (“E.T. must pay Mr. Kwan’s costs on a full-indemnity basis”). See The Civil Procedure Rules 1998, S.I. 1998/3132 (in force April 26, 1999), r. 44.3(1) (the Court may award costs on the “standard” or “indemnity” basis). Rule 57.01 of Ontario’s Rules of Civil Proce- dure, R.R.O. 1990, Reg. 194 authorizes the court to award costs on a “substantial indemnity” or “full indemnity” basis. It is confusing to utilize terms of art — solicitor and own client, solicitor and client and attorney and client — that not all lawyers and only a few parties understand. Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd., [1987] 2 W.W.R. 75 (Alta. Q.B.), 79 (Justice Veit catalogues the confusion associated with such imprecise terms as “solicitor-client” and “solicitor and his own client” costs) & E.M.I. Records Ltd. v. Ian Cameron Wallace Ltd., [1983] Ch. 59 (Eng. Ch. Div.), 74 (“For the future, however, if an application for solicitor and own client costs against the other side in litigation is being made or resisted, I hope that counsel will bear in mind ... that there may well be some uncer- tainty about the meaning and effect of such an order”). 2 Messrs. Solomon, Q.C. and Ho, of Jensen Shawa Solomon Duguid Hawkes LLP, appellants’ appeal counsel, were not appellants’ trial counsel. Lawyers from another law firm acted for the appellants at trial. 3 Alta. Reg. 124/2010. 4 Id., r. 1.2(3)(a). 5 This judgment generally refers to PrimeWest Energy Inc. and PrimeWest Gas Corp. collectively as the appellants or PrimeWest. 6 Pillar Resource Services Inc. v. PrimeWest Energy Inc., 2014 ABQB 317 (Alta. Q.B.), ¶ 12; (2014), 33 C.L.R. (4th) 263 (Alta. Q.B.), 268. 7 Id. at ¶ 14; 33 C.L.R. 4th at 268. 8 Id. ¶ 205; 33 C.L.R. 4th at 303. See also id. ¶¶ 35 & 148; 33 C.L.R. 4th at 272 & 293. 9 Id. ¶¶ 17-19; 33 C.L.R. 4th at 269. 10 Id. ¶ 34; 33 C.L.R. 4th at 272. 11 Id. ¶¶ 37, 38 & 42; 33 C.L.R. 4th at 273. See also id. ¶¶ 217 & 218; 33 C.L.R. 4th at 306. 12 Id. ¶ 55; Id. ¶ 55; 33 C.L.R. 4th at 276. 13 Id. ¶¶ 47, 64, 82, 94, 103 & 210; 33 C.L.R. 4th at 274, 277, 281, 283-284, 285 & 304. 14 Id. ¶¶ 76 & 87; 33 C.L.R. 4th at 280 & 282. 15 Id. ¶¶ 44 & 84; 33 C.L.R. 4th at 274 & 281-82. Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 239

16 Id. ¶¶ 45, 213 & 216; 33 C.L.R. 4th at 274 & 305-06. 17 Id. ¶¶ 89 & 212; 33 C.L.R. 4th at 283 & 304-05. 18 Id. ¶ 131; 33 C.L.R. 4th at 290. 19 Id. ¶ 95; 33 C.L.R. 4th at 284. 20 Id. ¶ 74; 33 C.L.R. 4th at 280. 21 Id. ¶ 216; 33 C.L.R. 4th at 305-06. 22 Id. ¶¶ 138 & 139; 33 C.L.R. 4th at 291. 23 Id. ¶¶ 140-45; 33 C.L.R. 4th at 291-92. 24 Id. ¶ 145; 33 C.L.R. 4th at 292. 25 Id. ¶ 146; 33 C.L.R. 4th at 292. 26 Id. ¶ 147; 33 C.L.R. 4th at 292-93. This is the difference between accounts totalling $1,801,278.13 and total payments of $946,327.68. 27 2014 ABQB 317, 33 C.L.R. (4th) 263 (Alta. Q.B.). 28 2016 ABQB 120 (Alta. Q.B.), ¶¶ 22 & 24; (2016), 52 C.L.R. (4th) 37 (Alta. Q.B.), 41 & 42. 29 R.S.A. 2000, c. C-31. 30 Alta. Reg. 124/2010. 31 See generally Alberta Treasury Branches v. 1401057 Alberta Ltd., 2013 ABQB 748 (Alta. Q.B.), ¶¶ 17-47; (2013), [2014] 3 W.W.R. 180 (Alta. Q.B.), 191-208; Scherer v. Counting Instruments Ltd., [1986] 1 W.L.R. 615 (Eng. & Wales C.A. (Civil)), 621 & Colgate- Palmolive Co. v. Cussons Pty. Ltd., 1993 FCA 536 (Australia Fed. Ct.), ¶ 24; (1993), 46 F.C.R. 225 (Australia Fed. Ct.), 232-34. 32 Court of Queen’s Bench Act, R.S.A. 2000, c. C-31, s. 21; Alberta Rules of Court, Alta. Reg. 124/2010, r. 10.31 & Danoil Energy Ltd. v. Olson, [1993] 7 W.W.R. 385 (Sask. C.A.), 392 (“The authority to award costs is part of the general powers of the Court”). 33 Court of Queen’s Bench Act, R.S.A. 2000, c. C-31, s. 21 (“Subject to an express provision to the contrary in any enactment the costs of and incidental to any matter ... are in the discretion of the Court or judge”); Alberta Rules of Court, Alta. Reg. 124/2010, r. 10.31(1) (“the Court may order one party to pay to another party ... any amount that the Court considers to be appropriate in the circumstances”); Sidorsky v. CFCN Communications Ltd., [1998] 2 W.W.R. 89 (Alta. C.A.), 98 (“Costs are discretionary”); Reese v. Alberta (1992), 133 A.R. 127 (Alta. Q.B.), 129 (“The award of costs lies in the court’s discretion”) & Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd., [1987] 2 W.W.R. 75 (Alta. Q.B.), 78 (“In Alberta, the rules allow a trial judge great discretion in awarding costs”). 240 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

34 Supreme Court Civil Rules, B.C. Reg. 168/2009, r. 14-1(9) (“Sub- ject to subrule (12), costs of a proceeding must be awarded to the successful party unless the court otherwise orders”); The Queen’s Bench Rules, r. 11-1(1) (Sask.) (“Subject to the express provision of any enactment and notwithstanding any other rule, the Court has discretion respecting the costs of or incidental to a proceeding or step and may make any direction or order respecting costs that it considers appropriate”); The Queen’s Bench Act, C.C.S.M., c. C280, s. 96(1) (“Subject to the provision of an Act or the rules, the costs of or incidental to a proceeding ... are in the discretion of the court and the court shall determine liability for costs and the amount of the costs”); Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1) (“Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding ... are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid”); Rules of Court, N.B. Reg. 82-73, R. 59.01(1) (“Subject to any Act and these rules, the costs of a proceeding ... are in the discretion of the court and the court may determine by whom and to what extent costs shall be paid”); Judicature Act, R.S.P.E.I. 1988, c. J-2.1, s. 60 (“Subject to the express provisions of any statute, the costs of and incidental to a proceeding authorized to be taken in a court are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid”); Civil Procedure Rules, R. 77.02(1) (N.S.) (“A presiding judge may, at any time, make any order about costs as the judge is satisfied will do justice between the parties”); Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D, r. 55.02(1) (“Notwithstanding the provisions of rules 55.02 to 55.14, the costs of any party, the amount thereof, the party by whom, or the fund or estate ... out of which they are paid, are in the discretion of the Court”); Rules of the Supreme Court of the Northwest Ter- ritories, N.W.T. Reg. 010-96, r. 206 (“Notwithstanding the costs consequences out in rules 192 and 201, the Court may make any order or disposition with respect to costs that it determines to be in the interests of justice in the circumstances of the case”); Supreme Court Act, R.S.Y. 2002, c. 211, s. 4(2) (“The Court shall ... have and may exercise in all cases, all the powers, duties and functions that were vested in the Territorial Court of the Yukon Territory immediately before the commencement of this Act”) & Federal Courts Rules, S.O.R./98-106, R. 400(1) (“The Court shall have full discretionary power over the amount and allocation of costs and the determination of by whom they are to be paid”). 35 E.g., Court of Appeal Act, R.S.A. 2000, c. C-30, s. 12 (“Subject to an express provision to the contrary in any enactment, the costs of Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 241

and incidental to any matter authorized to be taken before the Court or a judge are in the discretion of the Court or judge”; Court of Ap- peal Act, R.S.B.C., 1996 c. 77, s. 23 (“Unless the court or a justice otherwise orders, the party who is successful on an appeal is entitled to costs of the appeal”) & Supreme Court Act, R.S.C. 1985, c. S-26, s. 47 (“The Court may, in its discretion, order the payment of the costs of the court appealed from, of the court of original jurisdiction, and of the appeal ... whether the judgment is affirmed, or is varied or reversed”). 36 The Supreme Court Rules 2009, No. 1603 (L.17), r. 46(1) (in force October 1, 2009) (“The Court may make such orders as it considers just in respect of the costs of any appeal, application for permission to appeal, or other application to or proceeding before the Court”); Senior Courts Act 1981, c. 54, s. 51(1) (“Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings ... in the civil division of the Court of Appeal, ... the High Court, and ... any county court, shall be in the discretion of the court”); The Civil Procedure Rules 1998, S.I. 1998/3132 (L.17), r. 44.2(1) (in force April 26, 1999) (“The court has discretion as to ... (a) whether costs are payable by one party to another”); P.Simms v. Law Society, [2005] EWCA Civ 849 (Eng. & Wales C.A. (Civil)), ¶ 15 (“Under CPR 44.4 the Court had a discretion to award costs on the ‘standard’ or the ‘indemnity’ basis”); Rules of the Supreme Court 1965, S.I. 1965/1776 (in force October 1, 1966), Ord. 62, r. 2(4) (“The powers and discretion of the Court as to costs under ... the Act (which provides that the costs of and incidental to proceedings of the Supreme Court shall be in the discretion of the Court and that the Court shall have full power to determine by whom and to what extent the costs are to be paid) ... shall be exercised subject to and in accordance with this Order”); The Rules of the Supreme Court, 1883 (in force October 24, 1883), Ord. LXV, r. 1 (“Subject to the provisions of the Acts and these Rules, the costs of and incident to all proceedings in the Supreme Court ... shall be in the discretion of the Court or judge”) & Rules of Court, Ord. LV (in force Novem- ber 1, 1875) (“Subject to the provisions of the Act, the costs of and incident to all proceedings in the High Court shall be in the discretion of the Court ... [p]rovided, that where any action or issue is tried by a jury, the costs shall follow the event, unless upon application made at the trial for good cause shown, the Judge before whom such action or issue is tried or the Court shall otherwise order”). 37 High Court Rules 2004, r. 50.1 (“Subject to the provisions of any law of the Commonwealth and to these Rules, the costs of and incidental to all proceedings in the Court are in the discretion of the 242 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Court or a Justice”); Uniform Civil Procedure Rules 2005, r. 42.1 (N.S.W.) (“Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs”); Uniform Civil Procedure Rules 1999, s. 681(1) (Qld.) (“Costs of a proceeding ... are in the discretion of the court but follow the event, unless the court orders otherwise”); Supreme Court Act 1986, S. Vict., No. 110, s. 24(1) (“Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court ... is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid”); Supreme Court (Gen- eral Civil Procedure) Rules 2015, S.R. No. 103/2015, R. 63.03(1) (Vict.) (“The Court may, in any proceeding, exercise its power and discretion as to costs”); Supreme Court Rules 2000, S.R. 2000, No. 8, r. 839(d) (Tasmania) (“If costs are awarded to a party, the Court or a judge may ... direct by and to whom ... the costs are to be paid”); Rules of the Supreme Court 1971, Ord. 66, r. 1(1) (W. Austl.) (“Sub- ject to the express provisions of any statute and of these rules the costs of and incidental to all proceedings ... shall be in the discretion of the Court”); Supreme Court Civil Rules 2006, r. 264(1) (S. Austl.) (“The Court may, in the exercise of its discretion as to costs, award costs on any basis the Court considers appropriate”) & Federal Court of Australia Act 1976, s. 43(2) (“Except as provided by any other Act, the award of costs is in discretion of the Court or Judge”). 38 Supreme Court Rules 2004, r. 44(1) (“The Court may, in its discretion, make any orders that seem just concerning the whole or any part of the costs and disbursements of a civil appeal”); Court of Appeal (Civil) Rules 2005, S.R. 2005/69, r. 53 (“The Court may, in its discretion, make any orders that seem just concerning the whole or any part of the costs and disbursements of ... an appeal”) & High Court Rules 2016, L. I. 2016/225, r. 14.1 (“All matters are at the discretion of the court if they relate to costs ... of a proceeding”). 39 E.g., Chambers v. Nasco, Inc., 501 U.S. 32 (U.S. C.A. 5th Cir. 1991), 45-46 (a federal District Court has inherent jurisdiction to order a party or counsel that has acted in “bad faith, vexatiously, wantonly, or for oppressive reasons” to pay another party’s attorney’s fees); Civil Rights Attorney’s Fee Award Act of 1976, 42 U.S.C. § 1988 (“In any action or proceeding to enforce a provision of ... title VI of the Civil Rights Act of 1964 ... the court, in its discretion, may allow the prevailing party ... a reasonable attorney’s fee as part of the costs”); Bonnes v. Long, 599 F.2d 1316 (U.S. C.A. 4th Cir. 1979), 1319 (“This inquiry [as to whether the applicant is a ‘prevailing Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 243

party’] is properly a pragmatic one of both fact and law that will ordinarily range outside the merits of the basic controversy”); Rules of Civil Procedure, SCO 5 October 9, 1959, r. 82(a) (Alas.) (“Except as otherwise provided by law or agreed to by the parties, the prevailing party in a civil case shall be awarded attorney’s fees calculated under these rules”); Code of Civil Procedure § 128.5(a) (Cal.) (“A trial court may order a party ... to pay the reasonable expenses, including attorney’s fees, incurred by another party as a result of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay”); Code of Civil Procedure § 1021.5 (2016) (Cal.) (“Upon motion, a court may award attorneys’ fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest [under stipulated circumstances]”); Folsom v. Butte County Assoc. of Governments, 32 Cal. 3d 668 (U.S. Cal. Sup. Ct. 1982), 687; 652 P.2d 437 (U.S. Cal. Sup. Ct. 1982), 451 (the Court affirmed the trial court’s ruling that the transit-dependant taxpayer plaintiffs were “successful parties” in an action affecting the “public interest” and entitled to an award of attorneys’ fees under § 1021.5); Nev. Rev. Stat. § 18.010(2) (“In addition to the cases where an allowance is authorized by specific statute, the court may make an allowance of attorney’s fees to a prevailing party”); Ga. Code Ann. § 20-1404 (“Expenses of litigation may be allowed where the defendant has acted in bad faith, been stubbornly litigious, or caused the plaintiff unnecessary trouble and expense”); Raybestos-Manhattan, Inc. v. Friedman, 156 Ga. App. 880 (U.S. Ga. Ct. App. 1981), 883; 275 S.E.2d 817 (U.S. Ga. Ct. App. 1981), 821 (“In contract actions, the bad faith referred to has consistently been held by Georgia courts to refer to the conduct of the defendant out of which the cause of action arose, not to his conduct in defending the suit”); 22 New York Codes, Rules and Regulations § 130-1.1(a) (“The court, in its discretion, may award to any party or attorney in any civil action or proceeding before the court, except where prohibited by law, costs in the form of reimbursement for actual expenses reasonably incurred and reasonable attorney’s fees, resulting from frivolous conduct as defined in this Part”) & 150 Centreville LLC v. Lin Associates Architects, PC, 39 Misc. 3d 513, 963 N.Y.2d 819 (U.S. Dist. Ct. S.D. N.Y. 2013), 834 (the Court, under 22 NYCRR, ordered the plaintiffs to pay the defendants’ reasonable attorney fees on account of the plaintiffs’ “frivolous conduct”). 40 Alberta Treasury Branches v. 1401057 Alberta Ltd., 2013 ABQB 748 (Alta. Q.B.), ¶ 29; (2013), [2014] 3 W.W.R. 180 (Alta. Q.B.), 196. See also Jackson v. Trimac Industries Ltd. (1993), 138 A.R. 161 244 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

(Alta. Q.B.), 166 (“a trial judge has a very wide discretion when awarding costs provided that such discretion is exercised judicially”); Reese v. Alberta (1992), 133 A.R. 127 (Alta. Q.B.), 130 (“While the allocation of costs of a lawsuit is always in the discretion of the court, the exercise of that discretion must be consistent with the established principles and practice”); Stiles v. British Columbia (Workers’ Compensation Board) (1989), 38 B.C.L.R. (2d) 307 (B.C. C.A.), 310 (“The discretion [to order costs] must be exercised judicially, i.e., not arbitrarily or capriciously”); World Printing & Publishing Co. v. Vancouver Printing & Publishing Co. (1907), 13 B.C.R. 220 (B.C. C.A.), 223 (“to deprive the successful litigant of costs [the court] ... must find good cause”); Edmanson v. Chelie (1914), 7 W.W.R. 96 (Sask. S.C. en banc), 96 (“Where a plaintiff comes to enforce a legal right and completely succeeds and has been guilty of no misconduct, there are no materials upon which the court can exercise a discretion and the plaintiff is entitled to his costs”); Byers v. Kidd (1906), 13 O.L.R. 396 (Ont. K.B.), 397 (“There must be some reason ... for depriving a person who has the verdict of the jury of the ... indemnity that usually results from such verdict”); Campbell & Co. v. Pollak, [1927] A.C. 732 (U.K. H.L.), 776 (“the discretion ... is a judicial discretion”); Scherer v. Counting Instruments Ltd., [1986] 1 W.L.R. 615 (Eng. & Wales C.A. (Civil)), 621 (“This discretion is not one to be exercised arbitrarily; it must be exercised judicially, that is to say, in accordance with established principles and in relation to the facts of the case”); Civil Service Co- operative Society v. General Steam Navigation Co., [1903] 2 K.B. 756 (Eng. K.B.), 765 (the trial judge could not deprive the defendant of its rights to costs because the defendant had insisted that the action be tried according to law and declined the judge’s offer to arbitrate the dispute); Cooper v. Whittingham (1880), 15 Ch. D. 501 (Eng. Ch. Div.), 504 (“where a plaintiff comes to enforce a legal right, and there has been no misconduct on his part ... the Court has no discretion, and cannot take away the plaintiff’s right to costs”); Oshlack v. Richmond River Council, [1998] H.C.A. 11 (New South Wales S.C.), ¶ 65; (1998), 193 C.L.R. 72 (New South Wales S.C.), 96 (“Although the statutory discretion [to award costs] is broadly stated, it is not unqualified. It clearly cannot be exercised capriciously. Importantly, the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation”) per McHugh, J.; NMFM Property Pty. Ltd. v. Citibank Ltd., [2001] FCA 480 (Australia Fed. Ct.), ¶ 53; (2001), 109 F.C.R. 77 (Australia Fed. Ct.), 92 (“The discretion to award indemnity costs is a judicial one which must be exercised in accordance with principle”) & 150 Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 245

Centreville LLC v. Lin Associates Architects, PC, 39 Misc. 3d 513 (U.S. Dist. Ct. S.D. N.Y. 2013), 533; 963 N.Y.2d 819 (U.S. Dist. Ct. S.D. N.Y. 2013), 835 (“The amount of any award for reasonable attorneys fees cannot be plucked out of a hat or from thin air”). 41 Latoudis v. Casey, [1990] H.C.A. 59 (Australia H.C.), ¶ 27; (1990), 170 C.L.R. 534 (Australia H.C.), 558 (“Where a statute con- fers an unqualified discretion, an appellate court should ... point out those considerations which ought to guide the exercise of the discretion in the ordinary case so that, as far as possible, like cases will be decided in like manner”) per Dawson, J. & Norbis v. Norbis (1986), 161 C.L.R. 513 (Australia H.C.), 519 (“But the need for consistency in judicial adjudication, which is the antithesis of arbitrary and capri- cious decision-making, provides an important countervailing consideration supporting the giving of guidance by appellate courts, whether in the form of principles or guidelines”) per Mason and De- ane, JJ. 42 Vriend v. Alberta (1996), 141 D.L.R. (4th) 44 (Alta. C.A.), 48 (“the customary rule [is] that the successful party is entitled to costs”); Jackson v. Trimac Industries Ltd. (1993), 138 A.R. 161 (Alta. Q.B.), 166 (“The general rule is that costs follow the event”); Reese v. Alberta (1992), 133 A.R. 127 (Alta. Q.B.), 130 (“It is traditionally accepted in Canada’s common law provinces that as a general rule the successful party recovers its costs from the unsuccessful party”); Petrogas Processing Ltd. v. Westcoast Transmission Co. (1990), 73 Alta. L.R. (2d) 246 (Alta. Q.B.), 255 (“The general rule is that litigation costs are awarded on a party-and-party basis against the unsuccessful party”); Canada Deposit Insurance Corp. v. Canadian Commercial Bank (1987), 76 A.R. 271 (Alta. Q.B.), 274 (“the general rule [is] that costs follow the event”); Supreme Court Civil Rules, B.C. Reg. 168/2009, r. 14.1(9) (“Subject to subrule (12), costs of a proceeding must be awarded to the successful party unless the Court orders otherwise”); Macfie v. Cater (1920), 57 D.L.R. 736 (Ont. H.C.), 739 (“the successful party should have his costs; and that rule should not be departed from ... for anything but very good reasons”) aff’d (1920), 64 D.L.R. 511 (Ont. H.C.); Kerr v. Danier Leather Inc., 2007 SCC 44 (S.C.C.), ¶ 63; [2007] 2 S.C.R. 331 (S.C.C.), 363 (“Those who inflict .... [protracted litigation] on others in the hope of significant personal gain and fail can generally expect adverse cost consequences”) & L. Abrams & K. McGuinness, Cana- dian Civil Procedure Law 1408 (2d ed. 2010) (“the general rule across Canada with respect to costs is that, in the ordinary case, costs follow the event”). 246 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

43 The Civil Procedure Rules 1998, S.I. 1998/3132 (L.17), r. 44.2(2)(a) (“the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party”); Campbell & Co. v. Pollak, [1927] A.C. 732 (U.K. H.L.), 814 (“there is ... a settled practice of the Courts that in the absence of special circumstances a successful litigant should receive his costs”) per Lord Atkinson; Scherer v. Counting Instruments Ltd., [1986] 1 W.L.R. 615 (Eng. & Wales C.A. (Civil)), 621 (“The normal rule is that costs follow the event. That party who turns out to have unjustifiably either brought another party before the court, or given another party cause to have recourse to the court to obtain his rights is required to recompense that other party in costs”) & Jones v. Curling (1884), 13 Q.B.D. 262 (Eng. Q.B.), 267 (“unless there is good cause shewn ... costs ... must follow the event”). 44 Prebble v. Huata, [2005] NZSC 18 (New Zealand S.C.), ¶ 3 (the “invariable practice” is to award the successful party its costs); Bradbury v. Westpac Banking Corp., [2009] NZSC 234 (New Zea- land C.A.), ¶ 6; [2009] 3 N.Z.L.R. 400 (New Zealand C.A.), 404 (“Ordinarily the loser must pay the winner’s costs according to scale”) & High Court Rules, r. 14.2(a) (“The following general principles apply to the determination of costs (a) the party who fails with respect to a proceeding ... should pay costs to the party who succeeds”). 45 Oshlack v. Richmond River Council, [1998] H.C.A. 11 (New South Wales S.C.), ¶ 66; (1998), 193 C.L.R. 72 (New South Wales S.C.), 96 (“A successful litigant is generally entitled to an award of costs”) per McHugh, J.; Uniform Civil Procedure Rules 2005, r. 42.1 (N.S.W.) (“Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs”); Commonwealth of Australia v. Gret- ton, [2008] NSWCA 117 (New South Wales C.A.), ¶ 38 (“The general rule is that costs follow the event (see UCPR r 42.1) and are assessed on the ordinary basis: UCPR r 42.2 (the phrase ‘the ordinary basis’ has replaced the previously used expression of ‘party/party costs’”); Uniform Civil Procedure Rules 1999, r. 681(1) (Qld.) (“Costs of a proceeding ... are in the discretion of the court but follow the event, unless the court orders otherwise”); Cosgrove v. Chevron Queensland Ltd., [2000] QCA 157 (Queensland S.C.), ¶ 9 (“The ordinary consequence for the unsuccessful party is an order to pay party and party costs. Some unusual circumstance is required to warrant the court departing from that course”); Rules of the Supreme Court 1971, Ord. 66, r. 1(1) (W. Austl.) (“the Court will generally Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 247

order that the successful party to any action ... recover his costs”); Supreme Court Civil Rules 2006, r. 263(1) (S. Austl.) (“As a general rule, costs follow the event”) & Masha Nominees Pty. Ltd. v. Mobil Oil Australia Pty. Ltd., [2006] VSC 56 (Australia Vic. Sup. Ct.), ¶ 9 (“The general rule ... is that costs follow the event”). 46 Goodhart, “Costs”, 38 Yale L.J. 849, 852 (1929). See also Oshlack v. Richmond River Council, [1998] H.C.A. 11 (New South Wales S.C.), ¶ 63; (1998), 193 C.L.R. 72 (New South Wales S.C.), 95 (“At common law, courts had no jurisdiction to award costs”) per Mc- Hugh, J.; 4 W. Holdsworth, A History of English Law 536 (3d ed. 1945) (“But, though from an early date the Chancellor, in the exercise of his equitable jurisdiction, had assumed the fullest power to order the defeated party to pay costs, it was only by degrees that the principle made its way into the common law”); J. Hullock, Law of Costs 1 (1793) (“Before the Statute of Gloucester, [6 Edw. 1, c. 1] no person was entitled to recover any costs of suit either in plea real, personal or mixed: but, by the common law, if the plaintiff failed in his action, he was amerced [ordered to pay a fine to the Crown] ..., if he succeeded, the defendant was in misericordia for his unjust deten- tion of the plaintiff’s right, but was not liable to the payment of any costs of suit”); Latoudis v. Casey, [1990] H.C.A. 59 (Australia H.C.), ¶ 26; (1990), 170 C.L.R. 534 (Australia H.C.), ¶ 26 (“In equity from an early date, there was the fullest power to order a defeated party to pay costs, but it was only gradually, and by statute, that any such power found its way into the common law”); Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714 (U.S. C.A. 9th Cir. 1967), 717 (“As early as 1278, the courts of England were authorized to award counsel fees to successful plaintiffs in litigation. Similarly, since 1607 English courts have been empowered to award counsel fees to defendants in all actions where such awards might be made to plaintiffs”) & Driffill v. McFall (1878), 42 U.C.Q.B. 597 (Ont. H.C.), 598 (“The rule after the statute [of Gloucester] was, that the plaintiff in all actions in which he recovers damages shall also recover his costs of suit”). 47 Federal Rules of Civil Procedure, R. 54(d)(1) (“Unless a federal statute, these rules, or a court order provides otherwise, costs — other than attorney’s fees — should be allowed to the prevailing party”); Hardt v. Reliance Standard Life Insurance Co., 560 U.S. 242 (U.S. Sup. Ct. 2010), 252-53 (“‘Our basic point of reference when considering the award of attorney’s fees is the bedrock principle known as the ‘American Rule’. Each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise”); Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714 248 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

(U.S. C.A. 9th Cir. 1967), 718 (“since litigation is at best uncertain one should not be penalized for merely defending or prosecuting a lawsuit, and that the poor might be unjustly discouraged from insti- tuting actions ... if the penalty for losing included the fees of their opponents’ counsel”); Arcambel v. Wiseman, 3 U.S. 306 (U.S. Sup. Ct. 1796), 306 (“The general practice of the United States is in oppo- sition to [ordering the unsuccessful party to pay the successful party’s legal fees] ... and even if that practice were not strictly correct in principle, it is entitled to the respect of the court, till it is changed or modified by statute”); Slawik v. State, 480 A.2d 636 (U.S. Del. S.C. 1984), 639 (“Under the so-called ‘American Rule’, the remedy of fee shifting is ordinarily not available to a prevailing litigant ab- sent statutory authority to award costs, including counsel fees”); State Line Democrat v. Keosauqua Independent, 161 Iowa 566, 143 N.W. 409 (U.S. Iowa S.C. 1913) (“As costs were not taxable at common law, it is fundamental that they cannot now be taxed in the absence of a statute providing therefor, and as a rule, statutes granting the power are strictly construed, and implied authority to tax is not generally recognized”) & Estate of Urbach, Re, 252 A.D.2d 318 (U.S. N.Y.A.D. 3rd Dept. 1999), 321; 683 N.Y.S.2d 631 (U.S. N.Y.A.D. 3rd Dept. 1999), 633 (“Established New York common law requires that all parties to a controversy, the victors and the vanquished, pay their own counsel fees”). For a list of federal statutes sanctioning an award of attorney’s fees see Burlington (City) v. Dague, 505 U.S. 557 (U.S. Sup. Ct. 1992), 562. 48 In Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714 (U.S. C.A. 9th Cir. 1967), 718 Chief Justice Warren provided several defences of the American rule. First, the determination of reasonable attorney fees is a difficult and time consuming task. Second, the English costs practice increases the risk to an unacceptable degree that a person may decline to advance a reasonable legal position because of a potential future obligation to pay the other side’s costs. Third, an unsuccessful litigant is not necessarily blameworthy. An extraordinary cost burden should not be imposed on a party who is not blameworthy. The results of litigation are not sufficiently predict- able to allow a person to assess the strengths of his or her legal position. In 1872 the United States Supreme Court in Oelrichs v. Spain, 82 U.S. 211 (U.S. Sup. Ct. 1872), 231 provided this explanation: “The parties ... are upon a footing of equality [- neither a plaintiff nor a defendant are entitled to reimbursement of attorney’s fees if they succeed]. There is no fixed standard by which the honorarium can be measured. Some counsel demand much more than others. Some clients are willing to pay more than others. More counsel may be em- Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 249

ployed than are necessary. When both client and counsel know that the fees are to be paid by the other party there is a danger of abuse. A reference ... might be necessary to ascertain the proper amount, and this grafted litigation might possibly be more animated and protracted than in the original cause. It would be an office of some deli- cacy ... to scale down the charges, as might be necessary”. The American rule has its detractors. E.g., Ehrenzweig, “Reimbursement of Counsel Fees and the Great Society”, 54 Cal. L. Rev. 792, 794 (1966) (Professor Ehrenzweig railed against the unfairness of the American rule, describing it as “a festering cancer in the body of our law without whose excision our society will not be great”); Judicial Council of Massachusetts, First Report, 11 Mass. L.Q. 1, 63-64 (1925) (“On what principle of justice can a plaintiff wrongfully run down on a public highway recover his doctor’s bill but not his lawyer’s bill?”) & Comment, “Court Awarded Attorney’s Fees and Equal Access to the Courts”, 122 U.Pa.L.Rev. 636, 639 (1974) (“The American Rule for the recovery of attorney’s fees has been challenged unavailingly on numerous occasions in both state and federal courts”). It also has academic supporters. E.g., Comment, “Distribu- tion of Legal Expense Among Litigants”, 49 Yale L.J. 699, 703 (1940) (“It seems clear that the English system is not in accord with the American conception that every man has an inalienable right to go to law”). 49 155569 Canada Ltd. v. 248524 Alberta Ltd., 1999 ABQB 682 (Alta. Q.B.), ¶ 5; (1999), 251 A.R. 393 (Alta. Q.B.), 395 (“a court can, exceptionally, deprive a successful litigant of costs because of substantive wrongdoing”); The Queen’s Bench Rules, r. 11-1(2)(a) (Sask.) (a Court may order a successful party to pay costs); Mayhew v. Adams, [1931] 1 D.L.R. 611 (Sask. C.A.), 613 (“A mortgagee ... who has been guilty of vexatious or oppressive misconduct, may be deprived of his costs or some part of them”); Rules of Civil Proce- dure, R.R.O. 1990, Reg. 194, r. 57.01(2) (“The fact that a party is successful in a proceeding ... does not prevent the court from awarding costs against the party in a proper case”); Germscheid v. Valois (1989), 68 O.R. (2d) 670 (Ont. H.C.), 688 (the Court granted the plaintiff summary judgment on the liability issue but ordered the plaintiff to pay the defendants’ costs on a full-indemnity basis because he declined to participate in another action against the defendants that raised the same liability issue”); Watson v. Holyoake (1986), 15 C.P.C. (2d) 262 (Ont. H.C.), 268 (“A Court may exercise a discretion to deprive a successful plaintiff of costs in a situation where the successful plaintiff has made unfounded or unsubstantiated charges of fraud”); Harris v. Petherick (1879), 4 Q.B.D. 611 (Eng. C.A.) (the 250 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Court upheld the trial judge’s cost order requiring the plaintiff who received only a very small portion of the damages sought to pay the defendant’s costs); Cotterell v. Stratton (1972), (1872-73) L.R. 8 Ch. App. 295 (Eng. Ch. Div.) (a successful party may be deprived of costs for “misconduct”); Anglo-Cyprian Trade Agencies Ltd. v. Paphos Wine Industries Ltd., [1951] 1 All E.R. 873 (Eng. K.B.), 874 (a successful party may be deprived of costs or obliged to pay those of the unsuccessful party if “he has been guilty of some sort of misconduct”); Goodhart, “Costs”, 38 Yale L.J. 849, 861-62 (1929) (“a party who brings a vexatious or unnecessary action, even if he succeeds to some extent, may be ordered to pay the whole costs of the other side”); Oshlack v. Richmond River Council, [1998] H.C.A. 11 (New South Wales S.C.), ¶ 69; (1998), 193 C.L.R. 72 (New South Wales S.C.), 97 (“The traditional exceptions to the usual [costs] order ... focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion”) per McHugh, J. & L. Abrams & K. McGuinness, Canadian Civil Procedure Law 1410-11 (2d ed. 2010) (courts have awarded costs against successful parties “in significant public interest cases such as Canadian Charter of Rights and Freedoms cases”). 50 This has been a central feature of the common law for centuries. Young v. Young, [1993] 4 S.C.R. 3 (S.C.C.), 135 (“The basic principle on which costs are awarded is as compensation for the successful party”) (emphasis is in original); Wenden v. Trikha (1992), 1 Alta. L.R. (3d) 283 (Alta. Q.B.), 293 (“[party-and-party costs] are not designed for the purpose of punishing, penalizing or benefitting a party to an action”); Maple Leaf Lumber Co. v. Caldbick (1918), 14 O.W.N. 99 (Ont. C.A.), 100 (“costs are awarded as an indemnity, and not as a debt due from the losing party to the successful party”); Harold v. Smith (1860), 157 E.R. 1229 (Eng. Exch.), 1231 (“Costs as between party and party are given by the law as an indemnity to the person entitled to them; they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them”); Binnie v. Pacific Health Ltd., [2003] N.Z.C.A. 69 (New Zea- land C.A.), ¶ 32 (a costs order, whether or not it constitutes full indemnification is “not a punishment imposed on the losing party”); L. Abrams & K. McGuinness, Canadian Civil Procedure Law 1398 (2d ed. 2010) (“The English/Canadian approach to the award of costs en- courages parties to pursue apparently meritorious claims (and defences) to a successful conclusion by securing to them a reasonable prospect of reimbursement for a substantial portion of the cost of doing so.”); Comments, “Distribution of Legal Expense Among Liti- gants”, 49 Yale L.J. 699, 699 (1940) (“Costs are theoretically given Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 251

