Month: August 2022

The Power of Attorney Act

Sazarynick v Skwardchuk 2021 BCSC 443 reviewed how much of the common law re Power of Attorney cases was codified and strengthened in the modern BC Power of Attorney Act of 2008.

The fiduciary obligations that an ad hoc fiduciary attorney would owe in equity have largely been codified in the modern version of the Power of Attorney Act:

For example, s. 19(1) of the PAA now mandates that an attorney must “act honestly and in good faith” and “exercise the care, diligence and skill of a reasonably prudent person”.

Moreover, s. 19(1)(d) requires that an attorney “keep prescribed records and produce the prescribed records for inspection and copying at the request of the adult.”

An attorney is required to act in the “adult’s best interest’s” when managing and making decisions about the adult’s financial affairs: PAA, s. 19(2).

Finally, pursuant to s. 19(4) of the PAA, an attorney must keep their own property separate from the donor’s property.

In a similar vein, the Power of Attorney Regulation, B.C. Reg. 20/2011 (“Regulation”) imposes further obligations on attorneys.

Section 2(1) mandates that an attorney acting under an enduring power “must make a reasonable effort to determine the adult’s property and liabilities as of the date on which the attorney first exercises authority on the adult’s behalf” and “maintain a list of that property and those liabilities.”

Further record keeping obligations are imposed under s. 2(2) of the Regulation, which provides as follows:

(2) An attorney acting under an enduring power of attorney must keep the following records in relation to the period for which the attorney is acting:
(a) a current list of the adult’s property and liabilities, including an estimate of their value if it is reasonable to do so;
(b) accounts and other records respecting the exercise of the attorney’s authority under the enduring power of attorney;
(c) all invoices, bank statements and other records necessary to create full accounts respecting the receipt or disbursement, on behalf of the adult, of capital or income.

In short, the Regulation imposes fairly robust record keeping obligations on those acting under an enduring power of attorney.

The equitable obligations of a fiduciary at common law were well-established by 2008 and it is unnecessary to grapple with the modern statutory regime that has largely codified the common law, or the law of Manitoba, which was neither plead or argued.

The standard of care for an attorney, which has now been codified under s. 19(1) of PAA, was well-established in the case law by 2008.

For example, in Andreasen v. Daniels-Ferrie, 2001 BCSC 1503 at para. 27, the requisite standard of care for a fiduciary acting under a power of attorney was described as follows:
even where the attorney acts gratuitously he or she has a duty to account, to exercise reasonable care as would a typically prudent person managing his or her own affairs, and not act contrary to the interests of the donor.

In sum, the requisite standard of care was already well-established in the case law by 2008.

Promissory Estoppel and Equitable Easements

Purdy v Pighin 2022 BCSC 14099 followed Young v. Beck, 2017 BCCA 248 and reviewed the law relating to an equitable easement based upon the doctrine of proprietary estoppel.

The Young decision held that the owners of third lot were entitled to an equitable easement on the basis of proprietary estoppel: Young v. Beck, 2016 BCSC 562. As recounted by the Court of Appeal at para. 7 in upholding his decision the trial judge had relied upon the decision of Dykes v. Nagel, 2011 BCSC 1549, where the court stated the following about equitable easements at paras. 58-60:

[58] The legal principles governing the recognition of equitable easements have been extensively canvassed in the recent decision of Sherbinin v. Jackson, 2011 BCSC 74. It would serve no useful purpose to repeat the thorough analysis undertaken by Madam Justice Fitzpatrick in that case.

[59] It is clear that recognition of an equitable easement is rooted in the principles of proprietary estoppel. In recent years, the courts have taken a broader and more flexible approach to proprietary estoppel. The courts will give effect to proprietary estoppel in circumstances where parties have conducted themselves on an assumption about their rights and where it would be unfair or unjust to allow a party to go back on that assumption. So for example, where there has been an implied promise by conduct and acquiescence, coupled with detriment, it may be inequitable to allow a party to assert rights inconsistent with that implied promise.

[60] Fitzpatrick J. summarized the current law in the following way at para. 47:

[47] The judgment of Scarman L.J. in Crabb at 192-199 provides that in assessing any claim for proprietary estoppel, the Court must ask itself three questions:

(a) Is there an equity established? By this, there must be a belief by the plaintiff in the existence of a right created or encouraged by the words or the actions of the defendant such that it would be unconscionable and unjust to allow the defendants to set up their undoubted rights against the claim of the plaintiff;

(b) What is the extent of the equity? The Court must provide for the “minimum equity to do justice to the plaintiff as a right either as an easement or a license upon terms to be agreed”; and

An equity will be established where:

a. There was an assurance or representation, attributable to the owner, that the claimant has or will have some right to the property, and

b. The claimant relied on this assurance to his or her detriment so that it would be unconscionable for the owner to go back on that assurance.

