Citation:

Jensen et al v. Strata Plan VR2733 et al

Date:

20010530

 

 

2001 BCSC 751

Docket:

L001355

 

Registry:  Vancouver

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN:

LEE ALEXANDER JENSEN AND DEBRA JENSEN

PETITIONERS

AND:

THE OWNERS, STRATA PLAN VR2733 AND SHARON KELLY

RESPONDENTS

 

 

REASONS FOR JUDGMENT
OF THE
HONOURABLE MR. JUSTICE R. D. WILSON

 

 

Counsel for the Petitioners:

B.W.F. McLoughlin, Q.C.

Counsel for the Respondent
The Owners, Strata Plan VR2733:

A. Wade

 

Date and Place of Hearing/Trial:

1 May 2001

 

 

Vancouver, BC

 

I.

[1]            The petitioners seek an order that the costs of this proceeding be assessed as special costs,[1] or, alternatively, as increased costs.[2]

[2]            This proceeding is one authorized by the Judicial Review Procedure Act.  In the spring of 2000, the petitioners petitioned the court for an order setting aside the award of a single arbitrator.  The arbitrator had been appointed pursuant to s. 44(4) of the Condominium Act.  The arbitration proceedings commenced in June 1998.  The arbitrator's award was made 21 April 2000.  In reasons for judgment filed 16 October 2000, I made an order setting aside that award.  That order was based upon a finding that the conduct of the arbitrator would induce a perception of bias.  The formal order arising from the reasons for judgment has not been perfected by entry.

[3]            The petitioners claim that the conduct of the respondent Strata Council was of such a character that, applying the governing legal principles, an award of special costs, or alternatively increased costs, must follow.  The conduct complained of is said to have preceded the initiation of the arbitration proceedings and carried through to the present day.

II.

[4]            The conduct complained of by the petitioners, includes the following.

[5]            Prior to the commencement of the arbitration proceedings, the directors of the Strata Council caused to be filed, in the Land Title Office, a special resolution.  The wording of that filing differed from the words of the resolution passed at the meeting of the corporation.

[6]            A meeting of the Council in March 1998 was audio-recorded.  The directors of the Strata Council initially refused to provide a copy of the audiotape to the petitioners.  Subsequently, the petitioners were advised that the tape had been destroyed.

[7]            During the course of the arbitration proceedings, the petitioners' then counsel terminated her retainer.  For some period of time, the petitioners were not represented.  The petitioners say that the respondents endeavoured to take advantage of that absence of representation by refusing the petitioners an adjournment, inducing the arbitrator to adjourn the proceedings pending the petitioners' appointment of counsel and making an application to this court for an order terminating the arbitration proceedings.  As well, the petitioners complain of the direct communications between the arbitrator and counsel for the respondents, and the respondents' refusals to consider settlement offers.  For example, pending the hearing of the application to terminate the arbitration proceedings, counsel for the petitioners wrote to then counsel for the respondents, in part, as follows:

As to expense, I am informed by my client she has told the Strata Corporation she is willing to settle this matter for an amount approximately equal to the fees you will be paid if this matter continues to hearing.  Your clients' absence of response suggests that they are not concerned with expense but are carrying on a grudge battle.

 

[8]            Mr. McLoughlin says that the petitioners, at that point, (September 1999), were prepared to settle the matter for a consideration of between $15,000.00 and $20,000.00.  In result, however, legal expenses for the corporation thus far are some $130,000.00.

[9]            The result of the arbitration award was a monetary assessment against the petitioners.  The monetary award was promptly made an encumbrance against the title to the petitioners' strata lot.  Execution proceedings were threatened.  The petitioners sought a conciliatory resolution of that threat, pending the hearing of the judicial review proceedings.  The respondent refused to be conciliatory.  That necessitated an application by the petitioners for an order staying execution on the award.

[10]        Finally, the petitioners say that the respondent continues to refuse to discuss this matter in good faith.

III.