to indemnify the winning party against the expense of maintaining his cause and to punish the losing party for subjecting his opponent to the expense of an unfounded claim or defense”) & 15 Corpus Juris 19 (1918) (“Costs are certain allowances authorized by statute to reimburse the successful party for expenses incurred in prosecuting or defending an action or special proceeding”). Because costs are meant to indemnify the payee, they can never exceed the liability of the payee to his counsel and other third parties. Petrotrade Inc. v. Texaco Ltd., [2001] 4 All E.R. 853 (Eng. & Wales C.A. (Civil)), 856 & High Court Rules 2016, L.I. 2016/225, r. 14.2(f) (N.Z.) (“an award of costs should not exceed the costs incurred by the party claiming costs”). 51 Cachia v. Hanes (1994), 179 C.L.R. 403 (Australia H.C.), 410 per Mason, C.J. & Brennan, Deane, Dawson & McHugh, J.J. & G. Mor- gan & E. Wurtzburg, A Treatise on the Law of Costs in the Chancery Division of the High Court of Justice 1 (2d ed. 1882) (“The Statute of Gloucester, passed in the 6th Ed. I, was the foundation of the Com- mon Law jurisdiction as to costs”). 52 Reid Minty v. Taylor, [2001] EWCA Civ 1723 (Eng. & Wales C.A. (Civil)), ¶ 20; (2001), [2002] 2 All E.R. 150 (Eng. & Wales C.A. (Civil)), 155 (“an award of costs on an indemnity basis is not intended to be penal”); Oshlack v. Richmond River Council, [1998] HCA 11 (New South Wales S.C.), ¶ 44; (1998), 193 C.L.R. 72 (New South Wales S.C.), 89 (“It may be true in a general sense that costs orders are not made to punish an unsuccessful party”) per Gaudron & Gummow, JJ. & ¶ 67; 193 C.L.R. at 97 (“Costs are not awarded to punish an unsuccessful party”) per McHugh, J. & Latoudis v. Casey, [1990] H.C.A. 59 (Australia H.C.), ¶ 13; (1990), 170 C.L.R. 534 (Australia H.C.), 543 (“costs are not awarded by way of punishment of the unsuccessful party. They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings”) per Mason, C.J. New York has adopted the sanction model. 22 New York Codes, Rules and Regulations § 130-1.1(a) (“In addition to or in lieu of awarding costs, the court, in its discretion may impose financial sanctions upon any party or attorney in a civil action or proceeding who engages in frivolous conduct as defined in this Part which shall be payable as provided in section 130-1.3 of this Part”) & Levy v. Carol Management Corp., 260 A.D.2d 27, 698 N.Y.2d 226 (U.S. N.Y.A.D. 1st Dept. 1999) (“Sanctions [a fine paid to the state] are retributive, in that they punish past conduct. They also are goal oriented, in that they are useful in deterring future frivolous conduct not only by the particular parties, but also by the Bar at large. The goals include preventing the waste of judicial resources, and deter- 252 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

ring vexatious litigation and dilatory or malicious litigation tactics”). The New York protocol can be traced to the ancient practice of amercement. See J. Hullock, Law of Costs 1 (1793). 53 Cachia v. Hanes (1994), 179 C.L.R. 403 (Australia H.C.), 410-11 (“[Costs] were never intended to be comprehensive compensation for any loss suffered by a litigant. As Coke observed of the Statute of Gloucester, the costs which might be awarded to a litigant extended to the legal costs of the suit, ‘but not to the costs and expences of his travell and losse of time’”) per Mason C.J. & Brennan, Deane, Daw- son & McHugh, JJ. 54 I estimate that most Alberta costs payments represent less than twenty percent of the payee’s actual costs. The ratio decreases as the hourly rate of the lawyer increases. See Ed Miller Sales & Rentals Ltd. v. Caterpillar Tractor Co. (1998), 216 A.R. 304 (Alta. C.A.), 307 (a court order awarding a successful party its tariff costs generally represents “a fraction of solicitor-client costs”); Wenden v. Trikha (1992), 1 Alta. L.R. (3d) 283 (Alta. Q.B.), 293 (“In Alberta, except in unique circumstances, party-and-party costs will not approach indemnification of the successful party and thus it is more accurate to describe the awarding of costs as a contribution to the successful party’s expense in prosecuting or defending the action”); Reese v. Alberta (1992), 133 A.R. 127 (Alta. Q.B.), 130 (“[party-and- party costs] are not intended [to give] ... the successful party ... full indemnification of those fees and disbursements which it would be charged by its counsel”); Canada Deposit Insurance Corp. v. Canadian Commercial Bank (1987), 76 A.R. 271 (Alta. Q.B.), 276 (“party-party costs are not intended to be a complete indemnification of the successful party”); Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd., [1987] 2 W.W.R. 75 (Alta. Q.B.), 80 (“Even a successful litigant is normally left to pay a portion of the cost of taking an issue to court in recognition of the fact that there was objectively an issue of fact or law that had to be determined by the court”); McCarthy v. Calgary Roman Catholic Separate School District No. 1, [1980] 5 W.W.R. 524 (Alta. Q.B.), 525 (“[an award of party-party costs] does not serve to completely indemnify the successful party”); Williams v. Steinwand, 2015 NWTSC 3 (N.W.T. S.C.), ¶¶ 34-35 (the Court noted that the petitioner’s actual legal costs were over $20,000 and her entitlement under the standard party-and-party rate was $5,800 or twenty-nine percent); L. Abrams & K. McGuinness, Cana- dian Civil Procedure Law 1456 (2d ed. 2010) (in Ontario “a successful litigant will normally recover ... one-third to 40 percent of actual legal fees and disbursements”)& 1 M. Orkin, The Law of Costs 2-8 Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 253

(2d ed looseleaf release no. 61 August 2016) (“Partial indemnification is intended by the usual award of party-and-party costs”). 55 Huck v. Robson, [2002] EWCA Civ 398 (Eng. & Wales C.A. (Civil)), ¶ 73; [2002] 3 All E.R. 263 (Eng. & Wales C.A. (Civil)), 277 (“The general policy stance traditionally adopted in this country is that a claimant who obtains all he asks for should be awarded his costs on a basis which does not amount to full recovery”); McPhilemy v. Times Newspapers Ltd., [2001] EWCA Civ 933 (Eng. & Wales C.A. (Civil)), ¶ 20; [2001] 4 All E.R. 861 (Eng. & Wales C.A. (Civil)), 872 (“an award of costs on the standard basis will, almost invariably, lead to the successful claimant recovering less than the costs which he has to pay to his solicitor”) & Note, 82:19 Sol. J. 366 (1938) (an award of party-and-party costs usually equalled two- thirds of the payee’s actual solicitor’s costs). 56 Masha Nominees Pty. Ltd. v. Mobil Oil Australia Pty. Ltd., [2006] VSC 56 (Australia Vic. Sup. Ct.), ¶ 9 (“The ‘gap’ between the amount of costs in fact paid by a successful litigant and the amount of party and party costs which are recoverable is often substantial”) & Colgate-Palmolive Co. v. Cussons Pty. Ltd., 1993 FCA 536 (Aus- tralia Fed. Ct.), ¶ 4; (1993), 46 F.C.R. 225 (Australia Fed. Ct.), 226 (“It is a matter of notoriety that the indemnity for costs which one party recovers from another pursuant to the common [party-and-party costs] order ... does not very often provide the party entitled to the benefit of the order with anything approaching a full indemnity for the costs which have in fact been incurred. That is particularly so in long complex cases”). 57 Prebble v. Huata, [2005] NZSC 18 (New Zealand S.C.), ¶¶ 7 & 8; [2005] 2 N.Z.L.R. 467 (New Zealand S.C.), 470-71 & Kuwait Asia Bank EC v. National Mutual Life Nominees Ltd., [1991] 3 N.Z.L.R. 457 (New Zealand P.C.), 460 & 61 (standard costs orders capture a relatively modest portion of a litigant’s lawyer’s fees). 58 Young v. Young, [1993] 4 S.C.R. 3 (S.C.C.), 134 (“Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties”); Sidorsky v. CFCN Communications Ltd., 1997 ABCA 280 (Alta. C.A.), ¶ 28; (1997), [1998] 2 W.W.R. 89 (Alta. C.A.), 98 (“as a general rule a departure from party and party costs should only occur in rare and exceptional circumstances”); Canada Deposit Insurance Corp. v. Canadian Commercial Bank, 1989 ABCA 150 (Alta. C.A.), ¶ 18; (1989), 61 D.L.R. (4th) 161 (Alta. C.A.), 170 (“The court awards costs to a successful party on a solicitor-and-client basis only in rare instances, usually to express disapproval of the conduct of a 254 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

party in the litigation or to compensate one party for unnecessary proceedings caused by another”); Jacobi v. Newell (County No. 4) (1994), 153 A.R. 241 (Alta. Q.B.), 248 (“Costs on an indemnification basis should be awarded only in rare and exceptional cases”); Petrogas Processing Ltd. v. Westcoast Transmission Co. (1990), 73 Alta. L.R. (2d) 246 (Alta. Q.B.), 255 (“indemnity costs will only be awarded in rare and exceptional cases”); Cominco Ltd. v. Westinghouse Canada Ltd. (1980), 16 C.P.C. 19 (B.C. S.C.), 22 (“[solicitor-client costs] awards should only be made in circumstances where there has been scandalous conduct by the responsible party or some such exceptional incident”); McDonald Dure Lumber Co. v. Marston Holdings Ltd. (1976), 66 D.L.R. (3d) 375 (Man. C.A.), 380 (“solicitor-client costs should not be awarded except in exceptional cases”); Evaskow v. B.B.F. (1969), 9 D.L.R. (3d) 715 (Man. C.A.), 720 (“it must be a rare and most exceptional case in which costs will be awarded on a solicitor-client basis rather than on a party-and-party basis”) & L. Abrams & K. McGuinness, Canadian Civil Procedure Law 1429-30 (2d ed. 2010) (“full indemnification is reserved for situations in which the court wishes to impose a penalty for reprehensible conduct on the part of the party against whom costs are awarded [citing Young v. Young and Hamilton v. Open Window Bakery Ltd.]”). See also Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 57.01 (“In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing, ... the principle of indemnity ... [and] the amount of costs that an unsuccessful party could reasonably expect to pay”). 59 The Civil Procedure Rules 1998, r. 44.3 (the Court may award costs “on the standard basis; or ... on the indemnity basis”); P.Simms v. Law Society, [2005] EWCA Civ 849 (Eng. & Wales C.A. (Civil)), ¶ 16 (a court will order costs on an indemnity basis as opposed to a standard basis under r. 44.4 of The Civil Procedure Rules 1998 if “there is some element of a party’s conduct of the case which de- serves some mark of disapproval”); Excelsior Commercial & Industrial Holdings Ltd. v. Salisbury Hammer Aspden & Johnson, [2002] C.P. Rep. 67 (Eng. & Wales C.A. (Civil)), ¶¶ 19, 31 & 32 (Lord Woolf discusses the different consequences associated with a standard and indemnity costs order under r. 44.3) & Kiam II v. MGN Ltd., [2002] EWCA Civ 66 (Eng. & Wales C.A. (Civil)), ¶ 12; [2002] 2 All E.R. 242 (Eng. & Wales C.A. (Civil)), 246 (a court may order costs on an indemnity basis for “unreasonable [conduct] to a high degree” even though it does not deserve “moral condemnation”). Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 255

60 Court of Appeal (Civil) Rules, S.R. 2005/69, r. 53E(3); High Court Rules, r. 14.6(4) (N.Z.) & District Court Rules 2014, r. 14.6(4) (N.Z.) (“The court may order a party to pay indemnity costs if — (a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing or defending a proceeding or a step in a proceeding; or (b) the party has ignored or disobeyed an order or direction of the Court or breached an undertaking given to the Court or another party ...”); Prebble v. Huata, [2005] NZSC 18 (New Zealand S.C.), ¶ 6; [2005] 2 N.Z.L.R. 467 (New Zealand S.C.), 470 (“In New Zealand, costs have not been awarded to indemnify successful litigants for their actual solicitor and client costs, except in rare cases generally entailing breach of confidence or flagrant misconduct”); Bradbury v. Westpac Banking Corp., [2009] NZCA 234 (New Zea- land C.A.), ¶ 28; [2009] 3 N.Z.L.R. 400 (New Zealand C.A.), 410 (“Indemnity costs ... are exceptional and require exceptionally bad behaviour”) & Binnie v. Pacific Health Ltd., [2003] N.Z.C.A. 69 (New Zealand C.A.) (the Court awarded the plaintiff exemplary damages for flagrant and outrageous prelitigation misconduct and also ordered the defendant employer to pay a sum of roughly $175,000 rep- resenting eighty percent of the plaintiff’s lawyer’s fees and disbursements). 61 Uniform Civil Procedure Rules 1999, r. 703(1) (Qld.) (“The court may order costs to be assessed on the indemnity basis”); Cosgrove v. Chevron Queensland Ltd., [2000] QCA 157 (Queensland S.C.), ¶ 9 (a full indemnity costs order may be appropriate if a party, without reason, alleges fraud, engages in trial misconduct that consumes extra time for no valid purpose, adopts a position unsupportable or commences an action for an ulterior motive); Supreme Court Civil Rules 2006, r. 264(5)(b) (S. Austl.) (“In exercising its general discretion as to costs, the Court may ... award costs on the basis of an indemnity”) & Uniform Civil Procedure Rules 2005, r. 42.2 (N.S.W.) (“Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis”). 62 Chambers v. Nasco, Inc., 501 U.S. 32 (U.S. C.A. 5th Cir. 1991), 50; Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240 (U.S. Sup. Ct. 1975), 258 & F.D. Rich Co. v. United States, 417 U.S. 116 (U.S. Sup. Ct. 1974), 129-30 (the United States Supreme Court has repeatedly confirmed that a federal District Court has the inherent jurisdiction to order an unsuccessful party that has engaged in egregious conduct to pay the successful party’s attorney’s fees); Raybestos-Manhattan, Inc. v. Friedman, 156 Ga. App. 880 (U.S. Ga. Ct. App. 1981), 883; 275 S.E.2d 817 (U.S. Ga. Ct. App. 1981), 821 256 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

(“In contract actions, the bad faith referred to has been consistently held by Georgia courts to refer to the conduct of the defendant out of which the cause of action arose, not to his conduct in defending the suit”) & Nev. Rev. Stat. § 18.010(2)(b) (a court may order the unsuccessful party to pay the successful party’s attorney’s fees “in all appropriate situations to punish for and deter frivolous or vexatious claims and defenses because such claims and defenses overburden limited judicial resources, hinder the timely resolution of meritorious claims and increase the costs of engaging in business and providing professional services to the public”). 63 Reid Minty v. Taylor, [2001] EWCA Civ 1723 (Eng. & Wales C.A. (Civil)), ¶ 28; (2001), [2002] 2 All E.R. 150 (Eng. & Wales C.A. (Civil)), 156 (“If costs are awarded on an indemnity basis, in many cases there will be some implicit expression of disapproval of the way in which the litigation has been conducted. But I do not think that this will necessarily be so in every case”); G. Morgan & E. Wurtzburg, A Treatise on the Law of Costs in the Chancery Division of the High Court of Justice 5 (2d ed. 1882) (“Costs as between solicitor and client are ... occasionally awarded ... in cases of scandal or misconduct, by way of marking ... [the Court’s] disapproval”) & Watson, “A Rationale of the Law of Costs”, 16 Central L.J. 306, 306 (1883) (“the laws of Rome required the author of a groundless action to reimburse his adversary for all losses and expenses he might incur in the defense of his legal rights; but this rule was not based on any acknowledged right in the defendant to be made whole, but rather upon the ground that the abuse of a privilege of citizenship was, per se, a violation of the law, punishable, not alone by the imposition of costs, but also by other and far more severe penalties, among which was loss of status as a Roman citizen”). 64 This point is also discussed below at ¶¶ 127-130. 65 McPhilemy v. Times Newspapers Ltd., [2001] EWCA Civ 933 (Eng. & Wales C.A. (Civil)), ¶ 20; [2001] 4 All E.R. 861 (Eng. & Wales C.A. (Civil)), 872 (“neither costs on an indemnity basis nor interest ... will compensate the successful claimant for the inconvenience, anxiety and distress of proceedings or (where the claimant is a corporation) the disruption caused by the diversion of senior management from their normal duties”). 66 Alberta Treasury Branches v. 1401057 Alberta Ltd., 2013 ABQB 748 (Alta. Q.B.), ¶¶ 40 & 42; (2013), [2014] 3 W.W.R. 180 (Alta. Q.B.), 202-05. “A step may be unnecessary even if it increases the likelihood the purpose of the retainer will be achieved. For example, a lawyer may decide to devote time in the early stages of a file to Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 257

researching the law governing unlikely problems which may arise to reduce the risk that the unlikely problems will adversely affect the final outcome”. Alberta Treasury Branches v. 1401057 Alberta Ltd., 2013 ABQB 748 (Alta. Q.B.), ¶ 42; (2013), [2014] 3 W.W.R. 180 (Alta. Q.B.), 204-05. See also Sidorsky v. CFCN Communications Ltd., 1997 ABCA 280 (Alta. C.A.), ¶ 42; (1997), [1998] 2 W.W.R. 89 (Alta. C.A.), 103 (“The unsuccessful party should not bear the burden of 4 counsel simply because the successful party could afford to have them and the court finds them of some assistance”); Petrogas Processing Ltd. v. Westcoast Transmission Co. (1990), 73 Alta. L.R. (2d) 246 (Alta. Q.B.), 258 (“This [full-indemnity costs award] is subject to the [indemnitee] ... satisfying the taxing officer that the services performed were reasonably necessary and that the amounts charged were reasonable”); Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd., [1987] 2 W.W.R. 75 (Alta. Q.B.), 79 (costs incurred that are “reasonably connected to the proceedings ...” are covered by a full-indemnity costs award); Imperial Elevator & Lumber Co. v. Olive (1914), 7 Sask. L.R. 35 (Sask. S.C. [In Chambers]), 38 (“between party and party ... only those charges will as a general rule be allowed which are strictly necessary for the prosecution of the litigation”); MacKinnon v. Ontario (Municipal Employees Retirement Board), 2007 ONCA 874 (Ont. C.A.), ¶ 92; (2007), 288 D.L.R. (4th) 688 (Ont. C.A.), 710 (a full-indemnity costs order excludes costs unreasonably incurred); Apotex Inc. v. Egis Pharmaceuticals (1991), 4 O.R. (3d) 321 (Ont. S.C.J.), 325 (a full-indemnification costs award does not include “the costs of extra services judged not to be reasonably necessary”); Seitz, Re (1974), 53 D.L.R. (3d) 223 (Ont. H.C.), 227-28 (the Court declared that costs covered by a full-indemnity order are those “essential to and arising within the four corners of the litigation”); Magee v. Ottawa Separate School Board (1962), 32 D.L.R. (2d) 162 (Ont. H.C.), 165-66 (solicitor and client costs paid by a third party cover “those costs that are necessary for the proper presentation of the case” or “those costs that were fairly incurred in making a proper preparation and presentation of the case”); L. Abrams & K. McGuinness, Canadian Civil Procedure Law 1429 (2d ed. 2010) (a full-indemnification costs award does not capture “wasteful, extravagant or frivolous” costs); The Civil Procedure Rules 1998, S.I. 1998/3132 (L.17), r. 44.3 (“the court will not ... allow costs which have been unreasonably incurred or are unreasonable in amount”); Kazakhstan Kagazy Plc v. Zhunus, [2015] EWHC 404 (Eng. Comm. Ct.), ¶ 13 (“where very large amounts of money are at stake, it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to 258 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportion- ately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party”); E.M.I. Records Ltd. v. Ian Cameron Wallace Ltd., [1983] Ch. 59 (Eng. Ch. Div.), 71 (“I do not see why the loser should have to pay for absurd extravagances of the winner”); Binnie v. Pacific Health Ltd., [2003] N.Z.C.A. 69 (New Zealand C.A.), ¶ 14 (a full- indemnity costs order does not oblige the payor to indemnify the payee for costs unreasonably incurred); National Australia Bank Ltd. v. Petit-Breuilh, [2000] VSC 291 (Australia Vic. Sup. Ct.), ¶ 25 (a beneficiary of a full-indemnity costs order is not entitled to reimbursement for costs that “are of an unreasonable amount or have been unreasonably incurred”); Supreme Court Civil Rules 2006, r. 264(5)(b) (S. Austl.) (“In exercising its general discretion as to costs, the Court may ... award costs on the basis of an indemnity (that is, on the basis that the party will be fully reimbursed for costs incurred by the party in the conduct of the litigation except to the extent that the party liable for the costs shows them to have been unreasonably incurred”); Federal Court Rules 2011, r. 40.06 (Austl.) (costs that have been incurred “improperly, unreasonably or negligently” are not recoverable); Degmam Pty. Ltd. v. Wright (No. 2), [1983] 2 N.S.W.L.R. 354, 359 (Sup. Ct.) (Austl.) (a party bound by a full- indemnity costs order should not have to pay for “costs extravagantly incurred”) & 15 Corpus Juris 146 (1918) (“In actions at law the court has power in the exercise of its discretion to disallow a party any costs which he has caused unreasonably and unnecessarily to be accumulated”). 67 Courts have awarded enhanced costs in other circumstances. E.g., Montreal Trust Co. v. Tottrup (1990), 82 Alta. L.R. (2d) 363 (Alta. Q.B.), 365 (the Court awarded full indemnification costs to an unsuccessful party for portions of the case dealing with an important Char- ter issue); Dennis, Re (1987), 78 A.R. 81 (Alta. Surr. Ct.), 96 (the Court granted full-indemnity costs because the applications raised new, interesting and important points of law related to compulsory care orders under the Dependent Adults Act) & T. (F.) v. Alberta Children’s Guardian (1987), 55 Alta. L.R. (2d) 103 (Alta. Q.B.), 117 (the Court awarded solicitor-client costs because the “applicant presented a comprehensive and thorough argument on a matter left unclear in the Act”). 68 Chambers v. Nasco, Inc., 501 U.S. 32 (U.S. C.A. 5th Cir. 1991), 45-46 (a federal District Court has inherent jurisdiction to order a Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 259

party or counsel that has acted in “bad faith, vexatiously, wantonly or for oppressive reasons” to pay another party’s attorney’s fees). 69 Young v. Young, [1993] 4 S.C.R. 3 (S.C.C.), 134 (“Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties”); Scherer v. Counting Instruments Ltd., [1986] 1 W.L.R. 615 (Eng. & Wales C.A. (Civil)), 621 (“The grounds must be connected with the case. This may extend to any matter relating to the litigation and the parties conduct in it, and also to the circumstances leading to the litigation, but no further”) (emphasis added); Prebble v. Huata, [2005] NZSC 18 (New Zealand S.C.), ¶ 5; [2005] 2 N.Z.L.R. 467 (New Zealand S.C.), 470 (“Unreasonable conduct in litigation or giving rise to it may affect the availability or the amount of costs”) (emphasis added) & Oshlack v. Richmond River Council, [1998] H.C.A. 11 (New South Wales S.C.), ¶ 69; (1998), 193 C.L.R. 72 (New South Wales S.C.), 97 (a court, in assessing costs, may take into account “misconduct relating to the litigation, or the circumstances leading up to the litigation”) per McHugh, J. 70 Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 (S.C.C.), ¶ 26; [2004] 1 S.C.R. 303 (S.C.C.), 312-13 (the Court adopted the Young v. Young standard); Young v. Young, [1993] 4 S.C.R. 3 (S.C.C.), 134-35 (“Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties”); M. (W.A.) v. Alberta (Minister for Child, Youth and Family Enhancement Act), 2017 ABCA 14 (Alta. C.A.), ¶¶ 33 & 34 (the Court ordered the director under the Child, Youth and Family Enhancement Act to pay the costs of the unsuccessful appellant on an indemnity basis, in part, because of the director’s prelitigation misconduct); M. (W.A.) v. Alberta (Minister for Child, Youth and Family Enhancement Act), 2017 ABCA 14 (Alta. C.A.), ¶¶ 33 & 34 (the Court ordered the director under the Child, Youth and Family Enhancement Act to pay the costs of the unsuccessful appellant on an indemnity basis because of the director’s prelitigation misconduct); FIC Real Estate Fund Ltd. v. Phoenix Land Ventures Ltd., 2016 ABCA 303 (Alta. C.A.), ¶ 4 (prelitigation conduct may be the basis for a full-indemnity award); Colborne Capital Corp. v. 542775 Alberta Ltd., 1999 ABCA 14 (Alta. C.A.), ¶¶ 301-02; (1999), 228 A.R. 201 (Alta. C.A.), 262 (the Court upheld a solicitor-client costs award against the appellants based on prelitigation misconduct and ordered the appellants to pay the respondents appeal costs on a solicitor-client basis, even though the appellants’ appeal succeeded on several important issues); Sidorsky v. CFCN Communications Ltd., 1997 ABCA 280 (Alta. 260 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

C.A.), ¶ 28; (1997), [1998] 2 W.W.R. 89 (Alta. C.A.), 98 (the Court described several examples of prelitigation conduct that warranted an enhanced costs award); Jackson v. Trimac Industries Ltd. (1993), 138 A.R. 161 (Alta. Q.B.), 174 (the trial judge ordered the defendant to pay costs on a full-indemnity basis because of the defendant’s prelitigation misconduct), aff’d, 1994 ABCA 199 (Alta. C.A.), ¶ 29; [1994] 8 W.W.R. 237 (Alta. C.A.), 249 (the Court upheld the solicitor-costs award: “the litigation was not over an honest difference of opinion, but rather was a deliberate decision by the defendants to keep Jack- son from the fruits of his bargain for as long as possible. ... [The costs order] does not display any error in principle, and in the right circumstances [prelitigation misconduct] ... can be a proper ground for solicitor-client costs); Alberta Treasury Branches v. 1401057 Alberta Ltd., 2013 ABQB 748 (Alta. Q.B.), ¶ 34; (2013), [2014] 3 W.W.R. 180 (Alta. Q.B.), 199 (“Blameworthy litigation or prelitigation conduct may create a rare and exceptional case”) (emphasis added); Alberta (Provincial Court Judge) v. Alberta (Provincial Court Chief Judge), 1999 ABQB 639 (Alta. Q.B.), ¶ 36; (1999), [2000] 4 W.W.R. 92 (Alta. Q.B.), 104 (the Court awarded costs on a full-indemnification basis because of the defendant chief judge’s blameworthy prelitigation conduct); Sturrock v. Ancona Petroleums Ltd. (1990), 111 A.R. 86 (Alta. Q.B.), 114 (“In view of the fraudulent conduct of the defendants ... costs will be awarded against them on a solicitor-and-client basis”); Animal Welfare International Inc. v. W3 International Media Ltd., 2016 BCCA 372 (B.C. C.A.), ¶ 3; (2016), 90 C.P.C. (7th) 215 (B.C. C.A.), 218 (the Court never questioned the validity of the trial judge’s conclusion that “reprehensible pre-litigation ... misconduct may warrant special costs); Evergreen Building Ltd. v. IBI Leaseholds Ltd., 2009 BCCA 275 (B.C. C.A.), ¶ 29; (2009), 93 B.C.L.R. (4th) 77 (B.C. C.A.), 85 (a court may award special costs on account of prelitigation misconduct); Dockside Brewing Co. v. Strata Plan LMS 3837, 2007 BCCA 183 (B.C. C.A.), ¶ 90; (2007), 239 B.C.A.C. 33 (B.C. C.A.), 50 (the Court concluded that “[t]he authorities do not establish any rigid rule that would prohibit an award of special costs where pre-litigation conduct is ‘reprehensible’ and warrants rebuke”); Sun Life Assurance Co. of Canada v. Ritchie, 2000 BCCA 231 (B.C. C.A.), ¶ 54; (2000), 184 D.L.R. (4th) 635 (B.C. C.A.), 651-52 (“Special costs are usually awarded only in relation to misconduct in the course of the litigation itself. However, there may arise circumstances where special costs may be awarded because of reprehensible conduct giving rise to the litigation”) (emphasis added); Siemens v. Bawolin, 2002 SKCA 84 (Sask. C.A.), ¶ 118; [2002] 11 W.W.R. 246 (Sask. C.A.), 281 (“solicitor and client Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 261

costs may be awarded in exceptional cases [of prelitigation misconduct] to provide the other party complete indemnification for costs reasonably incurred”); Fernandez v. Tan, 2009 MBCA 113 (Man. C.A.), ¶¶ 7 & 8 (the Court upheld an award of solicitor-client costs noting that the defendants’ “egregious conduct includes ... actions ... that preceded the litigation and ... that occurred during the course of the litigation”) (emphasis added); Winnipeg Mortgage Holdings Ltd. v. Allard (1980), 20 B.C.L.R. 179 (B.C. S.C.), 180 (the Court awarded solicitor-client costs against the petitioner because its agent “acquiesced in the importuning of Mrs. Allard by her solicitor Mc- Mullen, in the knowledge that the benefit of McMullen’s misconduct would enure to the benefit of his own company ... and to his principal ... and in the knowledge of the enormous risk that he knew the respondent to be improvidently yet unconsciously undertaking”); Oz Optics Ltd. v. Timbercon Inc., 2012 ONCA 735 (Ont. C.A.), ¶ 16 (the Court awarded the applicant trial costs on the substantial indemnity scale because “the conduct of Timbercon in rigging the bids prior to the commencement of the litigation is sufficient to justify such an award”) (emphasis added); Davies v. Clarington (Municipality), 2009 ONCA 722 (Ont. C.A.), ¶ 30; Davies v. Clarington (Municipal- ity) (2009), 312 D.L.R. (4th) 278 (Ont. C.A.), 287; Hunt v. TD Securities Inc. (2003), 66 O.R. (3d) 481 (Ont. C.A.), 509 & Mortimer v. Cameron (1994), 17 O.R. (3d) 1 (Ont. C.A.), 23 (the three panels approved Dr. Orkin’s statement that “solicitor-and-client costs should not be awarded unless there is some form of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, which makes such costs desirable as a form of chastisement”) (emphasis added); Beaver Lumber Co. v. 222044 Ontario Ltd. (1996), 5 C.P.C. (4th) 253 (Ont. Gen. Div.), 256 (“Costs on a solicitor and client scale throughout will be awarded where there is a form of reprehensible conduct either in the circumstances giving rise to the cause of action or in the proceedings themselves ... as a mark of the court’s disapproval of the [party’s] ... conduct”) (emphasis added); Kepic v. Tecumseh Road Builders (1987), 23 O.A.C. 72 (Ont. C.A.), 74-75 (the Court varied the trial judge’s costs award and gave solicitor-client costs to a plaintiff because the plaintiff was victimized by the defendant’s fraudulent prelitigation conduct and the defendant presented deceptive statements of account at trial); Brace v. Snow, 2012 NLCA 24 (N.L. C.A.), ¶ 24; (2012), 322 Nfld. & P.E.I.R. 90 (N.L. C.A.), 96 (“Reprehensible conduct ... may occur either in the circumstances giving rise to the action or in the conduct of the litigation”) (emphasis added); Pelley v. Pelley, 2003 NLCA 6 (N.L. C.A.), ¶ 40; (2003), 221 Nfld. & P.E.I.R. 1 (N.L. C.A.), 22 (the 262 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Court approved this proposition: “The reprehensible, scandalous or outrageous conduct that merits an award of solicitor-client costs must occur either: (i) in the circumstances giving rise to the cause of action; or (ii) in the proceedings themselves”) (emphasis added) & Perry v. Heywood (1998), 175 Nfld. & P.E.I.R. 253 (Nfld. C.A.), 280 (the Court upheld the trial judge’s full-indemnity costs order on the basis of the defendant’s pre-trial misconduct — “oppressive conduct on the part of the appellants and a determined effort ... to avoid the method of resolution of problems which had been agreed among them”). 71 England: The Civil Procedure Rules 1998, S.I. 1998/3132 (6.17), r. 44.2(4) & (5) (a court, in deciding whether to order standard or indemnity costs, must consider “conduct before, as well as during, the proceedings”) (emphasis added); Campbell & Co. v. Pollak, [1927] A.C. 732 (U.K. H.L.), 815 (“in exercising his jurisdiction under Or- der LXV, r. 1, in a case heard by a jury, a judge is not confined to the consideration of the defendant’s conduct in the actual litigation itself”); Scherer v. Counting Instruments Ltd., [1986] 1 W.L.R. 615 (Eng. & Wales C.A. (Civil)), 621 (“The grounds must be connected with the case. This may extend to any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation, but no further”) (emphasis added); Jones v. McKie, [1964] 1 W.L.R. 960 (Eng. C.A.) (the Court upheld the trial judge’s decision not to grant the successful defendant costs because of prelitigation conduct of the defendant); Bostock v. Ramsey Urban DC, [1900] 2 Q.B. 616 (Eng. C.A.), 625 (a court may deprive a successful party before a jury of its costs for “good cause”: ‘good cause’ is not confined to causes founded upon the conduct of the successful party in the course of litigation”) (emphasis added) & Harnett v. Vise (1880), 5 Ex. D. 307 (Eng. C.A.), 310-11 (the Court held that Order LV of the 1875 Rules of Court authorized an order depriving a successful plaintiff of costs for prelitigation misconduct). Australia: Oshlack v. Richmond River Council, [1998] H.C.A. 11 (New South Wales S.C.), ¶ 69; (1998), 193 C.L.R. 72 (New South Wales S.C.), 97 (a court, in assessing costs, may take into account “misconduct relating to the litigation, or the circumstances leading up to the litigation”) (emphasis added) per McHugh, J.; Masha Nominees Pty. Ltd. v. Mobil Oil Australia Pty. Ltd., [2006] VSC 56 (Australia Vic. Sup. Ct.), ¶¶ 15-18 (the Court concluded that prelitigation conduct could be the basis for an indemnity costs order); Ali v. Hartley Poynton Pty. Ltd., [2002] VSC 292 (Australia Vic. Sup. Ct.), ¶ 10 (“On any view, however, the wrongs done to the successful party will provide the context within which to judge the subsequent con- Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 263