2. If an equity is established, the court must determine the extent of the equity and the remedy appropriate to satisfy the equity.

The elements of the modern doctrine of proprietary estoppel require:

(i) an assurance or representation by the defendant that leads the claimant to form a mistaken assumption or misapprehension that he or she has an interest in the property at issue;

(ii) a causative connection between the assurance or representation and the claimant’s reliance on the assumption such that the claimant changes his or her course of conduct;

(iii) a detriment suffered by the claimant that flows from his or her reliance on the assumption, which causes the unfairness and underpins the proprietary estoppel;

and (iv) a sufficient property right held by the defendant that could be transferred to satisfy the right claimed by the claimant. See Professor Bruce MacDougall’s Estoppel (Markham, ON: LexisNexis Canada Inc., 2012) at pp. 446, 462-3, 479, and 486.

[17] The enquiry, in the end, considering these elements, reduces to the ultimate issue of unconscionability.

Re-Opening a Trial & Miscarriage of Justice

Cox v Swartz 2022 BCSC 1494 reviewed the law relating to re-opening a trial and the prevention of a miscarriage of justice if not allowed.

The court has a broad discretion to permit a party to reopen its case and tender evidence to prevent fundamental miscarriages of justice.

The power is to be used sparingly and with care to prevent frauds and abuses of the courts process that might result: see Clayton v. British American Securities Ltd. (1934), [1934] 3 W.W.R. 257, [1935] 1 D.L.R. 432 at 440 (BCCA) [Clayton]; Graham v. Galaxie Signs Ltd., 2013 BCCA 266 at para. 33 (leave to appeal ref’d: 2014 CanLII 5831 (SCC)) [Galaxie Signs].

The test for reopening of a trial to bring new evidence into the case is whether the applicant has shown on a balance of probabilities that

(1) a miscarriage of justice would probably occur without reopening the trial, and

(2) the new evidence would probably have changed the result of the trial: Grewal v. Grewal, 2016 BCCA 237 [Grewal] at para. 71; Galaxie Signs at para. 33. As noted in Cowichan Valley (Reginal District) v. Jeffries (1983), 46 B.C.L.R. 303, 1983 CanLII 484 (BCSC) [Cowichan Valley] at para. 13, for the purposes of the test, the evidence must indeed be fresh evidence: It must have come to the applicant’s attention after trial, without being reasonably discoverable beforehand.

The farther a trial has proceeded and the more evidence that has been presented, the more stringently the test must be applied and the narrower the scope of the court’s discretion to reopen the trial. Reopening may still occur after judgment has been granted, but greater scrutiny must be applied in such cases: Clayton at 440; Vander Ende v. Vander Ende, 2010 BCSC 597 at para. 84.

The “onus is on the applicant to demonstrate first, that a miscarriage of justice would probably occur unless the matter is reopened, and second, that the new evidence would probably change the result”: AME at para. 9.

Miscarriages of justice do not result from simple unfairness perceived by a party that has failed to adduce evidence. This is a procedural issue usually and should be invoked where “the judicial procedure at issue [has not been] a judicial procedure at all”: see Lin v. Tang, [1997] 9 W.W.R. 679, 1997 CanLII 2675 (BCCA) at paras. 61-64.

It is not necessary for an applicant to show that they have been deliberately misled or deceived in order to reopen a trial. However, it is clear that “‘miscarriage of justice’ means something far beyond the possibility that a different result might have been reached”; a miscarriage of justice is “a result that would leave one party with such an unfair benefit or advantage at the expense of the other that a reasonable person would regard it as shocking and unconscionable”: Aquiline Resources Inc. et al. v. Wilson et al., 2005 BCSC 1461 [Aquiline] at para. 12.

In Moradkhan v. Mofidi, 2013 BCCA 132 [Moradkhan], the applicant lost a summary trial motion and sought to reopen the trial to adduce further evidence, including evidence as to the value of property that was in issue. On those facts, the Court of Appeal said the trial court should not have permitted the parties to adduce vast volumes of evidence, particularly evidence that was available at the time of the original trial.

