Alberta Court Awards Elevated Costs For Breach Of Contract And Discourages Misleading Negotiation Tactics

Complete indemnification for solicitor-client costs is rare, however, this was the recent award granted by the Alberta Court of Queen's Bench in Pillar Resource Services Inc v Primewest Energy Inc, 2016 ABQB 120. Pillar Resource Services Ltd. ("Pillar"), the successful party in this litigation, sought solicitor-client costs from the Defendants PrimeWest Energy Inc. and Primewest Gas Corp. (collectively, "PrimeWest"), subject to assessment and disbursements, including expert fees and the expenses arising from having certain parties give evidence by video conference. At issue was whether this "rare and exceptional" award was appropriate. In determining that it was, the Court held that conduct that prolongs litigation to leverage negotiations and sharp business practices aimed at exhausting creditors into settling for a lesser sum than what is justifiably owed is properly considered in determining whether elevated costs are appropriate.

Facts

In Pillar Resource Services Inc v PrimeWest Energy Inc and PrimeWest Gas Corp. 2014 ABQB 317, the Court found in favour of Pillar. Pillar had been hired to perform, and did perform, civil, structural and mechanical work on a gas processing plant owned and operated by PrimeWest. The Court ultimately held that Pillar had provided best-efforts estimates on the information available and that although the scope of the work changed materially over the course of the project, the work had been done at PrimeWest's request and Pillar had kept PrimeWest up-to date on costs. Despite Pillar having been requested to perform the work, and providing up-to-date information on costs, PrimeWest proceeded to send Pillar a letter indicating that it would pay the original estimate plus a sum for the "approved scope modifications" - a sum well below what had been invoiced.

Following this, at PrimeWest's request, Pillar prepared a detailed breakdown of its costs. PrimeWest then alleged that it had issues with Pillar's performance and raised questions about safety services and monitors, treatment of structural steel, equipment usage, the cost of security and equipment rental. At this point the Pillar invoices (totalling nearly $1.3 million) had been outstanding for 5 months despite the fact that the maximum prospective value of the issues being discussed was $50,000. PrimeWest testified that they were only trying to understand why the total amount invoiced was different from the original estimate. However, PrimeWest also conceded...