Special Costs of Tactical Maneuvers | The true cost of stubbornness

 

On June 14, 2016, Justice Pearlman of the BC Supreme Court released a decision on the issue of special costs in Dyer v. Dyer, 2016 BCSC 1115. The issue was whether Mr. Dyer was entitled to recover special costs against Mrs. Dyer after she brought an application to have the firm McLachlan Brown Anderson disqualified from acting for him on the basis that they were in a conflict of interest.

The litigation between the parties began in November 2013. Mr. Dyer retained McLachlan Brown Anderson to act for him and Mrs. Dyer retained another law firm. In October 2014, Mrs. Dyer fired her lawyer and hired a new lawyer. The conflict of interest issue arose because McLachlan Brown Anderson hired an associate named Scott Armstrong who worked in the office of Mrs. Dyer’s first counsel between November 2013 and October 2014.

Mrs. Dyer’s application to have McLachlan Brown Anderson disqualified was eventually dismissed by the court. Justice Pearlman found that McLachlan Brown Anderson largely complied with the Law Society guidelines with respect to conflicts of interest and that they had advised Mrs. Dyer of the potential conflict as soon as practicable.

Mr. Dyer applied for special costs against Mrs. Dyer. His evidence is that he spent approximately $30,000 defending the application which his counsel calls substantially tactical. Mrs. Dyer was advised that Mr. Armstrong was working in the McLachlan Brown Anderson office as soon as possible and she complained asking that the firm remove itself from the file. McLachlan Brown Anderson refused to voluntarily remove itself and Mrs. Dyer did not raise the issue again until Mr. Dyer brought an application with respect to parenting time. Despite the fact that she had been negotiating terms with the firm, approximately 6 months later, only after receiving Mr. Dyer’s notice of application, did Mrs. Dyer bring the application to have McLachlan Brown Anderson removed.

Justice Pearlman reviewed the pertinent law with respect to special costs as follows:

[52] Under Rule 16-1(1)(b)(ii), the court may depart from the general rule that costs must be assessed in accordance with Appendix B of the Supreme Court Family Rules, and may order that the costs of an application be assessed as special costs.

[53] Special costs are awarded to sanction reprehensible conduct, which encompasses both scandalous or outrageous conduct and milder forms of misconduct deserving of the court’s rebuke: Garcia v. Crestbrook Forest Industries Limited (1994), 9 B.C.L.R. (3d) 242 at para.17 (C.A.). The fact that a proceeding has little merit is not in itself a reason for awarding special costs. Something more is required, such as improper allegations of fraud, an improper motive for bringing the proceedings, or improper conduct of the proceedings themselves, before the conduct becomes sufficiently reprehensible to require an award of special costs: Garcia at para. 23

[54] In Westsea Construction Ltd.  v. 0759553 B.C. Ltd., 2013 BCSC 1352, Madam Justice Gropper summarized the principles for awarding special costs at para. 73:

Based upon my review of the authorities, I have derived the following principles for awarding special costs:

a) the court must exercise restraint in awarding specials 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.

[55] The test for special costs set out in Garcia applies in family law proceedings: Tomic v. Tough, 2013 BCCA 355 at para. 35.

After weighing all of the factors, Justice Pearlman found that Mrs. Dyer’s delay, combined with a significant tactical component constitutes reprehensible conduct worthy or rebuke by the court and awarded Mr. Dyer special costs of the application at a rate of 50%.

Costs consequences are one of the ways that the court tries to dissuade people from using its processes improperly. When making decisions in a court file, costs should be one of the main considerations and should weigh heavily against egos and stubbornness, a lesson that Mrs. Dyer learned the hard way.

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