• it is generally speaking in the interests of justice to consider that a trial is complete when each side has closed their case and the judge has delivered his or her judgment;
• a judge’s unfettered discretion to reopen a trial should be exercised with restraint;

• a party may not use the rule to re-argue, re-cast, or re-state his or her case, rather the rule is available to remedy what might otherwise be a substantial injustice;

• it is not intended that a party should be able to lead substantial new evidence, nor does the rule generally permit the leading of new expert evidence;

• the reasons that the evidence was not led or submissions not made in the first place may be relevant to the exercise of the judge’s discretion, particularly where the failure to do so in the first place was a considered or pragmatic decision; and

• the discretion should only be exercised if the reception of the new evidence would probably change the result of the trial.

Miscarriage of Justice

A miscarriage of justice will not easily be found. The meaning of “miscarriage of justice” was canvassed in Aquiline, where N. Smith J. made the following instructive comments:

Black’s Law Dictionary, 8th ed. (West Group, 2004) defines it as “a grossly unfair outcome in a judicial proceeding”. In Lin v. Tang (1997), 147 D.L.R. (4th) 577, 37 B.C.L.R. (3d) 325 (C.A.) [Lin], Huddart J.A. said:

Miscarriage of justice is a difficult concept. It is not simply unfairness as viewed by the party who perceives himself the victim of an unfair process. (¶61).
Later in her reasons, her ladyship said:

In my view, miscarriage of justice means that which is not justice according to law. A miscarriage of justice will almost always be procedural. The blemish must be such as to make the judicial procedure not a judicial procedure at all. (¶64).

In making the latter statement, Huddart J.A. relied on Robbins v. National Trust Co., [1927] 2 D.L.R. 97 (P.C.), where the term was defined as “such departure from the rules which permeate all judicial procedure as to make that which happened not in the proper use of the word judicial procedure at all”. (¶7).

In the Ontario case of 1307347 Ontario Ltd. V. 1243058 Ontario Ltd., [2001] O.J. No. 257 (Sup. Ct.), Nordheimer J. said at ¶9:
[A] miscarriage of justice involves more than just a finding that a different result might have occurred. It involves a finding that, absent the reopening of the matter and the reversal of the original determination, a fraud would be perpetrated or the giving of perjured evidence or the deliberate misleading of the Court would be countenanced…

S.10 Law & Equity Act Used to Enforce Settlement

Binning v Gill 20922 BCSC 1479 reviewed the law relating to court applications to enforce settlements and relied upon S. 10 of the Law & equity Act to enforce a settlement.

s. 10 of the Law and Equity Act:

” In the exercise of its jurisdiction in a cause or matter before it, the court must grant, either absolutely or on reasonable conditions that to it seem just, all remedies that any of the parties may appear to be entitled to in respect of any legal or equitable claim properly brought forward by them in the cause or matter so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of legal proceedings concerning any of those matters may be avoided.”

Son v. Kim, 2009 BCSC 776 held that s. 10 confers it with broad equitable jurisdiction to grant remedies in a cause or matter in order to avoid a multiplicity of legal proceeding concerning the matters at issue, including enforcing or setting aside a settlement agreement (para. 41).

The Court refers to Childs v. Childs Estate (1987), 45 D.L.R. (4th) 282 (Sask. C.A.).

In that case, the Saskatchewan Court of Appeal held that the court could enforce or set aside a settlement agreement compromising an action notwithstanding the fact that it involved matters extraneous to the action, or that there was substantial issue as to the terms, validity or enforceability of the agreement. Moreover, this could be done within the existing action and there was no need to commence a new action.

This represents the law in British Columbia: Hutton v. Hutton, 2020 BCSC 2046 at para. 26, citing McKenzie v. McKenzie (1975), 55 D.L.R. (3d) 373 at 377 (B.C.S.C.) where the court held that “there is a well-established practice in our courts based primarily on [predecessors to ss. 8 and 10 of the Law and Equity Act], and upon certain rules of practice in the English Court of Chancery to enforce settlement agreements in the suit compromised.”

In Son, the court stated it should be guided by the common law when exercising the discretion as described in Childs, stating at paras. 44–45:

The [Saskatchewan Court in Childs] held that the main criterion would be whether the requirements of justice to the parties were best served by

(1) a determination on affidavit evidence in the summary procedure (with possible cross-examination on the affidavits), or

(2) an order directing a trial of an issue in the same action, or (3) an entirely different action, or otherwise.

In making this determination, the Court must consider (1) the substance of the questions to be determined, (2) whether credibility was involved, (3) whether pleadings and discovery were desirable or necessary, and (4) any other factors which indicated proceeding in a particular way.

Based on the foregoing jurisprudence, there seems to be no doubt that the Court has the jurisdiction to enforce or set aside an agreement that compromises an action notwithstanding that it involves matters extraneous to the action, or even that there is a substantial issue as to the terms, validity or enforceability of the agreement. The exercise of this jurisdiction will depend on whether justice is best served under the summary procedure in the peculiar circumstances of the settlement agreement in question.

