Marathon Canada Ltd. v. Enron Canada Corp.,

• Judge: McMahon, J.
• Neutral Citation: 2008 ABQB 770
• Citation: (2008), 447 A.R. 89 (QB),2008 ABQB 770,100 Alta LR (4th) 356,447 AR 89,(2008), 447 AR 89 (QB),447 A.R. 89
• Date: 10 December 2008
• Court: Court of Queen's Bench of Alberta (Canada)

Marathon Can. Ltd. v. Enron Can. Corp. (2008), 447 A.R. 89 (QB)

MLB headnote and full text

Temp. Cite: [2009] A.R. TBEd. JA.021

Marathon Canada Limited (plaintiff) v. Enron Canada Corp. (defendant)

(0201 07692; 2008 ABQB 770)

Indexed As: Marathon Canada Ltd. v. Enron Canada Corp.

Alberta Court of Queen's Bench

Judicial District of Calgary

McMahon, J.

December 17, 2008.

Summary:

Enron Canada Corp. (ECC) was an asset of Enron Corp. which filed for bankruptcy in 2001. ECC subsequently undertook a voluntary solvent liquidation and dissolution under the Canada Business Corporations Act. Marathon Canada Ltd., which was party to a master agreement to sell gas to ECC, terminated the agreement on the basis that a material adverse change (MAC) within the meaning of the agreement occurred when a credit rating agency cut Enron Corp.'s credit rating to junk bond status. Marathon commenced legal proceedings against ECC. ECC counterclaimed.

The Alberta Court of Queen's Bench, in a decision reported 447 A.R. 46, found that there was a MAC and that Marathon validly terminated the master agreement. The court awarded judgment on the contract to Marathon for the gas that was delivered (i.e., $560,007.94 plus pre-judgment interest). The court dismissed the counterclaim, but provisionally calculated ECC's damages at $55,221,000. Costs issues arose.

The Alberta Court of Queen's Bench dealt with the costs issues accordingly.

Editor's Note: The trial decision was confirmed on appeal - see 439 A.R. 59; 2009 ABCA 31. A decision respecting posting of security of costs for the appeal is reported at 446 A.R. 88; 442 W.A.C. 88; 2008 ABCA 424.

Practice - Topic 7082

Costs - Party and party costs - Witness fees and costs of preparation for trial or appeal - Preparation for trial (incl. discovery) - Marathon Canada Ltd. terminated a master agreement to sell natural gas to Enron Canada Corp. (ECC), claiming that a material adverse change in circumstances occurred when a credit rating agency cut its parent corporation's credit rating to junk bond status - Marathon sued ECC - The Alberta Court of Queen's Bench held that Marathon validly terminated the master agreement and awarded damages of $560,097.94 - A multi-million dollar counterclaim was dismissed - Marathon claimed enhanced costs, arguing that the tariff items in Schedule C of the Alberta Rules of Court, Column 5, for document discovery should be increased from $1,500 to $25,000 - The Alberta Court of Queen's Bench allowed $10,000 - The court noted that 21 Affidavits of Record were exchanged between the parties - Production exceeded 15,000 pages - The tariff item 3(1) amount of $1,500 was wholly inadequate - See paragraphs 1 to 8 and 11.

Practice - Topic 7082

Costs - Party and party costs - Witness fees and costs of preparation for trial or appeal - Preparation for trial (incl. discovery) - Marathon Canada Ltd. terminated a master agreement to sell natural gas to Enron Canada Corp. (ECC), claiming that a material adverse change in circumstances occurred when a credit rating agency cut its parent corporation's credit rating to junk bond status - Marathon sued ECC - The Alberta Court of Queen's Bench held that Marathon validly terminated the master agreement and awarded damages of $560,097.94 - A multi-million dollar counterclaim was dismissed - Marathon claimed enhanced costs, arguing that the tariff items in Schedule C of the Alberta Rules of Court, Column 5, for trial preparation should be increased from $10,000 to $50,000 on the basis of complexity and duration of the trial and the number of witnesses to prepare or be prepared for - ECC did not object to this amount, provided that it was not further increased by a general multiplier - The Alberta Court of Queen's Bench allowed the $50,000 - See paragraphs 1 to 8, 13 and 14.