[11]        The first question raised by counsel is the admissibility of the evidence of events preceding the filing of the petition in the judicial review proceeding.  The respondent says that evidence is not admissible.  It relies upon this statement in Laye v. College of Psychologists (British Columbia)[3]:

I agree that what happened before the notice of appeal was filed is relevant only peripherally to the question of the costs of appeal.  As a general rule, special costs are awarded only for misconduct in the proceeding in which the costs order is made.

 

[12]        The petitioners contend that evidence is admissible.  They rely upon this statement of principle in Stiles v. B.C. (W.C.B.)[4]:

The principle which guides the decision to award solicitor and client costs ... is that solicitor-and-client costs should not be awarded unless there is some form of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, which makes such costs desirable as a form of chastisement.

 

[Mr. McLoughlin's emphasis]

 

[13]        In my opinion, the evidence led by Mr. McLoughlin of events prior to the initiation of the judicial review proceedings, is admissible.

[14]        I do not view the extract relied upon by Mr. Wade as a statement of principle of admissibility by the Court of Appeal.  That statement appears to have been made in relation to that particular case before the Court of Appeal.

[15]        In Laye, a psychologist successfully appealed, to this court, a finding by the College of Psychologists of improper conduct.  The psychologist was awarded special costs of the appeal.  The college appealed that order.

[16]        The Chambers judge had awarded special costs for the following reasons:

1.    There was a relentless pursuit by the college of the psychologist, at the end of which the psychologist was vindicated;

2.    The college made a last minute concession, on the appeal, on the count upon which the psychologist had been convicted;

3.    There was an allegation of sexual impropriety which was dismissed after six days of hearings before the college; and

4.    The psychologist made an offer which was not accepted by the college.  Had that offer been accepted, the position of the college would have been better than was the case following the hearing.

In result, the Chambers judge found that the conduct of the college was "reprehensible" and deserving of reproof or rebuke.  Hence, the award of special costs.

[17]        The Court of Appeal set that order aside.  In doing so, the Court of Appeal reviewed extensively the developments throughout the entire episode.  The factors giving content to the notion of "reprehensible" were not confined to events on the appeal.

[18]        The Court of Appeal was not persuaded that the conduct of the college was sufficient to attract an order for special costs.  However, the Court of Appeal was satisfied that the conduct of the college was sufficient to justify an award of increased costs.

[19]        In Fullerton v. Matsqui,[5] the Court of Appeal made an order for special costs at the trial and on the appeal.

[20]        The Fullerton action was a claim for damages for assault.  A jury dismissed the plaintiffs' claim.  On appeal, the plaintiffs applied for leave to introduce fresh evidence.  That fresh evidence involved the circumstances of the testimony of a representative of the defendants.  The Court of Appeal found that there was a lack of complete candour on the part of one of the defendants' witnesses.  The Court of Appeal found that this lack of candour was calculated to mislead the trial judge and jury.

[21]        Manifestly, the Court of Appeal did take into consideration the evidence of what happened before the notice of appeal was filed.

[22]        I conclude that the principle relied upon by the petitioners, from Stiles, above, is the governing law.  That is to say, special costs may be awarded, if there is some form of reprehensible conduct, either:

1.    in the circumstances giving rise to the cause of action, or

2.    in the proceedings in which the costs order is made.

[23]        The second question raised by counsel is, was the conduct of the respondent Strata Council "reprehensible"?

[24]        "Reprehensible" conduct is conduct which is "scandalous" or "outrageous" or constitutes "misbehaviour".  It also includes milder forms of misconduct.  "It means simply 'deserving of reproof or rebuke'".[6]

IV.

[25]        Mr. McLoughlin contends the governing factors on the question of the scale of costs are found in the following authorities.