It is clear from those passages that, ultimately, the Court must be guided when exercising its discretion by what best serves justice for the parties “in the peculiar circumstances of the settlement agreement in question”.

[49] All parties referred to Lougheed v. Ponomareva, 2013 ONSC 4347 [Lougheed]. That case concerns the settlement of a family law action. Each party was represented by counsel at a mediation and arbitration. They attended mediation and executed written minutes of settlement, which were signed by both parties and their counsel. That agreement resolved all issues in the litigation.

[50] However, less than a month later, the respondent changed counsel, who informed the opposing party that the respondent wanted to set the agreement aside. The respondent took the position that she was heavily medicated during the mediation and therefore not in a position to understand what was taking place. She also asserted that the minutes of settlement were unconscionably one-sided.

[51] In addition to filing an affidavit explaining her condition, the respondent deposed that she attended before a psychologist. That psychologist’s report was appended to the respondent’s affidavit. The Court notes that the respondent did not in her affidavit “assert that the applicant or the applicant’s counsel was aware that she was on medication, or that she was in any difficulty in understanding what was going on or what was agreed to” (para. 15).

The respondent’s position was to set aside the settlement on the ground that she was “emotionally and mentally incapable of understanding what was going on” (para. 36). The respondent argued that the evidence was uncontradicted that she was unable to understand what was taking place. Her position was that as a result of that, the minutes of settlement had to be set aside (para. 27).

The Court confirms that such evidence could be a legally sustainable ground for attacking minutes of settlement (para. 36). However, it went on to state:

The respondent’s bald assertion that she did not know what was going on must be assessed as against the surrounding circumstances.

The respondent was represented by two experienced counsel. They both understood Russian as well as English. One can assume, without evidence to the contrary, that counsel would not permit their client to sign minutes of settlement if there was any suggestion that the client did not understand what was going on.

The parties met with their counsel and with the mediator, together and separately. There is no evidence that any party to the proceedings observed conduct on the part of the respondent that suggested that she did not know what was going on.

The Court confirmed that to succeed, the respondent needed to show that the other party was aware of her lack of capacity or had constructive notice of it “by virtue of circumstances that should have put the other party on his inquiry as to the state of mind of the respondent” (para. 42).

This is based on the legal principle that a party seeking to escape the terms of the contract must show not only mental incompetence, but also that the other party knew about that incompetence: Imperial Loan Co. Ltd. v. Stone, [1892] 1 Q.B. 599 (C.A.) at 601, as quoted in Lougheed at para. 43. That rule had been somewhat relaxed because it could be shown that the contracting party was aware of facts that should have put that person on notice as to the state of mind (para. 44).

The Court in Lougheed also stated:

The fairness of the contract is not a relevant consideration except to the extent that it might be one of the factors that could put a party on notice of an issue regarding the mental competence of the other party. It is not an independent ground for setting aside a contract involving a mentally incompetent person.

Unjust Enrichment Claim Dismissed For Juristic Reason

Gill v Gill 2022 BCCA 264 upheld the dismissal of a former spouse’s claim for unjust enrichment in and to the matrimonial property on the basis that a rental agreement of the property signed by her spouse and his father prior to their marriage was a juristic reason to defeat her claim.

Generally, “the doctrine of unjust enrichment applies when a defendant receives a benefit from a plaintiff in circumstances where it would be “against all conscience” for him or her to retain it. Where this is found to be the case, the defendant will be obliged to restore that benefit to the plaintiff”: Moore v. Sweet, 2018 SCC 52 at para. 35.

Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762 at 788; 1992 CanLII 21 (SCC), stated d “[a]t the heart of the doctrine of unjust enrichment … lies the notion of restoration of a benefit which justice does not permit one to retain.”

Under the unjust enrichment framework, a plaintiff will be successful if they can show that

(1) the defendant was enriched;

(2) the plaintiff suffered a corresponding deprivation; and

(3) the defendant’s enrichment and the plaintiff’s corresponding deprivation occurred in the absence of a juristic reason: see Pettkus v. Becker, [1980] 2 S.C.R. 834 at 848; 1980 CanLII 22 (SCC) [Pettkus]; Garland v. Consumers’ Gas Co., 2004 SCC 25 at para. 30 [Garland]; Kerr, at paras. 30–45.

The third element of an unjust enrichment claim is that the benefit and corresponding detriment must have occurred without a juristic reason; in other words, that there is no reason in law or justice for the defendant to retain the benefit conferred by the plaintiff, making its retention unjust: Kerr at para. 40.

