Morrison Petroleums Ltd. v. Phoenix Canada Oil Co. et al., (1998) 236 A.R. 95 (QB)

• Judge: Moshansky, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: March 19, 1998
• Citations: (1998), 236 A.R. 95 (QB)

Morrison Petroleums v. Phoenix Can. (1998), 236 A.R. 95 (QB)

MLB headnote and full text

Temp. Cite: [1998] A.R. TBEd. JL.095

Morrison Petroleums Ltd. (plaintiff) v. Phoenix Canada Oil Company Limited and Richard J. Churchill Limited (defendants)

Phoenix Canada Oil Company Limited and Richard J. Churchill Limited (plaintiffs by counterclaim/defendants) v. Morrison Petroleums Ltd. (defendant by counterclaim/plaintiff)

(Action No. 9101-08457)

Indexed As: Morrison Petroleums Ltd. v. Phoenix Canada Oil Co. et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Moshansky, J.

July 10, 1998.

Summary:

Morrison Petroleums Ltd., Phoenix Canada Oil Co. and Richard J. Churchill Ltd. entered into a joint venture to drill a wild-cat oil and gas well in northeastern British Columbia. Phoenix had a 33.33% share, Churchill 20% and Morrison had 46.67%. Morrison, the operator, estimated the cost to be $2.1 mil­lion. However, the final cost was $3.2 mil­lion. Phoenix and Churchill declined to pay any part of the $1.1 million cost overrun on the ground that Morrison failed to obtain their approval before incurring additional expense. Morrison sued to recover their share of the $1.1 million (i.e., $547,433.04 plus interest). Phoenix and Churchill coun­terclaimed for $1,124,642 (their share being nearly $600,000) with respect to Morrison's negligence in, inter alia, the conduct of the drilling operation.

The Alberta Court of Queen's Bench, in a decision reported 198 A.R. 81, awarded Morrison net judgment of $97,526.10 plus interest. Phoenix and Churchill were awarded set-off with respect to the balance of Morrison's claim. They were also awarded damages of $106,904.63 on their counter­claim against Morrison. Subsequently, the parties applied for a ruling on costs.

The Alberta Court of Queen's Bench determined the costs issue accordingly.

Practice - Topic 7029.3

Costs - Party and party costs - Entitlement to party and party costs - Successful party - Exceptions - Delay or prolonging pro­ceedings - Counsel estimated trial time at two weeks - Following a pretrial confer­ence, the estimate was increased to three weeks - The trial lasted five months - In awarding costs, the Alberta Court of Queen's Bench observed that "[s]uch gross disparity between trial-time estimates and reality causes major dislocations in the scheduling of the work of the entire Court. I must say that at one time I seriously considered restricting the award of costs to the first three weeks of the trial only. There is precedent in England for such a result." - See paragraph 20.

Practice - Topic 7054

Costs - Party and party costs - Entitlement to party and party costs - Written briefs - Following a five month trial of complex issues, the court requested counsel to pre­pare a "concise" written argument - The plaintiff submitted a 75 page brief - The defendants submitted a 303 page brief - The defendants were awarded costs - The defendants requested $75,000 as the cost of the brief - The Alberta Court of Queen's Bench awarded the defendants a special fee of $15,000 for the brief - While the court ruled that the 303 page brief constituted "overkill", it was helpful in its deliber­ations - See paragraphs 30 to 33.

Practice - Topic 7085

Costs - Party and party costs - Witness fees and costs of preparation for trial or appeal - Expert witness fees - The operat­ing partner in an oil and gas well drilling venture sued the other two partners for their share of the overrun costs - The defendants counterclaimed - The defend­ants were awarded costs and claimed wit­ness fees for their experts - Hryhor was an explorationist with very extensive knowl­edge and experience in the field of geo­physics - However, he did not hold a formal degree in geophysics - The defend­ants claimed witness fees of $150 per hour for Hryhor - The Alberta Court of Queen's Bench awarded fees based on $75 per hour - The court noted that "this witness falls into a 'no-mans land", between a degree bearing expert and an ordinary witness. He is clearly an expert in his field, although not one blessed with a university degree." -See paragraph 49.

Practice - Topic 7107

Costs - Party and party costs - Special orders - Limiting rules or orders - [See Practice - Topic 7110 ].