duct leading up to and during any subsequent litigation”); Australian Guarantee Corp. v. De Jager, [1984] V.R. 483 (Australia Vic. Sup. Ct.), 502 (the Court awarded a defendant costs on a full-indemnity basis because of the plaintiff’s “high-handed” prelitigation conduct) (emphasis added); National Australia Bank Ltd. v. Petit-Breuilh, [2000] VSC 291 (Australia Vic. Sup. Ct.), ¶ 23 (the Court ordered the plaintiff bank to pay the defendants costs on a full-indemnity basis because of its “unconscionable” and “inexcusable” prelitigation conduct in securing the defendants signatures to a guarantees) & Cummings v. Lewis, 1992 FCA 334 (Australia Fed. Ct.), ¶ 22 (“in considering the matter of costs, the Court is entitled to look beyond the actual conduct of the case and have regard to the circumstances out of which it arose”). New Zealand: Prebble v. Huata, [2005] NZSC 18 (New Zealand S.C.), ¶ 5; [2005] 2 N.Z.L.R. 467 (New Zea- land S.C.), 470 (“unreasonable conduct in litigation or giving rise to it may affect the availability or the amount of costs”) (emphasis added) & Binnie v. Pacific Health Ltd., [2003] N.Z.C.A. 69 (New Zea- land C.A.) (the Court awarded the plaintiff substantial indemnity costs on account of the employer defendants’ flagrant and outrageous prelitigation misconduct). United States: Fox v. Vice [594 F.3d 423 (U.S. Sup. Ct. 2011)], No. 10-114, at 1 (“Federal law authorizes a court to award a reasonable attorney’s fee to the prevailing party in certain civil rights cases. ... We have held that a defendant may receive such an award if the plaintiff’s suit is frivolous”); Chambers v. Nasco, Inc., 501 U.S. 32 (U.S. C.A. 5th Cir. 1991), 45-46 (a federal court has the inherent power to “assess attorney’s fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons”); Vaughan v. Atkinson, 369 U.S. 527 (U.S. Sup. Ct. 1962), 530-31 (the Supreme Court ordered defendant shipowners that breached their contract with a sailor to pay the sailor’s attorney’s fees because they were “callous in their attitude, making no investigation of ... [the sailor’s] claim and by their silence neither admitting nor denying it. As a result of that recalcitrance, ... [this sailor] was forced to hire a lawyer and go to court to get what was plainly owed him under laws that are centuries old. The default was willful and persis- tent”); Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC (November 23, 2010), Doc. 10-2327 (U.S. C.A. 7th Cir.), at 10 (“We conclude that a case under the Lanham Act [a successful party may be awarded attorney’s fees in “exceptional cases” involving trade- marks and unfair competition litigation] is “exceptional”, in the sense of warranting an award of reasonable attorney’s fees to the winning party, if the losing party was the plaintiff and was guilty of abuse of process in suing, or if the losing party was the defendant and had no 264 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

defense yet persisted in the trade-mark infringement or false advertising for which he was being sued, in order to impose costs on his opponent”); McEnteggart v. Cataldo, 451 F.2d 1109 (U.S. C.A. 1st Cir. 1971), 1112 (even though the Court allowed the employer’s appeal and held that the defendant employer had reasons to dismiss the plaintiff from employment the court awarded the plaintiff his attorney’s fee “since [the] plaintiff was forced to go to court to obtain the statement of reasons to which he was constitutionally entitled”); Bell v. School Board of Powhatan County, 321 F.2d 494 (U.S. C.A. 4th Cir. 1963), 500 (the Court ordered a Virginia school board that operated segregated public schooling to pay the reasonable attorney’s fees of black school children whose wish to attend a desegregated school was thwarted by “long continued pattern of evasion and ob- struction ... thus casting a heavy burden on the children and their par- ents [to seek judicial remedies]”) & Raybestos-Manhattan, Inc. v. Friedman, 156 Ga. App. 880 (U.S. Ga. Ct. App. 1981), 883; 275 S.E.2d 817 (U.S. Ga. Ct. App. 1981), 821 (“In contract actions, the bad faith referred to has consistently been held by Georgia courts to refer to the conduct of the defendant out of which the cause of action arose, not to his conduct in defending the suit”) (emphasis added). 72 Larter v. Solid Rock Free Lutheran Church of Camrose, 2012 ABCA 292 (Alta. C.A.), ¶ 8 (the Court declared that prelitigation misconduct “cannot be the basis for an award of solicitor-client costs”); Polar Ice Express Inc. v. Arctic Glacier Inc., 2009 ABCA 20 (Alta. C.A.), ¶ 21; (2009), 446 A.R. 295 (Alta. C.A.), 301 (the Court stated by implication that prelitigation misconduct may not be the basis for an indemnity costs award); Walsh v. Mobil Oil Canada, 2008 ABCA 268 (Alta. C.A.), ¶ 113; (2008), 296 D.L.R. (4th) 178 (Alta. C.A.), 219 (the Court held that “the reviewing judge erred in principle in awarding [full indemnity] costs based on Mobil’s prelitigation conduct”); Gerula v. Flores (1995), 126 D.L.R. (4th) 506 (Ont. C.A.), 527 (“solicitor-and-client costs should relate to the conduct of the action and not to the conduct which might have been the subject of punitive damages”); Hypec Electronics Pty. Ltd. v. Mead, [2004] NSWSC 731 (New South Wales S.C.), ¶ 46 (“A connection with litigation, which takes the form of being the facts themselves the subject matter of litigation, is not a relevant type of connection for the purposes of making an indemnity costs order”); NMFM Property Pty. Ltd. v. Citibank Ltd., [2001] FCA 480 (Australia Fed. Ct.), ¶ 56; (2001), 109 F.C.R. 77 (Australia Fed. Ct.), 92 (“The conduct of a party that is relevant to the issue of indemnity costs is the party’s conduct as litigant. But, as noted below, the knowledge that a party has, including knowledge of his or her past conduct, may be relevant Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 265

to an assessment of his or her conduct as litigant”) & Harrison v. Schipp, [2001] NSWCA 13 (New South Wales C.A.), ¶ 139 (the Court set aside the trial judge’s full indemnity costs order because it was not based on litigation misconduct). 73 Several have held that prelitigation misconduct may just an indemnity costs award. M. (W.A.) v. Alberta (Minister for Child, Youth and Family Enhancement Act), 2017 ABCA 14 (Alta. C.A.), ¶¶ 33 & 34 (the Court ordered the director under the Child, Youth and Family Enhancement Act to pay the costs of the unsuccessful appellant on an indemnity basis because of the director’s prelitigation misconduct); FIC Real Estate Fund Ltd. v. Phoenix Land Ventures Ltd., 2016 ABCA 303 (Alta. C.A.), ¶¶ 4 & 10 (“In this appeal, while he might have done so on the facts as found by the trial judge, FIC’s counsel did not attempt to rely on evidence which suggests that solicitor-client costs were justified because Phoenix had been guilty of positive misconduct of a quasi-fraudulent nature or breach of trust”); Colborne Capital Corp. v. 542775 Alberta Ltd., 1999 ABCA 14 (Alta. C.A.), ¶ 300; (1999), 228 A.R. 201 (Alta. C.A.), 262 (the Court upheld a solicitor-client costs award against the appellant based on prelitigation misconduct); Sidorsky v. CFCN Communications Ltd., 1997 ABCA 280 (Alta. C.A.), ¶ 28; (1997), [1998] 2 W.W.R. 89 (Alta. C.A.), 98 (the Court expressly stated that prelitigation misconduct may constitute “rare and exceptional circumstances” and warrant an indemnity costs order) & Jackson v. Trimac Industries Ltd. (1993), 138 A.R. 161 (Alta. Q.B.), 173 (“Where the positive misconduct of the party which gives rise to the action is so blatant and is calculated to deliberately harm the other party, then despite the technically proper conduct of the legal proceedings, the very fact that the action must be brought by the injured party to gain what was rightfully his in the face of an unreasonable denial is in itself positive misconduct deserving of indemnification whether punitive damages are awarded or not”) (emphasis added), aff’d, [1994] 8 W.W.R. 237 (Alta. C.A.), 249. So have some Court of Queen’s Bench costs awards. Sturrock v. Ancona Petroleums Ltd. (1990), 111 A.R. 86 (Alta. Q.B.), 114 (“In view of the fraudulent conduct of the defendants ... costs will be awarded against them on a solicitor-and-client basis”) & Dusik v. Newton (1984), 51 B.C.L.R. 217 (B.C. S.C.), 219 (the Court ordered a defendant to pay solicitor- client costs to a plaintiff who was victimized by the defendant’s failure to discharge his duties as a corporate director). Several panels have either implicitly or expressly stated that only litigation misconduct may justify an indemnity costs order. Reeder v. Woodward, 2016 ABCA 91 (Alta. C.A.), ¶ 30; (2016), 67 R.P.R. (5th) 14 (Alta. 266 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

C.A.), 23 (“An award of solicitor and clients costs ... is generally reserved for cases of serious litigation misconduct”); Polar Ice Express Inc. v. Arctic Glacier Inc., 2009 ABCA 20 (Alta. C.A.), ¶ 21; (2009), 446 A.R. 295 (Alta. C.A.), 301 (“in general solicitor-client costs for misconduct must relate to conduct during the suit, not the pre-suit conduct sued over”); Larter v. Solid Rock Free Lutheran Church of Camrose, 2012 ABCA 292 (Alta. C.A.), ¶ 8 (the Court followed Polar Ice Express) & Walsh v. Mobil Oil Canada, 2008 ABCA 268 (Alta. C.A.), ¶¶ 112-13; (2008), 296 D.L.R. (4th) 178 (Alta. C.A.), 219 (the Court declared that “the reviewing judge erred in principle in awarding [full indemnity] costs based on Mobil’s prelitigation conduct”). 74 2016 ABCA 303 (Alta. C.A.), ¶¶ 4 & 10 (“Generally, an award of solicitor-client costs is based on misconduct that occurs during the course of litigation. However, that is not an invariable rule. ... In this appeal, while he might have done so on the facts as found by the trial judge, FIC’s counsel did not attempt to rely on evidence which suggests that solicitor-client costs were justified because Phoenix had been guilty of positive misconduct of a quasi-fraudulent nature or breach of trust pre-litigation, although these factors were recognized in Sidorsky as separate reasons justifying such an award”) (emphasis added). 75 1997 ABCA 280 (Alta. C.A.), ¶ 28; (1997), [1998] 2 W.W.R. 89 (Alta. C.A.), 98. 76 2009 ABCA 20 (Alta. C.A.), ¶ 21; (2009), 446 A.R. 295 (Alta. C.A.), 301. See also Larter v. Solid Rock Free Lutheran Church of Camrose, 2012 ABCA 292 (Alta. C.A.), ¶ 8 (the Court, following Polar Ice Express, declared that prelitigation misconduct “cannot be the basis for an award of solicitor-client costs”). 77 2008 ABCA 268 (Alta. C.A.), ¶ 112; (2008), 296 D.L.R. 4th 178 (Alta. C.A.), 219. 78 2009 ABCA 20 (Alta. C.A.), ¶ 21; (2009), 446 A.R. 295 (Alta. C.A.), 301. 79 [1993] 4 S.C.R. 3 (S.C.C.), 134-35. 80 [1993] 4 S.C.R. 3 (S.C.C.), 134. See R. v. Sellars, [1980] 1 S.C.R. 527 (S.C.C.), 529-30 & Newfoundland Assn. of Provincial Court Judges v. Newfoundland (2000), 191 D.L.R. (4th) 225 (Nfld. C.A.), 260 & 336-37 (obiter statements of principle of the Supreme Court of Canada have authoritative effect). 81 This observation brings to mind Justice Thomas’ pithy statement in Connecticut Nat. Bank v. Germain, 503 U.S. 249 (U.S. C.A. 2nd Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 267

Cir. 1992), 253-54: “courts must presume that a legislature says in a statute what it means and means in a statute what it says there. ... When the words of a statute are unambiguous, then, the first canon is also the last: ‘judicial inquiry is complete’”). 82 Id. 25, 107 & 110. 83 British Columbia (Dockside Brewing Co. v. Strata Plan LMS 3837, 2007 BCCA 183 (B.C. C.A.), ¶ 90; (2007), 239 B.C.A.C. 33 (B.C. C.A.), 50); Saskatchewan (Siemens v. Bawolin, 2002 SKCA 84 (Sask. C.A.), ¶ 118; [2002] 11 W.W.R. 246 (Sask. C.A.), 281); Mani- toba (Fernandez v. Tan, 2009 MBCA 113 (Man. C.A.), ¶¶ 7 & 8); Ontario (Oz Optics Ltd. v. Timbercon Inc., 2012 ONCA 735 (Ont. C.A.), ¶ 16); Prince Edward Island (M. (D.E.) v. M. (J.M.), 2011 PECA 16 (P.E.I. C.A.), ¶¶ 27 & 28; (2011), 4 R.F.L. (7th) 1 (P.E.I. C.A.), 10-11 (the Court upheld the motion judge’s substantial-indemnity costs order based on the respondent’s out-of-court misconduct) & Ellis v. MacPherson, 2005 PESCAD 19 (P.E.I. C.A.), ¶ 21-25; (2005), 248 Nfld. & P.E.I.R. 123 (P.E.I. C.A.), 128-29 (the Court upheld the motions judge’s order directing the payment of substantial indemnity costs because of the unsuccessful party’s blameworthy prelitigation misconduct — refusal to complete a transaction in accordance with a binding agreement)); Newfoundland (Brace v. Snow, 2012 NLCA 24 (N.L. C.A.), ¶ 24; (2012), 322 Nfld. & P.E.I.R. 90 (N.L. C.A.), 96) & Yukon (Calandra v. Henley, 2009 YKCA 6 (Y.T. C.A.), ¶ 34; (2009), 271 B.C.A.C. 162 (Y.T. C.A.), 170 (the Court upheld the trial judge’s special costs order based on blameworthy prelitigation conduct). See also L. Abrams & K. McGuinness, Cana- dian Civil Procedure Law 1458 (2d ed 2010) (“full indemnification costs should not be awarded unless it is shown that there was some form of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, sufficient to make such costs a desirable deterrent to the institution of like proceedings”) (emphasis added). 84 New Brunswick (Anderson v. Lawrence, 2013 NBQB 21 (N.B. Q.B.), ¶ 53; (2013), 398 N.B.R. (2d) 223 (N.B. Q.B.)3, 239 (the Court awarded the plaintiff solicitor-client costs because the defendant failed to disclose to the plaintiff purchaser that the house he sold the plaintiffs had rot, mold and moisture issues — prelitigation misconduct) & Black v. Norris, 2012 NBQB 387 (N.B. Q.B.), ¶¶ 9-14; (2012), 403 N.B.R. (2d) 22 (N.B. Q.B.), 27-28 (the Court implied that blameworthy prelitigation conduct could ground a full-indemnity costs award)); Nova Scotia (Elmsdale Landscaping Ltd. v. Nova Scotia (Minister of Environment), 2010 NSSC 127 (N.S. S.C.), ¶¶ 17 & 19; (2010), 289 N.S.R. (2d) 366 (N.S. S.C.), 370 (the Court ac- 268 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

knowledged that prelitigation misconduct might justify an award on a solicitor-and-client basis)) & Northwest Territories (Williams v. Steinwand, 2015 NWTSC 3 (N.W.T. S.C.), ¶ 18 & Woodley v. Yellowknife Education District No. 1, 2000 NWTSC 7 (N.W.T. S.C.), ¶¶ 5 & 32; (2000), 22 Admin. L.R. (3d) 237 (N.W.T. S.C.), 239 & 243-44 (the Courts acknowledged that blameworthy prelitigation conduct may justify full-indemnity costs orders but did not conclude that the unsuccessful party’s prelitigation conduct justified the requested costs order)). 85 (1990), 75 D.L.R. (4th) 46 (B.C. C.A.), 89. 86 Id. 89-90 (emphasis added). 87 [1993] 4 S.C.R. 3 (S.C.C.), 134-35. 88 Evergreen Building Ltd. v. IBI Leaseholds Ltd., 2009 BCCA 275 (B.C. C.A.), ¶¶ 24 & 29. 89 2007 BCCA 183 (B.C. C.A.), ¶ 90; (2007), 239 B.C.A.C. 33 (B.C. C.A.), 50. 90 1992 ABCA 34 (Alta. C.A.), ¶ 30; (1992), 120 A.R. 368 (Alta. C.A.), 375. 91 2009 ABCA 20 (Alta. C.A.), ¶ 21; (2009), 446 A.R. 295 (Alta. C.A.), 301. 92 (1992), 120 A.R. 368 (Alta. C.A.), 375 (emphasis added). 93 1997 ABCA 280, [1998] 2 W.W.R. 89 (Alta. C.A.). 94 Id. ¶ 28; (1997), [1998] 2 W.W.R. 89 (Alta. C.A.), 98. 95 (1993), 138 A.R. 161 (Alta. Q.B.), 172-73. 96 Id. 173-74 (emphasis added). 97 1997 ABCA 280 (Alta. C.A.), ¶ 35; (1997), [1998] 2 W.W.R. 89 (Alta. C.A.), 100-01. 98 1998 ABCA 303 (Alta. C.A.). 99 Id. ¶ 5. 100 2001 SCC 62, [2001] 2 S.C.R. 1082 (S.C.C.). 101 2001 SCC 62 (S.C.C.), ¶ 79; [2001] 2 S.C.R. 1082 (S.C.C.), 1116. 102 Supra notes 70 & 71. 103 E.g. Vogel v. Brazeau (Municipal District) No. 77 (1996), 183 A.R. 121 (Alta. Q.B.), 12 (the Court awarded full indemnity costs to the unsuccessful party who failed in his challenge to the validity of an election on the ground that “[t]his election was carried out in a most careless manner”); Ferris v. Rusnak (1984), 54 A.R. 319 (Alta. Q.B.), 320 (the Court ordered a lawyer to indemnify the former-client plaintiff for prelitigation misconduct) & Beaver Lumber Co. v. Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 269

222044 Ontario Ltd. (1996), 5 C.P.C. (4th) 253 (Ont. Gen. Div.), 256 (“Costs on a solicitor and client scale throughout will be awarded where there is a form of reprehensible conduct either in the circumstances giving rise to the cause of action or in the proceedings themselves ... as a mark of the court’s disapproval of the [party’s] ... conduct. Ontario courts have awarded costs on a solicitor and client scale throughout in cases that have involved breach of fiduciary duty, breach of trust, conspiracy, misrepresentation and other similar forms of reprehensible conduct”). See also The Civil Procedure Rules 1998, S.I. 1998/3132 (L.17) r. 44.2(4) & (5) (in deciding whether to award standard or indemnity costs the court must have regard to “the conduct [of the parties] before, as well as during, the proceedings”). 104 2008 ABCA 268 (Alta. C.A.), ¶¶ 112-13; (2008), 296 D.L.R. (4th) 178 (Alta. C.A.), 219. 105 [1993] 4 S.C.R. 3 (S.C.C.), 134-35. 106 R.S.A. 2000, c. C-31. 107 See Doucet v. Spielo Manufacturing Inc., 2011 NBCA 44 (N.B. C.A.), ¶ 154; (2011), 332 D.L.R. (4th) 407 (N.B. C.A.), 491 (the Court described R. 59.01 of New Brunswick’s Rules of Court as “drafted in the broadest of terms to preserve the discretion of trial judges”). 108 Alta. Reg. 124/2010. 109 This has been the practice in the modern era. E.g., Harnett v. Vise (1880), 5 Ex. D. 307 (Eng. C.A.), 310 (“the jurisdiction as to costs given to the judge by Order LV. is not confined ... to the conduct of the parties in the litigation itself”) & National Australia Bank Ltd. v. Petit-Breuilh, [2000] VSC 291 (Australia Vic. Sup. Ct.), ¶ 23 (the Court ordered the plaintiff bank to pay the defendants costs on a full- indemnity basis: “the initial unconscionable action of the plaintiff in obtaining the signatures of the defendants to the guarantee ... before and after the signatures were obtained are inexcusable”). Contra NMFM Property Pty. Ltd. v. Citibank Ltd., [2001] FCA 480 (Austra- lia Fed. Ct.), ¶¶ 60-62; (2001), 109 F.C.R. 77 (Australia Fed. Ct.), 93-94 (Lindgren, J. disagreed with the proposition that a full-indemnity costs award could be based “on nothing more than the bank’s antecedent conduct”). 110 There must be a principled basis to distinguish between blameworthy prelitigation and litigation conduct. See Latoudis v. Casey, [1990] H.C.A. 59 (Australia H.C.), ¶ 11; (1990), 170 C.L.R. 534 (Australia H.C.), 542 (“there is no sound basis for drawing a distinction in relation to the award and costs against an unsuccessful in- 270 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

formant between summary proceedings instituted by a police or other public officer and those instituted by a private citizen”). 111 A court must always be mindful of the effects of its determination. E.g., Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, No. 10-2327, at 7 (7th Cir. Nov. 23, 2010) (“A more practical concern is the potential for businesses to use Lanham Act litigation for strategic purposes — not to obtain a judgment or defeat a claim but to obtain a competitive advantage independent of the outcome of the case by piling litigation costs on a competitor”). 112 Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714 (U.S. C.A. 9th Cir. 1967), 718 (“since litigation is at best uncertain one should not be penalized for merely defending or prosecuting a lawsuit”) & Kuwait Asia Bank EC v. National Mutual Life Nominees Ltd., [1991] 3 N.Z.L.R. 457 (New Zealand P.C.), 460 (“litigation is often an uncertain process in which the successful party has not acted unreasonably and should not be penalised by having to bear the full party and party costs of his adversary as well as his own solicitor and client costs”). 113 E.g., Kazakhstan Kagazy Plc v. Zhunus, [2015] EWHC 404 (Eng. Comm. Ct.), ¶ 6 (the alleged fraudsters’ legal tab for a two-day hearing devoted to the plaintiff’s tracing application was roughly £945,000) & Kerr v. Danier Leather Inc., 2007 SCC 44 (S.C.C.), ¶ 63; [2007] 3 S.C.R. 331 (S.C.C.), 363 (“protracted litigation has become the sport of kings in the sense that only kings or equivalent can afford it”). 114 A different message will be appropriate if the client and the lawyer have a contingency fee agreement. 115 Oshlack v. Richmond River Council, [1998] H.C.A. 11 (New South Wales S.C.), ¶ 68; (1998), 193 C.L.R. 72 (New South Wales S.C.), 97 (“one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved”). 116 Alberta (Provincial Court Judge) v. Alberta (Provincial Court Chief Judge), 1999 ABQB 639 (Alta. Q.B.), ¶ 35; (1999), [2000] 4 W.W.R. 92 (Alta. Q.B.), 104 (“In awarding costs, the courts generally attempt to strike a balance between the competing interests of the unfairness of having the successful party pay its costs while, at the same time, not dissuading potential litigants from asserting or defending their rights by visiting the unsuccessful party with enormous costs”); Reese v. Alberta (1992), 133 A.R. 127 (Alta. Q.B.), 133 (“the level of party and party costs ... should not be such as to dis- Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 271

courage future prospective [litigants] ... when the application is reasonably meritorious but there is a risk of failure”) & Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714 (U.S. C.A. 9th Cir. 1967), 718 (“the poor might be unjustly discouraged from insti- tuting actions to vindicate their rights if the penalty for losing included the fees of their opponents’ counsel”). 117 Huck v. Robson, [2002] EWCA Civ 398 (Eng. & Wales C.A. (Civil)), ¶ 73; [2002] 3 All E.R. 263 (Eng. & Wales C.A. (Civil)), 277 (“There is a case for having a general policy stance that ... a [successful] claimant should be awarded his costs on the indemnity basis. However, that has not been the traditional stance adopted in this country”). 118 Cachia v. Hanes (1994), 23 N.S.W.L.R. 304 (Australia H.C.), 318 aff’d (1994), 179 C.L.R. 403 (Australia H.C.) (“The limited indemnity provided to a successful represented litigant for expense incurred and time lost reflects a compromise between the interests of successful and unsuccessful litigants”). 119 Oshlack v. Richmond River Council, [1998] H.C.A. 11 (New South Wales S.C.), ¶ 67; (1998), 193 C.L.R. 72 (New South Wales S.C.), 97. 120 Prebble v. Huata, [2005] NZSC 18 (New Zealand S.C.), ¶ 6; [2005] 2 N.Z.L.R. 467 (New Zealand S.C.), 470 (“Except in [extraordinary] ... cases ... orders for party and party costs have been limited to a reasonable contribution to the costs of the successful party”) & Kuwait Asia Bank EC v. National Mutual Life Nominees Ltd., [1991] 3 N.Z.L.R. 457 (New Zealand P.C.), 460 (“the guiding principle has been that, except where there is special reason for awarding costs on a solicitor and client basis, orders should be limited to a reasonable contribution towards the successful party’s costs on a party and party basis”). 121 According to Credit Suisse Research Institute’s Global Wealth Databook 106 (2016), there are 27,995,000 adults in Canada with a mean wealth per adult of US $270,179 and a median wealth of US $96,664. Almost fifty percent of Canadian adults have wealth over US $100,000 and four percent in excess of US $1,000,000. Roughly a quarter of Canadian adults have wealth between US $10,000 and US $100,000. Wealth is individual net worth. Net worth, according to the Credit Suisse Research Institute, is the “marketable value of financial assets plus non-financial assets (principally housing and land) less debts”. Global Wealth Databook 5 (2016). The median net worth in the United Kingdom is US $107,865; in the United States US $44,977. The mean wealth in the United Kingdom is US 272 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

$288,808; in the United States US $344,692. In the United Kingdom, slightly more than fifty percent of adults have net worth in excess of US $100,000; in the United States the proportion is just shy of thirty- seven percent. Global Wealth Databook 109 (2016). 122 This means that the prospects of failure do not exceed sixty percent. See also Reese v. Alberta (1992), 133 A.R. 127 (Alta. Q.B.), 133 (the case must be “reasonably meritorious”) & Doucet v. Spielo Manufacturing Inc., 2011 NBCA 44 (N.B. C.A.), ¶ 117; (2011), 332 D.L.R. (4th) 407 (N.B. C.A.), 472 (“A costs award should properly compensate the successful party and ... not deter plaintiffs from pursuing meritorious claims”). 123 Sidorsky v. CFCN Communications Ltd., 1997 ABCA 280 (Alta. C.A.), ¶ 32; (1997), [1998] 2 W.W.R. 89 (Alta. C.A.), 99 (“If the price of losing includes excessively high costs, it soon operates to prohibit the access of ordinary citizens to the court”) & Reese v. Al- berta (1992), 133 A.R. 127 (Alta. Q.B.), 130 (“if the unsuccessful party is required to bear all the costs of the successful party, citizens will be unduly hesitant to sue to assert their rights (even valid ones) or to defend their rights when sued”). 124 The assessment A and B retroactively make of their investment in the civil justice system depends, in large part, on the size of X and Y, their own resources and the nature of the dispute. Suppose that A and B are very large technology companies engaged in protracted litigation alleging patent violations. Both A and B spend $10 million on their legal teams and A secures a judgment against B for $250 million. A is satisfied that its investment - $10 million less $4 million (the amount B was ordered to pay A in costs) — was justifiable. While B is disappointed that it lost, B realizes that this expenditure - $14 million plus $250 million — is a cost of doing business and that if it had not defended its position the damages may have been greater. And the fact that it aggressively defended its position may deter a future adversary from suing it. The sums A and B paid to litigate will not deter them from appearing before the courts in the future. Suppose that A and B are wealthy medical specialists and are parties to a defamation suit. B said at a medical conference that A had the highest failure rate for high risk lung transplant surgery. That was incorrect. C did. A had the second highest failure rate. The court finds in A’s favour and awards her $1,000. Both sides retained top- notch litigators and expended $200,000 on legal fees and disbursements. Regardless of the costs order, the only victory A and B can claim is pyrrhic in nature. A and B might behave differently in the future. Suppose that A and B operate small farms. They cannot agree who is the owner of a plot of scrub land that is worth no more than Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 273

$25,000. They seek counsel. The lawyers advise their clients that their chances of success are fifty-fifty. A commences an action against B claiming ownership of the contested property. A prevails. Each side pays his lawyer $25,000. The court orders B to pay A $10,000 in costs. This costs order meant that B could not contribute to her daughter’s university tuition. A and B will never litigate again. In retrospect, they wished that they had tossed a coin or arm wrestled to resolve their dispute. 125 FIC Real Estate Fund Ltd. v. Phoenix Land Ventures Ltd., 2016 ABCA 303 (Alta. C.A.), ¶ 4 (“Generally, an award of solicitor-client costs is based on misconduct that occurs during the course of litigation. However, that is not an invariable rule”); Alberta Treasury Branches v. 1401057 Alberta Ltd., 2013 ABQB 748 (Alta. Q.B.), ¶ 34; (2013), [2014] 3 W.W.R. 180 (Alta. Q.B.), 199 (“Blameworthy litigation or prelitigation conduct may create a rare and exceptional case”); Alberta (Provincial Court Judge) v. Alberta (Provincial Court Chief Judge), 1999 ABQB 639 (Alta. Q.B.), ¶ 36 (1999), [2000] 4 W.W.R. 92 (Alta. Q.B.), 104 (the Court awarded full indemnity costs because the defendant’s prelitigation conduct was “unilateral”, “outside of the constitutional framework”, without “good faith” and not “conscientious conduct”); Jacobi v. Newell (County No. 4) (1994), 153 A.R. 241 (Alta. Q.B.), 249 (“the conduct of the Aqueduct defendants cannot be characterized as a flagrant disregard of the plaintiffs rights. It does not have that quality of blameworthiness necessary to attract costs on an indemnity basis”); Jackson v. Trimac Industries Ltd. (1993), 138 A.R. 161 (Alta. Q.B.), 173 (“Where the positive misconduct of the party which gives rise to the action is so blatant and is calculated to deliberately harm the other party, then despite the technically proper conduct of the legal proceedings, the very fact that the action must be brought by the injured party to gain what was rightfully his in the face of an unreasonable denial is in itself positive misconduct deserving of indemnification whether punitive damages are awarded or not); Sturrock v. Ancona Petroleums Ltd. (1990), 111 A.R. 86 (Alta. Q.B.), 114 (the Court awarded solicitor-and-client costs against defendants because they engaged in fraudulent pre-litigation conduct); Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd., [1987] 2 W.W.R. 75 (Alta. Q.B.), 80 (the trial judge ordered a person who, without excuse, filed a fraudulent proof of loss to pay “solicitor-client” costs); Olson v. New Home Certification Program of Alberta (1986), 69 A.R. 356 (Alta. Q.B.), 372 (the Court ordered solicitor-client costs on account of the defendant’s “distasteful” pre-litigation conduct and its “abhorrent” litigation conduct — failure to admit obvious facts and unnec- 274 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

essarily using trial time, “unnecessary adjournments, concealing material documents ... and failing to produce material documents in a timely fashion”); Masha Nominees Pty. Ltd. v. Mobil Oil Australia Pty. Ltd., [2006] VSC 56 (Australia Vic. Sup. Ct.), ¶¶ 15-18 (the Court concluded that prelitigation conduct could be the basis for an indemnity costs order); Australian Guarantee Corp. v. De Jager, [1984] V.R. 483 (Australia Vic. Sup. Ct.), 502 (the Court awarded a defendant costs on a full-indemnity basis because of the plaintiff’s “high-handed” prelitigation conduct); National Australia Bank Ltd. v. Petit-Breuilh, [2000] VSC 291 (Australia Vic. Sup. Ct.), ¶¶ 23 & 25 (the Court ordered the plaintiff bank to pay the defendant’s costs on an indemnity basis because the bank’s steps to secure the defendant’s signature to a guarantee were “inexcusable”); Prebble v. Huata, [2005] NZSC 18 (New Zealand S.C.), ¶ 6; [2005] 2 N.Z.L.R. 467 (New Zealand S.C.), 470 (“In New Zealand, costs have not been awarded to indemnify successful litigants for their actual solicitor and client costs, except in rare cases generally entailing breach of confidence or flagrant misconduct”) & Binnie v. Pacific Health Ltd., [2003] N.Z.C.A. 69 (New Zealand C.A.) (the Court awarded the plaintiff employee exemplary damages for the defendant employer’s flagrant and outrageous prelitigation misconduct and ordered the defendant to pay eighty percent of the plaintiff’s lawyers’ fees and disbursements). 126 E.g., Sidorsky v. CFCN Communications Ltd., 1997 ABCA 280 (Alta. C.A.), ¶ 35; (1997), [1998] 2 W.W.R. 89 (Alta. C.A.), 100-01 (the Court concluded that the trial judge erred in focussing on the harm the plaintiff landowner caused to his tenants, as opposed to the defendant broadcaster). 127 Campbell & Co. v. Pollak, [1927] A.C. 732 (U.K. H.L.), 812 (a court cannot refuse a successful party its costs “on the grounds of some misconduct wholly unconnected with the cause of action”); Jones v. McKie, [1964] 1 W.L.R. 960 (Eng. C.A.) (the Court upheld the trial judge’s decision to deny the successful defendant its costs in a collision case because the defendant allowed its workers to drive its vehicles on personal time); King v. Gillard, [1905] 2 Ch. 7 (Eng. C.A.), 11, 13 & 14 (the trial judge wrongly denied costs to the successful defendant in a passing off action because he thought that the defendant had falsely claimed that its product had received specific industry awards); Ritter v. Godfrey, [1920] 2 K.B. 47 (Eng. C.A.), 53, 63 & 68 (the court, having decided for the physician defendant in a medical malpractice suit, could not deny the successful defendant his costs because, after the medical treatment complained of, the physician wrote an inappropriate letter to the plaintiff) & Paper Reclaim Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 275

