COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:	Nuttall v. Krekovic,
	2018 BCCA 341

Date: 20180905

Docket: CA44983

Between:

Robin Giles Nuttall

Respondent

(Plaintiff)

And

Harman Singh Dhillon

Respondent

(Defendant)

And

Arsen Krekovic

Appellant

Before:

The Honourable Mr. Justice Willcock

The Honourable Madam Justice Fenlon

The Honourable Madam Justice Fisher

On appeal from: An order of the Supreme Court of British Columbia, dated November 30, 2017 (Nuttall v. Insurance Corporation of British Columbia,
2017 BCSC 2471, Vancouver Docket S131225).

Oral Reasons for Judgment

Counsel for the Appellant:	G. Cameron
No one appearing on behalf of the Respondents
Place and Date of Hearing:	Vancouver, British Columbia September 5, 2018
Place and Date of Judgment:	Vancouver, British Columbia September 5, 2018

Summary:

The appellant, counsel for the plaintiff in the underlying action, appeals an order for special costs made against him personally. The action involved a hit and run accident in which the plaintiff was injured. After a police investigation yielded no results, the appellant took steps to investigate the identity of the driver. Eventually, he obtained an order adding the respondent as a defendant in place of John Doe. In doing so, he relied on information provided to him by counsel for another party. Shortly after serving the order on the respondent, the appellant learned that the information he had received was incorrect. He then took steps to discontinue the action against the respondent. The respondent made an application for an order for special costs to be payable by the appellant personally. The chambers judge granted the order. He found that the appellant failed to inform the application judge of all of the details of his investigation and considered this to be an abuse of process meriting an order for special costs. HELD: Appeal allowed. The appellant’s conduct in making the application to add the respondent as a defendant did not approach the kind of reprehensible conduct required to justify an order for special costs against him as counsel. The chambers judge erred in principle in failing to consider the cautious approach that is required in making such orders as well as the kind of reprehensible conduct that would justify such an award. He also erred in concluding that the appellant’s failure to disclose the entire circumstances of his investigation was in itself sufficient to justify an order for special costs.

[1] FISHER J.A.: This is an appeal with leave of an order for special costs made against Arsen Krekovic, counsel for the plaintiff in the action below, arising from an application to add the respondent, Harman Singh Dhillon, in place of an unidentified driver. The underlying action involves a hit and run accident that occurred on May 27, 2012, outside the Wheelhouse Pub in Surrey, British Columbia. After an investigation by the RCMP did not reveal the identity of the driver, Mr. Krekovic took steps to do so himself in order for his client to have access to third party liability insurance.

[2] In making the application, Mr. Krekovic relied on information he obtained from counsel for the Wheelhouse Pub (another party to the action) that Mr. Dhillon was the driver. That information turned out to be erroneous, and after Mr. Krekovic learned this, he discontinued the action against Mr. Dhillon.

[3] When Mr. Krekovic indicated that his client would pay costs when he obtained a settlement or damages award, Mr. Dhillon sought an order for special costs to be made payable personally by Mr. Krekovic. That application was heard and determined on November 30, 2017. The chambers judge granted the order sought on the basis that Mr. Krekovic’s conduct in making the application to add Mr. Dhillon constituted an abuse of process.

[4] Mr. Krekovic asserts that the chambers judge erred in law and principle and misapprehended the evidence.

[5] Mr. Dhillon did not respond to this appeal or appear at the hearing.

Background

[6] Mr. Krekovic’s efforts to identify the driver of the other vehicle began in May 2014, and continued for over two years. He retained several private investigators, but the results of those investigations were inconclusive.

[7] In September 2014, after receiving some information from his client’s brother, Mr. Krekovic asked two different investigators to determine whether the respondent Mr. Dhillon was the driver. At that time, he had information suggesting that Mr. Dhillon’s birthdate was May 3, 1992, and one of the investigators (a Mr. Loncaric) had information suggesting the birthdate was in 1991. Shortly after this however, on October 17, 2014, Mr. Loncaric advised Mr. Krekovic that he had information from the ICBC Special Investigations Unit that Mr. Dhillon’s birthdate was November 16, 1994. He also provided an address and B.C. Driver’s License number.

[8] In November 2014, Mr. Krekovic received information from the other investigator (a Mr. Westman) suggesting that the driver was a different Mr. Dhillon, but the investigator was unable to obtain any firm information.

[9] In April 2015, Mr. Krekovic shared the information he had received from Mr. Westman with the RCMP and asked them to re-open their investigation. However, the RCMP were not able to obtain any further information and in June 2015, they considered that all avenues of investigation had been exhausted.