Practice - Topic 7110

Costs - Party and party costs - Special orders - Increase in scale of costs - General - Phoenix, Churchill and Morrison entered an oil and gas well joint venture - Morrison (the operator) sued Phoenix and Churchill to recover their share of the cost overrun (i.e., $547,433.04 plus interest) - Phoenix and Churchill counterclaimed for $600,000 - Morrison received judgment for $97,526.10 - Phoenix and Churchill received judgment for $106,904.63 and were awarded costs - Phoenix and Churchill requested, inter alia, that party and party costs be awarded on such a basis as to constitute full indemnity - Phoenix and Churchill cited (1) the complexity of the case, (2) its importance to the industry, and (3) the length of the trial (five months) - The Alberta Court of Queen's Bench awarded Phoenix and Churchill costs on single column 5 for all steps prior to their offer to settle and a multiple of triple column 6, including a second counsel fee, plus disbursements for all steps taken after service of their offer to settle with no limiting rule to apply - See paragraphs 15 to 24.

Practice - Topic 7110.4

Costs - Party and party costs - Special orders - Increase in scale of costs - Infla­tion - Phoenix, Churchill and Morrison entered an oil and gas well joint venture - Morrison (the operator) sued Phoenix and Churchill to recover their share of the cost overrun (i.e., $547,433.04 plus interest) - Phoenix and Churchill counterclaimed for $600,000 - Morrison received judgment for $97,526.10 - Phoe­nix and Churchill received judgment for $106,904.63 and were awarded party and party costs on an increased scale under Schedule C - Phoe­nix and Churchill requested an application of an inflation factor of 1.49 to the costs award under Schedule C - The Alberta Court of Queen's Bench granted an 1.49 increase to the fee portion of the party and party costs - See paragraphs 58 and 59.

Practice - Topic 7114

Costs - Party and party costs - Special orders - Increase in scale of costs - Novel or important issues - [See Practice - Topic 7110 ].

Practice - Topic 7115

Costs - Party and party costs - Special orders - Increase in scale of costs - Diffi­culty and complexity of proceedings - [See Practice - Topic 7110 ].

Practice - Topic 7116

Costs - Party and party costs - Special orders - Gross or lump sum in addition to party and party costs - Phoenix, Churchill and Morrison entered an oil and gas well joint venture - Morrison (the operator) sued Phoenix and Churchill to recover their share of the cost overrun (i.e., $547,433.04 plus interest) - Phoenix and Churchill counterclaimed for $600,000 - Morrison received judgment for $97,526.10 - Phoenix and Churchill received judgment for $106,904.63 and were awarded party and party costs on an increased scale - Phoenix and Churchill requested an unallo­cated lump award of $75,000 in addition to any taxed costs - The Alberta Court of Queen's Bench, in dismissing the request, held that Phoenix and Churchill would be appropriately compensated under Schedule C - See paragraphs 25 to 29.

Practice - Topic 7243

Costs - Party and party costs - Offers to settle - Effect of failure to accept - Phoenix, Churchill and Morrison entered an oil and gas well joint venture - Morrison (the operator) sued Phoenix and Churchill to recover their share of the cost overrun (i.e., $547,433.04 plus interest) - Phoenix and Churchill counterclaimed for $600,000 - Morrison's offer to settle for $529,000 was rejected - Morrison's offer claimed double costs for all steps taken after service of the offer - Phoenix and Churchill's offer to settle for $112,500 was rejected by Morrison - It too contained a claim for double costs - Morrison received judgment for $97,526.10 - Phoenix and Churchill received judgment for $106,904.63 - Phoe­nix claimed double costs even though there was no provision in the Rules of Court for double costs to a successful defendant - The Alberta Court of Queen's Bench awarded Phoenix and Churchill double costs - See paragraphs 5 to 7.

Practice - Topic 7247.1

Costs - Party and party costs - Offers to settle - Costs to successful defendant - [See Practice - Topic 7243 ].

Practice - Topic 7801

Costs - Solicitor and his own client costs - General - The Alberta Court of Queen's Bench observed that costs should only be awarded on a solicitor and his own client basis when the case involved rare and exceptional or extraordinary circumstances - The court listed nine examples resulting in the identification of a rare and excep­tional case - The court also noted that the nine factors applied equally to either a plaintiff or a defendant - See paragraph 10.

Practice - Topic 7803

Costs - Solicitor and his own client costs - Entitlement to - General - Phoenix, Churchill and Morrison entered an oil and gas well joint venture - Morrison (the operator) sued Phoenix and Churchill to recover their share of the cost overrun (i.e., $547,433.04 plus interest) - Phoenix and Churchill counterclaimed for $600,000 - Morrison received judgment for $97,526.10 - Phoenix and Churchill received judgment for $106,904.63 and were awarded costs - Phoenix and Churchill requested costs on a solicitor and his own client basis on the grounds of, inter alia, (1) the length of the trial (5 months), (2) the number of witnesses (20 including 9 experts), (3) the difficulty and complexity of the issues, (4) the importance of the case to the industry and (5) the adverse credibility finding against some of the plaintiff's witnesses - The Alberta Court of Queen's Bench declined to award costs on a solicitor and his own client basis - See paragraphs 8 to 14.

