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CIVIL PROCEDURE - Costs - Party and party or partial indemnity

Friday, January 17, 2020 @ 8:41 AM  

Lexis Advance® Quicklaw®
Appeal and cross-appeal from trial judgment respecting interest and costs in a builders’ lien action. The plaintiffs were the general contractors hired by the defendants to finish building their home. Disputes arose regarding the payment of invoices and quality of the work. The defendants terminated the contract. The trial judge concluded that the defendants had a right to terminate the contract on the basis that the plaintiffs did not prepare certain invoices in good faith and with honesty and that the plaintiffs were entitled to certain amounts for the work completed. The defendants were awarded punitive damages on the basis that the plaintiffs improperly contrived the invoices. The trial judge also awarded the defendants interest of $123,464 and costs on a party-and-party basis and double costs after a formal offer to settle. The defendants argued they should have received full indemnity costs, alleging that the plaintiffs engaged in wrongdoing both before and during the proceedings.

HELD: Appeal allowed. Cross-appeal dismissed. The trial judge erred in law by awarding the respondents $123,464 in interest. This was not an interest amount but a purported award of restitutionary damages arising from the breach of contract. The judge already considered the counterclaim in the trial proper and did not award damages to the respondents for breach of contract based on restitution. The substantive trial decision and Judgment Order indicated that the respondents were awarded interest on the sums held in trust. There was absolutely no mathematical relationship between the amount of interest on the sums held in trust and the amount awarded. The award in fact was for expenses incurred due to the plaintiffs’ breach of contract but these expenses were not pleaded. It was an error of law for a trial judge to decide the case on a basis that was not pleaded. The defendants were entitled to pre-judgment interest on the amount of $132,390 according to the Judgment Interest Act from the date the sums were paid into trust to the date of trial less the amount of interest actually earned on that amount. The revised interest calculation would not bring the defendants anywhere close to beating their formal offer to settle. There would thus be no doubling of the costs. There was no basis to interfere with the trial judge’s decision to refuse to grant full indemnity costs. The wrongdoing alleged did not rise to the special or extraordinary circumstances where full indemnity costs were awarded.

Coyle (c.o.b. Leyco Enterprises) v. O'Keefe, [2019] A.J. No. 1533, Alberta Court of Appeal, B.L. Veldhuis, D. Pentelechuk and K.P. Feehan JJ.A., November 18, 2019. Digest No. TLD-January132020009