Special Costs and Reprehensible Conduct

Plecas v Plecas 2015 BCSC 898 contains an excellent summary of special costs, where the court award declined to award  special costs against a plaintiff for suing to set aside transfers of his grandmother’s property outside of her estate to the defendant thus “leading them into litigation”.
Reprehensible
While the plaintiff’s claim was weak and bound to fail, however there was no evidence of recklessness or that plaintiff acted on improper motive or with malice .The  plaintiff should have withdrawn his breach of fiduciary duty allegation and generally reconsidered strength of his claim, but his conduct was not reprehensible or deserving of censure.
Special costs are an increasingly important aspect to estate litigation in that losing at trial carries far greater financial risk re costs than ever before.
Special Costs
15      The leading authority for awarding special costs is Garcia v. Crestbrook Forest Industries Ltd. (1994), 119 D.L.R. (4th) 740 (B.C. C.A.), at 746 -747. Lambert J.A. held that the threshold for awarding special costs is “reprehensible” conduct:
. . .
Having regard to the terminology adopted by Madam Justice McLachlin in Young v. Young, to the terminology adopted by Mr. Justice Cumming in Fullerton v. Matsqui, and to the application of the standard of “reprehensible conduct” by Chief Justice Esson in Leung v. Leung, in awarding special costs in circumstances where he had explicitly found that the conduct in question was neither scandalous nor outrageous, but could only be categorized as one of the “milder forms of misconduct” which could simply be said to be “deserving of reproof or rebuke”, it is my opinion that the single standard for the awarding of special costs is that the conduct in question properly be categorized as “reprehensible”. As Chief Justice Esson said in Leung v. Leung, the word reprehensible is a word of wide meaning. It encompasses scandalous or outrageous conduct but it also encompasses milder forms of misconduct deserving of reproof or rebuke. Accordingly, the standard represented by the word reprehensible, taken in that sense, must represent a general and all encompassing expression of the applicable standard for the award of special costs.
. . .
16      Special costs may be awarded under Rule 14-1(1) as well as the inherent jurisdiction of the Court: Westsea Construction Ltd. v. 0759553 B.C. Ltd., 2013 BCSC 1352 (B.C. S.C.) at paras. 25-26. Explaining Garciain Westsea Construction Ltd., Madam Justice Gropper observed:
[37] … Garcia emphasizes that the purpose of a special costs award is to chastise a litigant. By rebuking reprehensible conduct, the court punishes bad behaviour and deters it. It also serves to distance the court from the conduct at issue.
17      The parties agree that the principles for awarding special costs are accurately articulated at para. 73 of Gropper J.’s reasons in Westsea Construction Ltd.:
[73] . . .
a) the court must exercise restraint in awarding specials [sic] costs;
b) the party seeking special costs must demonstrate exceptional circumstances to justify a special costs order;
c) simply because the legal concept of “reprehensibility” captures different kinds of misconduct does not mean that all forms of misconduct are encompassed by this term;
d) reprehensibility will likely be found in circumstances where there is evidence of improper motive, abuse of the court’s process, misleading the court and persistent breaches of the rules of professional conduct and the rules of court that prejudice the applicant;
e) special costs can be ordered against parties and non-parties alike; and
f) the successful litigant is entitled to costs in accordance with the general rule that costs follow the event. Special costs are not awarded to a successful party as a “bonus” or further compensation for that success.
18      The defendant relies on Mayer v. Osborne Contracting Ltd., 2011 BCSC 914 (B.C. S.C.), in which Mr. Justice Walker said this:
[11] Special costs may be ordered in the following circumstances:
(a) where a party pursues a meritless claim and is reckless with regard to the truth;
(b) where a party makes improper allegations of fraud, conspiracy, fraudulent misrepresentation, or breach of fiduciary duty;
(c) where a party has displayed “reckless indifference” by not recognizing early on that its claim was manifestly deficient;
(d) where a party made the resolution of an issue far more difficult than it should have been;
(e) where a party who is in a financially superior position to the other brings proceedings, not with the reasonable expectation of a favourable outcome, but in the absence of merit in order to impose a financial burden on the opposing party;
[f] where a party presents a case so weak that it is bound to fail, and continues to pursue its meritless claim after it is drawn to its attention that the claim is without merit;
[g] where a party brings a proceeding for an improper motive;
[h] where a party maintains unfounded allegations of fraud or dishonesty; and
[i] where a party pursues claims frivolously or without foundation.