Practice - Topic 7082

Costs - Party and party costs - Witness fees and costs of preparation for trial or appeal - Preparation for trial (incl. discovery) - Marathon Canada Ltd. terminated a master agreement to sell natural gas to Enron Canada Corp. (ECC), claiming that a material adverse change in circumstances occurred when a credit rating agency cut its parent corporation's credit rating to junk bond status - Marathon sued ECC - The Alberta Court of Queen's Bench held that Marathon validly terminated the master agreement and awarded damages of $560,097.94 - A multi-million dollar counterclaim was dismissed - Marathon claimed enhanced costs, arguing that the tariff items in Schedule C of the Alberta Rules of Court, Column 5, for preparation of written argument should be increased from $5,000 to $25,000 - The Alberta Court of Queen's Bench allowed $20,000 - The court noted that ECC's written argument was 112 pages and Marathon's was 136 pages - ECC's reply was 114 pages and Marathon's was 44 pages - Enron referenced and filed 87 authorities and Marathon 47 authorities - The court stated that the written arguments from both sides were very helpful to the court - They were clear, well-organized and addressed all the issues - See paragraphs 1 to 8 and 15 to 17.

Practice - Topic 7090

Costs - Party and party costs - Witness fees and costs of preparation for trial or appeal - Drafting of pleadings and other documents - Marathon Canada Ltd. terminated a master agreement to sell natural gas to Enron Canada Corp. (ECC), claiming that a material adverse change in circumstances occurred when a credit rating agency cut its parent corporation's credit rating to junk bond status - Marathon sued ECC - The Alberta Court of Queen's Bench held that Marathon validly terminated the master agreement and awarded damages of $560,097.94 - A multi-million dollar counterclaim was dismissed - Marathon claimed enhanced costs, arguing that the tariff items in Schedule C of the Alberta Rules of Court, Column 5, for pleadings should be increased from $3,500 to $25,000 - The Alberta Court of Queen's Bench allowed $20,000 - The pleadings were numerous, including four amendments to the statement of defence to which Marathon responded - There were five demands for particulars and replies to each - The pleadings were also lengthy - The issues pleaded and answered were complex and required skill and care in drafting - These were not "boilerplate" pleadings as in a debt or automobile accident claim - The court stated that clearly, $3,500 would be inadequate - See paragraphs 1 to 9.

Practice - Topic 7109.1

Costs - Party and party costs - Special orders - Increased costs (based on solicitor and client or special costs) - The Alberta Court of Queen's Bench stated that "There is general judicial recognition that Schedule C, now ten years old, is a guide only and is seldom a fitting guide for complex and protracted civil litigation. There is also general acceptance of the principle that an award of costs should approximate 40 to 50 per cent of reasonable solicitor and own client costs ... It is, however, not usually possible to work backwards; that is, to determine reasonable solicitor and own client costs and then take a percentage ... So the better approach is to apply a multiplier to Schedule C, taking into account the factors discussed in Trizec [1999 ABQB], and see how that looks as against what little is known about the actual fees" - See paragraphs 29 to 32.

Practice - Topic 7110

Costs - Party and party costs - Special orders - Increase in scale of costs - General - [See Practice - Topic 7109.1 ].

Practice - Topic 7110.2

Costs - Party and party costs - Special orders - Increase in scale of costs - Written argument and rebuttal - [See third Practice - Topic 7082 ].

Practice - Topic 7115

Costs - Party and party costs - Special orders - Increase in scale of costs - Difficulty and complexity of proceedings - [See all Practice - Topic 7082 , Practice - Topic 7090 and Practice - Topic 7109.1 ].

Practice - Topic 7118.1

Costs - Party and party costs - Special orders - Multiplier - [See Practice - Topic 7109.1 ].

Practice - Topic 7118.1

Costs - Party and party costs - Special orders - Multiplier - Marathon Canada Ltd. terminated a master agreement to sell natural gas to Enron Canada Corp. (ECC), claiming that a material adverse change in circumstances occurred when a credit rating agency cut its parent corporation's credit rating to junk bond status - Marathon sued ECC - The Alberta Court of Queen's Bench held that Marathon validly terminated the master agreement and awarded damages of $560,097.94 - A multi-million dollar counterclaim was dismissed - Marathon claimed enhanced costs in a number of areas and that a multiplier of 3.0 be applied to all tariff items under Column 5, of Schedule C, including any enhanced items - The Alberta Court of Queen's Bench held that a multiplier of 3.0 times Column 5, was appropriate, but would be applied only to those tariff items not already increased by the court, namely pleadings, document discovery, trial preparation, written arguments and this costs application - See paragraphs 29 to 37.

