Eaton et al. v. HMS Financial Inc. et al., 2010 ABQB 364

• Judge: Rooke, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: May 27, 2010
• Citations: 2010 ABQB 364;(2010), 486 A.R. 130 (QB)

Eaton v. HMS Financial Inc. (2010), 486 A.R. 130 (QB)

MLB headnote and full text

Temp. Cite: [2010] A.R. TBEd. JN.047

Heike Eaton, Harlan Light, Douglas Alexander and William Barrett, as representative plaintiffs (plaintiffs) v. HMS Financial Inc. and Skyward Management Inc., Garth S. Bailey, Garth S. Bailey Professional Corporation, 990137 Alberta Ltd., 1037149 Alberta Ltd., operating as Cedar Management, 105382 Alberta Inc., 1070199 Alberta Ltd., 1079373 Alberta Ltd., 993638 Alberta Ltd., A-Z Investment Group, Abba Resources Unlimited, Academy Financial Inc., Academy Financial Planners & Consultants Inc., Ailanthus International Inc., Altruistic Holdings Ltd., Aspire Group International Realty Inc., Bailey & Dawes LLC, Bailey Daws LLP, Bogner Industries Ltd., B.P. Fritz Consulting Inc., The Carpenter's Shop Corporation, Casselman MCS Financial Inc., Cedar Pointe Consulting Group Inc., Chase Forbes Trust Ltd., CLJ Consulting LLC, Commonwealth Marketing Group Ltd., Community Credit Union Ltd., Companions Inc., D.K. Defreitas Professional Corporation, The Dakota Corporation, Dana I. Carlson, Datas Consulting, Defreitas & Associates, Desmond K. Defreitas, Diverse Equities Inc., Ethan Equities Inc., First National Bank of San Diego, Five Continents Consulting, Five Continents Consulting Corporation, Fowlks & Snyder LLP, Global Trustees (NZ) Limited, Graceful Beneficence Guessworks, Guessworks Foundation, The Hillpro Group Inc., Horizon Bank International Limited, Horizon Fiduciary Inc., HSBC Bank Canada, International Investments Inc., Jesco Inc., Kamikey Services Inc., Kelso Enterprises Inc., Kirby Audit Services Inc., Kingdom Advisors, Klass "A" Strategies Inc., La Alta Ltd., Linderhall Pty Ltd., M & M Computer Consulting, M & M Investments 101 Ltd., Magellan Moranda Investments, Marcol Management Ltd., Maritime, LLC, McCarthy Tetrault LLP, McCullough Financial Corporation, Michael Grosh Professional Corporation, Mountain Star Capital Corp., Mountain View Credit Union Limited, NDX Development LLC, Numa Ltd., Oxyoke Farms Ltd., Paget Capital Ltd., Paradise Bay Holdings Inc., Phoenix Global Resources Ltd., Pine Grove Management Inc., Richard Fowlks, RLM Consulting LLC, Sellars Financial Inc., Talisman Financial Investments Inc., Tamika Enterprises Inc., Thor Empire Trust, Titania Consulting Inc., TJ Kelly Inc., Tools of the Carpenter, Transmax Technologies Ltd., Triple-SSS Holdings Inc., Tyrolia Foundation, Vitron Consulting Inc., Singer Brothers Holdings, Zurich Ventures Inc., A. Gary Young, Guy Bailey, Alfred Barnfield, Connie Bartel, Robert Bartel, Victor Bauman, Mylo Berstad, Nancy Buford, Cameron Campbell, Rick Childers, Blaine A. Cisna, Kevin Coombes, Ellen Kate Covey, Douglas A. Cowan, Margaret Dart, Stanley Defreitas, Don Dickerson, Eugene Leroy Duce, Arnold Dyck, Juan Exposito, Alfredo Farpon, Ray Fisher, Jack Folsom, Jim Folsom, Richard Fowlks, Barie Fritz, Crystal Anne Fyn, Phyllis Fyn, Robert E. Fyn a.k.a. Colonel Fyn, Allan A. Gray, Michael Grosh, David Guess, Neil Guess, Kendra Haskett, Arnold Henry, David Henry, Gord Hiebert, Samuel Higgins, Winston Indsarsingh, Colleen Jespersen, James Jespersen, Mark Jespersen, Sharrell Jespersen, Wayne Johnson, Terry Kelly, Barbara L. King, Arthur Klassen, Ed Knott, Ruby Leachman, George Lennox, William Lenz, Daniel Lescamela, Willie Lichtner, Lucia Ling, Barbara Lockhart, Ron Lowrie, Don MacGillivray, Danny R. MacNaughton, Norma A. MacNaughton, Peter Manousos, Michael McCullough, William McGrath, Dave Miller, Mohan Maharaj, Rosendo Mendez, Peter Mol, Brad Mooney, Peter Morrisseau, Tom Oldridge, Roy Overton, Gertrude M. Prete, Donald Rabby, Amin Famji, Bilkish Ramji, Stan W. Remin, Jeffrey Robinson, Katherine Rodrigues-Bailey, Daniel Romero, John Romero, Orest Rusnak, Arie Schalk, Randall Seabrook, Claude Seguin, Robert J. Sellars, William Serediuk, Peter L. Sheridan, Janet Stark, Murray Stark a.k.a. Harold Murray Stark a.k.a. Murray H. Stark, Delmer Strobel, Verna Strobel, Cheryl Taylor, Milton Teibe, Robert F. Terborg, Enrique Toscano a.k.a. Chico Toscano, Lee-Anna Toscano, Henk Ujiterlinde, Wilma Ujiterlinde, Heather Vance, Christine Williams, John W. Willock, Margaret Wright, Stan Wright, Claude Zinger, John Doe, Richard Doe and XYZ Corp. (defendants)

(0501 08152; 2010 ABQB 364)

Indexed As: Eaton et al. v. HMS Financial Inc. et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Rooke, J.

