July 2010 - Award of Significant Court Costs Enhances Arbitration Clauses, Abuse of Process nets Single and Double Solicitor and Own Client Costs

The Court of Queen’s Bench of Alberta has imposed significant punishment on plaintiffs who proceeded with litigation in court rather than limit their claim to an arbitration process, as required by contract. Billington Barristers, acting for the Defendant obtained a dismissal of the Plaintiffs’ action on the first day of trial. Subsequently, the Plaintiffs were ordered to pay Billington Barristers’ client costs on a “solicitor-and-own-client” basis (that is, to reimburse every dollar of legal fees and disbursements incurred by the Defendant) for all steps in the litigation process, and “double solicitor-and-own-client” costs for every step taken by the Defendant after a formal offer of settlement had been tendered prior to trial.

Mr. Justice D. Miller imposed the rare and harsh costs award in recognition that the Plaintiffs’ action was an abuse of process. The dispute was about whether a house had been properly constructed, and the agreement between the parties specified that any dispute between them was to be resolved by arbitration. The Plaintiffs (the purchasers), brought certain complaints to arbitration, but after the arbitrator issued his decision, they sued the builder. In the decision (Memorandum of Judgment) the Court agreed with the position urged by Richard N. Billington, Q.C. at trial, that even if the Plaintiffs had not raised a complaint in the arbitration proceeding, they were required to have done so, and that it was improper to engage in litigation.

The Court, in a subsequent, companion decision (Costs Memorandum), found that because the Plaintiffs had abused the judicial system, and because they failed to deal with all of their complaints by way of arbitration, the Defendant must recover every dollar of litigation expense. Even more so, the Defendant was to recover double every dollar of litigation expense for all steps taken after the date on which a formal offer to settle was given to the Plaintiffs. The successful Defendant was represented at trial by Richard N. Billington, Q.C. and Monique Morin of Billington Barristers. Said Richard Billington, Q.C. after the judgment:

These decisions provide real strength to arbitration clauses. An agreement to arbitrate is not to be ignored. The award of costs that fully indemnifies the successful party is a rare departure from the usual practice of Canadian courts, which normally only partially indemnifies the successful litigant. An award of double the amount of full indemnification is particularly infrequent. We asked the Court to strongly express its disapproval of the Plaintiffs’ abuse of the judicial process, and it has done so.

In addition to litigation matters, Billington Barristers provides representation at arbitration and mediations. Richard N. Billington, Q.C. is available to serve as an arbitrator or mediator in commercial matters, including in oil & gas and corporate disputes.