19      It is of note however that each item in this list has an element of impropriety about it. The list includes words such as reckless, improper allegations, frivolous, unfounded or in the case of a party in a financially superior position, a misuse of that position. In other words they all involve a degree of reprehensible behaviour.
20      The defendant also refers to McLean v. Gonzalez-Calvo, 2007 BCSC 648 (B.C. S.C. [In Chambers]), for the proposition that special costs may be justified if a case was so weak it was bound to fail. The Court awarded special costs in that case because the claim was bound to fail and the plaintiff had neglected to withdraw several serious allegations that had no evidentiary basis (paras. 34-35). Unlike the present case however the plaintiff in McLean pursued those claims through a seven-day trial. McLean was cited approvingly in reasons ordering special costs against an unsuccessful defendant in Hochsteiner v. Kilback, 2014 BCSC 167 (B.C. S.C.) at paras. 11-14.
21      Hochsteiner also relied on the decision in Webber v. Singh, 2005 BCSC 224 (B.C. S.C. [In Chambers]), where the Court ordered the defendant Dulai Roofing Ltd. to pay the plaintiff’s special costs, holding that this order was justified by Dulai’s conduct in maintaining a legal position despite the absence of “any supporting legislation or case authorities” (para. 31). The Court found Dulai’s conduct in that regard to be reprehensible and deserving of reproof. However, the special costs order was overturned on appeal in Webber v. Singh, 2006 BCCA 501 (B.C. C.A.). The Court held that the mere fact that Dulai had taken a position which was “legally ill-founded” did not itself amount to reprehensible conduct (para. 18).
22      On that point, the plaintiff refers to Graham v. Moore Estate, 2003 BCCA 601 (B.C. C.A.) at para. 6, where the Court stated:
[6] . . .
. . .
2. This is not a case for special costs. Even though Mr. Campa pursued a fruitless appeal on the merits, refused reasonable offers to settle the appeal and caused some unnecessary interlocutory proceedings, his conduct does not, in our view, amount to reprehensible conduct requiring rebuke by special costs. Lack of merit alone is not sufficient: …
. . .
23      The Court came to a similar conclusion in Water’s Edge Resort Ltd. v. Canada (Attorney General), 2014 BCSC 1962 (B.C. S.C.), another case referred to by the plaintiff. In Water’s Edge Resort Ltd. the Court held that the mere fact that a party adopts a position which is meritless does not provide sufficient justification for an order for special costs:
[21] … in general, meritless claims alone will not attract special costs. However, meritless claims that are pursued for some improper motive have generally attracted special costs. In the present case, while the plaintiff’s claims and defence advanced in the rent action were found to be without merit, there is no evidence that the claims were advanced for an improper purpose or out of malice.
24      The plaintiff also relies on McLachlin & Taylor, British Columbia Practice, Vol. 2, 3d ed. at 14-55 where the authors state:
. . .