Ltd. v. Aotearoa International Ltd., [2006] NZCA 27 (New Zealand C.A.) ¶ 160; [2006] 3 N.Z.L.R. 188 (New Zealand C.A.), 219 (“His Honour not only took into account conduct which had never been pleaded as wrongful but also took it into account with respect to costs, to which it could never have been relevant”). 128 Alta. Reg. 124/2010. 129 Fleck v. Stewart (1991), 118 A.R. 345 (Alta. Q.B.), 362 (“An award of solicitor-client costs ... express[es] a court’s disapproval of the conduct of the litigation by a party to it”); Fiege v. Cornwall General Hospital (1979), 117 D.L.R. (3d) 152 (Ont. H.C.), 155 (the Court castigated counsel who failed to disclose a highly relevant document, declaring that counsel is “making a game of the case”); Dondi Properties Corp. v. Commerce Savings and Loan Association, 121 F.R.D. 284 (U.S. Dist. Ct. N.D. Tex. 1988), 288 (“Those litigators who ... [view] themselves solely as combatants, or who perceive that they are retained to win at all costs without regard to fundamental principles of justice, will find that their conduct does not square with the practices we expect of them. Malfeasant counsel can expect [to be sanctioned]”); Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240 (U.S. Sup. Ct. 1975) (the Court recognized that federal courts have the inherent power to order a party that has wilfully disobeyed a court order or has acted egregiously to pay the successful party’s attorney’s fees) & F.D. Rich Co. v. United States, 417 U.S. 116 (U.S. Sup. Ct. 1974), 129-30 (“The American Rule has not served, however, as an absolute bar to the shifting of attorneys’ fees in the absence of statute or contract. The federal judiciary has recognized several exceptions to the general principles that each party should bear the costs of its own legal representation. .... [A]ttorneys’ fees may be awarded to a successful party when his opponent has acted in bad faith, vexatiously, wantonly or for oppressive reasons”). 130 Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 (S.C.C.), ¶ 26; [2004] 1 S.C.R. 303 (S.C.C.), 313 (“When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent ... costs on a solicitor-client basis are appropriate”); Animal Welfare International Inc. v. W3 International Media Ltd., 2016 BCCA 372 (B.C. C.A.), ¶ 46; (2016), 90 C.P.C. (7th) 215 (B.C. C.A.), 233 (“Special costs are an appropriate rebuke to allegations of fraud that are baseless, motivated by spite, vindictiveness, or other forms of ill-will”); Chaplin v. Sun Life Assurance Co. of Canada, 2004 BCSC 116 (B.C. S.C.), ¶ 28 (an award of special costs is appropriate if “examination of all circumstances show the allegations of fraud were unwarranted and com- 276 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

pletely unfounded”); Apotex Inc. v. Egis Pharmaceuticals (1990), 2 O.R. (3d) 126 (Ont. Gen. Div.), 130 (the Court awarded solicitor- and-client costs in an interlocutory injunction application because the applicant alleged fraud, deceit and conspiracy “without any acceptable evidentiary basis”); Watson v. Holyoake (1986), 15 C.P.C. (2d) 262 (Ont. H.C.), 268 (“A Court may exercise a discretion to deprive a successful plaintiff of costs in a situation where the successful plaintiff has made unfounded or unsubstantiated charges of fraud); P.C.R.Z. Investments Pty. Ltd. v. National Golf Holdings Ltd., [2002] VSCA 24 (Australia Vic. Sup. Ct.), n. 16 (“pleading fraud knowing it to be false”); Colgate-Palmolive Co. v. Cussons Pty. Ltd., 1993 FCA 536 (Australia Fed. Ct.), ¶ 24; (1993), 46 F.C.R. 225 (Australia Fed. Ct.), 233 (the Court stated that a full-indemnity costs award is warranted if a party knowingly falsely alleges fraud) & Bradbury v. Westpac Banking Corp., [2009] NZCA 234 (New Zealand C.A.), ¶ 29; [2009] 3 N.Z.L.R. 400 (New Zealand C.A.), 410 (the Court adopted the Colgate-Palmolive protocol). 131 Olson v. New Home Certification Program of Alberta (1986), 69 A.R. 356 (Alta. Q.B.), 372 (“This is a case which ... justifies a departure from the general rule that restricts an award of costs to a party/party basis for there was ... an attempt to delay ... and defeat justice”) & 22 New York Codes, Rules and Regulations § 130- 1.1(c)(2) (“conduct is frivolous if ... it is undertaken primarily to delay or prolong the resolution of litigation, or to harass or maliciously injure another”). A party who fails to appear for questioning or disclose documents when obliged to do so unreasonably delays the litigation process. 132 Michael Wilson & Partners Ltd. v. Nicholls, [2009] NSWSC 669 (New South Wales S.C.), ¶ 21 (the trial court ordered the plaintiff to pay on a full-indemnity basis the defendant’s costs required by the plaintiff’s disclosure of a “trolley load” of documents at the last minute). 133 Olson v. New Home Certification Program of Alberta (1986), 69 A.R. 356 (Alta. Q.B.), 372 (“This is a case which justifies a departure from the general rule ... for there was an attempt to ... deceive and defeat justice”); 22 New York Codes, Rules and Regulations § 130- 1.1(c)(3) (“conduct is frivolous if ... it asserts material facts that are false”) & 150 Centreville LLC v. Lin Associates Architects, PC, 39 Misc. 3d 513 (U.S. Dist. Ct. S.D. N.Y. 2013), 533; 963 N.Y.2d 819 (U.S. Dist. Ct. S.D. N.Y. 2013), 834 (the Court ordered the plaintiffs to pay the defendants’ reasonable attorney fees, in part, because the plaintiff falsely informed the court that it was compiling answers to interrogations when it was not). Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 277

134 Polar Ice Express Inc. v. Arctic Glacier Inc., 2009 ABCA 20 (Alta. C.A.), ¶ 23; (2009), 446 A.R. 295 (Alta. C.A.), 301 (the Court ordered full indemnity costs for the trial, in part, because of the “improper denial of discovery of records on a material point”); Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd., [1987] 2 W.W.R. 75 (Alta. Q.B.), 81 (the trial judge criticized a defendant who only produced at trial a document repeatedly requested at discoveries); Olson v. New Home Certification Program of Alberta (1986), 69 A.R. 356 (Alta. Q.B.), 372 (the Court criticized the defendant for “concealing material documents from the plaintiff and failing to produce material documents in a timely fashion”); Davis v. Davis (1981), 9 Man. R. (2d) 236 (Man. Q.B.), 266 (the Court awarded solicitor-and-client costs against a defendant who acted fraudulently); Kepic v. Tecumseh Road Builders (1987), 23 O.A.C. 72 (Ont. C.A.) (the Court awarded solicitor-and-client costs against defendants who acted fraudulently); Union Carbide Canada Ltd. v. Vanderkop (1976), 1 C.P.C. 114 (Ont. H.C.), 121 (the Court ordered a defendant who forged documents to pay full-indemnity costs); Fiege v. Cornwall General Hospital (1979), 117 D.L.R. (3d) 152 (Ont. H.C.), 158 (the trial judge awarded the plaintiff costs on a “solicitor-and-his-client basis” because “the failure to produce the ... [incident report] extended the time of trial and ... has needlessly wasted time and money”) & Brawley v. Marczynski, [2002] EWCA Civ 1453 (Eng. & Wales C.A. (Civil)), ¶ 10; [2002] 4 All E.R. 1067 (Eng. & Wales C.A. (Civil)), 1071 (the Court concluded that the defendant’s failure to disclose relevant and important documents justified an indemnity costs award). 135 Olson v. New Home Certification Program of Alberta (1986), 69 A.R. 356 (Alta. Q.B.), 372 (“The conduct of the defendant that this court found particularly abhorrent and which should not be tolerated was the requirement imposed upon the plaintiff to prove major structural defects and other facts that should have been admitted”); Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd., [1987] 2 W.W.R. 75 (Alta. Q.B.), 80 & 81 (the trial judge awarded full-indemnity costs to the plaintiff, in part, because “it was apparent to me at the end of the trial that there was no serious issue of fact or law which required these lengthy, expensive proceedings ... [and that the defendants] were then contemptuous of the plaintiff in requiring the plaintiff to go to trial to get its money”); Shier v. Fiume (1991), 6 O.R. (3d) 759 (Ont. Gen. Div.) (the Court ordered a party to pay full indemnity costs because he knew his position was untenable); Noorani v. Calver, [2009] EWCA Civ 592 (Eng. Q.B.), ¶ 33 (the Court awarded the defendant his costs on a full-indemnity basis because the plain- 278 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

tiff’s case was “hopeless ... from the outset [and] ... the claimant knew it”); Farm Credit Canada v. Boss´e, 2014 NBCA 34, 419 N.B.R. (2d) 1 (N.B. C.A.) (the Court dismissed the appeal and ordered the appellant to pay costs on a solicitor-and-client basis because the grounds of appeal were frivolous); Bradbury v. Westpac Banking Corp., [2009] NZCA 234 (New Zealand C.A.), ¶ 24; [2009] 3 N.Z.L.R. 400 (New Zealand C.A.), 409, 410 (“an indemnity award may be made where a party persists with what proper consideration would have shown was a hopeless case”) & ¶ 29 (an indemnity award may be granted if the payee’s misconduct “causes loss of time to the court and to other parties”); Baulderstone Hornibrook Engineering Pty. Ltd. v. Gordian Runoff Ltd. (No. 2), [2009] NSWCA 12 (New South Wales C.A.), ¶ 4 (“a party should pay costs on an indemnity ... basis when it appears that an action (here an appeal) has been commenced or continued in circumstances where the moving party, properly advised, should have known that it had no chance of success”); Chaina v. Alvaro Homes Pty. Ltd., [2008] NSWCA 353 (New South Wales C.A.), ¶ 111 (the Court observed that “more recent case-law generally shows a tendency to grant indemnity costs orders more readily than was the case in the past. That may be seen to be an element of a broader policy directed to litigation of cases where there are no reasonable prospects of success”); P.C.R.Z. Investments Pty. Ltd. v. National Golf Holdings Ltd., [2002] VSCA 24 (Australia Vic. Sup. Ct.), n. 16-17 (the Court observed that “making assertions of facts which are patently groundless” and adopting a position that is “patently hopeless” exposes the malefactor to an enhanced costs award); Cosgrove v. Chevron Queensland Ltd., [2000] QCA 157 (Queensland S.C.), ¶ 9 (a full-indemnity costs award may be appropriate if a party adopts an unsupportable position); Commonwealth Bank of Australia v. Dalle Cort, [2015] Que. S.C. 41 (Queensland S.C.) (the Court awarded costs against the defendants and counterclaimants because, in part, “they should have known that they had no real defence to CBA’s claim or any legally sustainable counterclaim”); Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. (1988), 81 A.L.R. 397 (Australia Fed. Ct.), 401 (“it is appropriate to consider awarding ... “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law”); Colgate- Palmolive Co. v. Cussons Pty. Ltd., 1993 FCA 536 (Australia Fed. Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 279

Ct.), ¶ 24; 46 F.C.R. 225 (Australia Fed. Ct.), 233 (the Court stated that a full-indemnity costs award is warranted if a party engages in misconduct “that causes loss of time to the Court and to other parties”); Kuwait Asia Bank EC v. National Mutual Life Nominees Ltd., [1991] 3 N.Z.L.R. 457 (New Zealand P.C.), 460 (“If a party has acted unreasonably — for instance by pursuing a wholly unmeritorious and hopeless claim or defence — a more liberal award may well be made in the discretion of the Judge”) & 22 New York Codes, Rules and Regulations § 130-1.1(c)(1) (“conduct is frivolous if ... if it is completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law”). 136 Polar Ice Express Inc. v. Arctic Glacier Inc., 2009 ABCA 20 (Alta. C.A.), ¶ 25; 2009 ABCA 20 (Alta. C.A.), 301-02 (the Court awarded full-indemnity costs for the trial, in part, because the appellant’s witness was dishonest); FIC Real Estate Fund Ltd. v. Phoenix Land Ventures Ltd., 2016 ABCA 303 (Alta. C.A.), ¶¶ 7, 22 & 24 (the Court upheld an award of solicitor-client costs based, in part, upon the trial judge’s “[s]evere almost scathing adverse credibility findings”); Lavoie v. Wills, 2002 ABCA 240 (Alta. C.A.), ¶ 3; (2002), 312 A.R. 373 (Alta. C.A.), 374 (“The trial judge censured the appellant’s conduct and credibility at trial, and awarded solicitor-client costs”); Harnden v. Kosir (1995), 26 O.R. (3d) 588 (Ont. Gen. Div.), 592 (the Court awarded full indemnification costs against a defendant who burned down the plaintiff’s home and “lied in this proceeding in an attempt to avoid liability for it”) & Degmam Pty. Ltd. v. Wright (No. 2), [1983] 2 N.S.W.L.R. 354, 358 (Sup. Ct. 1983) (Austl.) (the Court ordered the defendant to pay costs on a full-indemnity basis in part, because “she so conducted herself in the proceedings, by multiplying allegation upon allegation, and by prevari- cating in the witness box, as grossly to prolong the litigation, thereby to cause the other parties to incur liability for solicitor and client costs far beyond what they could reasonably have expected to incur in litigation of genuine issues”). 137 Dor´e c. Qu´ebec (Tribunal des professions), 2012 SCC 12 (S.C.C.), ¶ 61; [2012] 1 S.C.R. 395 (S.C.C.), 428 (the Court adopted a commentator’s definition of incivility: “potent displays of disre- spect for the participants in the justice system, beyond mere rudeness or discourtesy”); Dondi Properties Corp. v. Commerce Savings and Loan Association, 121 F.R.D. 284 (U.S. Dist. Ct. N.D. Tex. 1988), 286 (“with alarming frequency, we find that valuable judicial and attorney time is consumed in resolving unnecessary contention and sharp practices between lawyers. Judges and magistrates of this court 280 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

are required to devote substantial attention to refereeing abusive litigation tactics that range from benign incivility to outright obstruc- tion”) & Unique Concepts, Inc. v. Brown, 115 F.R.D. 292 (U.S. Dist. Ct. S.D. N.Y. 1987), 293 & 294 (the Court sanctioned an attorney with a costs award to be paid personally for conduct that “was harassing wasteful, vexatious, and ruined the usefulness of the ... deposition. [The attorney’s conduct] ... was a sad and embarrassing display of unprofessionalism”). 138 An advocate’s obligation to zealously defend his or her client’s interest does not authorize professional misconduct that brings the profession and the administration of justice into disrepute. R. v. Lyt- tle, 2004 SCC 5 (S.C.C.), ¶¶ 43-44; [2004] 1 S.C.R. 193 (S.C.C.), 207 (an advocate who is engaged in the vitally important task of cross-examination has no right to harass the witness); Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130 (S.C.C.), 1200-01 (“Judges rely on commitments and undertakings given to them by counsel. Our whole system of administration of justice depends upon counsel’s reputation for integrity”); T. (E.) v. Rocky Mountain Play Therapy Institute Inc., 2016 ABCA 320 (Alta. C.A.), ¶ 18 (the Court ordered a self-represented litigant who accused another party and counsel of serious criminal acts, for no reason whatsoever, to pay costs on a full-indemnity basis); Bizon v. Bizon, 2014 ABCA 174 (Alta. C.A.), ¶ 84 [2014] 7 W.W.R. 713 (Alta. C.A.), 752 (the Court ordered a self-represented litigant who, without warrant, alleged that opposing counsel were obstructing justice and unethical and described a Queen’s Bench justice as dishonest to pay costs on a full- indemnity basis); College of Physicians & Surgeons (Alberta) v. H. (J.), 2009 ABQB 48 (Alta. Q.B.), ¶ 44; [2009] 7 W.W.R. 150 (Alta. Q.B.), 159 (“Dr. Ritchie is a person whose integrity is essential to his job. Making allegations of bias against a professional investigator is more serious than making allegations of bias against someone whose integrity is less critical to his work”); Groia v. Law Society of Upper Canada, 2016 ONCA 471 (Ont. C.A.), ¶ 119 (“Civility is not merely aspirational. It is a codified duty of professional conduct enshrined in the Conduct Rules and ... an essential pillar of the effective functioning of the administration of justice”); Vanderclay Development Co. v. Inducon Engineering Ltd. (1968), 1 D.L.R. (3d) 337 (Ont. H.C.), 344 (the Court ordered a plaintiff who, without any basis, alleged that the defendant had induced a solicitor the plaintiff had retained to breach the solicitor’s fiduciary duties to pay costs on a solicitor-and-client basis); McPhilemy v. Times Newspapers Ltd., [2001] EWCA Civ 933 (Eng. & Wales C.A. (Civil)), ¶ 29; [2001] 4 All E.R. 861 (Eng. & Wales C.A. (Civil)), 874 (the court noted that “to argue their case on Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 281

perversity must inevitably have brought the administration of justice into disrepute among right thinking people”); Simpson, Ex parte (1809), 33 E.R. 834 (Eng. Ch. Div.) 835 (the Court ordered the solicitor who drafted an affidavit containing a groundless allegation that another party had engaged in criminal behaviour “to pay the costs of the application, and all the costs, out of pocket, to be taxed as between solicitor and client”); P.C.R.Z. Investments Pty. Ltd. v. National Golf Holdings Ltd., [2002] VSCA 24 (Australia Vic. Sup. Ct.), n. 16 (the Court criticized a litigant who made “wild and contu- melious allegations”); Chambers v. Nasco, Inc., 501 U.S. 32 (U.S. C.A. 5th Cir. 1991), 76 (“Our [Federal Rules of Civil Procedure] ... permit sanctions [for blameworthy litigation conduct] because much of the conduct of the sort encountered here degrades the profession and disserves justice”) per Kennedy, J. & Kentucky Bar Ass’n v. Wal- ler, 929 S.W.2d 181 (U.S. Ky. S.C. 1996), 183 (the Court suspended a lawyer for six months who referred to a judge who had recused himself as an incompetent jurist). 139 T. (E.) v. Rocky Mountain Play Therapy Institute Inc., 2016 ABCA 320 (Alta. C.A.), ¶ 18 (the Court ordered a self-represented litigant who accused another party and counsel of serious criminal acts, for no reason whatsoever, to pay costs on a full-indemnity basis) & Bizon v. Bizon, 2014 ABCA 174 (Alta. C.A.), ¶ 84; [2014] 7 W.W.R. 713 (Alta. C.A.), 752 (the Court ordered a self-represented litigant who unjustifiably accused counsel of obstructing justice, lying in court and being unethical and a judge of being dishonest to pay costs on a full-indemnity basis). 140 Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham (2000), 138 O.A.C. 201 (Ont. C.A.), 236 (court- room civility is “of profound importance to the administration of justice and its standing in the eyes of the public”). 141 See Code, “Counsel’s Duty of Civility: An Essential Component of Fair Trials and an Effective Justice System”, 11 Can. Crim. L. Rev. 97 (2007). 142 Groia v. Law Society of Upper Canada, 2016 ONCA 471 (Ont. C.A.), ¶ 100 (“a presiding trial judge, in the exercise of his or her discretion, is empowered to take those lawful and reasonable steps that he or she concludes are necessary to control uncivil or other unacceptable conduct by all participants in open court, including advo- cates”) & Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham (2000), 138 O.A.C. 201 (Ont. C.A.), 245 (although the Court dismissed the plaintiff’s appeal against the trial judge’s determination that the defendant obstetrician was not 282 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

negligent, given the respondent’s oral submissions to the effect that they would not pursue the plaintiff for the $2.1 million costs award — no doubt because of the unprofessional conduct of defence counsel — the Court varied the cost order to relieve the plaintiff of any obligation to pay the defendants’ $2.1 million party-and-party costs award). 143 Petrotrade Inc. v. Texaco Ltd., [2002] 1 W.L.R. 947 (Eng. & Wales C.A. (Civil)), 949 (“The ability of the court to award costs on an indemnity basis ... should not be regarded as penal because orders for costs, even when made on an indemnity basis, never actually compensate a claimant for having to come to court to bring these proceedings. ... A claimant would be better off had he not become involved in court proceedings”) & Burridge v. Stafford, [2000] 1 W.L.R. 927 (Eng. & Wales C.A. (Civil)), 932 (“an award of indemnity costs is compensatory and not penal”). 144 [1995] 2 S.C.R. 1130 (S.C.C.), 1208. See also Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595 (S.C.C.), 645 (“Punitive damages are ... imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour”) (emphasis in original). 145 Parties who are either willing or unwilling participants in the litigation process are entitled to expect that the court will utilize a range of remedies, including full-indemnity costs orders to deter their ad- versaries from committing litigation misconduct in the portion of the litigation spectrum not yet complete and as a consequence for past blameworthy litigation conduct. College of Physicians & Surgeons (Alberta) v. H. (J.), 2009 ABQB 48 (Alta. Q.B.), ¶ 39; [2009] 7 W.W.R. 150 (Alta. Q.B.), 159 (“a chill effect is exactly what an award of solicitor and client costs is intended to do: discourage inappropriate conduct”); Dusik v. Newton (1984), 51 B.C.L.R. 217 (B.C. S.C.), 219 (the Court awarded solicitor-client costs to deter others from acting as the defendant did) & Vanderclay Development Co. v. Inducon Engineering Ltd. (1968), 1 D.L.R. (3d) 337 (Ont. H.C.), 344 (the court’s jurisdiction to award full-indemnity costs “does afford a real deterrent to persons who may be disposed to make wanton, scandalous and vicious charges against persons with whom they are in conflict”). 146 E.g. Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595 (S.C.C.), 663 (the jury awarded the plaintiff $1 million in punitive damages and the trial judge ordered the insurance company to pay the plaintiff $320,000 in solicitor-client costs); Leenen v. Canadian Broadcasting Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 283

Corp. (2001), 54 O.R. (3d) 612 (Ont. C.A.), 625 (the Court rejected the appellant’s argument that the contested burden to pay punitive damages and solicitor-and-client costs constituted “double” punishment: “The impact on the appellants may be the same but the fact is that the conduct in question may quite properly be the origin of both an award of ... punitive damages and an award of solicitor and client costs”); Harnden v. Kosir (1995), 26 O.R. (3d) 588 (Ont. Gen. Div.), 592-93 (the Court awarded punitive damages against a defendant who burned down the plaintiff’s home to punish the defendant and solicitor and client costs to indemnify the plaintiff for costs incurred “to recover their loss”) & Binnie v. Pacific Health Ltd., [2003] N.Z.C.A. 69 (New Zealand C.A.) (the Court awarded the plaintiff employee exemplary damages for the defendant employer’s flagrant and outrageous prelitigation misconduct and also ordered the defendant to pay eighty percent of the plaintiff’s lawyer’s fees and disbursements). See also Norberg v. Wynrib, [1992] 2 S.C.R. 226 (S.C.C.), 301 (McLachlin and L’Heureaux-Dˆub´e JJ. would have granted a drug dependant plaintiff taken advantage of by the defendant doctor punitive damages and solicitor and client costs; the majority ordered party-and-party costs throughout). 147 Jackson v. Trimac Industries Ltd. (1993), 138 A.R. 161 (Alta. Q.B.), 173 (“Where the positive misconduct of the party which gives rise to the action is so blatant and is calculated to deliberately harm the other party, then despite the technically proper conduct of the legal proceedings, the very fact that the action must be brought by the injured party to gain what was rightfully his in the face of an unreasonable denial is in itself positive misconduct deserving of indemnification whether punitive damages are awarded or not”); Beaver Lumber Co. v. 222044 Ontario Ltd. (1996), 5 C.P.C. (4th) 253 (Ont. Gen. Div.), 256 (“the issues of punitive damages and solicitor client costs are separate and the denial of an award of punitive damages does not preclude an award of solicitor and client costs throughout”); Gerula v. Flores (1993), 16 C.P.C. (3d) 362 (Ont. Gen. Div.), 365 (the Court ordered a surgeon to pay full indemnity costs up to the point in the litigation where he admitted that he operated on the wrong vertebra and had misled the plaintiff’s lawyer about his error even though no punitive damages were awarded) & Anderson v. Lawrence, 2013 NBQB 21 (N.B. Q.B.), ¶ 54 (the Court awarded the plaintiff solicitor-client costs because of the defendant’s prelitigation misconduct but declined to grant punitive damages). 148 Pacific Mobile Corp. v. Hunter Douglas Canada Ltd., [1979] 1 S.C.R. 842 (S.C.C.), 845 (“the Court should make use of its power to order costs payable by solicitors personally, in accordance with prin- 284 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

ciples which were fully stated by the House of Lords in Myers v. Elman, and need not be restated here”); Ridehalgh v. Horsefield, [1994] 3 All E.R. 848 (Eng. & Wales C.A. (Civil)), 856-57 (counsel who fail to perform as officers of the court may be sanctioned by a personal costs award); Myers v. Elman, [1940] A.C. 282 (U.K. H.L.), 319 per Lord Wright (“the Court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which he is engaged professionally”); 22 New York Codes, Rules and Regulations § 130-1.1(b) (“The court, as appropriate, may make such award of costs ... against either an attorney or a party to the litigation or both”); Richmond, “The Ethics of Zealous Advocacy: Civility, Candour and Parlor Tricks”, 34 Tex. Tech. L. Rev. 3, 18 (2003) & Arnold, “Ad Hominem Attacks: Possible Solu- tions for a Growing Problem”, 8 Geo. J. Legal Ethics 1075 (1995). 149 A costs award may be set aside if the trial judge erred in principle or made an award that is plainly wrong. Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 (S.C.C.), ¶ 27; [2004] 1 S.C.R. 303 (S.C.C.), 313. See also Walsh v. Mobil Oil Canada, 2008 ABCA 268 (Alta. C.A.), ¶ 111; (2008), 296 D.L.R. (4th) 178 (Alta. C.A.), 218- 19 (“An appellate court may interfere only if the trial judge made a palpable error in assessing the facts or erred in law by failing to apply, or misapplying, the appropriate criteria”); P.Simms v. Law Soci- ety, [2005] EWCA Civ 849 (Eng. & Wales C.A. (Civil)), ¶ 20 (“This court is normally reluctant to interfere with the judge’s exercising of discretion as to the basis on which costs are awarded”); Petrotrade Inc. v. Texaco Ltd., [2002] 1 W.L.R. 947 (Eng. & Wales C.A. (Civil)), 952 (Lord Woolf M.R. declined to set aside a costs award even though he disagreed with it because of its discretionary nature); McPhilemy v. Times Newspapers Ltd., [2001] EWCA Civ 933 (Eng. & Wales C.A. (Civil)), ¶ 7; [2001] 4 All E.R. 861 (Eng. & Wales C.A. (Civil)), 866-867 (“The court must resist the temptation to substitute its own view for that of the judge unless satisfied that his discretion has been exercised on a basis which is wrong in law; or that the conclusion which he has reached is so plainly wrong that his exercise of the discretion entrusted to him must be regarded as flawed”); P.C.R.Z. Investments Pty. Ltd. v. National Golf Holdings Ltd., [2002] VSCA 24 (Australia Vic. Sup. Ct.), ¶ 32 (“Generally speaking, an error of principle must be shown in the way the discretion was exercised or some substantial injustice must be established in the result allowed at.”) & Bradbury v. Westpac Banking Corp., [2009] NZCA 234 (New Zealand C.A.), ¶ 32; [2009] 3 N.Z.L.R. 400 (New Zealand C.A.), 411 (“the award will not be upset unless con- Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 285

trary to principle, as by adopting a wrong approach or disregarding a material factor, or wholly wrong”). 150 See Shier v. Fiume (1991), 6 O.R. (3d) 759 (Ont. Gen. Div.) (the Court ordered a party who knew, at the latest, after discoveries were concluded that his position was untenable to pay full-indemnity costs); Bradbury v. Westpac Banking Corp., [2009] NZCA 234, [2009] 3 N.Z.L.R. 400 (New Zealand C.A.) (the Court upheld a trial judge’s award of close to $1 million in full-indemnity costs against a plaintiff who should have known at the outset that his claim was without merit) & Oversea-Chinese Banking Corp. Ltd. v. Malaysian Kuwaiti Investment Co. SDN BHD, [2004] VSC 351 (Australia Vic. Sup. Ct.), ¶ 99 (“By the time the trial commenced the Defendant had received each Plaintiff’s Reply to its amended defence. It was provided with a written opening of the Plaintiffs. The weakness of the Defendant’s legal position which should long have been apparent was now spelt out in explicit terms”). 151 Goodhart, “Costs”, 38 Yale L.J. 849, 865 (1929) (“The purpose of the courts is to administer justice and not to referee a game between two players”). 152 Writing in 1927, a group of leading American judges and scholars asserted that “[n]either party should be permitted to tender or take issue upon any fact not honestly in controversy”. They lamented the current American practice: “The defendant, when he can do so without perjury, puts the plaintiff to the proof of any allegation regardless of whether he really denies or doubts its existence”. E. Morgan, Z. Chaffee, R. Gifford, E. Hinton, C. Hough, W. Johnston, E. Sunder- land & J. Wigmore, The Law of Evidence: Some Proposals for its Reform 2 & 3 (1927). See Foulis v. Robinson (1978), 92 D.L.R. (3d) 134 (Ont. C.A.), 142 (“Under our system defendants are entitled to put the plaintiff to the proof, and there is no obligation to settle an action ... The fact that the issue of liability was not seriously contested at trial, that the defendant did not give evidence, that he pleaded guilty to criminal negligence [in the operation of a motor vehicle], and that no evidence was called by the defendant and third party on the issues of liability and damages are not factors which, by themselves, merit punitive action in the award of costs”) & Goodhart, “Costs”, 38 Yale L.J. 849, 868 (1929) (“The English rules [The Rules of the Supreme Court, 1883 (in force October 24, 1883)] place this exorbitant cost on the party who unreasonably puts his opponent to the proof”). Values change. In response, rules change. When this happens, cases interpreting the old rules are of minimal value. Myers v. Defries (1880), 5 Ex. D. 180 (Eng. Exch.), 184 (speaking after the Supreme Court of Judicature Act, 1875, 38 & 39 Vict., c. 72 came 286 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

into effect, the Court opined that “the old law as to costs is gone”) & Shier v. Fiume (1991), 6 O.R. (3d) 759 (Ont. Gen. Div.), 763 (the Court noted that Foulis v. Robinson predated the new Rules of Civil Procedure that introduced provisions designed to disclose pre-trial the strength of an opponent’s case); Reid Minty v. Taylor, [2001] EWCA Civ 1723 (Eng. & Wales C.A. (Civil)), ¶ 13; (2001), [2002] 1 W.L.R. 2800 (Eng. & Wales C.A. (Civil)), 2804 (“Being a new procedural code, the ... [Civil Procedure Rules] are not to be taken as embodying or taking on board the baggage of the old rules; and generally speaking, although there are exceptions, most of the procedural cases decided under the ... [Rules of the Supreme Court] ... are not of relevance — or certainly not of central relevance — to an interpretation of these new rules”) & Baron v. Lovell, [1999] C.P.L.R. 630 (Eng. & Wales C.A. (Civil)), 640 “The whole thrust of the ... [Civil Procedure Rules] is to require the parties to behave reasonably towards each other in the conduct of litigation. The old antagonistic point scoring, which used to drag personal injury cases out and run up the costs, should now be at an end”). 153 Shier v. Fiume (1991), 6 O.R. (3d) 759 (Ont. Gen. Div.), 763 (the Court awarded full-indemnity costs against a litigant who knew that he had a hopeless case after discoveries concluded). 154 E.g., NMFM Property Pty. Ltd. v. Citibank Ltd., [2001] FCA 480 (Australia Fed. Ct.), ¶ 46; (2001), 109 F.C.R. 77 (Australia Fed. Ct.) (the plaintiff served six notices to admit facts before a seventy-two day trial commenced). 155 Olson v. New Home Certification Program of Alberta (1986), 69 A.R. 356 (Alta. Q.B.), 363 & 372 (the Court, without criticizing the plaintiff for failure to file a notice to admit facts, imposed solicitor- client costs because the defendant required the plaintiff to “prove major structural defects and other facts that should have been admitted, thus prolonging the trial”); Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd., [1987] 2 W.W.R. 75 (Alta. Q.B.), 80 & 81 (the trial judge, without criticizing the plaintiff for failure to file a notice to admit facts, awarded full-indemnity costs to the plaintiff, in part, because “it was apparent to me at the end of the trial that there was no serious issue of fact or law which required these lengthy, expensive proceedings”) & Gray v. Dougherty, 25 Cal. 266 (U.S. Cal. Sup. Ct. 1864), 281-82 (the Court concluded that the conduct of a litigant “warrant[ed] the conclusion that an express demand for further performance would have been fruitless”). See also Sidorsky v. CFCN Communications Ltd. (1997), 206 A.R. 382 (Alta. C.A.), 154 (“We are aware that a notice to admit is often not employed in suit for reasons particular to that suit. We do not suggest that failure to so use Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 287

the notice is improper in any way. It may well be that, on occasion, counsel conclude that the use of the notice is more troublesome than its value”). 156 Summary judgment is available if the moving party’s position is unassailable. A position is unassailable if the moving party’s prospects of success are very high and those of the nonmoving party very low. Access Mortgage Corp. (2004) Ltd. v. Arres Capital Inc., 2014 ABCA 280 (Alta. C.A.), ¶ 45; (2014), 584 A.R. 68 (Alta. C.A.), 78 (“A party’s position is unassailable if it is so compelling that the likelihood of success is very high.”) adopting Beier v. Proper Cat Construction Ltd., 2013 ABQB 351 (Alta. Q.B.), ¶ 61; (2013), 564 A.R. 357 (Alta. Q.B.), 374. See also Ghost Riders Farm Inc. v. Boyd Distributors Inc., 2016 ABCA 331 (Alta. C.A.), ¶ 11 & Stout v. Track, 2015 ABCA 10 (Alta. C.A.), ¶ 48; (2015), 62 C.P.C. (7th) 260 (Alta. C.A.), 278 per Wakeling JA (“The likelihood the moving party’s position will prevail is very high if the comparative strengths of the moving and nonmoving party’s positions are so disparate that the likelihood the moving party’s position will prevail is many times greater than the likelihood that the nonmoving party’s position will carry the day”). 157 Beier v. Proper Cat Construction Ltd., 2013 ABQB 351 (Alta. Q.B.), ¶ 67; (2013), 564 A.R. 357 (Alta. Q.B.), 376 (“the nonmoving party may be at risk of losing the summary judgment application if it fails to present a version of the facts that is inconsistent with that relied on by the moving party”). 158 See Chambers v. Nasco, Inc., 501 U.S. 32 (U.S. C.A. 5th Cir. 1991), 57 (the Court agreed with the District Court that the purchaser plaintiff in a specific performance suit could not be criticized for its failure to seek summary disposition of the dispute because of the un- cooperative conduct of the defendant vendor). 159 See Shier v. Fiume (1991), 6 O.R. (3d) 759 (Ont. Gen. Div.), 763. 160 See Polar Ice Express Inc. v. Arctic Glacier Inc., 2009 ABCA 20 (Alta. C.A.), ¶ 26; (2009), 446 A.R. 295 (Alta. C.A.), 302 (the Court suggested that the defendant’s failure “to give full and honest discovery” directly contributed to the excessive length of the trial) & Fiege v. Cornwall General Hospital (1979), 117 D.L.R. (3d) 152 (Ont. H.C.), 155 (the Court speculated that the failure of the defendant to produce a highly relevant document — the incident report — may have contributed to the inability of the parties to settle the liability issue). 161 1971. 288 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