In Garland, Iacobucci J., at paras. 44–46 outlined a two-step approach in determining whether there is no juristic reason for the retention of the benefit conferred.

At the first step, the plaintiff must prove there is no established category of juristic reason to deny recovery, including an intention to make a gift (donative intent), a contract, or a disposition of law: see also Kerr at para. 41. The plaintiff will have made out a prima facie case under the juristic reason component of an unjust enrichment analysis if they can demonstrate that no existing category is applicable. The prima facie case is rebuttable, however, where the defendant can show why the enrichment should be retained even though the case falls outside the established juristic reason categories.

At this second step, the defendant has a de facto burden of proof: Kerr at para. 43. It is at this step that a court may consider the legitimate expectations of the parties and moral and policy-based arguments about whether the retention of a particular benefit would be unjust: see Pettkus at 849; Peter v. Beblow, [1993] 1 S.C.R. 980 at 990; 1993 CanLII 126 (SCC); Kerr at paras. 44–45.

The trial judge found, as a fact, that a valid rental contract was in place throughout Gurinder’s residence in the Delta Property. Having come to this conclusion, the judge could not but otherwise conclude that there was a juristic reason for the benefit Gurinder (and Hardeep) conferred upon Gurmail. The judge was not wrong to consider whether the combined payment of rent and additional expenses attributable to the property exceeded its fair market rental value. Had the payments being made by Gurinder and Hardeep substantially exceeded the rent the property could reasonably be expected to attract on the open market, questions would arise as to whether the payments were, in fact, for rent or whether they were mortgage payment.

The Test For a Fiduciary Relationship

At the highest level of generality, a fiduciary must act with utmost loyalty, good faith, and in the best interests of the person over whom they exercise discretion or control: Galambos v. Perez, 2009 SCC 48 at para. 69; Can. Aero, at 606; Sull v Pengelly 2019 BCSC 575at para. 129.

As a result of these obligations, a fiduciary exercising a power of attorney cannot act for their own personal benefit or use property under their power for their own gain: Zeligs v. Janes, 2016 BCCA 280 at para. 86; .

The existence of a fiduciary relationship can arise in one of two ways.

First, there are per se fiduciaries that come from certain established classes of relationships. As Justice Rothstein reaffirmed in Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71 at para. 115, the list of per se fiduciary relationships include: trustee-cestui que trust, executor-beneficiary, solicitor-client, agent-principal, director-corporation, guardian-ward, and parent-child.

Second, there are ad hoc fiduciary relationships that, while not falling within the established categories of per se fiduciaries, nevertheless give rise to fiduciary obligations in the circumstances.

The test for establishing an ad hoc fiduciary relationship has gone through several iterations over the years. It was most recently reformulated in Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24 at para. 36 and clarified in Professional Institute, at para. 128.

The party seeking to establish the existence of an ad hoc fiduciary relationship must show:

(i) An undertaking by the alleged fiduciary to act in the best interest of the alleged beneficiary or beneficiaries;

(ii) A defined person or class of persons who is/are vulnerable to the fiduciary in that the fiduciary has a discretionary power over them; and

(iii) A legal or substantial practical interest of the beneficiary or beneficiaries that stands to be adversely affected by the alleged fiduciary’s exercise of discretion or control.

An executor-beneficiary relationship is a defined per se fiduciary relationship

In Wang v. Wang, 2020 BCCA 15 at para. 32, Justice Saunders noted that the historical indicia of a fiduciary relationship “will always exist” in an attorney-donor relationship, thereby hinting at a per sae fiduciary relationship.

As noted in Egli v. Egli, 2004 BCSC 529 at para. 76, aff’d 2005 BCCA 627, “[i]n most cases involving alleged breach of fiduciary duty by an attorney, it is taken as a given that where there is a power of attorney, there exists a fiduciary relationship between the attorney and the donor

Nevertheless, both Egli and Wang ultimately viewed an attorney-donor relationship through the ad hoc fiduciary framework. agent-principal relationship

However in Houston v. Houston, 2012 BCCA 300 at paras. 26–30, a donor-attorney relationship could arguably fall within the ambit of a per se fiduciary.

