Spartek Systems Inc. v. Brown et al., (2015) 608 A.R. 321 (QB)

• Judge: Ross, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: January 19, 2015
• Citations: (2015), 608 A.R. 321 (QB);2015 ABQB 190

Spartek Systems Inc. v. Brown (2015), 608 A.R. 321 (QB)

MLB headnote and full text

Temp. Cite: [2015] A.R. TBEd. MR.167

Spartek Systems Inc. (applicant) v. Robert Brown, 1133098 Alberta Ltd., Carlos Claveria, Real Time Measurements Inc., Petroniks Systems Inc., Terrence Matthews, Chris Holt and Mark Hartwell (respondents)

(1010 00250; 2015 ABQB 190)

Indexed As: Spartek Systems Inc. v. Brown et al.

Alberta Court of Queen's Bench

Judicial District of Red Deer

Ross, J.

March 20, 2015.

Summary:

Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools. In 2004, Brown agreed to sell his interest. Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions. Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek. Claveria and Holt entered into settlement agreements with Spartek. 113 sued Spartek for monies allegedly owing under the agreement on a promissory note.

The Alberta Court of Queen's Bench, in a decision reported at (2014), 596 A.R. 60, held that Brown's involvement with and actions on behalf of the corporation Petroniks violated the non-competition covenant in the share sale agreement. Brown, Matthews, Holt and Claveria were parties to a conspiracy. The claims against Hartwell were dismissed. Spartek had proven damages for lost profits in the amount of $1,298,366, plus interest. Spartek was also entitled to recover its recruitment and training costs of $104,993. Matthews' claim for contribution against Brown and 113 was allowed to the extent of 25% of Spartek's damages. 113 was jointly responsible with Brown (the corporate veil had been lifted). 113 was entitled to payment under the promissory note, subject to a set off with respect to Brown's liability to Spartek. The parties made submissions on costs.

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

Editor's Note: For a related decision, see (2009), 481 A.R. 213.

Company Law - Topic 9734

Actions against corporations and directors - Practice - Costs - General - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - The court found that Brown had breached the share sale agreement and that a conspiracy had been proven - 113 was successful in its counterclaim against Spartek and was not directly liable for conspiracy - The Alberta Court of Queen's Bench declined to award costs, payable by Spartek, to 113 as a successful defendant - 113 was a mere alter ego of Brown - Brown and 113 were represented by the same counsel - See paragraph 20.

Practice - Topic 7031.1

Costs - Party and party costs - Entitlement to party and party costs - Counterclaims - [See Company Law - Topic 9734 ].

Practice - Topic 7050

Costs - Party and party costs - Entitlement - Successful party not represented by counsel - [See third Practice - Topic 7161.2 and fourth Practice - Topic 7161.3 ].

Practice - Topic 7085

Costs - Party and party costs - Witness fees and costs of preparation for trial or appeal - Expert witness fees - [See Practice - Topic 7115 and fourth Practice - Topic 7161.3 ].

Practice - Topic 7110.1

Costs - Party and party costs - Special orders - Increase in scale of costs - Conduct of opposite party - [See Practice - Topic 7115 ].

Practice - Topic 7115

Costs - Party and party costs - Special orders - Increase in scale of costs - Difficulty and complexity of proceedings - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - The court found that Brown through his actions on behalf of the corporation Petroniks had breached the share sale agreement and that a conspiracy had been proven - The Alberta Court of Queen's Bench held that Spartek was entitled to double Column 5 costs plus disbursements against Brown, 113, Matthews and Petroniks - The amount of the judgment, including interest, put it in Column 5 - Double costs were appropriate due to the complexity and difficulty of the action, as well as the actions of the defendants - This was a complex action that was an organizational challenge - The defendants refused to agree to exhibits or statements of facts that could have shortened the trial - Instead, the trial was lengthened, particularly due to the conduct of Brown and Matthews - Spartek was also entitled to recover the fees and other charges of its expert witnesses - See paragraphs 6 to 19.

Practice - Topic 7155

Costs - Party and party costs - Liability for party and party costs - Bullock order or Sanderson order - Where success divided - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - The court found that Brown had breached the share sale agreement and that a conspiracy had been proven - Holt and Claveria were exempted from liability on the basis of settlement agreements - Hartwell was found not liable under the conspiracy - At issue regarding costs was whether a Bullock or Sanderson order should issue - The Alberta Court of Queen's Bench granted a Bullock order, requiring Spartek to pay Hartwell double Column 5 costs plus disbursements and requiring Brown and Matthews to reimburse Spartek for single Column 5 costs plus disbursements - The unsuccessful defendants Brown and Matthews were wholly responsible for the action - They were not, however, liable for Spartek's liability to pay double costs to Hartwell under rule 4.29 - It was appropriate, just and fair to require Brown and Matthews to pay the single costs of Hartwell - Brown and Matthews shared that liability equally - See paragraphs 43 to 52.