162 Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 (S.C.C.), ¶ 26; [2004] 1 S.C.R. 303 (S.C.C.), 313 (“When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent ... costs on a solicitor-client basis are appropriate”); Animal Welfare International Inc. v. W3 International Media Ltd., 2016 BCCA 372 (B.C. C.A.), ¶ 46; (2016), 90 C.P.C. (7th) 215 (B.C. C.A.), 233 (“Special costs are an appropriate rebuke to allegations of fraud that are baseless, motivated by spite, vindictiveness, or other forms of ill-will”); Chaplin v. Sun Life Assurance Co. of Canada, 2004 BCSC 116 (B.C. S.C.), ¶ 28 (an award of special costs is appropriate if “examination of all circumstances show the allegations of fraud were unwarranted and completely unfounded”); Apotex Inc. v. Egis Pharmaceuticals (1990), 2 O.R. (3d) 126 (Ont. Gen. Div.), 130 (the Court awarded solicitor- and-client costs in an interlocutory injunction application because the applicant alleged fraud, deceit and conspiracy “without any acceptable evidentiary basis”); Watson v. Holyoake (1986), 15 C.P.C. (2d) 262 (Ont. H.C.), 268 (“A Court may exercise a discretion to deprive a successful plaintiff of costs in a situation where the successful plaintiff has made unfounded or unsubstantiated charges of fraud); P.C.R.Z. Investments Pty. Ltd. v. National Golf Holdings Ltd., [2002] VSCA 24 (Australia Vic. Sup. Ct.), n. 16 (“pleading fraud knowing it to be false”); Colgate-Palmolive Co. v. Cussons Pty. Ltd., 1993 FCA 536 (Australia Fed. Ct.), ¶ 24; (1993), 46 F.C.R. 225 (Australia Fed. Ct.), 233 (the Court stated that a full-indemnity costs award is warranted if a party knowingly falsely alleges fraud); Bradbury v. Westpac Banking Corp., [2009] NZCA 234 (New Zealand C.A.), ¶ 29; [2009] 3 N.Z.L.R. 400 (New Zealand C.A.), 410 (the Court adopted the Colgate-Palmolive protocol) & Fane v. Fane, 13 Ch. Div. 228, 231 (1879) (“The claim [gross breach of trust] which must have caused the greatest anxiety to the Defendant ... has been abandoned, and it is a matter of course that all the costs occasioned by these allegations should be paid by the Plaintiff”). 163 Olson v. New Home Certification Program of Alberta (1986), 69 A.R. 356 (Alta. Q.B.), 372 (“The conduct of the defendant that this court found particularly abhorrent and which should not be tolerated was the requirement imposed upon the plaintiff to prove major structural defects and other facts that should have been admitted”); Max Sonnenberg Inc. v. Stewart, Smith (Canada) Ltd., [1987] 2 W.W.R. 75 (Alta. Q.B.), 80 & 81 (the trial judge awarded full-indemnity costs to the plaintiff, in part, because “it was apparent to me at the end of the trial that there was no serious issue of fact or law which required Pillar Resource Services Inc. v. PrimeWest Energy Inc. McDonald J.A. 289

these lengthy, expensive proceedings ... [and that the defendants] were then contemptuous of the plaintiff in requiring the plaintiff to go to trial to get its money”); Shier v. Fiume (1991), 6 O.R. (3d) 759 (Ont. Gen. Div.) (the Court ordered a party to pay full indemnity costs because he knew his position was untenable); Noorani v. Calver, [2009] EWCA Civ 592 (Eng. Q.B.), ¶ 33 (the Court awarded the defendant his costs on a full-indemnity basis because the plaintiff’s case was “hopeless ... from the outset [and] ... the claimant knew it”); Farm Credit Canada v. Boss´e, 2014 NBCA 34, 419 N.B.R. (2d) 1 (N.B. C.A.) (the Court dismissed the appeal and ordered the appellant to pay costs on a solicitor-and-client basis because the grounds of appeal were frivolous); Bradbury v. Westpac Banking Corp., [2009] NZCA 234 (New Zealand C.A.), ¶ 24; [2009] 3 N.Z.L.R. 400 (New Zealand C.A.), 409, 410 (“an indemnity award may be made where a party persists with what proper consideration would have shown was a hopeless case”) & ¶ 29 (an indemnity award may be granted if the payee’s misconduct “causes loss of time to the court and to other parties”); Baulderstone Hornibrook Engineering Pty. Ltd. v. Gordian Runoff Ltd. (No. 2), [2009] NSWCA 12 (New South Wales C.A.), ¶ 4 (“a party should pay costs on an indemnity ... basis when it appears that an action (here an appeal) has been commenced or continued in circumstances where the moving party, properly advised, should have known that it had no chance of success”); Chaina v. Alvaro Homes Pty. Ltd., [2008] NSWCA 353 (New South Wales C.A.), ¶ 111 (the Court observed that “more recent case-law generally shows a tendency to grant indemnity costs orders more readily than was the case in the past. That may be seen to be an element of a broader policy directed to litigation of cases where there are no reasonable prospects of success”); P.C.R.Z. Investments Pty. Ltd. v. National Golf Holdings Ltd., [2002] VSCA 24 (Australia Vic. Sup. Ct.), n. 16-17 (the Court observed that “making assertions of facts which are patently groundless” and adopting a position that is “patently hopeless” exposes the malefactor to an enhanced costs award); Cosgrove v. Chevron Queensland Ltd., [2000] QCA 157 (Queensland S.C.), ¶ 9 (a full-indemnity costs award may be appropriate if a party adopts an unsupportable position); Commonwealth Bank of Australia v. Dalle Cort, [2015] Que. S.C. 41 (Queensland S.C.), ¶ 12 (the Court awarded costs against the defendants and counterclaimants because, in part, “they should have known that they had no real defence to CBA’s claim or any legally sustainable counterclaim”); Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. (1988), 81 A.L.R. 397 (Australia Fed. Ct.), 401 (“it is appropriate to consider awarding ... 290 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

“indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law”); Colgate- Palmolive Co. v. Cussons Pty. Ltd., 1993 FCA 536 (Australia Fed. Ct.), ¶ 24; (1993), 46 F.C.R. 225 (Australia Fed. Ct.), 233 (the Court stated that a full-indemnity costs award is warranted if a party engages in misconduct “that causes loss of time to the Court and to other parties”); Kuwait Asia Bank EC v. National Mutual Life Nominees Ltd., [1991] 3 N.Z.L.R. 457 (New Zealand P.C.), 460 (“If a party has acted unreasonably — for instance by pursuing a wholly unmeritorious and hopeless claim or defence — a more liberal award may well be made in the discretion of the Judge”) & 22 New York Codes, Rules and Regulations § 130-1.1(c)(1) (“conduct is frivolous if ... if it is completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law”). 164 Goodhart, “Costs”, 38 Yale L.J. 849, 872 (1929) (a defendant that “forces his opponent to prove facts which are not in dispute ... will have to pay, and pay heavily”). 165Pillar Resource Services Inc. v. PrimeWest Energy Inc., 2014 ABQB 317 (Alta. Q.B.) Steel Tree Structures Ltd. v. Gemco Solar Inc. 291

[Indexed as: Steel Tree Structures Ltd. v. Gemco Solar Inc.] Steel Tree Structures Ltd., Plaintiff/Appellant and Gemco Solar Inc., Green Edge Products Inc. and Jean Michel Aoun, Fovere Investments Inc., Paul Marsiglio, Darryl Abbott, Fovere Glenbarra Energy Fund IV Limited Partnership and Fovere Glenbarra Energy Fund IV Ltd., Defendants Ontario Superior Court of Justice (Divisional Court) Docket: Toronto 534/15 2016 ONSC 955 C. Horkins J. Heard: February 4, 2016 Judgment: February 8, 2016 Civil practice and procedure –––– Parties — Adding or substituting parties — Adding defendant –––– Plaintiff had supplied solar racks and ballast tray to be installed on roof of property as part of solar power system installed by roof tenant at property — In October 2013, plaintiff retained lawyers to register construction lien in amount of $200,709.52 against property — Lawyers then commenced action against owner and general contractor with respect to lien — Roof tenant posted security and lien was vacated — On lawyer’s advice, plaintiff consented to order dismissing lien action as against owner of property and ordering return of security posted by roof tenant — Plaintiff subsequently discovered that lawyers had failed to properly register lien because it failed to identify roof tenant in lien — Plaintiff was unable to recover monies owed to it, which it claimed was due to negligence or breach of contract by lawyers — Master denied plaintiff’s request to add lawyers and paralegal as defendants to its lien action as there was not common issue of law between proposed negligence action and breach of trust action — Plaintiff appealed from final order denying them leave — Appeal allowed — Leave granted to add lawyers and paralegal as defendants — Liability of lawyers was not contingent upon outcome of breach of trust claims — While success and recovery upon trust claims with respect to project would benefit lawyers, failure of breach of trust claim did not mean that lawyers were not liable to plaintiff — Requiring plaintiff to pursue lawyers in separate action would lead to multiplicity of proceedings as plaintiff’s contract and breach of trust claims would be subject of litigation in both actions and costs would be significantly increased. 292 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

Cases considered by C. Horkins J.: Haikola v. Arasenau (1996), 46 C.P.C. (3d) 292, 27 O.R. (3d) 576, 1996 Cars- wellOnt 259, [1996] O.J. No. 231 (Ont. C.A.) — referred to Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 2001 CarswellOnt 4133, 207 D.L.R. (4th) 492, 56 O.R. (3d) 768, 152 O.A.C. 201, [2001] O.J. No. 4567, 15 C.P.C. (5th) 235, [2001] O.T.C. 360 (Ont. C.A.) — referred to Plante v. Industrial Alliance Life Insurance Co. (2003), 2003 CarswellOnt 2961, 66 O.R. (3d) 74, 3 C.C.L.I. (4th) 274, 39 C.P.C. (5th) 323, [2003] O.J. No. 3034, [2003] O.T.C. 715 (Ont. Master) — distinguished Schembri v. Way (2012), 2012 ONCA 620, 2012 CarswellOnt 11632, 112 O.R. (2d) 241, 7 B.L.R. (5th) 1 (Ont. C.A.) — referred to Voutour v. Pfizer Canada Inc. (2008), 2008 CarswellOnt 4673, 64 C.P.C. (6th) 136, [2008] O.J. No. 3070 (Ont. S.C.J.) — referred to Wellwood v. Ontario Provincial Police (2010), 2010 ONCA 386, 2010 Cars- wellOnt 3521, 319 D.L.R. (4th) 412, 262 O.A.C. 349, [2010] O.J. No. 2225, 90 C.P.C. (6th) 101, 102 O.R. (3d) 555 (Ont. C.A.) — referred to Zeitoun v. Economical Insurance Group (2009), 2009 ONCA 415, 2009 Cars- wellOnt 2665, 73 C.C.L.I. (4th) 255, 307 D.L.R. (4th) 218, 73 C.P.C. (6th) 8, 96 O.R. (3d) 639, [2009] O.J. No. 2003, 257 O.A.C. 29 (Ont. C.A.) — referred to Statutes considered: Construction Lien Act, R.S.O. 1990, c. C.30 Generally — referred to Rules considered: Rules of Civil Procedure, R.R.O. 1990, Reg. 194 R. 1.04(1) — considered R. 5.02 — considered R. 5.04(1) — considered R. 5.04(2) — considered R. 26 — considered R. 26.01 — considered R. 26.02 — considered

APPEAL by plaintiff of Master’s refusal to add lawyers and paralegal as defendants to its lien action.

Karey Anne Dhirani, for Plaintiff / Appellant Brendan D. Bowles, for Respondents, Lorne Honickman, Robert Griffin, Ste- phen Barbier and McCague Borlack LLP Steel Tree Structures Ltd. v. Gemco Solar Inc. C. Horkins J. 293

C. Horkins J.:

1 The appellant, Steel Tree Structures Ltd., appeals the final order of Master Pope dated September 22, 2015. This order denied leave to amend the statement of claim to add the appellant’s prior lawyers and paralegal, Lorne Honickman, Robert Griffin, Stephen Barbier and Mc- Cague Borlack LLP as defendants. I will refer to the proposed defendants collectively as McCague Borlack.

Overview 2 The following is a summary of the facts as pleaded in the proposed amended statement of claim that was before Master Pope. 3 The appellant carries on business as a manufacturer and installer of light gauge structures. At the request of the defendant Gemco Solar Inc. (“Gemco”), the appellant supplied solar racks and a ballast tray to be installed on the roof of a property at 1450 Castlefield Avenue (“the Castlefield property), as part of a solar power system. The appellant states that it is owed $220,484.52 for the supply of the above material. 4 In October 2013, the appellant retained McCague Borlack to register a construction lien in the amount of $200,709.52 against the Castlefield property. 5 On October 21, 2013, McCague Borlack registered a construction lien against title to the Castlefield property on the appellant’s behalf (the “lien”). McCague Borlack then commenced an action against Gemco and 1450 Castlefield Avenue Limited (“1450”) with respect to the lien (the “lien action”). 1450 was the registered owner of the Castlefield property. 6 Pursuant to the lien, the appellant was seeking payment of monies that Gemco owed for the manufacture and supply of solar racks and ballast trays for a roof top solar power system installed by the roof tenant at the Castlefield property. 7 On November 15, 2013, the roof tenant posted security and the lien was vacated. McCague Borlack then recommended that the appellant consent to an order discharging the lien and dismissing the lien action as against the registered owner of the Castlefield property. In reliance upon McCague Borlack’s advice, the appellant consented to the order. 8 On February 25, 2014, Master Albert granted an Order, on consent, discharging the lien, dismissing the lien action as against the registered owner of the Castlefield property and ordering the return of the roof tenant’s security. 294 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

9 The appellant subsequently discovered that McCague Borlack had failed to properly register the lien because it failed to identify the tenant in the lien. 10 The appellant states that the failure of McCague Borlack to properly register the lien constituted negligence and/or a breach of contract. Alter- natively, if the lien was valid, McCague Borlack’s advice that the appellant consent to its discharge constituted negligent advice and/or a breach of contract. 11 The appellant has been unable to recover the monies owing to it for the materials supplied to the Castlefield project. It is alleged that if the lien had been properly registered against the tenant, the monies that the tenant paid into court would be available to satisfy any judgment in the appellant’s favour. 12 As a result of the failure of McCague Borlack to register the lien against the tenant, the appellant was required to pursue this action (also referred to as the breach of trust claim) against the existing defendants. It is alleged that after the lien was discharged, the monies that had been paid into court were diverted from the Castlefield property project to other purposes inconsistent with the trust provisions of the Construction Lien Act, R.S.O. 1990, c. C-30. 13 After the Master denied the appellant’s motion, it was necessary for the appellant to start a separate action against McCague Borlack in order to avoid a limitation period that was about to expire (Court File no. CV- 15-537691). The appellant proposes to discontinue this separate action if the appeal is successful and McCague Borlack are added as defendants to this action (Court File No. CV-14-501848).

The Master’s Decision 14 On September 21, 2015, Master Pope released a final Order denying the appellant’s motion to amend their statement of claim to add Mc- Cague Borlack and claim against them in negligence and breach of contract. In her reasons, Master Pope stated that it was not just in the circumstances to add McCague Borlack as defendants. The Master gave the following reasons: (1) The breach of trust action arises out of the alleged breach of contract where the appellant contracted with the existing defendants for the manufacture and supply of solar tracks and ballast trays to be installed on the roof of a property as part of a rooftop solar power system (the breach of trust claim). Steel Tree Structures Ltd. v. Gemco Solar Inc. C. Horkins J. 295

(2) The solicitors’ negligence claim against McCague Borlack arises from the appellant’s retainer with McCague Borlack LLP to pursue and register a construction lien against the existing defendants. The appellant alleges that McCague Borlack failed to properly register the lien as it failed to identify the tenant in the lien. (3) Dealing with the similarity between the two claims the Master stated: “the only similarity between the 2 claims is that they both arise out of the same transaction; however, with the distinction that the solicitor negligence claim arises out of the subsequent and distinctly transaction, being the registration of the lien.” (4) There is “not a common issue of law” between the proposed negligence action and the breach of trust action. (5) The breach of trust action can proceed to trial without the negligence action being joined as nothing in the breach of trust action hinges on the alleged negligence of the McCague Borlack. (6) The appellant is within its right to issue a separate action against McCague Borlack at any time. (7) To add McCague Borlack to the breach of trust action and join the negligence claim with the breach of trust claim will cause delay and possible non-compensatory expense. If the amendment is granted there will be delay for McCague Borlack to deliver a defence and make productions and “get up to speed”. The trial time will be doubled with each group of defendants having no interest in the other claim. All defendants will suffer the added expense and delay of having to sit through a trial involving two different claims and these expenses and the delay may never be recovered. (8) The liability of McCague Borlack is contingent on the appellant obtaining judgment in the breach of trust action, creating the possibility that the solicitors’ negligence action would be rendered moot if the appellant did not succeed in its action against the existing defendants. 15 The appellant states that the Master “incorrectly applied the legal test, committed errors in principle and made palpable and overriding errors of fact” in denying the motion to add McCague Borlack as defendants.

Standard of Review 16 The standard of review in an appeal from the order of a master is the same as that for an appeal from an order of a judge: correctness for an 296 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

error of law, palpable and overriding error for an error of fact, and correctness or palpable and overriding error for a question of mixed fact and law, depending on whether there is an extricable legal principle (see Zeitoun v. Economical Insurance Group, 2009 ONCA 415 (Ont. C.A.) at para. 1; Wellwood v. Ontario Provincial Police, 2010 ONCA 386 (Ont. C.A.) at para. 28).

Analysis 17 The Master acknowledges that the motion was brought pursuant to rules 26.02 and 5.04(2). However there is no clear articulation of the test that the Master applied. 18 McCague Borlack acknowledges that the test is not set out in the reasons, but says that when the reasons are considered it is apparent that the Master applied the correct test. 19 Before considering the parties’ positions, it is important to review the test that applies on a motion under rules 26 and 5.04(2). 20 Rule 26 deals with amendments to a pleading. A properly framed pleading that is tenable at law “shall” be allowed unless it results in prejudice that cannot be addressed in costs or an adjournment. It states as follows: 26.01 On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. 21 The onus lies upon the defendant to show non-compensable prejudice under the rules. Under Rule 26, it is an error in principle for the court to refuse an amendment in the absence of prejudice that could not be addressed with costs or an adjournment. (see Haikola v. Arasenau, [1996] O.J. No. 231 (Ont. C.A.) at para.4). 22 Rule 5.04(2) is subject to the same legal tests as rule 26.01 but the Court retains discretion to refuse to add a party based upon principles of fairness and judicial efficiency. The rule states: 5.04 (1) . . . (2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. 23 In Plante v. Industrial Alliance Life Insurance Co., [2003] O.J. No. 3034 (Ont. Master), Master MacLeod set out the test for adding a party Steel Tree Structures Ltd. v. Gemco Solar Inc. C. Horkins J. 297

under rule 5.04(2). The following summary of the test is consistent with the extensive judicial authority concerning the test: 27 The tests for adding a party under rule 5.04(2) may therefore be stated as follows: a) The proposed amendment must meet all of the tests under Rule 26.01. b) Joinder should be appropriate under Rule 5.02(2) or required under Rule 5.03. The addition of the parties should arise out of the same transaction or occurrence (Rule 5.02(2)(a)), should have a question of law or fact in common (Rule 5.02(2)(b)), or the addition of the party should promote the convenient administration of justice (Rule 5.02(2)(e)). Ad- ding a party will be particularly appropriate if it is unclear which of the original defendant or the proposed defendant may be liable (Rules 5.02(2)(c) or (d)), or if it is necessary that the proposed defendant be bound by the outcome of the proceeding or his or her participation is otherwise necessary to allow the court to adjudicate effectively (Rule 5.03(1)). c) Joinder should not be inappropriate under Rule 5.03(6) or 5.05. The addition of a party should not unduly delay or complicate a hearing or cause undue prejudice to the other party. In a case-managed proceeding, it may also be appropriate to withhold consent if it will cause significant disruption to the court-ordered schedule: Belsat Video Marketing Inc. v. Astral Communications Inc. (1999), 86 C.P.R. (3d) 413, 118 O.A.C. 105 (C.A.). d) Addition of a party will not be permitted if it is shown to be an abuse of process. Abuse of process will exist where the addition of a party is for an improper purpose such as solely to obtain discovery from them, to put unfair pressure on the other side to settle, to harass the other party or for purely tac- tical reasons. National Trust Co. v. Furbacher, [1994] O.J. No. 2385 (QL) (Gen. Div.); MacRae v. Lecompte (1983), 143 D.L.R. (3d) 219, 32 C.P.C. 78 (Ont. H.C.J.). [Footnote omitted] 24 The initial question for the court to ask under rules 26 and 5.04(2) is whether the proposed defendant would suffer non-compensable prejudice. While under rule 5.04(2), the court has the discretion to deny the amendment in the absence of non-compensable prejudice, such discretion should not be invoked often. Added complication to the action and increased work and legal expense is not the type of non-compensable 298 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

prejudice envisioned by rules 26 and 5.04(2) (see Voutour v. Pfizer Canada Inc., [2008] O.J. No. 3070 (Ont. S.C.J.) at para. 21; Mazzuca v. Silvercreek Pharmacy Ltd., [2001] O.J. No. 4567 (Ont. C.A.) at paras. 25, 30 and 84; Schembri v. Way, 2012 ONCA 620 (Ont. C.A.) at paras. 25-26 and 42-44). 25 I find that the Master erred in refusing to add McCague Borlack as defendants to this action. For the reasons set out below, the amendment to the pleading to add McCague Borlack should have been permitted. Accordingly I allow the appeal. 26 While the Master does not clearly articulate the test she applied, the reasons reveal her consideration of some of the essential elements of the test. In my view, she erred in law in applying the test and misappre- hended the facts. The latter is a palpable and overriding error. 27 The starting point for the test under rules 26 and 5.04(2) is whether adding McCague Borlack will result in non-compensable prejudice. The Master found that adding McCague Borlack “will cause delay and possible non-compensatory expense” as follows: If the amendment is granted there will be delay for [McCague Borlack] to deliver a defence, make productions and get up to speed. The trial time will be double essentially with each group of Defend- ants having no interest in the other claim. The added expense of having to sit through a trial involving 2 different claims may never be recovered, not to mention the lost time and expense of each Defen- dant to sit through the trial of the entire action when their only interest is in one part of it. 28 This consideration of non-compensable prejudice was an error in law. First, the Master had no evidence of non-compensable prejudice. To say that there was “possible non-compensatory prejudice” was speculation. The onus is on the proposed defendant to prove non-compensable prejudice. The affidavit that McCague Borlack filed on the motion did not discuss or allege any form of prejudice. The existing defendants and the others that were added on his motion did not complain of any prejudice if McCague Borlack was added. Second, the type of prejudice that the Master speculated about, is not the type of non-compensatory prejudice that is envisioned by rules 26 and 5.02. As Justice Feldman stated in Schembri v. Way, 2012 ONCA 620 (Ont. C.A.) at para.44: 44 The trial judge also found that to join the Way Family Trust would unduly complicate the action and cause significant prejudice to the Trust in having to produce documents and incur accounting and legal expenses. However, this is not the type of prejudice envi- Steel Tree Structures Ltd. v. Gemco Solar Inc. C. Horkins J. 299

sioned by the rule. Unfortunately, everyone involved in litigation must endure the time and expense involved in its procedures. In any event, the plaintiffs were not seeking to add a party late in the litigation but at a fairly early stage before examinations and production. 29 While the court has the discretion to deny the amendment even in the absence of non-compensable prejudice, such discretion should not be invoked often. As the court of Appeal stated in Schembri v. Way at para. 25 “amendments to add parties should be presumptively approved, unless there is abuse of the court process or non-compensable prejudice”. In Schembri v. Way, the Court allowed the defendants to be added for the same factual reasons that exist in this case. At para. 26 the court stated: 26 There is neither an allegation of prejudice nor a limitation period issue here, and the action is at an early stage. The plaintiffs could commence a new action against the proposed defendants and then seek to join it with the existing action. The procedure of adding parties to the existing action circumvents the costly and time-consuming process involved in that procedure. 30 When the Master exercised her discretion to refuse to add McCague Borlack, this was contrary to test for adding parties and contrary to the principles of fairness and judicial efficiency. Following the test as articu- lated in Plante, it is clear that the amendment ought to have been allowed. 31 This is not a case where a limitation period has expired against the potential defendant. It is also not a case where the action is about to go to trial. The existing action is at the pleadings stage. It is agreed that the proposed pleading sets out a claim that is tenable at law. There is no basis for suggesting that the addition of McCague Borlack as defendants is an abuse of process. 32 As the Master stated, the breach of trust claim and the proposed solicitor’s negligence claim against McCague Borlack “both arise out of the same transaction”. It is admitted that there are questions of fact in common between the claims. McCague Borlack has an interest in the appellant successfully pursuing the existing defendants for recovery of monies that are owed to it. The breach of trust claim is the appellant’s effort to mitigate the alleged damages that flow from the alleged negligence of McCague Borlack. McCague Borlack argues that the appellant has a duty to mitigate its losses and clearly has an interest in how this mitigation proceeds. 300 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

33 The Master stated that any liability of McCague Borlack is contingent upon the appellant obtaining a judgment in the breach of trust action and for this reason there is a possibility that the solicitor’s negligence action would be rendered moot. This assumption is not reflected in the pleadings. It was an error in fact. The Master has incorrectly characterized the facts pleaded. This goes to the heart of the appellant’s claim for damages against McCague Borlack and is a palpable and overriding error. To the extent that the Master was stating a principle of law, this was wrong. 34 The liability of McCague Borlack is not contingent upon the outcome of the breach of trust claims. While success and recovery upon the trust claims with respect to the Castlefield project would benefit McCague Borlack, the failure of the breach of trust claim does not mean that Mc- Cague Borlack is not liable to the appellant. The appellant claims that the lien was improperly registered whether or not the breach of trust claim action succeeds. It alleges that all costs associated with the lien action were wasted and it has been forced to pursue a complex breach of trust action to attempt to recover its damages given the loss of its lien rights. The increased litigation costs will be claimed as consequential damages against McCague Borlack irrespective of the outcome of the breach of trust claims. If the appellant is unsuccessful on all breach of trust claims, but succeeds on its contract claim with respect to the Castlefield Project, McCague Borlack would be liable for damages if it is found to have been negligent or breached its contract with the appellant. 35 If McCague Borlack is not added to this action and the appellant is left to pursue McCague Borlack in a separate action, the appellant’s contract and breach of trust claims will be the subject of litigation in both actions and costs will be significantly increased. In addition, the appellant will need to lead evidence regarding the conduct and outcome of the breach of trust action in the solicitor’s negligence action, to establish its mitigation efforts and the reasonableness of its conduct in the breach of trust action. Such a multiplicity is to be avoided because it creates a risk of inconsistent or contradictory findings by the court on the same factual and legal issues. Indeed McCague Borlack’s counsel confirmed their position during this appeal: they are not bound by the findings of fact in the breach of trust action if they are not added as defendants. 36 The effect of the Master’s decision necessitated the issuance of a separate action against McCague Borlack to avoid the expiration of a limitation period. The Master accepted that the appellant had the right to issue Steel Tree Structures Ltd. v. Gemco Solar Inc. C. Horkins J. 301

this action and stated “there is a good likelihood that the action would be stayed pending the outcome of the trust action.” 37 Finally, the effect of the Master’s decision is contrary to rule 1.04(1) provides: These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. 38 Rule 1.04(1) is honoured by adding McCague Borlack as defendants to this action. To the extent that there are issues in this action that they have no interest in, they will be able to limit their participation accordingly. 39 This raises the question of what to do with the separate action that the appellant had to commence against McCague Borlack (Court File No. CV-15-537691). During the hearing of the appeal, the parties agreed that if the appellant is successful on this appeal the separate action commenced against McCague Borlack shall be discontinued and McCague Borlack shall be added as defendants to the breach of trust action effective the date of the motion before the Master (July 29, 2015). The appellant and McCague Borlack do not want consolidation of the two actions. 40 For the reason set out above, the appeal is granted. The order of Master Pope dated September 22, 2015, as it relates to the dismissal of the appellant’s motion seeking leave to add McCague Borlack LLP, Lorne Honickman, Robert Griffin and Stephen Barbier as defendants to the action CV-14 501848 is set aside. 41 Leave is granted to the appellant to add McCague Borlack LLP, Lorne Honickman, Robert Griffin and Stephen Barbier as defendants to action CV-14-501848 and amend the Statement of Claim to add the claims against the said proposed defendants as of the date of the motion on July 29, 2015. 42 As agreed, Court File No. CV-15-537691 shall be discontinued after McCague Borlack LLP, Lorne Honickman, Robert Griffin and Stephen Barbier are added as defendants to action CV-14-501848 43 The parties have agreed on the costs of this appeal. The costs of the appellant are fixed at $10,000 all-inclusive payable by McCague Borlack LLP, Lorne Honickman, Robert Griffin and Stephen Barbier. Appeal allowed. 302 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

[Indexed as: Technicon Industries Ltd. v. Woon] Technicon Industries Ltd. (Plaintiff) and Chin Fong Woon (Defendant) British Columbia Supreme Court Docket: Terrace 18192 2016 BCSC 1543 Fitzpatrick J. Heard: May 3-6, 9-12, 2016 Judgment: August 23, 2016 Contracts –––– Construction and interpretation — Miscellaneous –––– Plain- tiff T Ltd. hired defendant CW as estimator — There was no written employment agreement — CW asserted that he agreed to construct house for him as enticement for him to accept offer of employment — Parties disagreed as to financial terms on which house was to be built — T Ltd. asserted monies remained owing under cost-plus agreement — CW asserted there were deficiencies in construction of house and construction was not complete by deadline — CW ordered T Ltd. off job site — After construction issues came to head, T Ltd. dismissed CW from employment — T Ltd. brought action seeking to recover amount owing — Action allowed — Amount owing under contract to T Ltd. by CW was $193,272.89, which included credit to CW for deficiencies — There was contract to build house on cost-plus basis — CW created written contract in attempt to support position — CW altered contract with objective of removing interest provision and making other alterations more favourable to him — CW removed T Ltd.’s copy of interest contract from office file — Contract was such that T Ltd. could construct house on cost-plus labour and materials agreement with anticipated construction cost of $350,000 — No firm agreement was reached on construction schedule and payment schedule — Parties agreed house would be constructed within reasonable time and CW would make reasonable payments from time to time — Parties agreed that no interest would be payable by CW under contract. Labour and employment law –––– Employment law — Termination and dismissal — Termination of employment by employer — What constituting just cause — Incapacity to perform work — Incompetence and employer dissatisfaction –––– Plaintiff T Ltd. hired defendant CW as estimator — There was no written employment agreement — Parties disagreed as to financial terms on which house was to be built — T Ltd. asserted monies remained owing under cost-plus agreement — CW asserted it was fixed-price contract — CW asserted there were deficiencies in construction of house and construction was no com- Technicon Industries Ltd. v. Woon 303

plete by deadline — CW ordered T Ltd. off job site — After construction issues came to head, T Ltd. dismissed CW from employment — CW altered interest contract with objective of removing interest provision and making other alterations more favourable to him and removed T Ltd.’s copy of interest contract from office file — CW brought action seeking damages for wrongful dismissal — Action dismissed — T Ltd. had just cause to dismiss CW — CW was dismissed because of T Ltd.’s dissatisfaction with amount owing by CW relating to construction of house and growing mistrust of CW, which was not just cause — CW’s actions in accessing important documents relevant to their relationship and removing and then altering interest contract was sufficiently grave so as to justify dismissal — T Ltd. trusted CW and CW took advantage of that trust and breached fundamental aspect of relationship to serve T Ltd. faithfully, honestly and diligently. Cases considered by Fitzpatrick J.: Bradshaw v. Stenner (2010), 2010 BCSC 1398, 2010 CarswellBC 2652, [2010] B.C.J. No. 1953 (B.C. S.C.) — referred to Bradshaw v. Stenner (2012), 2012 BCCA 296, 2012 CarswellBC 1936, 78 E.T.R. (3d) 41, 33 B.C.L.R. (5th) 45, 18 R.P.R. (5th) 184, 325 B.C.A.C. 107, 553 W.A.C. 107 (B.C. C.A.) — referred to Bradshaw v. Stenner (2013), 2013 CarswellBC 549, 2013 CarswellBC 550, 447 N.R. 400 (note), 341 B.C.A.C. 320 (note), 582 W.A.C. 320 (note), [2012] S.C.C.A. No. 392 (S.C.C.) — referred to Browne v. Dunn (1893), 6 R. 67 (U.K. H.L.) — referred to Carr v. Fama Holdings Ltd. (1989), 40 B.C.L.R. (2d) 125, 63 D.L.R. (4th) 25, [1990] 1 W.W.R. 264, 45 B.L.R. 42, 28 C.C.E.L. 30, 1989 CarswellBC 187, [1989] B.C.J. No. 1888 (B.C. C.A.) — considered Dopf v. Royal Bank (1998), 156 D.L.R. (4th) 56, 1998 CarswellBC 86, 102 B.C.A.C. 52, 166 W.A.C. 52, 33 C.C.E.L. (2d) 208, 46 B.C.L.R. (3d) 66, [1998] 6 W.W.R. 565, [1998] B.C.J. No. 87 (B.C. C.A.) — considered Durand v. Quaker Oats Co. of Canada Ltd. (1990), 32 C.C.E.L. 63, 45 B.C.L.R. (2d) 354, 1990 CarswellBC 100, [1990] B.C.J. No. 725 (B.C. C.A.) — referred to McKinley v. BC Tel (2001), 2001 SCC 38, 2001 CarswellBC 1335, 2001 Car- swellBC 1336, 9 C.C.E.L. (3d) 167, 200 D.L.R. (4th) 385, 2001 C.L.L.C. 210-027, 91 B.C.L.R. (3d) 1, [2001] 8 W.W.R. 199, [2001] S.C.J. No. 40, 271 N.R. 16, 153 B.C.A.C. 161, 251 W.A.C. 161, [2001] 2 S.C.R. 161, REJB 2001-24834, 2001 CSC 38 (S.C.C.) — considered McTavish v. MacGillivray (1997), 28 M.V.R. (3d) 235, 1997 CarswellBC 1500, 38 B.C.L.R. (3d) 306, [1997] B.C.J. No. 1719 (B.C. S.C.) — considered Tower Waterproofing v. Mondiale Development Ltd. (2013), 2013 BCSC 1772, 2013 CarswellBC 2911, 26 C.L.R. (4th) 1 (B.C. S.C.) — referred to Wallace v. United Grain Growers Ltd. (1997), 152 D.L.R. (4th) 1, 219 N.R. 161, 1997 CarswellMan 455, 1997 CarswellMan 456, [1997] S.C.J. No. 94, 304 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

123 Man. R. (2d) 1, 159 W.A.C. 1, 97 C.L.L.C. 210-029, [1997] 3 S.C.R. 701, 36 C.C.E.L. (2d) 1, 3 C.B.R. (4th) 1, [1999] 4 W.W.R. 86, [1997] L.V.I. 2889-1, [1997] A.C.S. No. 94 (S.C.C.) — followed Statutes considered: Employment Standards Act, R.S.B.C. 1996, c. 113 Generally — referred to s. 21(1) — considered s. 63(2)(a) — considered Rules considered: Supreme Court Civil Rules, B.C. Reg. 168/2009 App. B, s. 2(2)(b) — referred to

ACTION by T Ltd. seeking to recover amount owing; ACTION by CW seeking damages for wrongful dismissal.