[10] In May 2016, Mr. Krekovic was advised by a lawyer at Dolden Wallace Folick LLP, counsel for the Wheelhouse Pub, that Mr. Loncaric had information on the hit and run driver. After trying for several months to contact Mr. Loncaric, Mr. Krekovic was advised that the investigator could no longer assist with finding the driver due to a conflict. Mr. Krekovic continued to make inquiries at Dolden Wallace Folick.

[11] Finally, on December 8, 2016, Mr. Folick advised Mr. Krekovic that his investigator had given him the identity of the driver but was not able to say how he obtained the information. Mr. Folick provided Mr. Dhillon’s name, a birthdate of November 16, 1994, a residential address and a B.C. Driver’s License number. All of this information was the same as that provided directly by Mr. Loncaric in October 2014.

[12] On February 8, 2017, Mr. Krekovic filed an application to add the respondent Mr. Dhillon to the notice of civil claim in place of John Doe. The affidavit in support of the application included the information provided by Mr. Folick, the fact that the RCMP had investigated without results, and that Mr. Krekovic had also retained investigators who had been unable to obtain any reliable information. The application was heard before Madam Justice Sharma on February 24, 2017. It was opposed by ICBC, whose position was that the evidence was insufficient and failed to explain how Mr. Folick obtained his information. Mr. Dhillon did not appear although duly served. The order was granted.

[13] In March 2017, Mr. Krekovic tried to obtain further information from Mr. Folick’s office, in particular “a nexus” between Mr. Dhillon and the vehicle or the night in question. He was advised that their investigator had provided information that the driver was identified as “most likely” Mr. Dhillon, and two other individuals were identified as “possibly” being “correlated with the incident”.

[14] The order of Madam Justice Sharma was entered on March 24, 2017 and was served on Mr. Dhillon on April 9, 2017. Meanwhile, Mr. Krekovic also passed along the information identifying Mr. Dhillon to the RCMP, requesting whether they could investigate him. On April 24, 2017, he sent the RCMP his investigation file and requested that the investigation be reopened.

[15] On April 27, 2017, Mr. Krekovic received correspondence from counsel for Mr. Dhillon advising that he was not the driver. He passed this information along to Mr. Folick’s associate, again seeking the evidence on which their investigator had identified Mr. Dhillon. On May 2, 2017, the associate advised him that the information they had provided was incorrect, as the Mr. Dhillon they had identified had a different birthdate of May 3, 1992. That same day, Mr. Krekovic advised Mr. Dhillon’s counsel of the error and that he would discontinue the action. The notice of discontinuance was eventually filed on July 17, 2017.

[16] Mr. Krekovic deposed that the identity of the driver was important given the limits on insurance coverage in the circumstances and the value of his client’s claim for damages, which he estimated to be between $2.5 and $4 million. He explained:

[17] The decision to add Harman Singh Dhillon as a defendant in February 2017 was not made lightly. I made the decision to seek instructions to add Harman Singh Dhillon, as I thought it was my duty to pursue every reasonable avenue to obtain justice for my client. I did not seek those instructions with any malice or in bad faith. I sought those instructions after consideration of the available information at hand, while endeavoring to obtain every remedy available for my client.

The chambers judge’s reasons

[17] The chambers judge considered that the naming of the respondent arose as a “case of mistaken identity”, and that the question before him was

[2] … who bears the blame for that mistaken identity and who bears responsibility for the cost the applicant was consequently put to as well as the degree of culpability for that step having been taken.

[18] His conclusion that Mr. Krekovic was responsible stems from the following finding:

[13] There is no evidence of Mr. Krekovic in the course of that application having disclosed to the court any of the substance of the investigation that had taken place over the previous more than two years, including the fact that there were multiple suggested parties whose names had come forward as possibly being drivers and/or owners, and other information that would have tended to cast doubt on the likelihood of the applicant’s involvement. He failed to disclose the inconsistent information as to the birth date of the applicant and the target of his investigation. Justice Sharma was given no reason to doubt or be concerned as to the validity of the positive identification of the applicant.

[19] The judge viewed this conduct as “indefensible and an abuse of process meriting sanction in the form of an order of special costs payable by him personally”. Despite Mr. Krekovic’s motivation to act in pursuance of his duty to his client, he considered the failure to disclose information about the history of the investigation to be in breach of his duty to the court to be forthright:

[21] Mr. Krekovic, however, provides no explanation for his failure to disclose to Sharma J. the history of the investigation, including the multiple parties identified as possible targets, and particularly, the information in his possession as to the inconsistent birth dates. Had he done so, the application may very well have had a different outcome.