Practice - Topic 7155

Costs - Party and party costs - Liability for party and party costs - Bullock order or Sanderson order - Where success divided - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - The court found that Brown had breached the share sale agreement and that a conspiracy had been proven - Holt and Claveria were exempted from liability on the basis of settlement agreements - Matthews' company Real Time Measurements (RTM) was found not liable under the conspiracy - At issue regarding costs was whether a Bullock or Sanderson order should issue - The Alberta Court of Queen's Bench granted a Sanderson order requiring Brown and Matthews to pay directly to RTM the costs that were payable by Spartek - This order was appropriate due to the close connection between RTM and Matthews - It was reasonable for Spartek to have included RTM in the action - While Brown and Matthews might not have been "wholly" responsible for the action, it was fair and just that they should bear responsibility for the costs of successful defendants, including RTM - See paragraphs 53 to 56.

Practice - Topic 7155

Costs - Party and party costs - Liability for party and party costs - Bullock order or Sanderson order - Where success divided - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - The court found that Brown had breached the share sale agreement and that a conspiracy had been proven - Holt was exempted from liability on the basis of settlement agreements - At issue regarding costs was whether a Bullock or Sanderson order should issue - The Alberta Court of Queen's Bench stated, "Given the nature of Holt's involvement in the conspiracy with Brown and Matthew, and the effects of the Settlement Agreement which he entered into with Spartek, I hold that neither a Bullock nor Sanderson Order will issue regarding the costs payable to him by Spartek." - See paragraph 57.

Practice - Topic 7161.2

Costs - Party and party costs - Liability for party and party costs - Liability of unsuccessful defendant for costs of third party - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - The court found that Brown had breached the share sale agreement and that a conspiracy had been proven - Holt and Claveria were exempted from liability on the basis of settlement agreements - Hartwell and Matthews' company Real Time Measurements (RTM) were found not liable under the conspiracy - At issue was Claveria's entitlement to costs for defending third party claims against him by Brown/113 and Matthews/RTM - The Alberta Court of Queen's Bench stated, "The Third Party Claimants, Brown and 113 are jointly responsible for Claveria's costs relating specifically to defence of their claim; Matthews and RTM are jointly responsible for Claveria's costs relating specifically to defence of their claim. All four Third Party Claimants are responsible for Claveria's costs (disbursements only) relating to the trial or pre-trial steps that he took as a self-represented litigant that pertain to the action generally." - See paragraphs 61 to 64.

Practice - Topic 7161.2

Costs - Party and party costs - Liability for party and party costs - Liability of unsuccessful defendant for costs of third party - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - The court found that Brown had breached the share sale agreement and that a conspiracy had been proven - Hartwell and Matthews' company Real Time Measurements (RTM) were found not liable under the conspiracy - Hartwell claimed costs of $4,757 against Matthews and RTM as arising out of the dismissal of a third party notice filed by Matthews/RTM in June 2010 - The Alberta Court of Queen's Bench held that Hartwell was entitled to costs of $2,000 - Matthews and RTM were jointly responsible for the costs - Hartwell was also entitled to costs as against Brown and 113 arising out of the dismissal of the third party notice filed by them - See paragraphs 66 to 69.

Practice - Topic 7161.2

Costs - Party and party costs - Liability for party and party costs - Liability of unsuccessful defendant for costs of third party - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - The court found that Brown had breached the share sale agreement and that a conspiracy had been proven - Holt was exempted from liability on the basis of a settlement agreement - Holt sought costs against Brown/113 and Matthews and his company Real Time Measurements for defending third party claims - The Alberta Court of Queen's Bench stated, "As a self-represented litigant, Holt is only entitled to disbursements. I have held that he is entitled to recover these from the Plaintiff subject to a Sanderson order. A Third Party costs order would be duplicative and therefore will not issue." - See paragraphs 70 to 73.

Practice - Topic 7161.3

Costs - Party and party costs - Liability for party and party costs - Liability of successful plaintiffs and unsuccessful defendants for successful defendants' costs - [See Company Law - Topic 9734 ].

Practice - Topic 7161.3

Costs - Party and party costs - Liability for party and party costs - Liability of successful plaintiffs and unsuccessful defendants for successful defendants' costs - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - The court found that Brown had breached the share sale agreement and that a conspiracy had been proven - Matthews' company, Real Time Measurements (RTM), was found not liable to Spartek as it was not involved in the conspiracy and there was no claim that the corporate veil should be pierced - RTM sought costs against Spartek as a successful defendant - The Alberta Court of Queen's Bench awarded RTM costs as against Spartek to 50% of its legal fees incurred from the action's commencement to December 5, 2012, when RTM and Matthews were represented by the same legal counsel - RTM had not engaged in misconduct - There was no basis for denying its entitlement to costs - See paragraphs 21 to 26.