Coady B. MacEachern, A. Thomas (A/S), for Plaintiff Matthew J. Mazurek, for Defendant

Fitzpatrick J.: INTRODUCTION 1 This action involves a construction dispute and a wrongful dismissal claim. While they might, on the surface, appear to be disparate claims, these two claims are very much intertwined. 2 The plaintiff, Technicon Industries Ltd. (“Technicon”), is a construction company. In March 2012, the defendant Chin Fong Woon (“Mr. Woon”) was hired by Technicon as an estimator. Mr. Woon says that Technicon agreed to construct a house for him in Terrace as an enticement for him to accept this offer of employment. Technicon says that it was not an enticement but that it did later agree to build a house for Mr. Woon as a perk of his employment. 3 In mid-2012, construction of Mr. Woon’s house at 5116 Coho Place, Terrace, B.C. (the “House”) began. 4 By late 2012/early 2013, various disputes between the parties arose, principally relating to Technicon’s requests for payment of construction costs and Mr. Woon’s refusal or inability to pay them. Ultimately, the parties disagreed as to the financial terms upon which the House was to be built; Technicon asserted that monies remain owing under the cost- plus agreement; Mr. Woon asserted that he had a fixed-price contract. In addition, Mr. Woon argued that there were numerous deficiencies in the Technicon Industries Ltd. v. Woon Fitzpatrick J. 305

construction of the House, and that construction was not complete by the agreed-upon deadline of January 1, 2013. 5 In April 2013, after the construction issues came to a head, Mr. Woon was dismissed from his employment. He alleges that he was terminated by Technicon without cause and without notice. Technicon asserts that it had cause for dismissal. Mr. Woon seeks damages for what he describes as the wrongful dismissal, including aggravated damages.

BACKGROUND FACTS 6 Technicon is in the construction business. It works on commercial and residential projects and also does restoration work. Technicon does business in Terrace, Kitimat, Prince Rupert and the surrounding areas. In 2012/early 2013, Technical had about 30 employees. Technicon does both small and large jobs, typically 50-100 jobs per year. 7 Technicon is a family business. At the relevant time in 2012/early 2013, Richard Van Genne (“Mr. Van Genne”) and his son-in-law, An- drew Contumelias (“Mr. Contumelias”), were equal partners in Technicon. Mr. Van Genne later retired in April 2013. Mr. Van Genne’s son, Brandon Van Genne (“Brandon”), is now an owner in the business. 8 In 2012, Mr. Van Genne and Mr. Contumelias both ran the business and oversaw the office and operations. On a high level, Mr. Contumelias was involved in many aspects of the business including estimating and project management. Mr. Van Genne was not a tradesperson but, rather, a business manager of Technicon. 9 Sometime before the spring of 2012, Technicon decided to hire an estimator/project manager. Mr. Contumelias advertised the position on the internet. 10 Mr. Woon was born in Malaysia. He appears to have had extensive experience working in Singapore and Indonesia since 1996. He worked as a project manager on some large construction projects in Southeast Asia. His most recent experience in Singapore was working as a senior quantity surveyor in 2009/2010. 11 Mr. Woon and his wife, Wee-Kee Chong, immigrated to Canada in September 2010. He started looking for work in Canada in his field commencing in 2011 but was unsuccessful. 12 Mr. Woon, who was living in the Lower Mainland at the time, responded to Technicon’s online advertisement. In March 2012, he and his wife were flown up to Terrace for an interview. This visit also involved a 306 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

one-week trial, where Mr. Woon was asked to perform one task in terms of pricing a house that had burned down. There were no issues in this trial period in terms of Mr. Woon’s performance. Mr. Van Genne recalls seeing his resume and being surprised that someone with Mr. Woon’s experience, which he considered impressive, would be looking at a position at a small construction firm in Terrace. 13 Mr. Woon says that on the first day after their arrival, Mr. Van Genne took him and his wife on a drive in the Bench area of Terrace. Mr. Woon says that Mr. Van Genne pointed to a house and said that if Mr. Woon wanted to stay in Terrace, Technicon could build a house like that for him for less than $200,000. Mr. Woon and Mr. Van Genne did not enter the home to view the interior. 14 While he was in Terrace, Mr. Woon was offered the job. Mr. Woon said that he needed time to think about it. 15 In the meantime, Mr. Woon and his wife returned to Vancouver. In considering the employment offer, Mr. Woon still had in mind what he called Mr. Van Genne’s “offer” of building him a house. Eventually, Mr. Woon did accept the job offer. Mr. Woon’s job responsibilities included reviewing potential jobs, measuring and pricing toward developing a quote for bidding purposes, and if Technicon got the job, working with the employees to finish the job. 16 Mr. Contumelias says that the offer was a yearly salary of $55,000 plus benefits, a company vehicle for business and personal use, use of a fuel card and payment of work-related expenses such as travel costs. This is somewhat contrary to Technicon’s letter of April 12, 2012 which states that Mr. Woon was employed as an estimator with a monthly salary of $5,000 and with no probationary period. This would put his yearly salary at $60,000. I accept that $60,000 was his yearly salary. 17 Mr. Woon started his employment on March 5, 2012, which I take to be the date of the initial interview. Mr. Woon says that he and Ms. Chong moved to Terrace in April 2012. Upon arriving in Terrace, Mr. Woon and Ms. Chong moved into an apartment on Walsh Street. They later moved to an apartment on Scott Street. 18 There is no written employment agreement. Technicon Industries Ltd. v. Woon Fitzpatrick J. 307

CONSTRUCTION CONTRACT ISSUES 19 The central issue in this litigation is whether the parties entered into a contract by which Technicon would build the House for Mr. Woon and, if so, what the terms of that contract are. 20 For the reasons that follow, I accept the evidence of Technicon that there was a contract to build the House on a cost-plus basis. I completely reject the evidence of Mr. Woon.

(a) The Contract Documentation 21 The parties agree that, despite the earlier discussions between Mr. Woon and Mr. Van Genne, no agreement was in place prior to Mr. Woon coming back to Terrace to begin his employment. Mr. Contumelias’ evidence, which I accept, supports that Technicon did not agree to build the House for Mr. Woon as an enticement for accepting employment with Technicon. 22 Mr. Woon states that soon after he and his wife arrived, they began looking for a lot. They eventually found the lot on Coho Place and pur- chased it for $60,000. Mr. Woon states that he and his wife found the plans for the House and agreed on a design. 23 Mr. Woon says that he showed these plans to Mr. Van Genne and Mr. Contumelias and they confirmed that Technicon could build the home for less than $200,000. He asserts that Technicon agreed to build the House for a fixed price of $168,950 plus tax. Mr. Woon then says that he phoned Shivjeet Mann, his banker from Royal Bank of Canada (“RBC” or the “Bank”), and advised that he only needed financing of $260,000 (including the lot cost of $60,000). 24 Mr. Contumelias’ recollection of these events is somewhat fuzzy but he assumes that Mr. Woon approached Technicon after Mr. Woon started at the company. He states that Technicon would not voluntarily have made that offer. He thinks Mr. Woon approached Technicon sometime after he started house or lot hunting in Terrace after his arrival. In any event, it is agreed that, at some point, Mr. Woon and Mr. Contumelias began talking about the possibility of Technicon building a house for Mr. Woon. Technicon had done so for employees in the past so this was not a new idea. Both Mr. Van Genne and Mr. Contumelias considered such a project as a way to help their employees. 25 Mr. Contumelias says that Technicon would normally have waited a longer period of time before agreeing to build a house for a new em- 308 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

ployee. In any event, he acknowledges that Technicon did agree to do so after only a few months so as to help their new employee, Mr. Woon. 26 Mr. Contumelias’ comment is consistent with Mr. Woon’s own evidence to the effect that Technicon agreed to help him out and build the House “if I stay in Terrace”. By all accounts this was a generous offer, as it is obvious that Mr. Woon had not “stayed” in Terrace for any length of time and had only just arrived in April 2012, shortly before these contractual arrangements were made. 27 There are two written contracts being asserted here and two separate versions of one of them. If the evidence that I relate below seems confusing, that is because it is. At the end of the day, in my view, little can be taken from any of these “contracts” beyond a consideration of the credibility issues that arise in relation to Mr. Woon. 28 Mr. Woon says that his wife insisted on having a written contract with Technicon confirming the fixed price of $168,950 based on the plans Mr. Woon showed Technicon. The only written evidence to which Mr. Woon points is a letter dated November 6, 2012 on Technicon letter- head addressed to Mr. Woon at his Scott Avenue address. This document refers to “Scope for New Home Construction” and lists the supply and installation of a large number of items and also includes a price breakdown of various items indicating a total of $168,950. I will call this the “Woon Contract”. 29 This document is not signed by anyone. It does bear a stamp on the second page with the name and address of Technicon, which Mr. Woon alleges was put there by Mr. Contumelias. Mr. Contumelias has no idea where this November 6, 2012 document came from or what it was for. He denies that it relates to the House. Mr. Contumelias was not cross- examined on the stamp found in one copy of the Woon Contract put into evidence. 30 Mr. Woon has no explanation for his assertion that this document - the Woon Contract - dated November 6, 2012, was given to him in May 2012 as his “contract”. He says he was focused on the total cost, not the date. 31 I do not accept Mr. Woon’s evidence concerning the Woon Contract. If true, this lackadaisical approach to recording contract terms is completely at odds with Mr. Woon’s other evidence about his careful attention to contract details in the large construction projects that he managed or estimated while in Southeast Asia. He purports to have been consistently aware of and attuned to all contract details in his employment. In- Technicon Industries Ltd. v. Woon Fitzpatrick J. 309

deed, he stated that he introduced Technicon to the ISO standards, which are international standards that, in part, address how to fill in contract documents properly. In re-direct, Mr. Woon confirmed that most of the contracts in his previous employment were in English so there are no language issues that may have given rise to confusion here. 32 There is another alleged written contract to be considered, of which there are two versions. 33 Technicon says this written contract came about because Mr. Van Genne thought that a contract was needed in the circumstances. This arose because Mr. Woon and Mr. Contumelias began discussing or nego- tiating rates for the labour component of the job. As Mr. Van Genne said, these lower rates were expected but Technicon had to get it close to its cost so they would not lose money on the job. Nevertheless, Mr. Van Genne understood from these discussions that this would be a “big” project compared to previous builds for Technicon employees, given the size and style of the proposed home. 34 As I will discuss below in more detail in relation to Mr. Mann, Mr. Van Genne and Mr. Contumelias also understood that Mr. Woon’s banker needed a written contract to be in place. 35 The written contract was prepared and signed when Mr. Woon, Mr. Contumelias and Mr. Van Genne were present at the office. This construction contract was executed by Technicon, as Contractor (by Mr. Contumelias) and Mr. Woon, as Owner, on May 14, 2012. Mr. Van Genne witnessed Mr. Contumelias’ signature. 36 There are two versions of this construction contract. The contracts are in the same printed form. They contain the same typed provisions, and both also contain various handwritten provisions where the form anticipates being filled in. The salient terms of each version are as follows: a) para. 2: the description of the work is “[d]escribed in the attached Work Schedule” but no such Work Schedule exists. There is also reference to the “Work” entailing plan number APS-1819-Base- ment. Certain Atlanta Plan Source, Inc. plans entitled “A1819 Al- ternate Basement” were introduced at trial (the “Plans”). Never- theless, Mr. Contumelias understood at the time this contract was signed that Mr. Woon’s plans had not yet been settled; b) para. 3: the timing states that work was to commence on or before June 1, 2012, “Substantial Completion” was to be on or before November 1, 2012 and “Full Completion” was to be on or before 310 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

January 1, 2013. The contract also addresses the possibility of delays. It states, “All time limits stated in this Contract are of the essence” although there are further provisions that apply in the event of delays; c) para. 4: the terms of payment refer to the contract price to be calculated as follows: “Stipulated fixed cost basis (all inclusive) $350,000.00 plus GST/HST”; and d) para. 5: the payment schedule provided that the Owner would make payments to the Contractor as follows: 30% ($105,000) upon start-up of work, 30% upon completion of lock-up, 30% upon Substantial Completion and 10% ($35,000) on Full Completion. 37 Despite Technicon having signed this contract, Mr. Van Genne did not consider that it was the governing contract between the parties. Rather, he stated that everyone at Technicon, including Mr. Woon, understood and agreed that Technicon would build the House on a cost-plus time and materials basis, with a budgeted cost of $350,000. 38 According to Mr. Van Genne, this is the amount he considered Technicon could build the House for, which he described as a beautiful home. Even then, he considered it an “amazing price” for the size and style of house that Mr. Woon had chosen. 39 The final plans for the House include a main floor of 1,909 square feet, two upstairs bonus rooms totalling 798 square feet, for a total of 2,707 square feet. There is also a garage of 474 square feet, for a total area of 3,181 square feet. There is also a crawl space underneath the House. 40 Brandon, then a third-year apprentice carpenter, was the Technicon employee who would be on the site almost daily and who worked the most on the House. Brandon described the home as “high end”, given features such as 9- or 12-foot ceilings, large exposed beams and intricate roof details. 41 Similarly, Mr. Contumelias states that even though the written contract was indicated as a “fixed price” contract, the overall intention and agreement was to build as much as possible at cost with a reduced mark up for overhead and profit. 42 The differences between the two versions of the written contract are found on pages four and five of the documents. Technicon Industries Ltd. v. Woon Fitzpatrick J. 311

43 One major difference between the two versions is found in paragraph 5 regarding the payment schedule and relates to interest. In the version of the contract upon which Technicon relies (the “Technicon Interest Con- tract”), it states: Payment is due within 30 days of invoicing. Interest of 26.8% per annum, or the maximum rate allowable by law, whichever is less, will be charged on unpaid invoices after the due date. A 26.8% interest rate was the standard rate under the Technicon contract. 44 The version of the contract upon which Mr. Woon relies to some extent (the “Technicon No Interest Contract”) indicates the default interest rate as 0%. 45 The second major difference between the two versions is that in the Technicon Interest Contract, there is a reference to a 10% holdback for 30 days after completion but 0% holdback for extras. In the Technicon No Interest Contract, there is no reference to a holdback after completion in the payment schedule (the percentage and days are left blank), but there is a reference to a 10% holdback for extras. 46 In paragraph 5 (regarding the payment schedule), the placement of the figures is different as between the two versions. It appears that the handwritten entries regarding the payment schedule by which the total of $350,000 is arrived at are different in location as between the two versions, but not in what figures are indicated. 47 In addition, the two contracts do bear some initials in the bottom right corner, but on at least two pages, they are different (page four re the interest rate and page five). In addition, in the Technicon No Interest Contract, page five does not evidence the initial that is found in the Technicon Interest Contract. The initials on either version are not Mr. Contumelias’ or Mr. Van Genne’s initials. 48 Mr. Woon says that many of the handwritten notations found in the Technicon Interest Contract, including the reference to 26.8%, are not his. He also denies that some of the initials are his. 49 Mr. Contumelias has a definite recollection of him, Mr. Woon and Mr. Van Genne being in the office while the contract was being prepared. While he recalls discussing the interest rate, he is uncertain what came about on that issue. He says that Mr. Woon filled out the document and they went through the document page by page. He says that Mr. Woon initialled all the pages before they both signed. 312 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

50 Mr. Contumelias recalls only signing one copy of the contract, which is confirmed by Mr. Van Genne. Similarly, Mr. Woon agrees that only one copy of the written contract was signed. Mr. Woon says that he made three copies, one for him, one for Technicon and one for the Bank. He also says he took the original home. 51 How then did these two versions of the written contract come about? It is a mystery that was not answered directly on the evidence. 52 By December 2012, issues had arisen between the parties concerning the amounts which Technicon was seeking from Mr. Woon for construction of the House. 53 Mr. Woon says that shortly after a December 18, 2012 meeting with Mr. Van Genne and Mr. Contumelias, he decided that he had to protect himself. He went to the office on the weekend or stayed after normal office hours, and copied the entirety of the Technicon file relating to the construction of the House. Ms. Chong was with Mr. Woon when he did this. He says that he found the Technicon No Interest Contract in his file. 54 He claims that this was the first time that he saw Technicon’s handwritten invoice #1583, which was marked as Exhibit 5. This invoice refers to $168,950 as “Scope for New Home Construction (Partial)” and was addressed to Mr. Woon at his Scott Avenue address. The date when this document was created is not evident although at some point in late 2012, a Technicon employee, Pauline Walker, placed the date of “Nov 1/12” in order to record it in the accounting system. The undated invoice was signed by Vanessa Greening, a Technicon employee. Even so, there are limits to this document supporting Mr. Woon’s assertion of a fixed- price contract. In addition to the amount of $168,950, this invoice also refers to further profit and overhead of $25,342 and tax by which the total is said to be $217,607. 55 Technicon did not find the original or any copy of either version of the written Technicon Contracts in its file when the issues with Mr. Woon arose. 56 Mr. Woon did produce the Technicon No Interest Contract in this litigation. Even more curious, Mr. Woon produced what he described as the “original” of the Technicon No Interest Contract only in the midst of this trial and during Mr. Contumelias’ testimony. Suddenly, Ms. Chong “found” it in some luggage in the House. This “original” was marked only during Mr. Woon’s cross-examination. Technicon says that this is not, in fact, an original but a copy. Based on my visual examination, it is Technicon Industries Ltd. v. Woon Fitzpatrick J. 313

not possible to tell and no expert analysis of the document could have been done at that late stage. 57 The final bit of confusion arises from the fact that the Technicon In- terest Contract was emailed by Mr. Woon to Mr. Mann on May 14, 2012. Mr. Woon did not produce this document. Technicon only discovered the document when it later reviewed Mr. Woon’s emails in the course of this litigation. Mr. Woon suggests, although he is vague on the point, that he is not sure whether he forwarded the Woon Contract or the Technicon No Interest Contract to Mr. Mann in May 2012. He refused to acknowledge that he sent the Technicon Interest Contract to Mr. Mann. 58 In my view, it is impossible to square the existence of the Technicon Interest Contract in May 2012, which I find Mr. Woon did email to Mr. Mann with Mr. Woon’s evidence that the Technicon No Interest Contract is the “correct” version. Equally implausible is Mr. Woon’s testimony that he “found” the latter version in the Technicon file only later in De- cember 2012, let alone that he later produced a copy in this litigation but it was not found in the file. I also do not accept his evidence that he or his wife “found” the “original” of the Technicon No Interest Contract in May 2016 in the House only once the trial began.

(b) Collateral Evidence 59 Given the confusion in the documentary evidence and the fact that much of the issues arise from verbal discussions between Mr. Woon, Mr. Van Genne and Mr. Contumelias, one would have expected that Mr. Woon would have marshalled any collateral evidence as was available to support his version of events. 60 As I will discuss, that collateral evidence was equally confusing or unsatisfactory. In addition, evidence that was available to Mr. Woon was not called. 61 In his evidence, Mr. Woon referred to his discussions with Mr. Mann. He said initially that even before he accepted the job at Technicon, Mr. Mann told him that he had been pre-approved by RBC for a mortgage loan of $300,000. 62 This was not true and Mr. Mann confirmed that the later approval in May 2012 was in a lower amount. Mr. Mann gave evidence that Mr. Woon was approved for a mortgage in the amount of $268,832, not $300,000. This happened on May 16, 2012, just days after Mr. Woon 314 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

sent him the Technicon Interest Contract. Mr. Woon states in the email dated May 14, 2012: Here is the contract for my house. The contract amount is based on actual cost we bill to customer. 63 At trial, Mr. Mann initially said that Mr. Woon told him the price of construction was going to be between $260,000-$290,000. However, he confirmed that he had also sent Mr. Woon an email in May 2013 where he stated: ... At the beginning of construction you advised me that your builder’s quoted you a cost of $169,000 to build your home for you. I did mention to you that the construction cost quoted was quite low and it will most likely cost more to complete the project. ... 64 Mr. Mann recalls advising Mr. Woon that the appraisal amount was based on square footage and indicated a cost of $110-$120 per square feet. RBC had appraised the total cost of construction at $405,600. He therefore considered that there was a “disconnect” between the appraised price and what Mr. Woon said he had been quoted. 65 Mr. Mann’s evidence at trial concerning the price of construction is consistent with his email of November 28, 2012 to Mr. Woon that states: ... The total cost of construction initially provided by you was $275,000. Mr. Mann currently has no recollection as to where the $275,000 figure came from but, by this time — November 2012 — issues between Mr. Woon and Technicon were developing quickly. 66 Mr. Mann stated that if there is a builder involved, RBC does require a copy of the contract. In that way, RBC is able to release more money in the draws. 67 Mr. Woon states that Mr. Mann was told that the $168,950 price was a special price for a Technicon employee. Then, Mr. Woon alleges that Mr. Mann told him that it was too low and that Mr. Woon should still get a contract at market price, giving rise to the Technicon (Interest/No Inter- est) Contracts. Mr. Woon states that $350,000 was never meant to be the price to build the House. This scenario was not put to Mr. Mann during his direct or cross-examination as the reason why the Technicon Interest Contract was forwarded to Mr. Mann. 68 There is also no evidence that Mr. Mann received a copy of the Woon Contract and the only evidence, such as it is, is Mr. Woon’s vague comment that he may have sent it to him. Technicon Industries Ltd. v. Woon Fitzpatrick J. 315

69 I have difficulty accepting that Mr. Mann, as an employee of RBC, would have had RBC rely on a document which Mr. Woon allegedly told him was not a valid contract. By all accounts, Mr. Mann accepted the Technicon Interest Contract, sent to him by Mr. Woon, as the controlling document and RBC relied on it in approving the mortgage loan and later advancing progress draws. 70 All of this is to say that Mr. Mann’s evidence is not persuasive in supporting Mr. Woon’s contention that he had an agreement with Technicon at the fixed price of $168,950 plus tax. Mr. Mann had a very poor recollection of the entire matter and he had not reviewed his file from years ago in terms of refreshing his memory before he gave his evidence. It appears that Mr. Mann/RBC’s entire file was not disclosed in this litigation, which may have shed more light on other discussions between Mr. Woon and Mr. Mann and may have disclosed other documentation beyond some emails produced. Mr. Woon subpoenaed Mr. Mann (and as a result, Technicon did not), and he was to bring all documents with him; however, his video attendance made any review of his file, if he had brought even it, impossible. 71 More difficult for Mr. Woon is the fact that he failed to call his wife, Ms. Chong, to testify. Ms. Chong could have been expected to testify on key matters central to the issue as to the contractual arrangements between the parties: a) Mr. Woon says that his wife was well-aware of the Woon Con- tract (allegedly incorrectly dated November 2012), which he says he received from Technicon/Mr. Contumelias in May 2012 and discussed with her. He said that she pointed out the date discrepancy in the document but he told her not to worry; b) Ms. Chong was present when Mr. Woon copied the file at Technicon in December 2012. I do not accept Mr. Woon’s evidence that she sat in a corner reading a book and did not participate in what was done at that time. She could have testified about the contents of the file, particularly as to the presence of the written contract (i.e. which version was there, if any). In fact, Mr. Woon contradicted himself when his direct testimony later re- sumed at trial. Rather than confirming his statement that his wife had pointed out the date discrepancy in the Woon Contract in May 2012, he later said that she did this in December 2012; and c) Ms. Chong could have confirmed the circumstances regarding finding the “original” of the Technicon No Interest Contract at the 316 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

House during the course of the trial. Indeed, Ms. Chong was present throughout the trial and appeared to all participants to be actively engaged in the trial process, including speaking regularly with Mr. Woon’s counsel.

(c) Expert Evidence 72 Both parties called construction experts regarding the actual cost of building the House and the building and housing market in Terrace.

(i) Darren Hedberg 73 Technicon retained Darren Hedberg, of D.C.H. Industries Ltd. Mr. Hedberg has worked as a residential builder in the construction industry in Terrace and Kitimat for over 22 years. The recent attendance of Mr. Hedberg at the House was authorized by the order of Justice Punnett dated February 3, 2016. 74 Mr. Hedberg attended at the House on February 29, 2016, and his report is dated March 7, 2016. He was qualified as an expert in the field of residential construction practices and costing in the Terrace market. 75 Mr. Hedberg reviewed the Plans in addition to inspecting the House. He described it as not a simple house to build given that it has intricate details. 76 In Mr. Hedberg’s opinion, the minimum cost of building the House in 2012 was $150 per square foot, without allowing for overhead and profit. Given the 2,700 square footage, this would be at least $405,000 at completion (consistent with RBC’s appraisal). He also considered that a final price to a client for the House would be $170-$200 per square foot, resulting in a range of pricing from $459,000-$540,000. This amount includes administrative costs and profit as well as contingencies. In his experience, the amount charged to clients would include a markup of employee wage rates by 2.5 times, such that an employee earning $20 per hour would be charged out at $50. 77 Mr. Hedberg considered that the $350,000 cost figure (in the Technicon (Interest/No Interest) Contracts) was less than the actual cost of building the House, let alone the $168,950 figure, which he considered absolutely unreasonable and significantly below a builder’s cost. 78 I accept Mr. Hedberg’s evidence, which supports that any reasonable builder would be extremely unlikely to agree to build the House for as little as $168,950 in 2012 as this would be significantly below the actual cost of doing so even without any markup for administration and profit. Technicon Industries Ltd. v. Woon Fitzpatrick J. 317

(ii) Steven Corneau 79 Mr. Woon retained Steven Corneau to provide an expert report. Mr. Corneau’s report is dated April 19, 2016, and although it was intended to provide a response to Mr. Hedberg’s report, it is well-taken that he went beyond that scope. In any event, Mr. Hedberg responded to Mr. Corneau’s report in his oral evidence, as agreed by counsel. 80 Mr. Corneau has been working in the construction industry for more than 40 years. He has owned and operated several construction companies. His latest one, under whose name the report was written, is Cana- dian Craftsmen Builders, located in Smithers. Although he has done extensive commercial work, his experience includes renovations or builds of over 150 single-family units, which includes houses, apartments and condominiums. He was accepted by the Court as an expert in the field of construction practices and creating estimates for construction of single- family houses in Northwest B.C. (which includes Terrace). 81 Mr. Corneau states that a reasonable cost to build the House to completion in 2012 was $347,884 or $109.36 per square foot based on 3,181 square feet (before tax of 5%). He notionally calculates the cost of building the House to the time that Technicon left the job site to be $233,964 (or $73.55 per square foot) using a model he created. If this cost is reduced by a 15% profit and overhead amount, Mr. Corneau says that Technicon’s cost to the time they left in late January 2013 would be $203,447. 82 Mr. Corneau stated that he generally uses a materials calculation of 50% of the contractor work. Mr. Hedberg disagreed, stating the somewhat common-sense position that even though cheaper materials may be used, you will likely have the same labour costs to install it. It became evident that Mr. Corneau was using a program that applied general aver- ages that he uses in estimating jobs, which he acknowledged would normally be superseded by a more accurate quote from a contractor. 83 Mr. Hedberg states that a full costing of the materials for the House of $172,638 by Mr. Corneau is not realistic. On certain items, such as interior finish and framing, he strongly disagrees with Mr. Corneau’s numbers. 84 While Mr. Corneau was recognized as an expert in the northwest B.C. area, he was challenged as to his credentials in constructing single-family homes in Terrace. As stated above, he is located in Smithers and, as best I can tell, does a significant amount of work there. Indeed, as best he recalls, he has never constructed a single-family home in Terrace or Kiti- 318 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

mat. He states that the last single-family home he built was in Smithers in 2013. 85 There are other difficulties with Mr. Corneau’s report that need not be specifically addressed. Overall, I prefer the credentials and methodology of Mr. Hedberg and I accept his opinion over that of Mr. Corneau. 86 Importantly, however, even Mr. Corneau agreed with Mr. Hedberg that the House could not be built at cost for $168,950.

(d) Conclusions re Contract 87 I do not consider that Mr. Woon is a credible witness. His evidence was extremely vague and contradictory. His story does not comport with common sense and normal commercial realities. I accept that “normal” commercial realities do not necessarily apply to the full extent here since Technicon was doing a favour for its employee, Mr. Woon. However, they do not disappear, as Mr. Woon would assert. 88 In addition, Mr. Woon’s evidence is simply inconsistent with the overall circumstances of this case that are undeniably true: Bradshaw v. Stenner, 2010 BCSC 1398 (B.C. S.C.) at para. 186, aff’d 2012 BCCA 296 (B.C. C.A.), leave to appeal ref’d (2013), [2012] S.C.C.A. No. 392 (S.C.C.). 89 I am unfortunately drawn to the conclusion that Mr. Woon created the Woon Contract himself in late 2012 in an attempt to bolster his position that he had a fixed-price contract with Technicon in the amount of $168,950. I accept the evidence of the Technicon employees that they did not create this document and that they had never seen it before this litigation began. 90 The circumstances relating to Technicon’s invoice #1583 are equally suspicious. It is not dated and even this document is inconsistent with Mr. Woon’s contention about the fixed-price contract. I agree with Ms. Walker that this invoice was likely created by Mr. Woon and Technicon’s junior employee, Ms. Greening, and put in the file for purposes only known to them. It is not evidence supporting an agreement between Technicon and Mr. Woon regarding construction of the House. 91 It is uncontroverted that Mr. Woon had full and unrestricted access to his file while he was employed at Technicon. I think it more likely than not that Mr. Woon, once financial problems relating to the construction arose, accessed his file and created the Woon Contract in an attempt to support his position. Technicon Industries Ltd. v. Woon Fitzpatrick J. 319

92 This comment equally applies to the written contract signed by the parties. I conclude and find that Mr. Woon found the Technicon Interest Contract in the file in December 2012 (when he and his wife attended to copy the file), and Mr. Woon subsequently altered it with the important objective of removing the interest provision and making other alterations more favourable to him. There is simply no logical explanation for Mr. Woon sending the Technicon Interest Contract to Mr. Mann in May 2012 and then him finding this contract magically altered by the time the issues arose between the parties in late 2012. I also conclude, and find as a fact, that Mr. Woon removed Technicon’s copy of the Technicon Interest Contract from the office file. 93 I conclude also that the production of the “original” of the Technicon No Interest Contract was only a last ditch effort by Mr. Woon and his wife to bolster his argument that no interest was agreed to. I would add that this was confusing enough even before it became apparent that Mr. Woon did not even assert that the Technicon No Interest Contract was the controlling document. 94 No explanation was given for the failure to call Ms. Chong. I draw an adverse inference that Ms. Chong’s evidence would not have supported that of Mr. Woon had she been called: Tower Waterproofing v. Mondiale Development Ltd., 2013 BCSC 1772 (B.C. S.C.) at paras. 22-24. 95 I found the evidence of the Technicon employees to be credible and reliable. Mr. Contumelias’ evidence was also somewhat vague at times but I consider that, overall, his evidence was given in a straightforward and direct manner. His evidence was largely consistent with that of Mr. Van Genne. I found Mr. Van Genne, in particular, to be a very straightforward and fair individual who did not attempt in any way to embellish his evidence. He had a firmer recall of events in comparison to Mr. Con- tumelias as to the critical discussions regarding the contract and the execution of the Technicon Interest Contract. I accept the evidence of both Mr. Van Genne and Mr. Contumelias unreservedly and particularly where it conflicts with that of Mr. Woon. 96 In conclusion, I find as a fact that at the May 2012 meeting between Mr. Van Genne, Mr. Contumelias and Mr. Woon, it was agreed the contract between Mr. Woon and Technicon was such that Technicon would construct the House on a cost-plus labour and materials agreement with a budgeted or anticipated construction cost of $350,000. I accept that the overall agreement between Technicon and Mr. Woon included that Technicon would discount the labour charges that they would normally 320 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

charge in order to build the House. I also accept that the agreed-upon rates were charged by Technicon and are owed at this time. 97 In addition, I accept Mr. Contumelias’ evidence that the amount to be charged to Mr. Woon included a profit and administration charge of 10%, which was less than Technicon’s normal markup of 20%. This was done to give Technicon’s employee what he described as a “fair price”. Implicitly, these matters were considered by the parties within the “budgeted” amount. A cost-plus contract is not unusual where the parties anticipate changes in the construction as time goes on. In fact, this is exactly what happened here when changes were made to the House’s design. 98 This agreement was consistent with the intention of Mr. Van Genne and Mr. Contumelias to build the House for a “reasonable price” for its employee, Mr. Woon. It belies common sense and commercial reality that Technicon would agree to build the House for less than their actual cost for an employee, Mr. Woon, who had only been employed for a few weeks. I do not accept Mr. Woon’s evidence that he had a fixed price contract with Technicon or that the fixed price was $168,950. 99 This budgeted amount of $350,000 was, of course, reflected in the Technicon (Interest/No Interest) Contracts, but I conclude that these contracts did not govern the relationship between the parties. The informal means by which the contract arose is consistent with the nature of Technicon’s business approach in trusting their employees, although this may be an example of “no good turn goes unpunished”. 100 I am not convinced that any firm agreement was reached between the parties on the matter of the construction schedule and the payment schedule. Although the construction started almost immediately, little attention was paid to the schedule set out in the Technicon (Interest/No Interest) Contracts. This only changed in the latter part of 2012/early 2013 when Mr. Woon was searching for an argument against Technicon and he alleged that the House had not been constructed on time. This is an odd position since he now says that the Technicon (Interest/No Interest) Con- tracts are irrelevant anyway. Needless to say, he was never troubled by his failure to abide by the payment schedule set out in the Technicon (Interest/No Interest) Contracts. 101 I conclude and find as a fact that the parties agreed the House would be constructed within a reasonable time and that Mr. Woon would make reasonable payments to Technicon from time to time. I reject Mr. Woon’s evidence that his payments to Technicon were only to be made once he received progress draws from RBC. Even so, I find that the par- Technicon Industries Ltd. v. Woon Fitzpatrick J. 321

ties did anticipate that Technicon would be generally paid in accordance with the payment schedule in the Technicon Interest Contract although, of course, Technicon was very generous with Mr. Woon in not asking that these payment deadlines be strictly met. 102 I have also concluded that the parties agreed that no interest would be payable by Mr. Woon under the contract. Mr. Van Genne was not sure what interest rate, if any, was agreed to in the parties’ discussions. Mr. Contumelias was uncertain. In my view, this is consistent with the informal nature of the discussions and the ultimate agreement and the generous terms that were being offered to Mr. Woon.