Wills Interpretation – Bequests to Charity or It’s Officer

Royal Trust v Welfare Institution of Jews of Athens 2022 BCSC 1454 involved an application under S 86 Trustee act for directions and interpretation relating to a will that posed the following 4 issues:

1. if the proper construction of paragraph 4(b)(b) of the 1985 Will is that the contingent beneficiary was the President at the time that the 1985 Will was made (Mr. Kalavitsoglou), does the gift lapse due to the death of Mr. Kalavitsoglou in 2014, and the Trust property fall back into the residue of the estate?
2. is the proper construction of paragraph 4(b)(B) is a gift virtute officii to Estia or a gift to Mr. Keskinoglou, the current President of Estia, in his personal capacity?
3. if the gift was intended to be made to Mr. Keskinoglou virtute officii and is therefore impressed with a trust in favour of Estia, does the gift fail due to the non-recognition of trusts under Greek law?
4. if the gift fails on any of these grounds, does the Trust property fall back into the residue of the estate and be distributed to Ms. Conrad?

The court found that the intent of the testator was to make a gift to the charity and not the president of the organization personally.

The Law

Robson Estate (Re), 2006 BCSC 673 para. 11:

… the courts will make every effort to discover which beneficiary was intended by the deceased and to not allow misdescription, either imperfect or inaccurate, to defeat the deceased’s intent. This is especially so when the gift is to a charitable institution. If the description is sufficient to identify the intended beneficiary with reasonable certainty, that person should be the recipient.

The court had no hesitation in concluding that Ms. Georges’ intent was to make a gift to the charity, Estia. As noted earlier, whether the charity ultimately selected by Ms. Conrad or the one selected by Ms. Georges was to be the recipient, the trust property was clearly earmarked for charitable purposes.

There was no evidence that Ms. Georges even knew, let alone had any sort of relationship with, the individual who was the President of Estia at the time of the 1985 Will. Absent such evidence, it logically follows that it was the charity, not the person, who was the intended beneficiary.

This conclusion is only reinforced by the concept of virtute officii and/or the phrase “for the time being” as it appears in the 1985 Will.

In Lucey v. Catholic Orphanage of Prince Albert, [1951] S.C.R. 690, the will left a bequest to “Reverend William Bruck o.m.i. St. Patricks Orphanage of the City of Prince Albert …, absolutely”. Cartwright J., at 526, referred to the following passage in Halsbury’s Laws of England as an accurate statement of the law:

The mere description of a donee as the holder of an office is not of itself sufficient to raise the inference that the gift is for the benefit of the office and not of the holder personally, unless the context and circumstances show that the holder for the time being was intended. A gift, however, to a person either described as, or known to the testator as, the holder of an office, “or his successors,” or a gift to the holder of an office for the time being, is for the benefit of the office or of the association or body in which the office is held. [emphasis added]

In re Morton Estate, [1941] 1 W.W.R. 310 (BC SC), the testator left a bequest to be paid annually to “the officiating clergyman for the time being” of her Baptist church. Her intestate heirs argued that the gift was intended for individual donees personally, rather than to the church, and was therefore void pursuant to the rule against perpetuities. The Court disagreed and held (at 318) that the gift was intended for the church, not the individuals:

… it was to the office for the benefit of the said church for religious purposes in the strict sense and … it was a good charitable gift.

Dishonest Testimony In Itself Doesn’t Warrant Special Costs

AM Gold Inc. v Kaizen Discovery Inc. 2022 BCCA 284 reviewed the law on an award of special costs and in particular found that dishonest testimony in itself does not warrant such an award of punitive costs.

Special costs are usually awarded when one party has engaged in reprehensible conduct: Young v. Young, [1993] 4 S.C.R. 3 at 134.

While a special cost award provides a greater degree of indemnity against its actual legal expenses, in the ordinary course “[s]pecial costs are not compensatory; they are punitive”: Smithies Holdings Inc. v. RCV Holdings Ltd., 2017 BCCA 177 at para. 56. They are typically awarded to address conduct in the course of the litigation that is deserving of censure and rebuke: Grewal v. Sandhu, 2012 BCCA 26 at para. 106, leave to appeal ref’d [2012] S.C.C.A. No. 120.

While special costs are usually awarded for the whole proceeding, it is open to a judge to make a partial award if it would be disproportionate to award special costs for the entire proceeding: Gichuru v. Smith, 2014 BCCA 414 at para. 91, leave to appeal ref’d [2014] S.C.C.A. No. 547.

The seminal test for special costs was set out in Garcia v. Crestbrook Forest Industries Ltd. (1994), 9 B.C.L.R. (3d) 242 (C.A.), where Lambert J.A., after an extensive review of the authorities, concluded:

[17] … 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.

An award of special costs is discretionary and it does not follow as a matter of right from a conclusion that a party’s conduct is deserving of rebuke: Walker v. John Doe, 2014 BCSC 294 at para. 57.