Practice - Topic 7161.3

Costs - Party and party costs - Liability for party and party costs - Liability of successful plaintiffs and unsuccessful defendants for successful defendants' costs - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - The court found that Brown had breached the share sale agreement and that a conspiracy had been proven - Regarding Hartwell, the court found that he was not liable for civil conspiracy, as agreement and intention were not proven, but he had breached his duty of confidentiality - As the breach had not caused any damages, Hartwell was not liable to Spartek on that ground either - Hartwell sought costs from Spartek as a successful defendant, including double costs based on two formal offers to settle that were not accepted - The Alberta Court of Queen's Bench awarded Hartwell double Column 5 costs as against Spartek for all actions taken after the first formal offer was served - There was no misconduct by Hartwell that brought him under one of the exceptions to the rule that successful parties were entitled to costs - See paragraphs 27 to 36.

Practice - Topic 7161.3

Costs - Party and party costs - Liability for party and party costs - Liability of successful plaintiffs and unsuccessful defendants for successful defendants' costs - Brown was the president, director and one of the two largest shareholders of Spartek, which manufactured and marketed downhole tools - In 2004, Brown agreed to sell his interest - Brown and his wholly owned company (113) entered into a share sale agreement with Spartek, which included confidentiality, non-solicitation and non-competition provisions - Spartek alleged that Brown, in a conspiracy with the defendants Matthews, Holt, Claveria and Hartwell, had breached Brown's contractual and common law obligations to Spartek - Holt had settled with Spartek in October 2005, but was included as a defendant by Spartek on the basis that he had breached his obligations under the settlement agreement - The court found that Brown had breached the share sale agreement and that a conspiracy had been proven - Holt was protected from liability by the settlement agreement which also provided that neither Holt nor Spartek would be liable for the costs of the other - At issue was Holt's entitlement to costs as a successful defendant - The Alberta Court of Queen's Bench observed that, but for the settlement agreement, Holt would have been liable to Spartek as a party to the conspiracy - There was no basis on which to put him in a better position than he would have been in under the settlement agreement - Spartek was not liable to pay Holt for legal fees incurred while he was represented by counsel and while the settlement agreement was in effect - For the period after December 2009, when Holt was added back into the action and was self-represented, he was entitled to disbursements only, including costs incurred in respect of expert opinion evidence presented on his behalf - See paragraphs 37 to 42.

Practice - Topic 7243

Costs - Party and party costs - Offers to settle - Effect of failure to accept - [See third Practice - Topic 7161.3 ].

Practice - Topic 9871

Settlements - Costs - [See fourth Practice - Topic 7161.3 ].

Cases Noticed:

Hogarth et al. v. Rocky Mountain Slate Inc. et al., [2013] A.R. Uned. 90; 2013 ABCA 116, leave to appeal denied [2013] S.C.C.A. No. 160, refd to. [para. 5].

Canada Deposit Insurance Corp. v. Canadian Commercial Bank (1989), 95 A.R. 1; 64 Alta. L.R.(2d) 322 (Q.B.), refd to. [para. 6].

HSBC Bank Canada v. 1100336 Alberta Ltd. et al., [2012] A.R. Uned. 57; 2012 ABQB 27, refd to. [para. 16].

Sanderson v. Blyth Theatre Co., [1903] 2 K.B. 533 (C.A.), refd to. [para. 44].

Bullock v. London General Omnibus Co., [1907] 1 K.B. 264 (C.A.), refd to. [para. 44].

Palechuk v. Fahrlander (2008), 425 A.R. 74; 418 W.A.C. 74; 2008 ABCA 10, refd to [para. 45].

Gladue v. Alberta (Attorney General) et al. (2011), 514 A.R. 287; 2011 ABQB 535, refd to. [para. 46].

Simpson v. Bender et al., [1996] 5 W.W.R. 96; 180 A.R. 220; 37 Alta. L.R.(3d) 191 (Q.B.), refd to. [para. 47].

Milina v. Bartsch (1985), 63 B.C.L.R. 122; 1 C.P.C.(2d) 269 (S.C.), refd to. [para. 59].

Weatherall et al. v. Seaba et al., [2009] A.R. Uned. 61; 2009 ABQB 173, refd to. [para. 59].

Counsel:

Robert Hawkes, Q.C., and Stacy Petriuk (Jensen Shawa Solomon Duguid Hawkes LLP), for the applicant, Spartek Systems Inc.;

Bruce N. Bothwell (Siewert Bothwell), for the respondents, Robert Brown and 1133098 Alberta Ltd.;

James K. Lawson (Lawson Gold Mahoney), for the respondent, Real Time Measurements Inc.;

C.E. Forgues, for the respondent, Mark Hartwell;

Chris Holt was self-represented;

Carlos Claveria was self-represented;

Terrence Matthews was self-represented.

This matter was heard on January 19, 2015, by Ross, J., of the Alberta Court of Queen's Bench, Judicial District of Red Deer, who delivered the following memorandum of judgment on March 20, 2015.