ACCOUNTING ISSUES 103 This issue requires a summary of events after the contract was entered into. As will be seen in this later discussion, Mr. Woon’s actions after the spring of 2012 are equally consistent with the contract being on the terms I have set out above. 104 The first draw from RBC was on May 28, 2012 for approximately $40,000, which Mr. Mann described as Mr. Woon’s “lot loan”. I presume this amount was used by Mr. Woon towards payment for the lot on Coho Place upon which the House would be built. 105 Mr. Woon received a building permit from the City of Terrace on July 18, 2012. Mr. Contumelias says that work began in mid to late July 2012. This was beyond the Technicon Interest Contract start date of June 1, 2012, due to Mr. Woon having to apply for a new home warranty. Construction began around July 31, 2012. 106 As was reasonably anticipated by the parties, changes were made to the Plans as construction went along. Mr. Van Genne stated that these were not serious issues and he was not aware of any serious setbacks in the progress of the construction. It must be remembered that Mr. Woon was not like any regular client of Technicon. He was on the job site daily and was actively involved in ordering materials and also doing certain construction work on the build from time to time. As an estimator, he would have been intimately familiar with the stages of construction, any changes made and the relative cost of construction as it went along. 107 Mr. Contumelias describes Mr. Woon as the owner/project manager on the job. Mr. Woon attempted to distance his oversight of the project in his evidence, which I do not accept. 322 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

108 The financial issues arose in October/November 2012. Mr. Van Genne formed the view that Mr. Woon did not fully understand the process by which RBC would release funds to him for the construction. 109 By mid-November 2012, Mr. Woon was reporting to Mr. Mann that once some windows were installed by next week: [t]hen, it is 100% good for lockup. And next week, framing is also 100% complete. 110 Mr. Woon’s first payment to Technicon was $14,000 on November 30, 2012. This arose from the second mortgage draw on November 28, 2012 of $13,985. 111 On November 28, 2012, Mr. Woon’s emails to Mr. Mann regarding the amount of the draw indicated that he needed $170,000 for the foundation, roofing, windows, doors and framing in order to bring the House to lock-up. He began a series of emails to Mr. Mann. He stated that he had not more than $55,000 work to complete the House. 112 On November 29, 2012, Mr. Mann replied that the appraiser had calculated the total cost of construction to be $405,600 and that the appraiser considered that the House was only 46% completed. Mr. Woon was clearly upset at not having more funds available to him under the mortgage. He replied to Mr. Mann that he may not have money to pay for the workers’ wages and that they may stop work. Mr. Woon replied to Mr. Mann that the Bank was hindering construction of the House. 113 Clearly, by November 2012, Technicon was pushing for a further payment in respect of construction expenses that had then been accruing over three months. If nothing else, Mr. Woon’s pleas to RBC for money to pay Technicon is consistent with him owing more than a maximum price of $168,950 for the build. 114 Eventually, Mr. Woon paid Technicon a further amount of $50,000 on December 14, 2012. That same date, Mr. Woon reported to Mr. Mann that Technicon was not happy with the payment amount and that they had decided to stop work until he paid them in full and also paid a 50% deposit for future work. 115 Mr. Woon says that on December 18, 2012, just days after making the second payment, he was called into a meeting with Mr. Van Genne and Mr. Contumelias. He portrays Mr. Van Genne as playing the “bad guy” and Mr. Contumelias as playing the “good guy”. He states that Mr. Van Genne was banging the table and trying to scare him. Mr. Van Genne suggested selling the House, which Mr. Woon refused to do. Mr. Woon Technicon Industries Ltd. v. Woon Fitzpatrick J. 323

says that the Technicon employees denied that they had promised to build Mr. Woon a house for less than $200,000. When Mr. Woon said that he could still draw down over $100,000 on the mortgage, he was told that it was not good enough. Even based on Mr. Woon’s evidence, there was no mention at this meeting by him about the previous agreement that he only had to pay when he received draws from RBC. 116 For the first time, on cross-examination, Mr. Woon also said that a couple of days after this December 18, 2012 meeting, Mr. Van Genne came to him and apologized to him about denying the deal regarding the House. He said Mr. Van Genne hugged him. 117 Mr. Van Genne and Mr. Contumelias gave no evidence about this meeting in direct and they were not challenged in cross-examination as to Mr. Woon’s version of events as to the meeting taking place, what was discussed at this meeting, or the later encounter between him and Mr. Van Genne. 118 I have serious doubts about Mr. Woon’s evidence regarding this meeting given my views as to his lack of credibility. In particular, the failure to put this to Mr. Van Genne and Mr. Contumelias in cross-examination leads me to conclude that no weight should be placed on Mr. Woon’s evidence: Browne v. Dunn (1893), 6 R. 67 (U.K. H.L.). 119 It was shortly after this alleged December 18, 2012 meeting that Mr. Woon decided that he had to “protect himself” and resulted in him copy- ing his entire file outside of normal office hours. I conclude that the more likely scenario is that Mr. Woon discovered that Technicon’s patience in terms of getting paid had reached a breaking point and he needed to shore up a defence to prevent Technicon from continuing to demand payment and possibly closing down the project. 120 Mr. Woon also suggested at trial that he was not required to pay any amounts to Technicon because he had not received an invoice. In my view, this is a disingenuous argument. Effectively, he was the project manager and he was well-aware of the actual costs that had been incurred on the project. If he wanted a formal invoice, all he had to do was ask the Technicon staff to issue him an invoice. 121 However, on the issue of formal billings, Mr. Woon had somewhat of a point. 122 There is no doubt that Technicon’s billing procedures were anything but ideal. I consider the delay in not formally billing Mr. Woon until 324 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

January 2013 largely arose from his employment at Technicon and the informal nature of the agreement relating to the building of the House. 123 The billings that arose on the project were created as a result of Technicon’s time-keeping and billing procedures. Technicon’s office ad- ministrator, Ms. Walker, testified as to Technicon’s procedures. She said that all time was recorded by hand by the various employees on weekly time sheets. The time sheets set out certain information in detail, such as the date of the work, a reference to the particular job site, a description of the work performed, and the number of hours attributed to the attendance that date. 124 These handwritten time sheets were then submitted to Technicon’s office where office staff copy the time sheets and place a copy in each job file to which they refer. Then, the data from the time sheets is input- ted into spreadsheets and there is a calculation of the value of the time recorded based on the employee’s pay level. In this way, the spreadsheet was constantly being updated as the job progresses and more time is being spent on it. 125 In a similar fashion, all invoices received from suppliers are copied and placed in the relevant client or job file. Further, a spreadsheet was maintained and updated from time to time setting out the supplier invoices for each job. 126 Every client (or job) had its own file folder, which contained copies of all relevant time sheets, supplier invoices and Technicon invoices. These files were kept in a cabinet in the office and were generally acces- sible by people in the office. This would include the owners of Technicon at the time, including Mr. Van Genne and Mr. Contumelias. As indicated earlier in these reasons, Ms. Walker’s evidence was that Mr. Woon, as a person working in the office, had full access to the client or job files, including his own. Accordingly, Mr. Woon would have had full access to all this documentation created over the course of the project. 127 Mr. Contumelias refers to the ongoing discussions between him and Mr. Woon to get money to pay the payments contemplated under the Technicon Interest Contract. Both he and Mr. Van Genne understood that Mr. Woon was having trouble getting the money or enough money from RBC in order to do so. Mr. Van Genne overheard arguments on the phone between Mr. Woon and someone at RBC in January 2013. Mr. Van Genne describes Mr. Woon as very stressed at the time. 128 Ultimately, Mr. Contumelias considered that even with Technicon not being paid in accordance with the payment schedule, it was prudent just Technicon Industries Ltd. v. Woon Fitzpatrick J. 325

to finish the House (or sufficient to get it to lock-up and out of the weather) and wait for the banking arrangements to be sorted out sufficiently where it could get caught up on the payments. 129 Mr. Woon says that earlier in August 2012, he had advised Mr. Con- tumelias that he would be taking an unpaid leave of absence to go to Singapore for a two-month period in February/March 2013. This meant that further pressure was put on both parties to resolve matters in January 2013. 130 By January 2013, Mr. Contumelias was attempting to calculate the amounts that had been incurred in building the House, no doubt in an attempt to get things sorted out with Mr. Woon. He saw this as a way to smooth things over with Mr. Woon and get Technicon paid. 131 On January 25, 2013, Mr. Woon again contacted RBC to see if he could increase the mortgage amount. Mr. Mann replied that he would get close to $50,000 on the next draw. Mr. Woon said it was too little. Mr. Woon stated: ... I hope you can help me out because I need to pay $170,000 to the contractors. This was, of course, the same figure that Mr. Woon had mentioned in the earlier email he had sent to Mr. Mann on November 28, 2012 when he was trying to get money from the Bank then. 132 Just minutes later on January 25, 2013, Mr. Woon again emailed Mr. Mann stating: I believe the house is 80% complete. I hope you can help me out to verify $100,000. 133 Mr. Mann was not willing or able to “help out” Mr. Woon to that extent. He said that another $50,000 would be drawn next week. Indeed, this happened and Mr. Woon received a draw of $52,248 on January 25, 2013. Technicon received a third payment from Mr. Woon in the amount of $52,150 on January 28, 2013. 134 In late January 2013, Technicon issued various billing documents to Mr. Woon for the construction of the House. In a January 28 letter, Technicon refers to its price breakdown of material and labour to January 5 ($212,284.54) and profit ($21,228.45) and indicated a total cost of $233,512.99 excluding tax. This arose from a document described as the “Chin Labour Report”, which was compiled by Mr. Contumelias, and included these same figures. 326 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

135 Technicon also issued a typed invoice #1583 on January 29, 2013. This invoice also referred to the current billings for materials, labour, profit and administration (10%) and taxes and referenced Mr. Woon’s two payments totalling $64,000. The total owing was $197,534.54. The third payment by Mr. Woon was not reflected on the invoice. 136 Mr. Woon says he was “shocked” to receive this invoice. He says that he asked for a breakdown of the amounts billed, although he could have easily accessed his file to see all the details at any time. Indeed, by this time, all the details in his file to at least December 2012 had been copied by him and his wife, although I consider that he would have been generally, if not specifically, aware of the cost incurred to that time in any event. 137 Mr. Contumelias and Mr. Van Genne decided to propose a resolution with Mr. Woon that would ease Mr. Woon’s cash flow problem and get Technicon paid. One proposal was that Technicon would pay for the labour going forward to finish the House, to be considered as a bonus to Mr. Woon over future years. Then, Technicon would resume the work needed to get him into the House. As Mr. Contumelias says, they “tried everything”. Mr. Woon rejected all of Technicon’s offers, considering them ridiculous and a “scam”. There was, however, still no communication from Mr. Woon as to how he was going to pay the amounts outstanding. 138 With his imminent departure for Singapore in mind, Mr. Woon says that he decided to act. He felt that Technicon was “running wild” with the materials and labour costs and he did not want to be shocked by more costs upon his return from Singapore. This action took the form of Mr. Woon delivering a formal, albeit handwritten, notice to Technicon’s offices on January 31, 2013. That letter stated: This is to put in writing that I do not allow any work by Technicon and your sub-trades done on the house what-so-ever during my absence in Feb and March 2013. 139 As a result of this notice, both Mr. Van Genne and Mr. Contumelias saw a definite problem in the works in terms of getting paid by Mr. Woon. At this point, Mr. Van Genne stated to Mr. Contumelias that they were “in trouble”. Mr. Van Genne considered Mr. Woon’s actions irra- tional and “suspicious and dangerous”. Mr. Van Genne even considered that Mr. Woon might be defrauding them. 140 In the context of Mr. Woon kicking them off the job site, Mr. Con- tumelias discussed what Technicon on-site equipment was there. As re- Technicon Industries Ltd. v. Woon Fitzpatrick J. 327

quested, Mr. Woon returned various items, including a dehumidifier that had been placed in the crawl space to dry it out. Mr. Woon also returned the company vehicle he was driving, the office key and the fuel card. 141 In the meantime, while discussions were ongoing, Mr. Van Genne decided that Technicon needed to act to protect itself given the lack of payment and that there was no resolution yet in sight. Accordingly, Mr. Van Genne arranged for Technicon to file a builders’ lien against the House on February 1, 2013. He stated in the lien that Technicon was owed $153,066.13 as of January 31, 2013. He openly discussed his intention to file the lien with Mr. Woon and told him why Technicon considered that it was necessary to do so. Mr. Woon was angry. 142 On June 13, 2013, Mr. Woon filed his Response to Civil Claim. At paragraph 11 under “Facts” he states: At no point has [Mr. Woon] denied that Technicon is owed a certain sum of money for the work completed on the Home. This pleading is consistent with my finding as to the amounts owed to Technicon as of the end of January 2013. It is also inconsistent with Mr. Woon’s position regarding the fixed-price contract. 143 It is clear to me that the filing of a builders’ lien was an entirely new experience for Mr. Van Genne and Mr. Contumelias. In the past, when they had built a house for an employee, no such issues had arisen. In- deed, their general approach was to sit down and discuss any problems with all customers or clients to resolve any issues. More to the point, the lien filed by Mr. Van Genne was the first one he had ever done, which I would venture to say is unusual for a construction company and his own long-standing experience as a builder. 144 The House construction was very much advanced by the time Technicon was ordered off the job site by Mr. Woon. Mr. Contumelias states that the interior was about 70-80% complete and the exterior was about 80% complete, with some rock work and trim needed to be done. There was no occupancy permit at the time. By this time, Mr. Van Genne considered that only approximately $50,000-$60,000 was needed to finish the House. This, in part, informed his approach in making Mr. Woon an offer to finish the House. He thought that if that had been accepted, Mr. Woon could have come back from Singapore and moved into a fin- ished house. 145 As with any system where human beings are involved, perfection is sought but rarely achieved. This was definitely true with Technicon’s accounting system. In my view, this is not a circumstance that one could 328 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

describe as unusual. The purpose of the billing process is to advise the client of certain charges, and the details of those charges, so as to allow the client to review it. Any prudent and careful client would do so. It is not unusual for a client to catch errors in the billing and point them out to the construction company. If the client is right, then no doubt, the billing is corrected and then paid. 146 Mr. Contumelias prepared a detailed accounting for Mr. Woon while he was in Singapore. Further accounting breakdowns were provided to Mr. Woon in April and June 2013, after he returned to Canada. However, there is no evidence that Mr. Woon provided a detailed or substantive response to the various charges. 147 The accountings provided, particularly the updated balance in the April 18, 2013 billing, reflected that Mr. Woon’s last paycheque before he left for Singapore of $1,342.29 had been credited to his outstanding account in April 2013. 148 In addition, as a result of the impending trial, Ms. Walker had an opportunity to review the underlying invoices more carefully. She discovered that certain charges were made to Mr. Woon’s account that should not have been. In addition, she discovered further invoices that should have been added but were not. This resulted in further adjustments. 149 The updated billing summary as of May 3, 2016 introduced at trial indicated total billings of $256,006.64, which included profit and administration of $25,600.66. This amount included labour of $131,777.00, materials of $121,899.59 and rental and miscellaneous of $2,330.05. Af- ter deducting the three payments made by Mr. Woon and his last paycheque (as noted above), the net amount owing is indicated as $197,907.89. 150 In relation to this final accounting, Mr. Woon argues that there are further errors. I agree that further adjustments are required in relation to JNJ Enterprises ($1,554 and $815), Naomi Schwartz’s time ($345) and a chair that Mr. Woon bought for the office and which remains there ($167), for a total of $2,881. 151 Mr. Woon also raises other potential problems with the accounting: a) certain E.B. Horsman invoices in mid-September 2012. On one of the invoices dated September 13, 2012 for $892.58 (before tax), the customer reference was originally printed as “Shane’s House” which was then crossed off and noted as Shawn. Ms. Walker describes this is likely a mistake at E.B. Horsman in incorrectly Technicon Industries Ltd. v. Woon Fitzpatrick J. 329

referencing the Technicon job, which was corrected by Robert Coburn, one of the electricians working on the job. Indeed, the order number attached to this invoice is #4293533, which is consistent with other E.B. Horsman invoices and pick tickets (which allow pick up of materials) around this time and which do clearly reference Mr. Woon’s house. Ms. Walker confirmed that Technicon did not have any jobs around that time under the name of either Shane or Shawn. I agree that the evidence is sufficient to establish that all these amounts were properly charged to Mr. Woon; b) Mr. Woon also argues that Ron Pocha, an electrical apprentice, made two trips to E.B. Horsman on November 28, 2012 to pick up metallic cable. There is no direct evidence as to why this happened, so I am unable to conclude that anything untoward occurred or that Mr. Pocha incurred excess time beyond what was reasonable; and c) Mr. Woon also points to Mr. Coburn’s time on December 12, 2012 where he recorded that he spent one-and-a-half hours “Counted material & removed from site. Called for inspection”. Mr. Woon says that Technicon’s records do not show that any materials were returned and that he was credited for these materials. Yet, there is no evidence as to what “material” was removed and whether it had any value. 152 In conclusion, I find that the amount owing under the contract to Technicon by Mr. Woon is $197,907.89, less adjustments of $2,881, for a net amount of $195,022.89.

DEFICIENCY ISSUES 153 Mr. Woon alleges that the House was not constructed in a good and workmanlike manner and that deficiencies remained when Technicon left the job site. 154 Even so, Brandon has no recollection of Mr. Woon ever expressing dissatisfaction to him about the quality of Technicon’s work on the House. The only thing that Brandon heard was a sarcastic Facebook post- ing by Mr. Woon where he was complaining about the pace of work by Technicon’s employees. 330 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

155 Mr. Hedberg also commented generally on the cause of any deficiencies as of the time that Technicon left the job site: From what I observed of the work performed prior to lock up, the deficiencies arose from incomplete work. Small deficiencies like incomplete trim, nail holes in trim not being filled and painted, cut ends of trim not being repainted were observed. ... While what I discussed in the paragraph above are deficiencies, in my opinion, it is more likely that the job was not completed or the contractor stopped working on the project than [sic] created the deficiency. 156 Deficiencies claimed by Mr. Woon include: a) Water leaks: Jack Haworth is a plumber. On September 5, 2013, he was called about some water leaks in the House. He discovered two leaks: firstly, one behind the shower in the bathroom on the main floor, likely caused by not using thread sealant and which required removal of drywall; and, secondly, one in the water distribution pipe in the crawl space. He charged and was paid $122.50. Mr. Haworth noted in his invoice, “Plumbing in house was poorly done and both leaks could have been easily prevented using common practices in the trade.” There is no evidence that this problem arose from any work completed by Technicon; b) Crawl space moisture: Mr. Woon hired Universal Restoration Sys- tems (“Universal”) to inspect the House and complete a mould or fungal inspection. Darrell Meleshinski attended at the House on June 19, 2013. He inspected the crawl space and discovered water ingress and high humidity. There was also some spotting on sheet- ing or joists. Universal charged Mr. Woon $541.86 for “fungal abatement”. There is no evidence that this problem arose from any work completed by Technicon. In fact, in conjunction with his “stop work” notice, it was agreed that Technicon would remove heaters placed in the crawl space to deal with moisture. It is equally likely that Mr. Woon’s neglect of this issue while he was out of the country resulted in any problems; c) Siding issues: Mr. Corneau stated that he found multiple gaps of 3/16” between the planks that are unacceptable. He considered that: the exterior trim needed nails to be filled and painted; caulking needed to be applied; and the Plans call for shingles on the dormer, not plank siding. He estimated the cost of repair to be $13,975. Mr. Hedberg disagrees. On the latter point, he states that Technicon Industries Ltd. v. Woon Fitzpatrick J. 331

the siding on the dormer is up to the agreement between the owner and the contractor. There was no evidence from Mr. Woon or anyone on this alleged deficiency. Further, Mr. Hedberg says that this siding was installed correctly in terms of spacing and that all the siding does not need to be removed and replaced. While Mr. Hed- berg concedes there are small gaps, he says that 3/16” gaps are normal and not excessive. These are normally fixed by painting and caulking in the warmer weather in the spring. On this point, I accept the evidence of Mr. Hedberg that this was not a deficiency at lock-up; and d) other minor deficiencies identified by Mr. Corneau and to which Mr. Hedberg agreed, including fixing damage to a garage door panel ($1,000), for an overall total of $1,750. 157 Finally, Mr. Woon claims the sum of $3,875 for what he describes as time spent by Technicon employees fixing or repairing work that failed an inspection or was “substandard”. 158 The City of Terrace’s inspector, Steve Buhr, gave evidence. There were a number of inspections by him and B. Miller. Those that took place in August, October and on November 15, 2012 all passed. The inspection on November 20 (re framing), November 26 (re slab), Decem- ber 5 (re framing and garage slab), December 19, 2012 and January 9, 2013 did not pass. 159 Mr. Woon argues that the substandard work is evidenced by various time records of Brandon, Martin Percival and Daniel Contumelias from late November 2012 to early January 2013. In my view, the connection between these time records and these alleged deficiencies is not made out. 160 The experts also disagreed on the inspection issue. Mr. Corneau is of the view that the level of re-inspections on the House was beyond what is reasonable. He thinks one or two are reasonable. Mr. Hedberg describes the re-inspections on the House as not “abnormal”. He says that the City of Terrace was simply being strict. I accept Mr. Hedberg’s evidence on the point since it is manifestly obvious that he has more experience working in the Terrace market than Mr. Corneau. Even accepting that there were too many re-inspections, there is no direct evidence as to what cost or damage was suffered by Mr. Woon as a result. 161 In conclusion, Mr. Woon is entitled to a further credit of $1,750 for the deficiencies I have accepted. 332 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

EMPLOYMENT ISSUES (a) Further Background Facts 162 Mr. Woon left for Singapore on February 1, 2013. 163 Mr. Woon stated that he was trying to get a bank loan while he was in Singapore in order to pay Technicon, but he was ultimately unsuccessful. He says that this was only in the event that Technicon did provide a detailed accounting showing there were extra items beyond what he says was the “fixed contract price” and the amount that was owed on that basis. I find that he was trying to get more money because he well understood that Technicon was owed money by him for the construction to that time and that the amount owed was not tied to any fixed price. 164 Mr. Woon understood that he could not get any more money from RBC because the lien had been registered. 165 On February 2, 2013, Mr. Woon emailed Ms. Walker asking if Technicon was holding his salary for the week. He expected it to be de- posited into his account. Mr. Contumelias responded to Mr. Woon’s email on February 4, 2013. He told Mr. Woon that the accounting depart- ment had been instructed to hold off with his final cheque since they had not been able to sort out matters before he left the country. Mr. Contume- lias advised Mr. Woon that there was an outstanding balance and that the amounts needed to be tallied so as to arrive at a final number to be addressed when Mr. Woon returned. 166 As I mentioned above, while Mr. Woon was away in Singapore for two months, Mr. Contumelias undertook, through his staff, a detailed review of Mr. Woon’s file and the underlying documents. He describes the file as a “nightmare” given that it was not in order. In addition, it contained numerous errors and was missing documentation. Most importantly, the file did not contain the original or a copy of the Technicon Interest Contract that both Mr. Van Genne and Mr. Contumelias had expected to be there. 167 Mr. Woon states that he was angry and unhappy with the withholding of his final paycheque. He felt that Technicon was trying to squeeze him out of the House and that it was “evil”. In these continuing email ex- changes, Mr. Contumelias asked that Mr. Woon keep them posted on when he would be paying the amounts owed. On February 17, 2013, Mr. Woon replied that he was waiting for an appointment date. He testified the appointment was to see an officer at a Singapore bank. Technicon Industries Ltd. v. Woon Fitzpatrick J. 333

168 On March 25, 2013, Mr. Contumelias again contacted Mr. Woon in the hopes of finding a solution. He stated that the first order of business upon Mr. Woon’s return was: ... squaring up financially with you and repairing relationships so we can move on. Mr. Woon took this comment to mean that if he paid Technicon, he could continue to work there. 169 Mr. Woon responded that he would return to work on April 2. Mr. Contumelias replied “[w]hat about the money? ... A little insight would be appreciated.” 170 Mr. Contumelias thought, perhaps too optimistically, that once the final accounting was completed, he could go over it with Mr. Woon upon his return and, through this process, Mr. Woon could raise any discrepan- cies which would be resolved. By the end of March 2013, Mr. Contume- lias was still optimistic that they could find a solution and repair the relationship of the parties, rather than sever it. 171 Mr. Woon returned to the office on April 2, 2013. 172 Mr. Woon and Mr. Contumelias had a meeting at that time. 173 Mr. Contumelias says that he had a discussion with Mr. Woon to the effect that he had been away for some time and that Technicon was going to lay him off. He says that Mr. Woon agreed that this was the best outcome. Mr. Contumelias referred to Mr. Woon needing time to finish the House. In addition, Mr. Contumelias confirms that there was definite unease at Technicon about the debt and a growing frustration with Mr. Woon and his true intentions. It is fair to say that a definite mistrust had arisen on the part of Technicon management at this time in relation to Mr. Woon. Mr. Contumelias describes this “lay off” as a mutual decision and not a hostile meeting. Nevertheless, he acknowledges that Mr. Woon was not given any notice per se when he was “laid off”. 174 Mr. Woon has a different version of what happened at this meeting with Mr. Contumelias on April 2, 2013. He does confirm that Mr. Con- tumelias asked him if he or his wife had brought some money back to Canada and that Mr. Contumelias stated that two directors of Technicon were not happy with the situation. Mr. Woon says that Mr. Contumelias told him that if he apologized and paid the monies owing, he could come back to work. Mr. Contumelias stated that he would “lay off” Mr. Woon so he could collect employment insurance (“EI”). 334 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

175 On a rare point of agreement, Mr. Van Genne and Mr. Woon say that at no time was Mr. Woon told that if he did not pay the monies owing to Technicon, he would be terminated from his employment. 176 Mr. Woon says that he rejected this “lay off” offer although it is not clear how and when he did so. He did not consider that he owed any money to Technicon. In fact, he considered that he had overpaid them, although he acknowledges not having paid the full $168,950. Mr. Woon also questioned why he would apologize when he had done nothing wrong. 177 Mr. Woon states that he did not receive any prior notice that he would be “laid off” or terminated. It was a surprise to him. He was not aware at this time of any performance issues regarding his work as an estimator. 178 Before he left the April 2, 2013 meeting, Mr. Woon delivered a handwritten letter of that date to Mr. Contumelias asking for a breakdown of the materials and labour on the job. As stated above, details of the accounting were later delivered by Technicon in April and June 2013. 179 Mr. Woon’s last day working for Technicon was April 4, 2012. The Record of Employment (“ROE”) refers to the reason as “Shortage of Work / End of contract or season”. The ROE also indicated that Mr. Woon was paid $1,200 (one week) in lieu of notice. His last paycheque dated April 3, 2013 is in the amount of $1,342.29. This is the net result of calculating the amount owing to him to January 31, 2013. 180 The pay stub indicated that $1,342.29 was “Applied to House” and this amount was factored in the later accounting of what Mr. Woon owed to Technicon, as noted above.

(b) Was there Just Cause? 181 The first issue is whether Mr. Woon agreed with Mr. Contumelias to a “lay off” as opposed to a dismissal. 182 I have concluded that Mr. Woon did not agree to a “lay off”. I have no doubt but that there was a significant degree of tension and mistrust at this meeting. Mr. Contumelias was no doubt hoping very much that there would be a mutual parting of the ways. However, it is my strong suspi- cion that Mr. Contumelias took Mr. Woon’s silence to mean acceptance, when there was no such thing. 183 At bottom, I agree that Mr. Woon was dismissed because of Technicon’s dissatisfaction with the amount owing by Mr. Woon relating Technicon Industries Ltd. v. Woon Fitzpatrick J. 335

to the construction of the House and a growing mistrust of Mr. Woon. This is not just cause in the eyes of the law. 184 In the alternative, Technicon alleges that Mr. Woon was guilty of dishonest conduct sufficient to justify his dismissal. Technicon also argues that even though it only discovered this conduct after the April 2, 2013 meeting, it did justify terminating Mr. Woon’s employment. This approach is supported by the statements found in Carr v. Fama Holdings Ltd. (1989), [1990] 1 W.W.R. 264 at 271, 40 B.C.L.R. (2d) 125 (B.C. C.A.): As the Ontario Court of Appeal observed in McIntyre v. Hockin (1889), 16 O.A.R. 498 at 501, the rule is the same where the parties are employer and employee: It is now settled law that if a good cause of dismissal really existed, it is immaterial that at the time of dismissal the master did not act or rely upon it, or even did not know of its existence, or that he acted upon some other cause in itself insufficient. The main question always is, were there at the time of the dismissal facts sufficient in law to warrant it ... See Taylor v. Oakes, Roncoroni & Co. (1922), 127 L.T. 267 (C.A.) at 269, 289. It is clear, then, that Fama’s interpretation of the law is correct - an employer may dismiss an employee, giving the wrong reasons, provided that causes which would justify dismissal did in fact exist at the time. ... [Emphasis in original.] 185 In McKinley v. BC Tel, 2001 SCC 38 (S.C.C.), the court discussed the type of conduct that will rise to the level of “misconduct”: 48 In light of the foregoing analysis, I am of the view that whether an employer is justified in dismissing an employee on the grounds of dishonesty is a question that requires an assessment of the context of the alleged misconduct. More specifically, the test is whether the employee’s dishonesty gave rise to a breakdown in the employment relationship. This test can be expressed in different ways. One could say, for example, that just cause for dismissal exists where the dishonesty violates an essential condition of the employment contract, breaches the faith inherent to the work relationship, or is fundamen- tally or directly inconsistent with the employee’s obligations to his or her employer. 336 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

186 Technicon alleges that the following conduct of Mr. Woon was “misconduct”: the disagreement about the terms of the construction contract; Mr. Woon’s removal of the Technicon Interest Contract from his file in December 2012; and Mr. Woon’s deliberate alteration of the Technicon Interest Contract after he accessed the document in his file in December 2012. 187 I agree with Technicon that the actions of Mr. Woon in accessing important documents relevant to their relationship and removing and then altering the Technicon Interest Contract is sufficiently grave so as to justify his dismissal. While the Technicon Interest Contract was not the “controlling” document relevant to the terms of the agreement, it was an important one. This is certainly evident enough by Mr. Woon’s actions taken to alter it to his benefit. 188 Mr. Woon was an employee and therefore had access to Technicon’s documents, which would not normally be available to just any client of the company. Technicon trusted its employees to deal with the documents in a proper fashion. In relation to Mr. Woon, this was particularly so when he had open and unsupervised access to the file and where Technicon did not make special efforts to “protect” the integrity of the file against the later actions of Mr. Woon. Again, this circumstance no doubt arose from the fairly informal nature of Technicon’s relationship with its employees for whom they were completing building projects. 189 Simply put, Technicon trusted Mr. Woon. Mr. Woon took advantage of Technicon’s trust and therefore breached a fundamental aspect of the relationship to serve Technicon “faithfully, honestly and diligently”: Durand v. Quaker Oats Co. of Canada Ltd. (1990), 45 B.C.L.R. (2d) 354 (B.C. C.A.) at 361, (1990), 32 C.C.E.L. 63 (B.C. C.A.). By the time of the meeting in early April 2013 when Mr. Woon was dismissed, Mr. Van Genne’s feeling in particular was that Mr. Woon was attempting to take advantage of Technicon or even defrauding Technicon. He was right about the former, although he may not have known all of the means by which Mr. Woon was doing so. 190 In argument, Mr. Woon’s counsel agreed that, if I accepted Technicon’s submissions and found that Mr. Woon had altered the Technicon Interest Contract, such would be just cause for dismissal. 191 In all of these circumstances, I find that Technicon had just cause to dismiss Mr. Woon. I am not ordering that Mr. Woon repay the $1,200 that he received for one week’s notice. In my view, Technicon voluntarily paid that amount. Technicon Industries Ltd. v. Woon Fitzpatrick J. 337

(b) Damages 192 The parties argued damages in the event that just cause was not established. Consideration of what is reasonable notice is based on the well- known factors discussed in Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 at paras. 81-84, 152 D.L.R. (4th) 1 (S.C.C.). I will address these issues briefly in the alternative to my conclusion on just cause above. 193 Mr. Woon claimed that the applicable notice period should be 4.5 months. He claims that he was not re-employed in Terrace during that period of time. Based on his $5,000 per month salary at Technicon, he claims the sum of $22,500 gross. 194 Technicon argued that the maximum length of notice should be two weeks, being the minimum under the Employment Standards Act, R.S.B.C. 1996, c. 113, s. 63(2)(a) [ESA]. 195 On April 9, 2013, Mr. Woon began looking for jobs as an estimator. He lists a number of contacts that he made throughout April. He declined an estimating job in Prince Rupert because the pay was too low ($3,000 per month). He only became aware of one job in Medicine Hat, Alberta, which he decided not to take. He declined to pursue any jobs in Vancou- ver because he did not think he could afford to live there and also maintain his mortgage in Terrace. He decided that he would pursue estimating jobs in Terrace, Kitimat or Prince Rupert. 196 He began collecting EI on April 21, 2013 and collected a total of $7,042 until mid-August 2013. 197 Mr. Woon was 55 years old at the time of trial. He was employed by Technicon in a mid-level job as an estimator. Clearly, both Technicon and Mr. Woon saw this as a learning experience for him to some extent given his lack of training or experience in Canada. His total length of service was 13 months, although that includes two months of unpaid leave. Mr. Woon was not induced to leave any other employment before his job with Technicon, as he had been unemployed in Canada for years before. There was no promise of job security when he agreed to move to Terrace to take the job. 198 The more difficult factor is the availability of similar employment and what efforts Mr. Woon took to mitigate his damages. 199 While Mr. Woon says he was making efforts to find another job, it is quite evident that he was mainly focussed on finishing the construction of his House during his first two months off. His intention was to secure 338 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

a provisional occupancy permit for the House such that he and his wife could move in. That permit was issued on June 13, 2013. It was only after that time that Mr. Woon considered that he had time to look for a job. 200 Despite his earlier claims that he was unable to bring back any money from Singapore, Mr. Woon did bring back $10,000, which he described as his last savings of $10,000. In addition, Mr. Woon was able to pay his expenses and finish the House as a result of borrowing about $100,000 from his wife and brother-in-law. 201 Credibility issues in relation to Mr. Woon also arise in respect of his efforts to obtain employment in the spring/summer of 2013 and what success he had in doing so. He applied for a position as an estimator with Progressive Ventures (“Progressive”) and says that he obtained a part- time position in June 2013. He says that he worked for a few days and got paid approximately $800. However, this contradicted his evidence at the examination for discovery that he was not employed until mid-Au- gust 2013. He also failed to disclose that he had collected EI in the notice period he asserts is reasonable. 202 In addition, Mr. Woon failed to produce documents relating to his actual income in 2013, including a tax return and pay stubs. His own counsel agreed during argument that this lack of disclosure was a “problem” for him. When asked about this in cross-examination, Mr. Woon then said that he was paid in cash. 203 Technicon asks that I draw an adverse inference arising from Mr. Woon’s failure to provide such documents, citing McTavish v. MacGil- livray (1997), 38 B.C.L.R. (3d) 306, 28 M.V.R. (3d) 235 (B.C. S.C.). 204 Again, I am unfortunately drawn to the conclusion that Mr. Woon’s evidence as to his true efforts and success in obtaining employment are not credible. I think it probable that shortly after he was dismissed, Mr. Woon spent most of his time finishing his House and not looking for employment until mid-June 2013. At that time, he fairly quickly found some employment at Progressive. Mr. Woon has not produced the documentation to accurately determine his employment status from mid-June to mid-August. Ultimately, Universal hired Mr. Woon on August 15, 2013. His salary was $4,750 per month or $57,000 per year. At the time of the trial, Mr. Woon was employed with Risk Management Services. His job duties entailed inspecting homes for the purposes of underwriting home insurance. Technicon Industries Ltd. v. Woon Fitzpatrick J. 339

205 If I had found no just cause for the dismissal, I would have awarded one months’ salary to Mr. Woon as reasonable notice. 206 Mr. Woon also asserted that he was dismissed in a callous manner. He claims between $20-30,000 in aggravated damages: see Wallace at para. 103. Mr. Woon alleges two circumstances in support of this claim. 207 Firstly, Mr. Woon says that $1,342.29 (his last net pay on April 3, 2013) was applied to his construction balance and not paid to him in accordance with the ESA. The ESA provides: Deductions 21 (1) Except as permitted or required by this Act or any other enactment of British Columbia or Canada, an employer must not, directly or indirectly, withhold, deduct or require payment of all or part of an employee’s wages for any purpose. 208 Secondly, Mr. Woon alleges that Technicon “maneuvered” him into a situation where he was in a “power dependency” situation with Technicon, citing Dopf v. Royal Bank (1998), 156 D.L.R. (4th) 56 at paras. 72-75, 46 B.C.L.R. (3d) 66 (B.C. C.A.). He alleges that he was left with a House that he could not afford, although it is apparent that he did have substantial financial resources available to pay expenses and continue working on the House to the point where he and his wife could move in. I fail to see how Mr. Woon was financially dependent on Technicon in any different sense from any other employee who might be terminated. 209 He also states that he was left with nowhere to live when he returned to Terrace. After his dismissal, Mr. Woon and his wife lived in a friend’s house in Kitimat. This is a strange argument since it appears that Mr. Woon gave up his apartment before he left for Singapore. Why he would do this is a complete mystery. He knew that the House had not been approved for occupancy when he left the country. He could not have had any expectation that it would have progressed over his two months away since he had kicked Technicon off the job site. By all accounts, this was a self-inflicted problem created by Mr. Woon himself. 210 Finally, Mr. Woon complains about the filing of the builders’ lien as an aggravating feature. However, Mr. Woon was by all accounts extremely experienced in contract issues in Southeast Asia. He purported to have detailed knowledge of contract terms, which must mean those terms that give rights to a contractor in the event of default. That would mean, in this case, the right to file a builders’ lien if the contractor needed to protect itself in terms of amounts owing on the contract. If Mr. Woon did 340 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

not know this, then he should have. In addition, he would of course know that it would be his employer filing a lien in those circumstances in the event that a dispute arose between them. 211 I see no basis for Mr. Woon’s arguments for aggravated damages. Mr. Contumelias’ discussion with him on April 2 was not heavy handed, rude or aggressive. I took the tone of the meeting to be somewhat tense but not overly so. In fact, by that time, Mr. Contumelias still had hopes of resolving the situation with Mr. Woon such that Mr. Woon could be rehired. While Technicon’s deduction of the amount on the paycheque was technically a breach of the ESA, I do not consider it egregious and certainly not sufficient to justify any damages.

