Alberta Judge Finds Party in Contempt of Court, Ends Multi-Million Dollar Litigation Case

by Blake, Cassels & Graydon LLP
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The Alberta Court of Queen’s Bench recently ended a complex, multi-million dollar litigation between Attila Dogan Construction and Installation Co. Inc. (AD) and AMEC Foster Wheeler Americas Limited (AMEC) regarding a construction project terminated in 2002. In AMEC Foster Wheeler Americas Ltd. v Attila Dogan Construction and Installation Co. Inc., Chief Justice N. C. Wittmann ruled that AD was in contempt of court for its failure to renew or replenish a letter of credit posted as security for costs and subsequently struck AD’s amended statement of claim as a result of AD’s continued failure to do so. The abrupt conclusion to this lengthy dispute reflects the importance of AMEC’s cumulative victories on applications relating to process and substance.

Blakes has acted for AMEC in this litigation since 2010.

BACKGROUND

AMEC and AD partnered in a joint venture to design and build a magnesium oxide plant in Jordan for the owner, Jordan Magnesia Company Limited (JorMag). The project was seriously delayed and JorMag terminated the joint venture’s contract in 2002.

In 2007, following an arbitration against JorMag, AD filed a claim against AMEC, seeking C$50-million in enumerated damages, and unquantified damages likely in the tens of millions of dollars. AD claimed that AMEC was responsible for the owner’s contract termination and for the losses AD suffered on the project. AMEC counterclaimed against AD for approximately C$12-million, AD’s share of the legal costs the joint venture incurred in the arbitration against JorMag.

Chief Justice Wittmann was appointed to hear all interlocutory applications and manage this litigation.

This Bulletin discusses key decisions in this matter and the significance of AMEC’s interlocutory applications.

AMEC’S INTERLOCUTORY SUCCESS

Security for Costs

In 2011, the court awarded AMEC C$1.6-million in security for costs. This was the largest security for costs award in Alberta history and has become the leading case on security for costs.

AMEC later received two more awards, bringing the total security for costs posted by AD to over C$2-million.

Summary Judgment Applications

In 2013, AMEC applied for summary judgment on its counterclaim and dismissal of certain of AD’s claims.

Before AMEC’s application for summary judgment could be heard, AD applied to amend its statement of claim to assert undue influence and conflict of interest. Chief Justice Wittmann dismissed AD’s amendments as “doomed to fail.” AD unsuccessfully appealed.

AD changed counsel twice in 2014 and applied to adjourn AMEC’s application for summary judgment several times. It was finally heard in September 2014. Chief Justice Wittmann granted judgment to AMEC for AD’s share of the legal costs of the arbitration against JorMag in the amount of over C$11.6-million and dismissed AD’s claims for delay, estimated to be worth approximately C$18-million. The Court of Appeal of Alberta dismissed AD’s appeal.

Contempt of Court

AD failed to pay costs awarded on various applications and appeals, totalling C$66,666.62. Chief Justice Wittmann ordered that AD pay the full sum to AMEC by March 16, 2016, failing which AMEC could make a demand on one of the letters of credit AD posted as security for costs. AD failed to make payment by that date, and AMEC made a demand on one of the letters of credit.

Chief Justice Wittmann then ordered AD to renew or replenish the C$66,666.62 in security for costs (Outstanding Security for Costs) by March 31, 2016. AD failed to do so, and AMEC applied for a declaration that AD was in contempt of court. AD argued that it was in dire financial straits and that it had faced logistical hurdles in renewing or replenishing the Outstanding Security for Costs. Chief Justice Wittmann declared that AD was in contempt of court and ordered that AD’s amended statement of claim would be struck if AD did not renew or replenish the Outstanding Security for Costs by June 3, 2016.

AD again failed to renew or replenish the Outstanding Security for Costs, and again complained of its financial and logistical challenges. On June 22, 2016, Chief Justice Wittmann struck AD’s amended statement of claim, bringing the litigation to an end.

It is rare to receive a declaration of contempt, and rarer still for pleadings to be struck as a result. AD’s pattern of delaying the proceedings and failing to comply with court orders played a significant role in Chief Justice Wittmann’s decision. However, Chief Justice Wittmann also considered that the security for costs posted by AD was insufficient to cover AMEC’s costs incurred up to the date of the application.

CONCLUSION

This litigation’s outcome reflects how effective a series of well-timed interlocutory applications can be. AMEC was overwhelmingly successful in the dispute, including in 15 of the 17 reported decisions. The outcome also reminds litigants of the importance of complying with court orders, no matter how seemingly insignificant.

For a list of all reported decisions, click here.

The authors acknowledge the contribution of Stephen Vincelli, Summer Law Student.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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