[22] While it is true that Mr. Krekovic was conducting the application in pursuance of his duty to his client, Mr. Krekovic, as an officer of the court, was also under a duty to the court to be forthright in disclosing the entire circumstances of his investigation into the driver’s identity. Chapter 2 of the Code of Conduct sets out the Canons of Legal Ethics. Section 2.1-2(a) of the Canons provides, “A lawyer’s conduct should at all times be characterized by candour and fairness.” That duty was breached.

[20] The chambers judge concluded that this finding alone was sufficient to justify an order for special costs, and that the fault was compounded by serving Mr. Dhillon “without further investigation to substantiate the hearsay evidence he had from Mr. Folick” (at para. 23). He held that Mr. Krekovic’s conduct was of the nature contemplated by Rule 14-1(33) of the Supreme Court Civil Rules “and is deserving of reproach”.

On appeal

[21] Mr. Krekovic asserts that the chambers judge erred in law and principle by

(a) inaccurately characterizing his conduct as an abuse of process and failing to apply the principle that the discretion to award costs against counsel must be exercised with restraint and only in rare and exceptional cases;

(b) proceeding on the basis that where counsel fails to bring to the Court’s attention all possible theories or facts which are known to them and which are later found to be material, their conduct is ipso facto reprehensible and thus must attract the sanction of special costs; and

[22] He also asserts that the judge erred in misapprehending the evidence relating to the birthdate of Mr. Dhillon, which was a key issue underlining his finding of a breach of the duty of candour.

Standard of review of costs awards

[23] It is clear that awards of costs, being discretionary, are given a high degree of deference by this Court. A costs award should only be set aside on appeal if the judge below has made an error in principle or if the award is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 at para. 27. Applying these principles in Yung v. Jade Flower Investments Ltd., 2013 BCCA 170, this Court stated that it will only interfere:

[17] … “if there is misdirection or the decision is so clearly wrong as to amount to an injustice”: Agar v. Morgan, 2005 BCCA 579 at para. 26, 47 B.C.L.R. (4th) 36. Misdirection may include making an error as to the facts, taking into consideration irrelevant factors, or failing to take into account relevant factors, all of which would amount to an error in principle: Sutherland v. Canada (Attorney General), 2008 BCCA 27 at para. 24, 77 B.C.L.R. (4th) 142.

[24] It is also clear that findings of fact may only be reversed by an appellate court where there is a palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33 at para. 10. A misapprehension of evidence will result in a reversible error only where it goes to the core of the reasoning process of the judge: see Tambosso v. Holmes, 2016 BCCA 373 at para. 30 and the cases cited therein.

Analysis

[25] It is my view that the chambers judge made several errors that warrant intervention by this Court.

[26] First, special costs have a punitive or deterrent element and are only appropriate where the conduct in issue is deserving of punishment or rebuke. This well-known principle stems from numerous cases, most recently enunciated in J.P. v. British Columbia (Children and Family Development), 2018 BCCA 325 at para. 28. The chambers judge erred in principle by failing to consider the cautious approach to an award of special costs against a lawyer personally, as well as the kind of reprehensible conduct that would justify such an award, mandated by the Supreme Court of Canada in Young v. Young, [1993] 4 S.C.R. 3 and more recently in Quebec (Director of Criminal and Penal Prosecutions) v. Jodoin, 2017 SCC 26.

[27] In Young the court directed judges to be “extremely cautious” in awarding costs personally against lawyers given their duties to guard confidentiality of instructions and to bring forward with courage even unpopular causes:

... A lawyer should not be placed in a situation where his or her fear of an adverse order of costs may conflict with these fundamental duties or his or her calling.

[28] In Jodoin, the court confirmed that the threshold for exercising the power to award costs against lawyers is high, such that there must be a finding of reprehensible conduct by the lawyer. Reprehensible conduct “represents a marked and unacceptable departure from the standard of reasonable conduct expected of a player in the judicial system” (at para. 27). Mr. Justice Gascon, for the majority, described the kind of conduct that would justify such an order at para. 29:

[29] In my opinion, therefore, an award of costs against a lawyer personally can be justified only on an exceptional basis where the lawyer’s acts have seriously undermined the authority of the courts or seriously interfered with the administration of justice. This high threshold is met where a court has before it an unfounded, frivolous, dilatory or vexatious proceeding that denotes a serious abuse of the judicial system by the lawyer, or dishonest or malicious misconduct on his or her part, that is deliberate...

[29] Consistent with these decisions, this Court has long held that such orders should be made only in “very special circumstances”, and not on the basis of mistake, error in judgment or even negligence: see Hannigan v. Ikon Office Solutions Inc. (1998), 61 B.C.L.R. (3d) 270 (C.A.); Pierce v. Baynham, 2015 BCCA 188 at para. 41.