[26]        Stiles v. B.C. (W.C.B.), supra, in the Court of Appeal, was an appeal from the decision of a Chambers judge awarding Mr. Stiles solicitor/client costs, payable forthwith.  Mr. Stiles was a firefighter.  A review board of the Workers' Compensation Board held that Mr. Stiles was entitled to benefits under the Workers' Compensation Act.  The employer appealed.  The board refused to implement the decision of the review board pending the employer's appeal.  Mr. Stiles commenced proceedings under the Judicial Review Procedure Act to compel payment of the benefits to which he had been declared entitled.  The Chambers judge granted an order restraining the hearing of the employer's appeal pending the hearing of Mr. Stiles' petition under the Judicial Review Procedure Act.  It was on the grant of that order that the Chambers judge made the decision on costs under appeal.

[27]        The Court of Appeal reversed the decision on costs.  In so doing, the Court of Appeal made the following statement of principle:

The principle which guides the decision to award solicitor-and-client costs in a contested matter ... is that solicitor-and-client costs should not be awarded unless there is some form of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, which makes such costs desirable as a form of chastisement.  The words "scandalous" and "outrageous" have also been used.  ...

 

[28]        Fullerton v. Matsqui, supra, was an assessment of costs by the Court of Appeal in the first instance.  In Fullerton, the test set out by the Court of Appeal in Stiles was applied.  As well, reference was made to Nygard International Ltd. v. Robinson (1990), 46 B.C.L.R. (2d) 103 (C.A.) for the following proposition:

"Our general rule is that costs on a solicitor-and-client scale are given only with respect to or in situations of misbehaviour in the conduct of the litigation."[7]

 

[29]        In Leung v. Leung, supra, Mr. Leung obtained an interim injunction without providing notice of his application therefor to the defendants.  The defendants made application, successfully, to have that interim injunction set aside.  The court set aside the interim injunction, and in doing so, made an order for special costs against Mr. Leung.  That decision as well involved an application of the principle, cited above, from Stiles.  The court went on to say, however:

There is nothing in the conduct of Mr. Leung in relation to this matter which I would call "scandalous" or "outrageous".  But "reprehensible" is a word of wide meaning.  It can include conduct which is scandalous, outrageous or constitutes misbehaviour; but it also includes milder forms of misconduct.  It means simply "deserving of reproof or rebuke".

 

[30]        The court went on to say:

... Anyone considering whether to proceed ex parte should reflect that they do so at the risk, if they cannot later satisfy the court that the failure to give notice was justifiable, of special costs being awarded.  ...

 

[31]        Garcia v. Crestbrook Forest Industries[8] was another instance in which the Court of Appeal set the costs in the first instance.

[32]        Mr. Garcia had succeeded at the trial level in an action for damages for breach of an employment contract by his employer, the defendant Crestbrook Forest Industries.  The employer appealed.

[33]        Among other things, Garcia is authority for the proposition that "special costs are the costs that used to be called solicitor-and-client costs".[9]  It is also another instance of the application of the principles set out in Stiles and the principle in Leung.

[34]        An award of special costs was made for the following reasons:

1.    The appeal had no reasonable prospect of success.

 

2.    The litigation was a financial drain on the respondent's resources and the respondent brought those circumstances carefully to the attention of the president of the appellant company.

 

3.    The appellant company had failed to pay promptly the termination payment required by the Employment Standards Act and had failed to provide the respondent promptly with his record of employment as was required by him to obtain unemployment insurance.

 

4.    After making an offer to settle equivalent to nine months' wages, three months before trial, the appellant failed to pay any amount in excess of the payment required by the Employment Standards Act until after the judgment at trial when it paid the respondent the equivalent of eight months' wages although it knew, or should have known, about his difficult financial circumstances.[10]

 

[35]        Edgar v. Freedman[11] was a personal injury action.  The trial judge awarded the successful plaintiff increased costs because of the defendant's conduct in prolonging the trial by arguing that the plaintiff's injuries were caused by a subsequent accident.  The defendant appealed.  The appeal was dismissed.  The Court of Appeal was content that no error had been committed by the trial judge in awarding increased costs by reason of the conduct of the defendant.  The Court of Appeal approved the statement of principle in National Hockey League v. Pepsi-Cola Canada Ltd. (infra):

The discretion to award increased costs may be exercised where the court determines that "for any reason" an award of ordinary costs would lead to an unjust result.

