The parties to this Action, Terry Lay and Bradley Lay, are brothers. Terry Lay and his wife (collectively, the “Appellants”) and Bradley Lay and his wife (collectively, the “Respondents”) were the only shareholders in Steep Rock Construction Materials Ltd. (“Steep Rock”). The Respondents were responsible for the day-to-day management of Steep Rock while the Appellants were mostly silent investors. In the underlying Action, the Case Management Judge (“CMJ”) found that the Action was barred under the Limitations Act, RSA 2000, c L-12, or, in the alternative, the Appellants’ claim was extinguished by a mutual release.

On Appeal, the Appellants applied to introduce new evidence and appealed the Decision of the CMJ both in regards to Summary Dismissal of the underlying Action and the associated award of Costs. The Appellants contended that the new evidence raised a reasonable apprehension of bias on the part of the CMJ because the Judge’s daughter had obtained employment at the firm which represented the Respondents during the time that the CMJ’s decision on Summary Dismissal was on reserve and before Costs had been determined.

The Court of Appeal reviewed the relevant jurisprudence and confirmed that Canada has many large law firms and that it is not uncommon for a Judges’ children to become lawyers. A rule that would bar Judges from hearing any case where counsel is from the same law firm as the Judge’s close relative would be unworkable: Boardwalk Reit LLP v Edmonton (City), 2008 ABCA 176. Further, in a Concurring Judgment, Wakeling J.A. noted that the delay caused by a withdrawal at this stage would be extensive, may unnecessarily increase the workload of other Judges, and would be contrary to the foundational Rules of 1.2. 

The Majority of the Court of Appeal noted that following the initial decision of the CMJ, the Respondents sought double Costs for all steps taken after the provision of a Formal Offer to Settle. The CMJ had considered the factors in Rule 10.33(1) and noted that the allegation of fraud was a significant factor that affected His Lordship’s decision on a multiplier. The CMJ had awarded party and party Costs based on Schedule C, Column 5, with a multiplier of three. He also ordered Double Costs for all steps taken after the Formal Offer to Settle.

The Majority of the Court of Appeal agreed and concluded that the Appellants were unsuccessful in a substantial fraud claim seeking over $2 million. In the end, the Court of Appeal gave considerable deference to the Costs decision of the CMJ and found that the CMJ had exercised His Lordship’s discretion to award a multiple of Costs against the Appellants consistently with the multiples awarded against them for other Applications in the proceedings. As such, the Appeal was dismissed.