Misconduct can constitute “unusual circumstances” causing ordinary costs to be “grossly inadequate or unjust”, thereby justifying an uplift of costs under s. 2(5) of Appendix B: 380876 British Columbia Ltd. v. Ron Perrick Law Corp., 2009 BCSC 1209 at para. 37; Luu v. Wang, 2012 BCSC 626 at para. 65; Walker at para. 62. This may include conduct by the unsuccessful party in the litigation which falls short of attracting an award of special costs: On Call Internet Services Ltd. v. Telus Communications Company, 2010 BCSC 1031 at paras. 7–11.
An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for special costs, since not all such attempts will constitute conduct deserving of rebuke. However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception. When a party makes such allegations unsuccessfully at trial despite having access to information sufficient to conclude the other party was neither dishonest nor fraudulent, special costs are appropriate: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 at para. 26.

[ Dishonest testimony alone is not sufficient to warrant an order for special costs. There must be something more egregious in the impugned conduct for it to be considered reprehensible: Gill v. Bassi, 2016 BCSC 754 at para. 15. There is a distinction between evidence that is rejected by the court and evidence that was intended to mislead or was given with an improper motive; only the latter warrants rebuke in the form of an order for special costs: Westsea Construction Ltd. v. 0759553 B.C. Ltd., 2013 BCSC 1352 at paras. 70–73; Mayer v. Osborne Contracting Ltd., 2011 BCSC 914 at paras. 12–15. The evidence must be considered from the perspective of the person giving the evidence at the time they testified or at the time the allegations were made.

In Behan v. Park, 2014 BCSC 1982, Justice Voith, set out three factors that identify testimony worthy of a rebuke in the form of an order for special costs:
[49] … where a party gives:

i. false evidence that has been contrived, concocted or fabricated;
ii. with an intention to mislead;
iii. on an issue that is central to the matter before the court, and, which if accepted, would “drive [the opposing party] from the judgment seat”.

[ The Court can award costs against a non-party pursuant to its inherent jurisdiction: Oasis Hotel Ltd. v. Zurich Insurance Co. et al. (1981), 124 D.L.R. (3d) 455 at 462 (B.C.C.A.). Such an order is exceptional and should only be made in special circumstances: Perez v. Galambos, 2008 BCCA 382 at para. 17, rev’d on other grounds 2009 SCC 48.

[62] Special costs may be awarded against a non-party where:

a) the non-party stands behind the nominal litigant and can be taken to be the promoter of and to have a direct interest in the litigation: Interclaim Holdings Ltd. v. Down, 2002 BCCA 632 at para. 46, additional reasons 2003 BCCA 201;
b) the non-party engaged in deceptive or fraudulent conduct, abuse of process, or gross misconduct in the commencement or conduct of the litigation: International Hi-Tech Industries Inc. v. FANUC Robotics Canada Ltd., 2007 BCSC 1724 at para. 54; and
c) the non-party has put up a straw man to prosecute the claim and is the “real litigant”: Anchorage Management Services Ltd. v. 465404 B.C. Inc., 1999 BCCA 771 at para. 21.

C. Standard of Review

An award of costs, including the appropriate scale of costs, is subject to a wide measure of discretion. This Court should not interfere with that discretion unless the judge misdirected themselves on the applicable law, made an error in principle, made a palpable error in assessing the facts, or otherwise made an award that is so clearly wrong as to amount to an injustice: Hamilton at para. 27; Tanious v. The Empire Life Insurance Company, 2019 BCCA 329 at para. 33.

Mr. Justice Joyce, in Hung v. Gardiner, 2003 BCSC 285, aff’d 2003 BCCA 256, addressed the question raised in the present case, namely, when can it be said that the plaintiff acted reprehensibly in pursuing unmeritorious claims:

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.

Justice Joyce’s comments in Hung have been cited with approval in this Court: Cimolai v. Hall, 2007 BCCA 225 at para. 68; Animal Welfare International Inc. v. W3 International Media Ltd., 2016 BCCA 372 at para. 49, additional reasons 2016 BCCA 489.

Solicitor/ Lawyer Privilege – The Wills Exception

The existence of this “wills exception” was explained by the Supreme Court of Canada in Geffen v. Goodman Estate, [1991] 2 S.C.R. 353 at 381:

An exception has, however, developed to permit a solicitor to give evidence in wills cases and a variety of explanations for this exception to the general rule concerning solicitor-client privilege have been advanced by commentators and courts alike. In Wigmore on Evidence (vol. 8, (SS) 2314), for example, the author suggests that, in so far as issues relating to the execution or contents of a will are concerned, the rationale underlying the exception relates to the testator’s desire for secrecy.