 

[emphasis in the original]

 

[36]        The issue in Moore v. Castlegar & District Hospital[12] was the authority of the Supreme Court of British Columbia to order costs between defendants.  The trial judge held that there was no authority so to do, the Court of Appeal reversed.  In so doing, the Court of Appeal confirmed that the matter of costs in the Supreme Court of British Columbia was a matter of discretion (to be judicially exercised).

[37]        The next series of authorities urged upon me by Mr. McLoughlin dealt with the consequences of a party's failure to accept an offer to settle.

[38]        Vukelic v. Canada[13] was a personal injury action.  The defendant appealed the trial decision in favour of the plaintiff.  The plaintiff cross-appealed, seeking an increase in the quantum of damages awarded.  The defendant's appeal was dismissed; the plaintiff's cross-appeal was allowed by an increase in the quantum of damages.

[39]        Prior to the hearing of the appeal, the plaintiff had made an offer to settle his claim for a lesser amount than was ultimately established by the Court of Appeal.  The plaintiff sought double costs of the appeal by analogy to R. 37 of the Supreme Court Rules.

[40]        The Court of Appeal rejected the argument that R. 37 would apply by analogy.  However, double costs were awarded, from the date of the offer, on the following principle:

... the purpose of Rule 37 applies equally to appeals as to trials.  It is to discourage frivolous litigation and to encourage the parties to make reasonable offers to settle as early as possible; see Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201 (B.C.C.A.), at 211.  One way to induce the parties to settle litigation, with the attendant judicial economy in cost and in time, is to augment the costs award of a party who proposes a settlement which ought to be accepted.

 

[41]        Sitwell v. Sitwell[14] was a matrimonial dispute.  The defendant made an offer to settle the plaintiff's claim for support which was more generous than awarded following the trial.  The defendant sought costs pursuant to R. 37(24).  The judgment of the court essentially contains a discussion of the preservation of the judicial discretion to make orders for costs notwithstanding the letter of the rule.  Essentially, the decision is an example of the application of R. 37(24).

[42]        In L.A. Kings v. Pepsi-Cola Canada Ltd.,[15] the trial judge made an award of increased costs to the successful defendant on the grounds of complexity of the litigation, the unfounded allegations of criminal conduct by the plaintiff against the

defendant, and the attempt by one of the plaintiffs to withhold evidence at trial by filing a false affidavit.  The Court of Appeal discerned no error in that determination.  The Court of Appeal said, at paragraph 19:

... The discretion to award increased costs may be exercised where the court determines that "for any reason" an award of ordinary costs would lead to an unjust result.  A review of the trial judge's reasons leaves no doubt that the principal consideration which led him to that determination in this case was the very considerable discrepancy between an award of ordinary costs under scale 4 in s. 2 of App. B and his estimate of what special costs would amount to if assessed under R. 57(3).  I agree with the trial judge that in some cases such a discrepancy may alone be a sufficient basis upon which to make an award of increased costs.  The other matters referred to by the trial judge were factors which had the effect of accentuating the unjust nature of the very considerable discrepancy which existed in this case.  I am not persuaded that in taking them into account he erred in principle or that the conclusion he reached as a result was unreasonable.

 

[43]        Graham v. Dillon[16] was a custody dispute.  Prior to trial, the successful parent delivered a "without prejudice" letter setting out a proposal for settlement.  The parent making the offer recovered, following the trial, precisely the relief proposed in the offer to settle.  That parent sought costs in the face of an order that each party bear his or her own costs.  Objection was taken to the admissibility of the letter containing the offer to settle.  The letter was held to be not admissible.  In the absence of a "Calderbank" reservation clause,[17] a without prejudice communication is not admissible.

[44]        To the same effect is Primrose v. Hanlon,[18] also a custody dispute.  The court said, at paragraph 27:

... The weight of authority in this province is that offers to settle, which have not been made the subject of a Calderbank reservation clause and have not been formalized pursuant to the Rules of Court can be given no effect on a costs hearing ...

