995544 ALBERTA LTD v CENOVUS ENERGY INC.

This decision addressed the disposition of costs arising from two interlocutory Applications brought by one of the two Defendants, Cenovus Energy Inc. (“Cenovus”). Cenovus applied to dismiss the Action for delay under Rule 4.33 and separately sought Security for Costs. The Plaintiff was successful in resisting both Applications, and the parties were unable to agree on costs.

The Plaintiff sought enhanced costs equivalent to 75% of its actual legal fees, relying on McAllister v Calgary (City), 2021 ABCA 25. Cenovus argued that any costs award should be assessed under Schedule C and proposed a substantially lower amount.

Applications Judge Farrington considered the discretionary factors governing costs pursuant to Rule 10.33, including the result of the applications, the applications’ importance, the complexity of the issues, and the conduct of the parties. While noting that the Applications were potentially dispositive of the Action, the Court found that they were not complex and that neither party had engaged in misconduct or unnecessarily complicated the proceedings.

Applications Judge Farrington distinguished between costs awards that are made following a full determination of an action and those arising from isolated interlocutory applications. The Court held that enhanced costs are more appropriately assessed once the overall outcome of the litigation is known. Applications Judge Farrington highlighted that awarding enhanced costs at an interlocutory stage, where the merits of the Action had not yet been determined, risked an inequitable result if the Plaintiff is ultimately unsuccessful in the Action.

In the result, the Court declined to award immediate enhanced costs and instead ordered costs in the cause, such that the Plaintiff’s entitlement to recover the costs of resisting the Applications was subject to the Plaintiff’s ultimate success in the Action.