CONCLUSION AND DISPOSITION 212 Technicon is granted judgment against Mr. Woon in the amount of $193,272.89. 213 In addition, Technicon is entitled to a builders’ lien in that amount as against the House on the terms sought, save that the builders’ lien does not have priority as against the mortgage of RBC. 214 Subject to the mutual agreement of the parties, Mr. Woon will have 30 days in which to pay the judgment amount in full, failing which Technicon is at liberty to apply for an order that the House be sold. 215 Technicon is entitled to its costs of this action, including the filing of the lien, on a party and party basis, Scale B. T Ltd.’s action allowed; CW’s action dismissed. Carleton Condo. Corp. No. 449 v. 622294 Ontario Ltd. 341

[Indexed as: Carleton Condominium Corp. No. 449 v. 622294 Ontario Ltd.] Carleton Condominium Corporation No. 449, Plaintiff (Moving Party) and 622294 Ontario Limited, Defendant (Responding Party) Ontario Superior Court of Justice Docket: 11-51446 2016 ONSC 2306 Liza Sheard J. Heard: December 8, 2015 Judgment: April 18, 2016 Real property –––– Condominiums — Common expenses –––– Owners of neighbouring properties entered into Joint Use Agreement (JUA); agreement provided for joint use, operation, management, supervision, maintenance and repair of common interior roadways (common roadway expenses) — Owners were plaintiff/owner of phase I lands, condominium corporation/owner of phase II lands, and defendant/owner of phase III lands (numbered company) — Num- bered company stated it intended to build industrial warehouse/office project on phase III lands, but never built project nor registered condominium corporation — In 1999, trial judge declared that although numbered company did not build anything on its lands, it was still liable to pay 38.45 percent of total common roadway expenses in accordance with formula in JUA — Trial judge allowed for future variation of numbered company’s share of common roadway expenses in accordance with para. 6(f) of JUA — After trial judge’s order, numbered company erected two small buildings on phase III lands used seasonally as office and for storage for numbered company’s snow dump operation; buildings had no running water, they were not connected to hydro grid, electricity was created by solar power system, sufficient to power television, lights, and power station for cell phone and computer — Numbered company argued its proportionate share of common roadway expenses was to be reapportioned — Plaintiff brought motion for partial summary judgment to find numbered company remained liable to pay 38.45 percent of certain shared expenses in accordance with JUA and that JUA’s reapportionment provisions were not triggered — Mo- tion granted — There was no genuine issues that required trial and motion for summary judgment was proportionate and less expensive means to achieve just result; facts were not really in dispute, amounts involved were relatively small, and issues were relatively uncomplicated — JUA remained in force and allocations of common roadway expenses was as set out in JUA; namely, numbered 342 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

company remained obligated to pay 38.45 percent of common roadway expenses — Reapportionment provisions of para. 6(f) of JUA were not triggered by buildings erected by numbered company on its lands — What numbered company built on its lands were not condominium corporations; structures were qualitatively so different from warehouse/office building contemplated by parties to JUA that, for purposes of JUA, they could not be considered building so as to trigger readjustment clause — Structures were little more than no buildings at all; they were toll booths — Fair interpretation was that for purposes of JUA, numbered company’s lands were not developed. Cases considered by Liza Sheard J.: Creston Moly Corp. v. Sattva Capital Corp. (2014), 2014 SCC 53, 2014 CSC 53, 2014 CarswellBC 2267, 2014 CarswellBC 2268, 373 D.L.R. (4th) 393, 59 B.C.L.R. (5th) 1, [2014] S.C.J. No. 53, [2014] 9 W.W.R. 427, 461 N.R. 335, 25 B.L.R. (5th) 1, 358 B.C.A.C. 1, 614 W.A.C. 1, (sub nom. Sattva Capital Corp. v. Creston Moly Corp.) [2014] 2 S.C.R. 633 (S.C.C.) — referred to Hryniak v. Mauldin (2014), 2014 CarswellOnt 640, 2014 CarswellOnt 641, 37 R.P.R. (5th) 1, [2014] S.C.J. No. 7, 46 C.P.C. (7th) 217, 27 C.L.R. (4th) 1, (sub nom. Hryniak v. Mauldin) 366 D.L.R. (4th) 641, 2014 CSC 7, 453 N.R. 51, 12 C.C.E.L. (4th) 1, 314 O.A.C. 1, 95 E.T.R. (3d) 1, 21 B.L.R. (5th) 248, [2014] 1 S.C.R. 87, [2014] A.C.S. No. 7, 2014 SCC 7 (S.C.C.) — followed MacDougall v. MacDougall (2005), 2005 CarswellOnt 7257, 205 O.A.C. 216, 262 D.L.R. (4th) 120, [2005] O.J. No. 5171 (Ont. C.A.) — considered Salah v. Timothy’s Coffees of the World Inc. (2010), 2010 ONCA 673, 2010 CarswellOnt 7643, 74 B.L.R. (4th) 161, [2010] O.J. No. 4336, 268 O.A.C. 279 (Ont. C.A.) — considered Toronto Standard Condominium Corp. No. 1487 v. Market Lofts Inc. (2015), 2015 ONSC 1067, 2015 CarswellOnt 2383, 53 R.P.R. (5th) 67 (Ont. S.C.J.) — considered Statutes considered: Building Code Act, 1992, S.O. 1992, c. 23 Generally — referred to Condominium Act, R.S.O. 1980, c. 84 Generally — referred to Rules considered: Rules of Civil Procedure, R.R.O. 1990, Reg. 194 R. 20 — considered R. 20.04(2) — considered Carleton Condo. Corp. No. 449 v. 622294 Ontario Ltd. Liza Sheard J. 343

R. 20.04(2.1) [en. O. Reg. 438/08] — considered

MOTION by plaintiff for partial summary judgment to find numbered company remained liable to pay share of certain shared expenses in accordance with agreement, and that agreement’s reapportionment provisions were not triggered.

Rodrigue Escayola, for Plaintiff Joseph Y. Obagi, for Defendant

Liza Sheard J.: Overview 1 The plaintiff brings a motion for partial summary judgment. It asks this Court to find that the respondent remains liable to pay 38.45% of certain shared expenses in accordance with an agreement entered into among the parties in 1988. It further asks the Court to find that the two buildings erected by the respondent are not sufficient to trigger the agreement’s reapportionment provisions. 2 In 1988, the three owners of neighbouring properties entered into a Joint Use Agreement. Among other things, the agreement provided for “the joint use, operation, management, supervision, maintenance and repair of the common interior roadways and the shared service easements.” I will refer to these as the “common roadway expenses”. The JUA set out how the three owners would share the common roadway expenses. The agreement was dated November 24, 1988 and amended on March 29, 1994 (collectively the “JUA”). 3 The three owners are: the plaintiff/moving party and owner of the Phase I lands, Carleton Condominium Corporation No. 449 (“CCC 449”), Carleton Condominium Corporation No. 517, which owns the Phase II lands (“CCC 517”), and the defendant/responding party and owner of the Phase III lands, 622294 Ontario Limited* (“622”). CCC 517 is not a party to this action or motion but is on notice of it. *For the purposes of this motion, 622 and its predecessor, 670685 Ontario Inc., are referred to as “622”. 4 The parties to the JUA agreed to share the common roadway expenses using a formula based on the square footage of the commercial/industrial condominiums that had been, or were to be, built on the Phase I, II, and III lands. In the JUA 622 is defined as “Owner”. The JUA states that “...until the Phase II and Phase III condominium Corpo- rations are registered, if ever, the Owner its successors and assigns shall 344 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

pay and be responsible for the proportionate share of [the common roadway expenses]...” 5 622 has never built the 65-unit 65,186 sq. ft. industrial warehouse/office project contemplated by the JUA nor registered a condominium Corporation. 6 In the JUA, 622 states that it intends to build a 65-unit 65,186 sq. ft. industrial warehouse/office project on the Phase III lands. Based on the formula agreed by the parties to the JUA, 622’s proportionate share of the common roadway expenses is 38.45% of the total common roadway expenses.

Background 7 In 1996, 622 began using its land for a snow dump: a place for trucks to offload their loads of snow. 622 determined that it did not want or need to build the industrial warehouse/office condominium contemplated by the JUA. 8 The other owners and some of their tenants objected to the use of the Phase III land as a snow dump. Their objections included concerns about surface drainage of the snow dump site and the adverse impact of the use of the common roadway by heavy vehicles, including the accompanying noise, mud and slush. 9 In January 1999, 622 obtained a Judicial Declaration allowing the Phase III lands to be used for a snow dump. The principal of 622, Paul Beauchamp (“Beauchamp”), was involved in that court application. He remains a principal of 622 and was the affiant for 622 on this motion for partial summary judgment. Beauchamp is an Officer and Director of 622 as well as 670685 Ontario Inc. In his affidavit, he refers to both corporations collectively as “622 Ontario”. 10 In 1999, a second court application was brought to determine what share, if any, 622 had to pay toward the common roadway expenses. At that time, 622 argued that it had not built on its lands and did not intend to do so and, therefore, its share of the common roadway expenses should be zero. 11 By Judgment dated November 25, 1999 Madam Justice MacKinnon (“the Mackinnon Judgment”), determined that the JUA was “valid and subsisting and sets out the proportionate liability for cost of maintaining, repairing, replacing, inspecting or altering the common interior roadway and the service easements [the common roadway expenses]. She declared Carleton Condo. Corp. No. 449 v. 622294 Ontario Ltd. Liza Sheard J. 345

that, despite that 622 had built nothing on its lands, 622 was still liable to pay 38.45% of the total common roadway expenses in accordance with paras. 6(a) and 6(b) and Schedule “A” of the JUA. 12 Paragraph 4 of the Mackinnon Judgment allowed for a future variation of 622’s share of the common roadway expenses in accordance with paragraph 6(f) of the JUA. In this action and motion, 622 argues that paragraph 6 (f) operates to obligate the parties to readjust its share of the common roadway expenses to reflect the size of the buildings it has built on the Phase III lands. 13 Paragraph 6(f) of the JUA states: The Owner intends to construct buildings on its lands containing the square footage set out in Schedule “C” hereto. However, should the actual square footage change from that presently intended, resulting in a change in the Proportionate Interest of [CCC 449] and the Owner, then [CCC 449] and the Owner covenant and agree to effect an appropriate readjustment between themselves in respect of the amounts payable by them so that the proportionate share of each phase accords with the final proportionate interest of each party.* [*Note: Schedule “C” was not attached to the JUA and is not found in any of the materials put before me on the motion.]

Buildings Erected on Phase III lands after Mackinnon Judgment 14 After the Mackinnon Judgment, 622 erected two small buildings on the Phase III lands. The two buildings sit on cinder block foundation and are used seasonally as an office and for storage for 622’s snow dump operation. The buildings have no running water. They are not connected to the hydro grid: electricity is created by way of a solar power system, sufficient to power a television, lights, and as a power station for a cell phone and computer. Heat comes from a permanently installed propane furnace. The plaintiff/moving party labels them as “seasonal sheds”. 15 In this action and motion, 622 argues that its proportionate share of the common roadway expenses should be reapportioned. It asserts that it is unfair that its share of the common roadway expenses is based on the 65,186 square foot industrial building contemplated in Schedule “A” to JUA when the actual square footage of its structures is significantly smaller: 28.09 and 98.06 square feet respectively. 622 argues that Clause 6(f) requires the parties to reapportion the cost allocations. 16 CCC 449 seeks to enforce the JUA and for an order that 622 is still required to pay 38.45% of the common roadway expenses. CCC 449 ar- 346 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

gues that the structures erected on the 622 lands are not bona fide buildings that can or should trigger the reapportionment provisions found in clause 6(f).

Issues on the Summary Judgment Motion: 1. Can the parties’ obligations pursuant to the JUA be determined on a motion for summary judgment? 2. If so, do the two structures built on 622’s property trigger the reapportionment provisions of clause 6(f)? 3. If the answer to this question is “yes”, then can the Court adjudicate the reapportionment by way of motion for summary judgment or is a trial required? 4. If the structures do not trigger a readjustment, is 622 still responsible to pay 38.45% of the common maintenance and repair expenses? 5. 622 raises additional issues: (a) Is CCC 449 statute-barred from bringing a claim for payment of asphalt repairs which were originally invoiced on December 30, 2008, but not sued upon until May 26, 2011? (b) Has CCC 449 unilaterally (and improperly) changed the manner in which it has calculated snow removal costs? 17 Since 2008, 622 has resisted paying 38.45% of the common roadway expenses. 622 has asserted that the buildings on its lands are very small and that its share of the common roadway expenses should be based on the square footage of the buildings it actually built, not on buildings that it has no plans to build. It wants to reapportion the percentages as man- dated by paragraph 6(f). 18 The evidence of CCC 449 is that 622 refused to pay the amount invoiced by CCC 449 in 2010 for 622’s proportionate share of asphalt repairs in the amount of $43,608.76 or its share of the 2010 snow removal costs in the amount of $5,967.86. If it is successful on this motion, CCC 449 has asked for a reference to determine the exact amount owing by 622. I reference these figures here not for their accuracy but to illustrate the relatively modest amounts in issue. 19 622 also argues that CCC 449’s claim on an unpaid invoice to 622 for asphalt work is statute-barred because it relates to expenses incurred and originally invoiced in 2008, more than two years before the statement of claim was issued. The invoice being sued upon is dated June 10, 2010, Carleton Condo. Corp. No. 449 v. 622294 Ontario Ltd. Liza Sheard J. 347

well within two years of the issuance of the statement of claim on May 26, 2011.

Motion for Summary Judgment 20 The facts relevant to the issues on this motion are uncontroversial. That alone makes the issues before the Court well-suited to be determined on a motion for summary judgment. In addition, to some extent, the issues before this Court were addressed and determined by the Mack- innon Judgment. 21 Rule 20 of the Rules of Civil Procedure, RRO 1990, Reg. 194, permits a party to bring a motion for summary judgment. Rule 20.04(2) di- rects the court to grant summary judgment if satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. 22 In determining whether or not there is a genuine issue for trial, rule 20(2.1) permits the judge to weigh the evidence; evaluate the credibility of a deponent; and/or draw any reasonable inference from the evidence. 23 Hryniak v. Mauldin, 2014 SCC 7 (S.C.C.), is the leading authority on motions for summary judgment. CCC 449 referred the Court to the following principles and paragraphs found in Hryniak: (a) There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result [para. 49]; (b) ...The new rule, with its enhanced fact-finding powers, demonstrates that a trial is not the default procedure. [para. 43]; (c) On a summary judgment motion, the evidence need not be equivalent to that at trial, but must be such that the judge is confident that she can fairly resolve the dispute... [para. 57]; (d) In assessing whether it is in the “interests of justice” to exercise the new fact-finding powers granted under Rule 20 to arrive at a judgment at the motion stage instead of insisting on a full trial, the court must consider the principle of proportion- ality, assessing the relative cost and speed of the motion versus trial, and the consequences of the motion for the litigation as a whole [paras. 28-33.] 348 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

24 Most of the issues before me do not require me to use the expanded fact-finding powers under Rule 20. However, as more fully set out below, I did accept the evidence put forth by CCC 449 over that of 622 on the issue of whether the claim for payment of the asphalt repairs was statute-barred and on the issue of whether CCC 449 had changed its square footage. To the extent that my findings on those issues required me to weigh the evidence I did exercise the additional powers under Rule 20. In doing so, I considered the principles set out in Hryniak, and in Toronto Standard Condominium Corp. No. 1487 v. Market Lofts Inc., 2015 ONSC 1067 (Ont. S.C.J.). 25 Having read the evidence and heard submissions I am satisfied that there are no genuine issues that require a trial and a motion for summary judgment is “a proportionate, more expeditious and less expensive means to achieve a just result.” The facts are not really in dispute; the amounts involved are relatively small and the issues are relatively uncomplicated.

Do the two structures built on 622’s property trigger the reapportionment procedure set out in clause 6(f) of the JUA? 26 CCC 449 argues that the structures on 622’s land are not “bona fide” buildings for the purposes of the JUA. 27 To understand the JUA and to assess whether the 622 buildings can be considered “bona fide” for the purposes of the JUA, I must “search for an interpretation that is in accordance with the parties’ intention at the time they entered into the contract.”(MacDougall v. MacDougall [2005 CarswellOnt 7257 (Ont. C.A.)], 2005 CanLII 44676 (at para. 22.) 28 The subject matter of the JUA were the lands and premises owned by CCC 449, (the “Phase I lands”), and the lands and premises owned by 622, (defined as “the Owner”), which included lands lying adjacent to the Phase I lands and the Phase II and Phase III lands. JUA begins with a number of recitals including: AND WHEREAS the Owner intends to develop and construct a 65 unit industrial warehouse and office project on the lands...called the Phase III lands. AND WHEREAS the Corporation and the Owner have entered into this Agreement for the purpose of providing for the joint use, operation, management, supervision, maintenance and repair of the common interior roadway’s and the shared service easements. 29 The cost-sharing provisions begin at para. 6 of the JUA in which the parties covenant and agree to maintain and keep the common roadway in Carleton Condo. Corp. No. 449 v. 622294 Ontario Ltd. Liza Sheard J. 349

good repair and agree that the servicing easements and the cost of maintaining, repairing, replacing, inspecting or altering the same shall be borne as set out in subparagraphs 6 (a) - (f), reproduced in part below: (a) [CCC 449] and the Owner, their successors and assigns shall pay and be solely responsible for that proportion or percentage of the total cost of maintaining, repairing, replacing, inspecting or altering the common interior roadway and the Servicing Easement in the proportion that the number of square feet of building space of each of the three Phases bears to the total number of square feet of building space in all three Phases (hereinafter referred to as its “proportionate interest” or “proportionate share”). The square footage of the building space of the Phase I lands together with the proposed square footage of the building space of the Phase II and III lands and their respective proportionate interests are set out in Schedule “A” hereto; (b) Provided that until the Phase II and Phase III condominium Cor- porations or registered, if ever, the Owner its successors and assigns shall pay and be responsible for the proportionate share of such maintenance and repair costs for and in respect of each of the adjacent Phases. The Corporation hereby confirms that from the date of registration of its declaration it shall pay and be solely responsible for its proportionate share of such maintenance and repair costs; ... (d) Any amounts not contributed by the Corporation or the Owner in accordance with the foregoing provisions, shall, until advanced, bear interest at the rate of twenty-four (24%) per cent per annum, calculated and compounded monthly on such amount as is from time to time unpaid, and until so paid, such amount together with interest thereon as aforesaid shall, to the extent thereof, be and constitute a first lien and charge against: ... (i) Such of the Owner’s Lands upon which no condominium is registered, where the Owner ought to have contributed such sum in respect of same. (Emphasis added) ... 30 Paragraph 6(f) (reproduced at para. 13, above) must be read in the context of the whole JUA and, in particular, para. 6(b) clearly contem- plates that the Owner will pay its proportionate share until “the Phase II and Phase III condominium Corporations or registered, if ever.” It does 350 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

not contemplate that the proportionate share should not be paid in the event that 622 decides not to develop the Phase III lands or not to build a condominium Corporation. That was not the agreement that the parties entered into. 31 Schedule “A”, inadvertently omitted from the JUA, was incorporated into the JUA by agreement dated March 29, 1994. Schedule “A” provides that the total square feet for Phase III is 65,186 sq. ft. and, based on that and the square footage of the other two condominiums, 622’s proportionate interest/share of the common roadway expenses is 38.45%. 32 As at March 29, 1994, only 622 had not built on its lands. The owner of Phase II had built and incorporated a condominium Corporation (CCC 517). That is strong evidence that even as at March 29, 1994 the parties, including 622, intended and agreed that the lands would be developed into commercial Condominiums. The interior roadway was built in anticipation of those developments, which were suitable for the size of the lands allocated to each of Phase I, II and III. 33 The Court must consider the “factual matrix” in interpreting the JUA. The objective of that exercise to avoid “commercial absurdity”. (See, Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673 (Ont. C.A.). 34 In considering that “factual matrix”, the Mackinnon Judgment concluded that the parties agreed and expected that the three properties would share the costs of those common roadways, whether or not the commercial warehouses or offices had been built. Considering both the wording of the JUA and the Mackinnon Judgment, iit is difficult to conclude that the parties could have intended that an owner who had constructed buildings totalling approximately 126 square feet (.2% the size of that of the originally contemplated) versus the contemplated 65,186 square foot warehouse/office condominium, would be entitled to a corre- sponding reduction of its proportionate share. 35 However, the question before me is not by how much, if any, 622’s share should be reapportioned. The question is: do the buildings of the size and nature constructed by 622 trigger the provisions of the reapportionment clause? If so, the determination of the proper reapportionment would be determined in accordance with that clause. 36 CCC 449 argues that, in interpreting what the parties intended by the word “building” in the JUA, the Court could consider the interpretation of the word “building” as that term is defined in the Ontario Building Carleton Condo. Corp. No. 449 v. 622294 Ontario Ltd. Liza Sheard J. 351

Code Act, 1992. Under that Act the structures that 622 put on its lands would not fall within the definition of building. 37 It is a well-accepted principle of contract interpretation that you must read the contract as a whole in order to determine the intentions of the parties. (Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53 (S.C.C.)). 622 rejects the notion of looking beyond the JUA to understand what the parties meant by the words used in it. It argues that the Court must give the words used by the parties their ordinary meaning. Therefore, it would be wrong to apply the Building Code Act definition of “building” to the meaning intended by the parties to the JUA. 38 I am guided by the intentions of the parties in the JUA. They built the common roadways in anticipation that all three Phases would be developed. They agreed to a formula for sharing those expenses based on what could be built on the Phase I, II and III lands. The Mackinnon Judgment concluded that the JUA was clear that the formula applied whether or not the contemplated condominiums had been built. It would seem to lead to an unintended and “commercially absurd” result, that one owner could build structures that are so qualitatively different from those contemplated by the JUA and still seek to argue that they constitute the “buildings” contemplated by the JUA. 39 What 622 has built on its lands are not condominium Corporations. Further they in no way resemble the “buildings” that the parties contemplated in the JUA. Beauchamp describes the building built in 2003 as “... a metal building with cinderblock foundation equipped with windows on all sides and a steel door.” He describes the building built in 2004 as a wood-framed, fully insulated building, sitting on a cinderblock foundation...[with] vapour barriers on all four walls, along the floor and in the ceiling. The roof is a shingle roof ... and [T]he building is heated by way of a permanently installed propane furnace. Electricity is provided by way of a solar power system which is sufficient to power a television, lights and serves as a power station for a cell phone and computer. 40 Beauchamp confirms “...that the square footage of the first metal building is 28.09 square feet and that the square footage of the wood framed office building is 98.06 square feet.”

Proposed Improvements to the 622 Buildings 41 In its materials, CCC 449 includes colour photocopies of photographs taken of the 662 buildings. The president of CCC 449 describes them as 352 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

a “toll booth type structure”. Judging from the photographs, that is a fair description of the buildings. 42 Notwithstanding that in 2015, 622 applied for a building permit to improve the buildings, the improvements do not change the character of the structures. The improvements are described as: Lift existing building to construct a slab foundation beneath it.” The building permit describes the proposed use as an office/storage building. The upgraded building will still not have running water or washroom facilities and will not be connected to hydro. 43 I find as a fact that these two buildings are qualitatively so different from the 65,186 square foot warehouse/office building contemplated by the parties to the JUA that, for the purposes of the JUA they cannot be considered buildings so as to trigger the readjustment clause. They are little more than no buildings at all. 44 A fair interpretation of what has happened on the 622 lands is that, for the purposes of the JUA, they have not been developed. Indeed, that is essentially what Beauchamp admits when he says that 622 has no need or intention of building anything much beyond what it has already erected. 45 In view of my findings above regarding the nature of the buildings, I conclude that the readjustment clause in para. 6(f) of the JUA has not been triggered. 46 As a result, I see no basis to deviate from the conclusions in the Mackinnon Judgment that 622 is required to pay 38.45% of the common roadway expenses.

Is CCC 449’s Claim for Asphalt repairs Statute-Barred? 47 In his affidavit, Beauchamp asserts that the claim against 622 for asphalt repairs in the amount of $48,608.76 is statute-barred by reason that the claim was issued on May 26, 2011, more than two years after the initial invoice dated December 31, 2008.

CCC 449’s Evidence on the Asphalt Repairs 48 In her supplementary affidavit sworn April 29, 2014, Jennifer Jones (“Jones”), on behalf of CCC 449, explained that all of the common roadway expenses are paid by CCC 449 which then allocates the cost between the shared areas and the exclusive areas on the basis of the JUA. Carleton Condo. Corp. No. 449 v. 622294 Ontario Ltd. Liza Sheard J. 353

49 Jones acknowledges that the invoice on which CCC 449 is suing was re-issued on June 14, 2010, but covered asphalt expenses incurred in 2008. She explains that when the invoice was originally rendered, 622 refused to pay it on that basis that the allocation of expenses as between the common and the exclusive portions of the roadway was wrong. 50 In the winter of 2010, CCC 449 hired a surveyor to determine the exact locations of the common interior roadway and the exclusive portions of the roadway. The surveyor’s report was obtained on April 28, 2010. It provided an accurate allocation of expenses to the common roadway. On June 14, 2010, a new invoice was rendered to 622, based on the surveyor’s report. 51 Jones states that CCC 517 accepted the new figures and paid its share. 622 did not. On a without prejudice basis, CCC 449 then reverted to its previous method of calculating 622’s shares using the 14.25% factor. 622 also refused to pay these invoices. As a result, CCC 449 liened the 622 lands and issued its statement of claim. 52 I accept the evidence of Jones. It is supported by correspondence and business records that explain why the original invoice was replaced by one dated June 14, 2010. I also accept that any limitation period should commence from June 14, 2010. As a result, I find that claim was issued within two years of the invoice and is not statute-barred.

Other reasons for the JUA to require an adjustment of the proportionate shares. 53 In addition to challenging its obligation to pay 38.45% of the common roadway expenses, Beauchamp asserts that CCC 449 unilaterally changed the way it calculated the allocation of the common roadway expenses, which has allegedly doubled 622’s purported liability for those costs. Beauchamp specifically alleges that historically, the total cost of snow removal was multiplied by 14.25%, which was the percentage allocated to the common roadway. This number was then multiplied by the proportionate share of each owner. In the case of 622, the formula would be: the total cost of snow removal multiplied by 14.25% 38.45%. 54 I accept Jones’ explanation of how 622’s proportionate share of the snow removal expenses was calculated and reject 622’s assertions that a wrong formula was applied by CCC 449. 55 Beauchamp also asserts that in July 1993, CCC 449 amended the site plan to remove “Building F” from the Phase III lands. The result was that, what had been intended to be a building was replaced by parking 354 CONSTRUCTION LAW REPORTS 59 C.L.R. (4th)

spaces, which reduced the overall square footage of Phase III from 65,185 to 47,930 [sq. ft.]. 56 This site plan amendment predated the Mackinnon Judgment which found the 622’s proportionate share to be 38.45%. I conclude therefore that 622 is estopped from making this argument and that this issue is res judicata. 57 Finally, Beauchamp asserted that CCC 449 has increased the square footage of its buildings on its Phase I lands and estimates that they have increased by 39,000 feet to an estimated total of 113,290 square feet. He suggests that this change in square footage would alter the proportionate shares of the parties to the JUA. 58 In her affidavit, Jones denies Beauchamp’s allegation that CCC 449 has increased the square footage of its buildings. Her evidence is corrob- orated by CCC 449’s Declaration pursuant to the Condominium Act, R.S.O. 1980, CH. 84 dated November 11, 1988. Section 3(b) of Schedule C and Schedule D of the Declaration make reference to the second floor assemblies to which Jones believes Beauchamp is referring in his assertion that the second floor assemblies constitute an increase in square footage. 59 The affidavit of Kazimierz Jacob Kasey Krupa (“Krupa”) sworn April 29, 2014 in support of the motion brought by CCC 449 also supports a finding that there has been no increase in the square footage of its condominium. 60 Krupa is on the Board of Directors of CCC 449 and is a unit holder. He asserts that, contrary to Beauchamp’s allegations, there have been no changes and, in particular no recent changes, to the layout or square footage of the buildings on CCC 449. He states that they have not increased in size and their footprint has not changed. He asserts that the “second floor assemblies within the existing cubic space of the units”, which he believes Beauchamp refers to as “duplexing”, does not increase the footprint of the buildings and is not new. He further states that the second floor assembly on certain units was in place at the time of the initial construction and predated the JUA. 61 Krupa states that he bought his unit in December 1988 and had visited many units before buying. At that time, he visited many “duplexed” units. Finally, he refers to s. 3.2 of CCC 449’s Declaration which specifically prohibits the addition, removal, extension or alteration of any boundary wall or floor without the prior written consent of CCC 449. He has no recollection of any such request. Carleton Condo. Corp. No. 449 v. 622294 Ontario Ltd. Liza Sheard J. 355

62 I find that the evidence of Jones and Krupa fully responds to and answers Beauchamp’s allegations regarding an alleged increase in the Phase I square footage.

Conclusion 63 For the reasons set out above, I grant partial summary judgment and find as follows: (1) The JUA remains in force and the allocations of the common roadway expenses as set out in Schedule A to the JUA. Namely, 622 remains obligated to pay 38.45% of the common roadway expenses; (2) The reapportionment provisions of section 6(f) of the JUA have not been trigged by the buildings erected by 622 on its lands; (3) The plaintiff’s claim for payment of the asphalt invoice dated June 10, 2011 is not statute barred and I grant judgment in that amount; (4) If the parties cannot otherwise agree on the amounts, then I order a reference to be conducted by the Master to determine the amount payable by 622 to CCC 449 based on 622’s proportionate share of 38.45% of the common roadway expenses.

Costs 64 CCC 449 has been successful on this motion for partial summary judgment and is entitled to its costs. If the parties cannot agree on amount, they may file submissions not exceeding three pages in length, together with Bills of Costs within 30 days of the date of this decision. Motion granted.