 

[authorities omitted].

 

[45]        It is banal, but I say it anyway:  General principles do not decide concrete cases; but they are the place to start.  And, similar cases should be decided alike.  I do not find any of the previous cases "similar", on their facts, to this case.

V.

[46]        There is no universal referent for the notion of conduct deserving of reproof or rebuke.

[47]        In Mr. McLoughlin's submission, "... the conduct of [the Strata Council] from commencement of this matter demonstrates an arrogant, stubborn effort to take advantage of the

petitioners and to refuse all reasonable resolution of outstanding matters."  Therefore, goes the argument, that conduct is "reprehensible", that is to say, "deserving of reproof or rebuke" by an order that costs be assessed as special costs, or alternatively, increased costs.

[48]        I am not persuaded on a preponderance of the evidence in this case that Mr. McLoughlin has captured an accurate characterization of the conduct of the Strata Council.

[49]        I find that this entire proceeding has been burdensome to all of the parties involved.  This may have been the result of an irresistible force encountering an immovable object.  The unrepresented petitioners, apparently, were in pursuit of an informal decision-making process, as contemplated by s. 44 and s. 45 of the Condominium Act.  The Strata Council, represented by counsel, was seeking the expedition of a structured formal proceeding.

[50]        The dispute resolution process did not develop apace.  Several irritants surfaced.  The arbitrator appears to have found herself in the position of organizing matters, and in that capacity made direct contact with each of the parties, in the absence of the other.  As well, the Strata Council's frustration with the delay inherent in the process increased in direct proportion to the duration of the proceedings with no apparent progress toward an expeditious resolution of the several disputes.

[51]        The atmosphere created appears to become acrimonious at times.  The Strata Council's chosen remedies for the delay was, at one stage, an effort to compel the petitioners to retain counsel.  At another stage, the Strata Council made application for an order dismissing the arbitration proceedings, or in the alternative, an order for directions.  That application came on for hearing before this court on 4 November 1999.  The remedy imposed by the court was the provision of directions.  Those directions were given in reasons filed 31 December 1999.  Among other things, those directions prescribed that the arbitration proceedings would continue only if the petitioners continued to be represented by counsel.  Furthermore, it was a direction that the arbitration proceedings must be concluded by 30 April 2000.

[52]        The hearings did convene and were conducted during the month of March 2000.  The award was issued 21 April 2000.  The Strata Council was, essentially, successful.  Among other things, an award of costs was made in the Council's favour.

[53]        The petitioners thereupon initiated the judicial review proceedings.

[54]        The Strata Council filed a lien for the costs awarded in the award of $51,341.09.  There was an indication by the Council of its intent to execute on the award, a position from which it would not resile.  Whereupon the petitioners applied for an order staying any execution, pending the hearing of the judicial review proceedings.  That application was heard 28 June 2000.  While no formal order was made by the court, staying execution proceedings, the court did say that no execution proceedings would be taken by the Strata Council, without leave of the court, and then only on an application if the petitioners failed to set the judicial review proceedings for hearing in the month of September 2000.

[55]        The petition was heard 27 through 29 September 2000.

[56]        I do not take into consideration the complaints the petitioners made of the Council's conduct prior to the initiation of the arbitration proceedings.  Those disputes are yet to be resolved.

[57]        There may have been a degree of asperity displayed during the proceedings.  I am not persuaded, however, that the remedies chosen by the Strata Council were arrogant, heavy-handed, scandalous, outrageous or contumacious misbehaviour.  I find the object of the Council to be in search of a method to bring some expedition into the dispute resolution process.

[58]        I make no findings on the merits of the disputes between the parties.  There is no evidence before me that the Strata Council was aware of the solicitor/client relationship between the arbitrator and its counsel.  Nor of its counsel's participation in the educational event with the arbitrator.  I do not find that conduct was the responsibility of the Strata Council.

