Executive Summary: Key Legal and Evidentiary Issues

• Tidewater’s request for full solicitor-client costs was denied due to excessive hours and lack of billing rate transparency.

• A Calderbank offer was made by Tidewater on July 11, 2024, but was found not to be a genuine compromise.

• Allegations by Axiom of bad faith termination and reputational harm to Tidewater were not supported by sufficient evidence.

• The Court determined 135.8 hours on affidavit preparation and 231.9 hours on brief drafting were excessive.

• Justice Horner applied a McAllister award, granting 50% of Tidewater’s legal fees, excluding the first costs brief.

• No enhanced costs were awarded post-Calderbank offer; each party bore their own costs for the costs portion.

Background and dispute

Axiom Oil and Gas Inc. and Tidewater Midstream and Infrastructure Ltd. were parties to agreements relating to oil and gas assets in Alberta’s Brazeau River region. These included an Asset Purchase Agreement (APA) and a Gas Handling Agreement (GHA). Under the GHA, Tidewater agreed to exclusively process sour gas from wells Axiom had acquired under the APA. In spring 2024, Tidewater ceased processing, asserting that it had terminated the GHA per its interpretation of the agreement.

Tidewater claimed that continuing to process the sour gas would require a $10 million facility refresh and lead to multi-million-dollar losses. Axiom sought a mandatory injunction, arguing that the termination was in bad faith and would result in significant shut-in costs and lost revenue due to lack of alternatives.

Procedural history and decision on injunction

The injunction application was heard on September 6, 2024, and dismissed with oral reasons delivered on September 25, 2024. The Court found that the evidence did not support Axiom’s claims, and the application was not granted.

Policy terms and clauses in dispute

The dispute centered on Tidewater’s right to terminate the GHA based on economic viability. While specific clauses were not quoted, Tidewater’s position relied on its interpretation of the GHA permitting termination under adverse economic conditions. Axiom contested this and accused Tidewater of acting in bad faith, an allegation not substantiated by the Court.

Ruling on costs

After the injunction was denied, the issue of costs was contested. Tidewater sought full solicitor and client costs totaling approximately $347,000, including $325,250 in legal fees and $4,800 in disbursements and other charges. In the alternative, it sought a 40–50% McAllister award, doubled for post-offer costs.

Tidewater had made a Calderbank offer on July 11, 2024, proposing to pay Axiom $25,000 inclusive of costs if it ceased seeking injunctive relief. Axiom rejected the offer.

Justice Horner found:

• The number of billable hours (635.9) and number of lawyers (six, including two students) were excessive.

• 135.8 hours on affidavit preparation and 231.9 hours on the legal brief were unreasonable.

• Three lawyers attended each cross-examination session, though one lawyer conducted the questioning.

• Tidewater’s brief cost $110,000, and 46.8 hours were billed for a three-hour hearing and a one-hour oral ruling.

• Billing rates were not disclosed, but the blended rate was estimated at $511/hour.

• The Court agreed with Axiom that 33.2 hours for the first costs brief was premature and excessive.

Tidewater also argued for enhanced costs due to alleged reputational harm caused by Axiom’s unproven bad faith allegations. However, Justice Horner found no evidence of reputational damage and considered the allegation a neutral factor.

Final outcome

The Court awarded Tidewater 50% of its legal fees, excluding 33.2 hours for the first costs brief. Using the estimated blended rate of $511/hour over 600 compensable hours, the award totaled $153,300, plus reasonable disbursements, other charges, and GST. Justice Horner declined to grant enhanced post-offer costs, finding the Calderbank offer was not a genuine compromise. Each party was directed to bear its own costs for the costs portion of the application.