Practice - Topic 7134

Costs - Party and party costs - Disbursements - Photocopies - A successful plaintiff claimed disbursements of $70,247 for photocopying and laser printing charges - The claim represented more than 440,000 pages at a cost varying between 10 cents and 25 cents per page - The Alberta Court of Queen's Bench held that the cost of copying drafts was not recoverable; nor was the cost of copying documents such as pleadings, motions and affidavits compensated under another item in the costs schedule - The court, noting that it did not have particulars of those copies, fixed the recoverable disbursement at $30,000, based upon 200,000 copies at 15 cents per page, plus GST - See paragraph 53.

Practice - Topic 7137

Costs - Party and party costs - Disbursements - Travelling expenses - Counsel - A successful plaintiff claimed travel expenses of in-house counsel of $28,110 US - Two persons from the plaintiff's legal department in the United States attended from time to time at examinations for discovery and throughout trial to assist and instruct counsel - The Alberta Court of Queen's Bench allowed this claim - The court stated that given the magnitude of the claim in this case, it was reasonable for the plaintiff to have its employed counsel attend from its American parent's office - The court stated that had those counsel been outside law firms engaged for a second or additional opinion, the result might be different - See paragraph 53.

Practice - Topic 7138

Costs - Party and party costs - Disbursements - Computer research - A successful plaintiff claimed for disbursements for computer research of $19,474 plus GST - The Alberta Court of Queen's Bench stated that most authorities did not permit recovery of the cost of computer research on the basis that it was already covered by the fee portion of Schedule C - This claim was not allowed - See paragraph 53.

Practice - Topic 7146

Costs - Party and party costs - Disbursements - Trial transcripts - A successful plaintiff claimed disbursements for a trial court reporter for daily transcripts of $28,679.90 plus GST - The Alberta Court of Queen's Bench noted that several cases had disallowed such claims, while others had allowed that recovery - Here, the daily transcripts were a valuable tool for counsel in preparing for both examination in chief and cross-examination - An electronic copy was provided to the court which gave the judge an important search capability - The court stated that in document intensive and complex trials, the use of real time reporting was to be encouraged - The court allowed this claim - See paragraph 53.

Practice - Topic 7150.2

Costs - Party and party costs - Disbursements - GST - A successful plaintiff claimed GST on its costs - The Alberta Court of Queen's Bench allowed the claim - The court stated that GST would be calculated on the full amount to be paid after a multiplier or doubling - The court stated that neither rule 605 nor logic made any distinction between the base amount and the multiplied amount - See paragraphs 26 to 28.

Practice - Topic 7150.7

Costs - Party and party costs - Disbursements - Delivery and service charges - A successful plaintiff claimed $2,996.53 plus GST for delivery (courier) charges - The Alberta Court of Queen's Bench allowed the claim, considering the bulk of the documents produced, the fact that many witnesses were not resident in Calgary and the duration of the litigation - See paragraph 53.

Practice - Topic 7241

Costs - Party and party costs - Offers to settle - General (incl. what constitutes and validity) - [See Practice - Topic 7242.1 ].

Practice - Topic 7242.1

Costs - Party and party costs - Offers to settle - Grounds for denying double costs - Marathon Canada Ltd. terminated a master agreement to sell natural gas to Enron Canada Corp. (ECC), claiming that a material adverse change in circumstances occurred when a credit rating agency cut its parent corporation's credit rating to junk bond status - Marathon sued ECC - The Alberta Court of Queen's Bench held that Marathon validly terminated the master agreement and awarded damages of $560,097.94 - A multi-million dollar counterclaim was dismissed - Marathon sought double costs based on an early offer to settle that was made and withdrawn before examinations for discovery - The offer called on ECC to pay the full principal amount of Marathon's claim ($560,007.94) and discontinue its counterclaim - In return Marathon would waive its claim to interest and costs - The Alberta Court of Queen's Bench held that Marathon was not entitled to double costs where the offer to settle was not a genuine offer in the sense required by rule 174 of the Rules of Court - See paragraphs 38 to 51.

