Two complex underlying Actions, heard together, dealt mostly with a lawsuit against various parties involved in the Cold Lake Industrial Park Limited Partnership (“CLIP”) for a return of funds invested by the Plaintiffs in CLIP and a subsequent lawsuit commenced by CLIP and numerous Defendants in response (the “Underlying Actions”). The Trial Judge was critical of a number of the Defendants in the Underlying Actions finding, inter alia, that many were not credible witnesses, had sworn false Affidavits of Records, had failed to answer Undertakings, and had given deceptive or misleading evidence during the Trial (the “Defendants’ Conduct”). The Trial Judge ordered an award of Costs of double Column 5 and double Column 4 payable by the Defendants found to be liable, and no Costs would be awarded to those Defendants that were not found liable.

The Appellants/Defendants appealed the Costs awarded by the Trial Judge in two factions: (1) some of the liable Defendants appealed the findings that Costs were payable; and (2) some non-liable Defendants appealed the decision not to award Costs to them. Matthys Muller (“Mr. Muller”), a non-liable Defendant, also separately appealed the denial of Costs to him, in part, for failing to acknowledge a Formal Offer he had made prior to Trial (collectively, the “Appeals”).

The Court found that many of the non-liable Defendants had not obtained permission to Appeal the issue of Costs in accordance with Rule 14.5(1)(e). Having failed to comply with Rule 14.5, these non-liable Defendants did not have standing to appeal the Trial Judge’s Decision. The Court also reviewed Rules 5.3 and 8.4, as these Rules relate to unanswered Undertakings. The Court noted that pursuant to Rule 8.4(3)(e), unless enforcement of the Undertaking has been pursued, the witness is entitled to assume that an answer is no longer required. The Court emphasized that any unanswered Undertakings do not support an adverse inference that the answer would have been unfavorable to the witness, because there are many reasons why Undertakings are not answered, including the waiver found in Rule 5.3, implied by non-enforcement.

The Trial Judge found a genuine Calderbank and Formal Offer from the Plaintiffs (the “Offers”) which had been exceeded at Trial and for which Costs had been awarded accordingly. The Court of Appeal agreed with the Trial Judge’s Decision with respect to the doubling of Costs under Rule 4.29(1) in this regard. The Court reviewed Rules 10.29 and 10.31 and the general rule that a successful party in an Action is entitled to a Costs Award subject to the Court’s discretion. In applying the factors set-out in Rule 10.33, the Court found that Defendants’ Conduct and the Offers had warranted the Costs awarded by the Trial Judge and dismissed the Appeals in this regard.

In addressing the Appeal by Mr. Muller, the Court found that Mr. Muller had made a genuine Calderbank and Formal Offer to extract himself from the suit at a stage when it was apparent that there was no reasonable prospect of liability being found against him. While Mr. Muller had engaged in some of the Defendants’ conduct at Trial, the Court found that those actions did not rise to the threshold of reprehensible, scandalous or outrageous conduct. The Court found that a contrary conclusion by the Trial Judge was an error in principle, or a palpable and overriding error, such that Mr. Muller was entitled to his Costs on single column 5, subject to double Costs for bettering his Formal Offer of settlement.

The Court also reviewed the jurisprudence on the applicability of Sanderson and Bullock Orders noting that a Sanderson Order allows a successful Defendant to recover Costs directly from an unsuccessful co-Defendant and a Bullock Order allows a Plaintiff to add to the Costs recoverable from an unsuccessful Defendant, the amount of Costs which he is obliged to pay to a successful Defendant. Due to the Defendants’ Conduct, the Court granted a Bullock Order in favour of the Plaintiffs against two of the Defendants, including CLIP, to allow for a right of recovery as against those two parties for the Costs payable by the Plaintiffs to Mr. Muller.