At page 610 of vol. 8, Professor Wigmore states:

But for wills a special consideration comes into play. Here it can hardly be doubted that the execution and especially the contents are impliedly desired by the client to be kept secret during his lifetime, and are accordingly a part of his confidential communication. It must be assumed that during that period the attorney ought not to be called upon to disclose even the fact of a will’s execution, much less its tenor. But, on the other hand, this confidence is intended to be temporary only. That there may be such a qualification to the privilege is plain.

See also: Fawcett Estate v. Fawcett Estate (1998), 21 E.T.R. (2d) 271 (B.C.S.C.) at para. 14.

The wills exception allows the court to set aside privilege over communications between a client and solicitor where the client is deceased and their testamentary intent is not clear. The rationale for the exception was explained by Justice Wilson in Geffen at 387:

a) certain situations where the individual is still living, relying on Re Kathleen Palamarek, 2010 BCSC 1894 at para. 52 [Palamarek]; and
b) certain documents relevant to the issues beyond pure wills interpretation, relying on Geffen at 387.

Waiver of Solicitor Client Privilege

Siegerist v Siegerist 2022 BCSC 1427 reviewed the law of waiver of solicitor/lawyer client privilege.

Files that are part of a communication between a solicitor and client for the purpose of seeking or receiving legal advice and were intended to be privileged: Huang v. Silvercorp Metals Inc., 2017 BCSC 795 at para. 81.

Once a lawyer-client relationship exists, the privilege becomes permanent, unless the client waives it: Descôteaux et al. v. Mierzwinski, [1982] 1 S.C.R. 860 at 872-873; Huang at para. 80; Graham v. Canada (Minister of Justice), 2021 BCCA 118 at para. 44.

Waiver of solicitor-client privilege is ordinarily established where the holder of the privilege voluntarily evinces an intention to waive it. This is referred to as intentional waiver: S. & K. Processors Ltd. v. Campbell Avenue Herring Producers Ltd. (1983), 45 B.C.L.R. 218 (S.C.) at 220; Graham at para. 47.

Waiver may also be implied by the conduct of the privilege-holder in certain circumstances. For example:

a) If a party advances a state of mind defence and relies on legal advice to justify their conduct, a waiver may be inferred: Soprema Inc. v. Wolrige Mahon LLP, 2016 BCCA 471 at para. 22; Graham at para. 47.

b) Where existence of a conversation between a client and solicitor is adduced as evidence of the client’s good faith conduct, the content of the conversation may be subject to waiver: Schwartz Estate v. Kwinter, 2008 ABQB 123 at para. 19.

c) A party may waive privilege by directly raising in a pleading or proceeding the legal advice that they received, thereby putting that advice in issue: York v. Gilligan (1996), 19 B.C.L.R. (3d) 40 (S.C.) at para. 14; McDermott v. McDermott, 2013 BCSC 534 at para. 116.

d) A party may waive privilege by denying that they gave certain instructions to their lawyer: York at para. 14.

e) Waiver may be found to have occurred more generally where fairness and consistency require this result due to selective but limited disclosure by the party resisting production. The court summarized the applicable principles in this respect in United States v. Meng, 2020 BCSC 1461 [Meng]:

Implicit waiver may take place where a party does not expressly waive privilege, but takes a position in relation to privileged materials that is inconsistent with maintaining the privilege. This may be by, for example, selectively disclosing part of a privileged document or a category of privileged documents on a particular subject, but withholding the remainder of the document or other documents on that same subject. In these circumstances, to uphold the privilege over the remaining communications would be unfair, because the opposing party and the court would be deprived of access to the full narrative. In Huang v. Silvercorp Metals Inc., 2017 BCSC 795 at para. 143, Madam Justice Warren explained:

The common thread in the cases where implied waiver is found is that the privilege holder has attempted to use and, at the same time, to shelter behind privileged documents. In such cases, fairness and consistency require production because the privilege holder uses the privilege as a sword to justify or explain a position or action while also using the privilege as a shield to prevent the other party from testing the justification or explanation.

Waiver once made, cannot be retracted.

The decisions in Cheung et al. v. 518402 B.C. Ltd., [1999] B.C.J. No. 2415 (S.C.) at paras. 13 and 22, and Casino Tropical Plants Ltd. [v. Rentokil Tropical Plant Services Ltd. (1998), 55 B.C.L.R. (3d) 233 (S.C.)] at para. 16, once a waiver of privilege has been made it cannot be retracted. This is a logical consequence of the waiver, as being able to retract it would result in untenable litigation advantages and general unfairness.

See also: Do Process LP v. Infokey Software Inc., 2015 BCCA 52 at paras. 30-32