[30] Second, the chambers judge erred in concluding that Mr. Krekovic’s failure to disclose the entire circumstances of his investigation was in itself sufficient to justify an order for special costs. A special costs order is not justified only because counsel fails to disclose evidence that ultimately proves to be material or incorrect: see Pierce at para. 43. The chambers judge made no finding of dishonesty, accepting that Mr. Krekovic’s motivation to bring the application was “in pursuance of his duty to his client”. Given that, his failure to disclose more about his investigation does not constitute reprehensible conduct sufficient to justify an award of special costs. This is particularly so in the context of the evidence in the application that Mr. Krekovic clearly informed the court that his own investigation had not yielded any reliable information and he was relying only on information provided to him from another lawyer, the basis for which had not been disclosed.

[31] Moreover, I cannot agree that disclosure of further information would necessarily have yielded a different outcome in the application. The chambers judge placed considerable importance on “the discrepancy between the date of birth that he had given for the Mr. Dhillon identified by Mr. Folick, and the date of birth of the Mr. Dhillon whom his investigation had previously identified as a potential defendant”. In fact, there was no discrepancy in the most recent date of birth provided by the investigator, Mr. Loncaric, and the date of birth later provided by Mr. Folick. The only discrepancy was with the earlier information Mr. Loncaric had given, which had not been confirmed. Had the application judge been informed of these or other details – such as the inconclusive information pointing to another Mr. Dhillon – the order may have nonetheless been granted. It is also important, in my view, that Mr. Dhillon did not attend himself to oppose the application. Instead, the application was opposed only by ICBC, who put the issue of the sufficiency of the information squarely before the court.

[32] Additionally, Mr. Krekovic’s conduct after the order was granted demonstrates an effort to be prudent. He did not enter the order or serve the amended notice of civil claim without making further inquiries of Mr. Folick’s office about the reliability of the information, and as soon as he learned that the information was in fact incorrect, he advised Mr. Dhillon’s’ counsel that the action would be discontinued against him.

[33] In my opinion, Mr. Krekovic’s conduct was far from being characterized as reprehensible.

[34] Finally, the chambers judge referred to Rule 14-1(33) as allowing for an order for special costs. Rule 14-1(33) gives the court discretion to make various orders if it considers that a party's lawyer “has caused costs to be incurred without reasonable cause, or has caused costs to be wasted through delay, neglect or some other fault”. One of those orders is that the lawyer “be personally liable for all or part of any costs that his or her client has been ordered to pay to another party”.

[35] This rule, which does not distinguish between party and party costs and special costs, has expanded the scope of conduct which might support a costs order against a lawyer. As explained in Nazmdeh v. Spraggs, 2010 BCCA 131, there is no requirement for “serious misconduct” to justify an order that a lawyer pay party and party costs, but it is still necessary to find reprehensible conduct on the part of the lawyer to justify an order for special costs. Moreover, the lower standard mandated by Rule 14-1(33) must also be exercised with restraint, as the Court reasoned at paras. 103‒104:

[103] The power to make an order for costs against a lawyer personally is discretionary. As the plain meaning of the Rule and the case law indicate, the power can be exercised on the judge’s own volition, at the instigation of the client, or at the instigation of the opposing party. However, while the discretion is broad, it is, as it has always been, a power to be exercised with restraint. All cases are consistent in holding that the power, whatever its source, is to be used sparingly and only in rare or exceptional cases.

[104] The restraint required in the exercise of the court’s discretion is not to be confused with the standard of conduct which may support its use. Care and restraint are called for because whether the unsuccessful party or his lawyer caused the costs to be wasted may not always be clear, and lawyer and client privilege is always deserving of a high degree of protection.

[36] In conclusion, it is my view that Mr. Krekovic’s conduct in making the application to add Mr. Dhillon as a defendant did not approach the kind of reprehensible conduct required to justify an order for special costs against him as counsel.

[37] I would allow the appeal and set aside the order of the chambers judge that Mr. Krekovic personally pay the special costs of Mr. Dhillon. I would also award costs to the appellant of this appeal and for the application for special costs in the court below.

[38] WILLCOCK J.A.: I agree.

[39] FENLON J.A.: I agree.

[40] WILLCOCK J.A.: The appeal is allowed. The order for costs below is set aside and the appellant will have costs in this Court and on the application for special costs in the court below.

[Submissions by counsel]

[41] WILLCOCK J.A.: I do not know if you need an order dispensing with approval on form of order given that counsel did not appear, but in the event that any question arises in the registry, there will be an order dispensing with the approval on form of order.

“The Honourable Madam Justice Fisher”