Cases Noticed:

Martin v. McCoy, [1993] A.J. No. 405 (C.A.), refd to. [para. 5].

Petro Can Oil & Gas Corp. v. Westcoast Gas Service Inc. (1995), 178 A.R. 138; 110 W.A.C. 138 (C.A.), refd to. [para. 6].

Jackson and Parkview Holdings Ltd. v. Trimac Industries Ltd. et al. (1993), 138 A.R. 161 (Q.B.), refd to. [para. 6].

Reese et al. v. Alberta (Ministry of Forestry, Lands and Wildlife) et al. (1982), 133 A.R. 127; 5 Alta. L.R.(3d) 40 (Q.B.), refd to. [para. 6].

Canada Southern Petroleum Ltd. et al. v. Amoco Canada Petroleum Co. et al. (1997), 211 A.R. 48; 55 Alta. L.R.(3d) 301 (Q.B.), refd to. [para. 6].

Jacobi v. Board of Education of Aqueduct (Roman Catholic Separate) School Dis­trict No. 374 et al. (1994), 153 A.R. 241; 19 Alta. L.R.(3d) 394 (Q.B.), refd to. [para. 9].

Sidorsky et al. v. CFCN Communications Ltd. et al. (1997), 206 A.R. 382; 156 W.A.C. 382 (C.A.), refd to. [para. 13].

Pharand Ski Corp. v. Alberta (1991), 122 A.R. 395 (Q.B.), refd to. [para. 15].

Novalta Resources Ltd. v. Ortynsky Exploration Ltd. (1994), 151 A.R. 161 (Q.B.), refd to. [para. 17].

Harris v. Nugent et al. [1995] 9 W.W.R. 674; 172 A.R. 309 (Q.B.), refd to. [para. 17].

Nova, An Alberta Corp. v. Guelph Engineering Co. (1988), 89 A.R. 363; 60 Alta. L.R.(2d) 366 (Q.B.), refd to. [para 17].

Fitzpatrick v. Industrial Incomes Ltd. et al. (1994), 164 A.R. 139 (Q.B.), refd to. [para. 26].

Miller (Ed) Sales & Rentals Ltd. v. Caterpillar Tractor Co. et al. (1994), 170 A.R. 341; 26 Alta. L.R.(3d) 16 (Q.B.), refd to. [para. 26].

Canadian Egg Marketing Agency v. Richardson (c.o.b. Northern Poultry) [1996] N.W.T.J. No. 85; D.R.S. 97-01896, refd to. [para. 26].

Canada Deposit Insurance Corp. v. Canadian Commercial Bank, [1987] 3 W.W.R. 160; 76 A.R. 271 (Q.B.), refd to. [para. 26].

Kassam v. Dragish (1991), 123 A.R. 161 (Q.B.), consd. [para. 55].

Claudio's Restaurant Group Inc. and Lamonaco v. Calgary (City) (1993), 147 A.R. 355; 15 Alta. L.R.(3d) 141 (Q.B.), consd. [para. 58].

Green Drop Ltd. v. Schwormstede (1994), 155 A.R. 302; 73 W.A.C. 302; 22 Alta. L.R.(3d) 89 (C.A.), refd to. [para. 58].

Bohus v. Williams (1996), 188 A.R. 79 (Q.B.), refd to. [para. 58].

Waterous Investments Inc. v. Liberton Holdings Ltd. (1996), 183 A.R. 229 (Q.B.), refd to. [para. 58].

Statutes Noticed:

Court of Queen's Bench Act, R.S.A. 1980, c. C-29, sect. 19 [para. 6].

Rules of Court (Alta.), rule 601(1)(a) [para. 25].

Counsel:

John P. Petch, Q.C., and W.T. Dewitt, for Morrison Petroleums Ltd.;

William R. Pieschel, Q.C., and G.S. Watson, for the defendants Phoenix Canada Oil Co. et al.

Solicitors of Record:

Howard Mackie, for Morrison Petroleums Ltd.;

Parlee McLaws, for the defendants Phoe­nix Canada Oil Co. et al.

This matter was heard on March 19, 1998, in Calgary, Alberta, by Moshansky, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the fol­lowing decision on July 10, 1998.