VI.

[59]        As noted above, the petitioners also contend that the Strata Council's failure to accept an offer to settle is a ground justifying an award of special, or increased, costs.

[60]        Mr. McLoughlin distinguishes the inadmissibility principles in Graham and Primrose, above, on the ground that the settlement offers in those cases were written "without prejudice".  Presumably, that means those words appeared on a piece of paper.  In my view, the words "without prejudice" are not determinative of the issue.  The principle is based upon substance, not form.  Therefore, if a bona fide proposal is submitted to achieve a compromised resolution of a present dispute, by one party to the other, there is a privilege, or immunity, from production of that proposal; and the proposal is not admitted into evidence.  On that analysis, the proposal made by the petitioners in the summer of 1999 is not distinguishable from the proposals made in Graham and Primrose.

[61]        What is not discussed in Graham or Primrose is my understanding of the principle as it was described in Underwood v. Cox [19]:

On grounds of public policy, letters written without prejudice and written bona fide to induce the settlement of litigation, are not to be used against the party sending them. ...

 

[the underlining is mine]

 

[62]        Calderbank appears to be authority for the proposition that the privilege or immunity does not attach to the sender, but rather to the communication itself.  However, I need not pursue that interesting inquiry, because whether the petitioners' offer, or indeed offers, are admissible, I am not persuaded that, at this stage, the Council's refusal to entertain the proposals is that degree of misbehaviour which would attract a special order for costs.

[63]        As noted above, in Vukelic, the remedy attaches where a settlement which ought to be accepted is refused.  It is easy in hindsight to say that if the Council had accepted the petitioners' proposal, in the summer of 1999, a $130,000.00

legal account could have been avoided.  It is one thing to say of the past, "if choice 'A' then result 'B'".  It is a different thing to project into the future, "if choice 'A' then result 'B' is reasonably probable".  In the summer of 1999, both sides were convinced of the merits of their respective positions.  I am unable to say in the spring of 2001 that the petitioners' offer ought to have been accepted.

VII.

[64]        In result, the costs of these proceedings will be assessed as ordinary costs on Scale 3.  Since the formal order has not been entered, I view the present application as an interlocutory application.  Therefore, costs of this application will be governed by R. 57(12).

"R.D. Wilson, J."
The Honourable Mr. Justice R.D. Wilson

This Judgment was released from the Vancouver Registry on May 30, 2001 and is date stamped accordingly.



[1]     R. 57(1), Rules of Court.

[2]     Appendix B, s. 7(1), Rules of Court.

[3]     (1998), 59 B.C.L.R. (3d) 349 (B.C.C.A.), at paragraph 18, page 354.

[4]     (1989), 38 B.C.L.R. (2d) 307 (B.C.C.A.), page 311.

[5]     (1992), 74 B.C.L.R. (2d) 305 (B.C.C.A.).

[6]     Leung v. Leung (1993), 77 B.C.L.R. (2d) 314 (B.C.S.C.), at page 315.

[7]     Fullerton at page 309, paragraph 16.

[8]     (1994) 119 D.L.R. (4th) 740 (B.C.C.A.).

[9]     Garcia, supra, at page 745.

[10]     Garcia, supra, at page 749.

[11]     (1997), 40 B.C.L.R. (3d) 87 (B.C.C.A.).

[12]     (1998), 59 B.C.L.R. (3d) 368 (B.C.C.A.).

[13]     (1997), 37 B.C.L.R. (3d) 217 (B.C.C.A.).

[14]     (1997), 29 B.C.L.R. (3d) 61 (B.C.S.C.).

[15]     (1995), 2 B.C.L.R. (3d) 14 (B.C.C.A.).

[16]     (1986), 5 B.C.L.R. (2d) 218 (B.C.S.C.).

[17]     Calderbank v. Calderbank, [1975] 3 W.L.R. 586 (C.A.).

[18]     [1998] B.C.J. No. 2091.

[19]     (1912), 4 D.L.R. 66 (Ont.C.A.).