Cases Noticed:

Klemeke Mining Corp. v. Shell Canada Ltd. et al., [2007] A.R. Uned. 513; 2007 ABQB 427, refd to. [para. 11].

Philip v. Whitecourt General Hospital et al. (2005), 381 A.R. 234; 2005 ABQB 174, refd to. [para. 11].

Castillo v. Go (2000), 269 A.R. 361 (Q.B.), refd to. [para. 21].

Diamond Park Builders Ltd. v. Conlee Construction Ltd., 2002 ABQB 470, refd to. [para. 24].

Trizec Equities Ltd. v. Ellis-Don Management Services Ltd. et al. (1999), 251 A.R. 101; 1999 ABQB 801, refd to. [para. 30].

LSI Logic Corp. of Canada Inc. v. Logani et al., 2001 ABQB 968, refd to. [para. 30].

Murphy Oil Co. et al. v. Predator Corp. et al. (2005), 379 A.R. 388; 2005 ABQB 134, refd to. [para. 32].

Crossing Company Inc. v. Bannister Pipelines Inc. et al., [2003] A.R. Uned. 614; 2003 ABQB 792, refd to. [para. 33].

Dix v. Canada (Attorney General) et al. (2002), 315 A.R. 139; 2002 ABQB 768, refd to. [para. 33].

Allen v. University Hospitals Board et al. (2006), 384 A.R. 23; 367 W.A.C. 23; 2006 ABCA 101, refd to. [para. 42].

Jones v. Trans America Life Insurance Co. of Canada (1996), 184 A.R. 120; 122 W.A.C. 120 (C.A.), refd to. [para. 47].

Phillips v. Nagy - see Nagy v. Canada et al.

Nagy v. Canada et al. (2007), 404 A.R. 162; 394 W.A.C. 162; 2007 ABCA 58, refd to. [para. 47].

Meyer v. Partec Lavalin Inc. et al. (2002), 303 A.R. 385; 273 W.A.C. 385; 2002 ABCA 114, refd to. [para. 50].

Millott Estate et al. v. Reinhard et al. (2002), 322 A.R. 307 (Q.B.), refd to. [para. 53].

Sidorsky et al. v. CFCN Communications Ltd. et al. (1995), 167 A.R. 181; 27 Alta. L.R.(3d) 296 (Q.B.), refd to. [para. 53].

Pauli et al. v. Ace INA Insurance et al., [2003] 11 W.W.R. 74; 336 A.R. 85 (Q.B.), refd to. [para. 53].

Petrogas Processing Ltd. v. West Coast Transmission Co. (1990), 105 A.R. 384 (Q.B.), refd to. [para. 53].

Miller (Ed.) Sales & Rentals Ltd. v. Caterpillar Tractor Co. et al. (1998), 216 A.R. 304; 175 W.A.C. 304; 1998 ABCA 118, refd to. [para. 53].

MacCabe v. Board of Education of Westlock (Roman Catholic Separate School) District No. 110 et al. (1999), 243 A.R. 280; 1999 ABQB 666, refd to. [para. 53].

Lauzon et al. v. Davey et al. (2007), 413 A.R. 392; 2007 ABQB 121, refd to. [para. 53].

S.G.H. v. Gorsline et al. (2001), 292 A.R. 329; 2001 ABQB 671, refd to. [para. 53].

Statutes Noticed:

Rules of Court (Alta.), rule 174 [para. 39]; rule 605(9) [para. 26].

Counsel:

James L. Lebo, Q.C., Donald W. Dear, James P. Flanagan and Charles P. Russell, Q.C. (McLennan Ross LLP), for the plaintiff;

Dalton W. McGrath, A. Robert Anderson, Q.C., Michael W. McCachen, Jason M. Holowachuk, Duffern Harper, Michael C. O'Brien, Melanie R. Gaston and Christopher A. Petrucci (Blake, Cassels & Graydon LLP), for the defendant.

This matter was heard on December 10, 2008, by McMahon, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following decision on December 17, 2008.