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Special Costs Summarized

Robillard v Robillard 2015 BCSC 2011 summarizes the law of special costs in the decision where special costs of the trial were awarded against the defendant who breached his fiduciary duty Special Costs both in his misuse of a power of attorney before the attorney’s death as well as after death in his capacity as executor. The case is one of an increasing number indicating the willingness of the court to punish egregious behavior not just throughout the trial, but in matters that lead up to trial by awarding special costs. The court made the following comment re the conduct of parties in positions of trust with estates who abuse it: “Perhaps a special costs order such as this will serve as a warning to others entrusted with the important duties of administering estates: trustees who engage in this sort of nonsense will pay a high price.”

 

In simple terms special costs means that the losing party must pay all the legal fees, taxes and disbursements of the winning party, which can be very considerable after a trial.

 

As I recently summarized the law with respect to special costs in Plecas v. Plecas, 2015 BCSC 898, I will repeat that summary here:

[15]      The leading authority for awarding special costs is Garcia v. Crestbrook Forest Industries Ltd. (1994), 119 D.L.R. (4th) 740 at 746-747 (B.C.C.A.). 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 at paras. 25-26. Explaining Garcia in 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 Contract Ltd., 2011 BCSC 914, 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.

[6]             However, the discretion of the court is to be exercised with restraint. The party “seeking special costs must demonstrate exceptional circumstances to justify the award”, A.B.Z. v. A.L.F.A., 2015 BCSC 34 at para. 33.

[7]             In Friedlander v. Claman, 2015 BCSC 482, Madam Justice Gropper found that the application of special costs should be limited to “exceptional circumstances” and stated:

[24]      I went on to say at para. 38 of Westsea that despite Lambert J.A.’s effort to clearly articulate the threshold for awarding special costs in Garcia, it can be difficult to apply this standard because the concept of “reprehensibility” captures a wide range of misconduct, special costs awards are determined on a case by case basis, and it is sometimes challenging to pinpoint the outer limits of what is reprehensible. What is key to the analysis is the exceptional element or “something more”. I agree that the application of special costs should be limited to exceptional circumstances. The Supreme Court of Canada very recently affirmed this “exceptional” circumstances threshold at para. 137 of Carter v. Canada (Attorney General), 2015 SCC 5, when clarifying the test for special costs in cases involving public interest litigants.

[8]             In the context of an estate matter Mr. Justice Thompson in Estate of Forbes McTavish Campbell, 2015 BCSC 774, said this:

[24]      It is to be expected that trustees may fall well short of perfection in the course of administering trusts. Mistakes will be made. However, these errors I have just referenced are not in the category of careless mistakes or errors in judgment. On the contrary, I find that this is reprehensible behaviour that calls out for reproof and rebuke. Aside from punishment of a wayward party, one of the valid purposes of a special costs order is deterrence. Perhaps a special costs order such as this will serve as a warning to others entrusted with the important duties of administering estates: trustees who engage in this sort of nonsense will pay a high price.

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