May 27, 2010.

Summary:

The plaintiffs sued the defendants, alleging that they were part of a class of some 1,000 investors who invested approximately $80 million in what they alleged was a fraudulent investment scheme (the HSM scheme). The American Federal Bureau of Investigation seized some funds alleged to be the fruits of that scheme. The United States did not claim ownership, and eventually began interpleader proceedings in the United States Federal District Court for the Southern District of California. The action was certified as a class action in Alberta subject to certain conditions and exceptions (see 458 A.R. 282). The case management judge issued an order giving victims who had directly traceable claims and were not alleged to have taken part in wrongdoing, their claims out of the funds held. The rest of the funds were to be held by the Clerk of the Court in Calgary. Certain persons were ordered to pay to the same Clerk any funds which they received from the American court in San Diego. The order also requested the American court not to deduct any legal fees for Canadian persons. There were other ancillary provisions. The defendants appealed the order.

The Alberta Court of Appeal, in a decision reported at 477 A.R. 192; 483 W.A.C. 192, dismissed the appeal. The parties made submissions on costs.

The Alberta Court of Queen's Bench determined the issues with respect to costs of the application.

Practice - Topic 7110.1

Costs - Party and party costs - Special orders - Increase in scale of costs - Conduct of opposite party - The plaintiffs sued the defendants, alleging that they were part of a class of some 1,000 investors who invested approximately $80 million in what they alleged was a fraudulent investment scheme (the HSM scheme) - The American Federal Bureau of Investigation seized some funds alleged to be the fruits of that scheme - The United States did not claim ownership, and eventually began interpleader proceedings in the United States Federal District Court for the Southern District of California - The action was certified as a class action in Alberta - The case management judge issued an order giving victims who had directly traceable claims and were not alleged to have taken part in wrongdoing, their claims out of the funds held - The rest of the funds were to be held by the Clerk of the Court in Calgary - Certain persons were ordered to pay to the same Clerk any funds which they received from the American court in San Diego - The order also requested the American court not to deduct any legal fees for Canadian persons - The Alberta Court of Queen's Bench awarded the plaintiffs' costs as claimed, i.e.,three times the Column 5 amount for a contested application under Schedule C of the Alberta Rules of Court (3 x $1,500 = $4,500), multiplied by an inflation factor of 1.2 ($4,500 x 1.2 = $5,400), plus taxable and non-taxable disbursements of $200.50 and GST on the taxable disbursements, totalling $5,603.49 - A larger costs award was necessary in this case in light of the amounts concerned (approximately $5 million USD) and in order to "sanction behaviour that increases the duration and expense of litigation" and to "ensur[e] that litigation was conducted in an efficient and just manner," both of which were proper considerations in an award of costs - The court agreed that inflation should be taken into consideration so that the successful party was not penalized where Schedule C had been set 12 years ago.

Practice - Topic 7110.4

Costs - Party and party costs - Special orders - Increase in scale of costs - Inflation - [See Practice - Topic 7110.1 ].

Practice - Topic 7118.1

Costs - Party and party costs - Special orders - Multiplier - [See Practice - Topic 7110.1 ].

Cases Noticed:

Morrison Petroleums Ltd. v. Phoenix Canada Oil Co. et al. (1998), 236 A.R. 95; 1998 ABQB 624, refd to. [para. 13].

Pharand Ski Corp. v. Alberta (1991), 122 A.R. 395 (Q.B.), refd to. [para. 13].

Fitzpatrick v. Industrial Incomes Ltd. et al. (1994), 164 A.R. 139 (Q.B.), refd to. [para. 20].

British Columbia (Minister of Forests) v. Okanagan Indian Band et al., [2003] 3 S.C.R. 371; 313 N.R. 84; 189 B.C.A.C. 161; 309 W.A.C. 161; 2003 SCC 71, refd to. [para. 22].

Zust Bachmeier International Air Cargo Inc. v. Klapatiuk et al., [2006] A.R. Uned. 786; [2007] 3 W.W.R. 331; 2006 ABQB 875, refd to. [para. 24].

Dilcon Constructors Ltd. v. ANC Developments Inc. (1996), 189 A.R. 161 (Q.B.), refd to. [para. 24].

Claudio's Restaurant Group Inc. and Lamonaco v. Calgary (City) (1993), 147 A.R. 355 (Q.B.), refd to. [para. 26].

Amalgamated Transit Union et al. v. Independent Canadian Transit Union et al. (1997), 203 A.R. 204 (Q.B.), refd to. [para. 26].

Spar Aerospace Ltd. v. Aerowerks Engineering Inc. et al. (2007), 428 A.R. 18; 2007 ABQB 688, refd to. [para. 26].

Wainwright (Town) et al. v. G-M Pearson Environmental Management Ltd. et al. (2008), 447 A.R. 346; 2008 ABQB 446, refd to. [para. 26].

Counsel:

Graham McLennan and Stuart Chambers (McLennan Ross LLP), for the plaintiffs;

C.G. Docken, Q.C. (Docken & Company), for the defendants, Mr. Victor Bauman, Skyward Management Inc., and 1037149 Alberta Ltd. and Stan Remin.

This case was heard on January 8 and 9, 2010, by Rooke, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following memorandum of decision on May 27, 2010.