Solicitor and client costs were considered by the Court only in very exceptional cases, such as where the award was to act as a deterrent to a litigant who made wanton, scandalous and malicious charges against the other litigant (Vanderclay Development Co. Ltd. v. Inducon Engineering Ltd., [1968] O.J. No. 1268, 1 D.L.R. (3d) 337 (H.C.J.)); there was evidence of improper motive on the part of the party (McGrath v. Goldman, [1975] B.C.J. No. 911, [1976] 1 W.W.R. 743 (S.C.)); the case was unfounded and had not merit whatsoever (Basran v. Basran, [1981] B.C.J. No. 1767, 123 D.L.R. (3d) 508 (S.C.)); the party attempted to mislead the Court (Sofocleous v. Dikaios (c.o.b. A-D Design & Illustration Co.), [1982] B.C.J. No. 2241 (C.A.)); there was “scandalous conduct” (Cominco Ltd. v. Westinghouse Canada Ltd., [1980] B.C.J. No. 1353, 16 C.P.C. 19 (S.C.)); a party was guilty of positive misconduct (Winnipeg Mortgage Holdings Ltd. v. Allard, [1980] B.C.J. No. 1596, 20 B.C.L.R. 170 (S.C.) and Dusik v. Newton, [1984] B.C.J. No. 3084, 51 B.C.L.R. 218 (S.C.)); or numerous proceedings had been issued without research or preparation (Simons v. Illig Holdings Ltd., [1982] B.C.J. No. 726 (Co. Ct.)). To justify such an award the party had to show an “extraordinary disregard for the standard of conduct expected”: British Columbia Automobile Association v. Manufacturers Life Insurance Co., [1979] B.C.J. No. 562, 14 B.C.L.R. 237 (S.C.). It is not enough that the conduct giving rise to the proceedings can be characterized as “shabby”: Sneddon v. Nahoum, [1990] B.C.J. No. 57, 30 C.P.C. (2d) 39 S.C.).
. . .
25      In Hung v. Gardiner, 2003 BCSC 285 (B.C. S.C.), Mr. Justice Joyce considered what was required to justify a special costs award:
[16] In order to justify an award of special costs, it is not sufficient simply to establish that the plaintiff’s allegations of bad faith and malice were not proven. It is necessary to show that the plaintiff acted improperly in making or maintaining the allegations in this proceeding or otherwise acted improperly in the manner in which she conducted the litigation before special costs will be awarded. It must be shown, not just that the allegation was wrong, but that it was obviously unfounded, reckless or made out of malice. The matter must be considered from the point of view of the plaintiff at the time she made or maintained the allegations …
26      In my view the matter of entitlement to special costs in this instance turns on two issues: firstly, the merit of the plaintiff’s claims and secondly, the propriety of the plaintiff’s failure to withdraw unsupported allegations.
Was the Plaintiff’s Claim Meritless?
27      With respect to the defendant’s submission that the plaintiff’s claim lacked merit, the plaintiff’s argument was that both execution and delivery of the transfers was required in order for them to be effective. I rejected that argument and found as follows:
[37] I am satisfied that the Form A Transfers executed by Alice Plecas were, pursuant to s. 20 of the Act, effective as against her upon execution and were intended to be so. The transfers carry “with them the right to apply for registration even after … death,” Chung Estate v. Chan (1995), 4 B.C.L.R. (3d) 371 (S.C.), at para. 11.
[38] The plaintiff does not pursue the claim of resulting trust, acknowledging that there could be no presumption of resulting trust given the body of evidence relating to the testatrix’s intent: Pecore v. Pecore, 2007 SCC 17, at para. 44. In any event, that evidence would be sufficient to rebut a presumption of resulting trust on a balance of probabilities.
[39] There is no evidence that the defendant breached any fiduciary obligations owed to the plaintiff, nor anything to indicate that “good conscience” as defined by McLachlin C.J.C. in Soulos v. Korkontzilas, [1997] 2 S.C.R. 217, at paras. 35-36, requires imposition of a constructive trust respecting the Farm Properties. Further, as I have found that the inter vivos gifts are valid and enforceable, the plaintiff has not suffered any loss compensable by damages

Trevor Todd

Trevor Todd is one of the province’s most esteemed estate litigation lawyers. He has spent more than 40 years helping the disinherited contest wills and transfers – and win. From his Kerrisdale office, which looks more like an eclectic art gallery than a lawyer’s office, Trevor empowers claimants and restores dignity to families across BC. He is a mentor to young entrepreneurs and an art buff who supports starving artists the world over. He has an eye for talent and a heart for giving back.

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