The "Loser Pays" System: Rule 14-1(9) and Principles of Costs Consequences
Rule 14-1(9) of the BC Supreme Court Rules typically requires a losing party to pay costs to a successful party unless the Court “otherwise orders“. Useful reasons for judgement were released last week by the BC Supreme Court discussing this Rule and the legal principles in play when a Court should deviate from the default “loser pays” result.
In last week’s case (LeClair v. Mibrella Inc.) the Plaintiff sued the Defendant for damages. The lawsuit was ultimately unsuccessful and dismissed at trial largely because the court “did not accept the plaintiff’s evidence”. The Plaintiff asked the Court to deviate from the usual costs result. The Court found that the usual ‘loser pays‘ result should apply although the costs the Defendant was entitled to should be reduced by 50% to take into account some “improper” behaviour of the Defendant in the course of the lawsuit. In discussing the principles behind Rule 14-1(9) Mr. Justice Voith provided the following useful summary:
[10] The following legal principles are relevant:
i) Costs represent an important instrument by which courts can either promote or, conversely, sanction given conduct. Rule 14-1(9) provides one means of achieving this overarching object. The broad role served by cost awards is captured in the following statements:
a) In Houweling Nurseries Ltd. v. Fisons Western Corporation (1988), 49 D.L.R. (4th) 205 at 226, 37 B.C.L.R. (2d) 2 (C.A.) at 25, leave to appeal ref’d, [1988] 1 S.C.R. ix, McLachlin J.A., as she then was for the courts, said:
… Parties, in calculating the risks of proceeding with a particular action or defence, should be able to forecast with some degree of precision what penalty they face should they be unsuccessful.
b) In Karpodinis v. Kantas, 2006 BCCA 400 at para. 4, Hall J.A., for the court, said:
Cost considerations are meant to guide counsel and litigants in the choices and strategies they pursue in litigation. …
c) In Skidmore v. Blackmore (1995), 122 D.L.R. (4th), 2 B.C.L.R. (3d) 201 (C.A.), Cumming J.A., speaking for a five member panel of the court, said:
[28] … the view that costs are awarded solely to indemnify the successful litigant for legal fees and disbursements incurred is now outdated. A review of Rule 37, which deals with offers to settle, reveals that in certain circumstances a party may be entitled to costs, or double costs, or to no costs at all. One of the purposes of the costs provisions in Rule 37 is to encourage conduct that reduces the duration and expense of litigation, and to discourage conduct that has the opposite effect. Thus, although it is true that costs are awarded to indemnify the successful litigant for legal fees and disbursements incurred, it is also true that costs are awarded to encourage or to deter certain types of conduct.
[Emphasis added.]
d) Recently, in Catalyst Paper Corporation v. Companhia de Navegação Norsul, 2009 BCCA 16, Hall J.A., in the context of addressing Rule 57(9), said:
[15] In the recent case of Bedwell v. McGill, 2008 BCCA 526, a case dealing with a particular aspect of costs not relevant to this appeal, Newbury J.A., for the court, at para. 33, noted the purpose of former R. 37(24) as being “aimed at encouraging litigants to settle wherever possible, thus freeing up judicial resources for other cases.”
[16] It seems to me that the trend of recent authorities is to the effect that the costs rules should be utilized to have a winnowing function in the litigation process. The costs rules require litigants to make careful assessments of the strength or lack thereof of their cases at commencement and throughout the course of litigation. The rules should discourage the continuance of doubtful cases or defences. This of course imposes burdens on counsel to carefully consider the strengths and weaknesses of particular fact situations. Such considerations should, among other things, encourage reasonable settlements.
ii) The onus is on the person who seeks to displace the usual rule that costs follow the event: Grassi v. WIC Radio Ltd., 2001 BCCA 376 at para. 24.
iii) Though Rule 14-1(9) conveys a discretion to the court, that discretion is to be exercised in a “principled way”: Rossmo v. Vancouver Police Board, 2003 BCCA 677 at para. 59; or on “sound principle”: Brown v. Lowe, 2002 BCCA 7 at para. 147.
iv) The exercise of discretion must be connected to the conduct (or misconduct) of a party in the litigation: Lawrence v. Lawrence, 2001 BCCA 386 at paras. 31-32; Smith v. City of New Westminster, 2004 BCSC 1304 at para. 9.
v) The conduct in question can arise either at trial or at some earlier stage in the proceeding. For example, conduct that has been held to justify a denial of costs includes giving false evidence on discovery: Brown at para. 149-150. It also includes a failure to make timely and thorough production of relevant documents; Forsyth v. Pender Harbour Golf Club Society, 2006 BCSC 1108 at para. 72.
vi) Costs are not to be used to sanction a party whose evidence was exaggerated or who gave evidence in error: Brown at para. 149. Where the appropriate dividing line lies was explained in each of Roberts v. Wilson (1997), 10 C.P.C. (4th) 188 (B.C.S.C.) at para. 25; Cardwell v. Perthen, 2007 BCSC 366 at para. 13; Noyes v. Stoffregen, [1995] B.C.J. No. 73 at paras. 79-80.
vii) Where a court concludes that a party has intentionally or deliberately sought to mislead the court that party will normally be deprived of its costs: Medeiros v. Vuong, 2001 BCSC 326 at para. 12.
[11] I would add the following additional comments. First, Rule 14-1(9) is not intended to provide an unsuccessful party with an opportunity to parse through the litigation conduct of the opposing party searching for behaviour that might be criticized. I do not say that the discretion which is conferred in Rule 14-1(9) is limited to exceptional cases. The Rule is not, however, intended to address imperfect or less than optimal conduct. It is generally not intended to address questionable judgment. Instead it provides the court with an objective means of communicating its censure in relation to conduct that manifestly warrants rebuke.
[12] Second, the Rules of Court and the rules of evidence apply equally to both parties who are represented by counsel and to those who are self-represented. Self-represented litigants are not insulated from these requirements or the obligations they create. Nevertheless, depending on the nature of the concern expressed, some greater flexibility or tolerance may be accorded a self-represented litigant. For some issues, the need for honesty being the clearest example, no different standard can or does apply to a lay litigant. The requirement that parties be forthright is readily understood by all and is inflexible.
[13] In other cases, some increased measure of lenience will be appropriate and necessary. For example, a well-intentioned lay litigant’s imperfect understanding of relevance may cause that litigant to fail to produce certain documents, or to ask unnecessary questions of a witness or to object to what are proper questions. So long as that litigant acts properly once alerted to the deficiencies in his or her conduct, little is achieved in seeking to sanction the earlier conduct. There is no intentional conduct or abuse of the court’s process that warrants sanction.