Complex litigation under BC's new Supreme Court Civil RulesComplex litigation under BC's new Supreme Court Civil Rules Andrew I. Nathanson and Gavin Cameron, Articled Student Fasken

WEEK 1: Complex litigation under new Rules

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Complex litigation under BC's new Supreme Court Civil Rules

Andrew I. Nathanson and Gavin Cameron, Articled Student Fasken Martineau DuMoulin LLP

I. Introduction

On July 1, 2010, British Columbia's new Supreme Court Civil Rules ("SCCR") came into force, replacing the Rules of Court. The SCCR reflect a package of substantive and structural changes to the procedural rules governing proceedings in the Supreme Court of British Columbia. They represent "incremental ... but significant change".1

As one commentator contends in the context of judicial review, proportionality is the "ultimate rule of law".2 Proportionality features prominently in the SCCR. So too do other rule changes, all of which reflect a design to reduce the time, cost and complexity of civil litigation. This, it is hoped, will occur "by encouraging both early resolution of those cases that can be settled, and earlier, shorter, and more focused trials for those that require formal adjudication".3

While many of the changes to the SCCR are designed to reduce cost and complexity to bring marginal, previously uneconomic cases back to the system, they have important implications for the conduct of complex litigation. The changes to the standard for document production and new rules governing expert reports, including the potential to limit the number of experts and force increased use of joint experts, address two areas of significant cost and delay in complex litigation. Case planning conferences and orders, available near the outset of the action, give the court significant powers to regulate the use of pre-trial procedures. And the proportionality principle, appropriately and firmly employed, will force parties to justify what discovery and other pre-trial procedures each case requires, granting them what is necessary to do justice, but no more. If accompanied by a corresponding cultural change, this will represent a significant move away from the traditional, party-driven model which, at least in practice, allowed litigants wide latitude to use all available pre-trial procedures, with little regard to expense or a cost- benefit analysis of each step. Proportionality also means that more process ought be available in cases that are more complex or where more is at stake. We discuss this below.

The structure of the paper is as follows. We begin by discussing the inclusion of the principle of proportionality as part of the object of the SCCR. We attempt an explanation of proportionality, and what it requires of the parties and the court. In doing so, we refer to the English experience. There, rules revisions adopted an "overriding objective" similar to our new Rule 1-3(2). The broad statements of principle that emerge from the English decisions are instructive, particularly in this, the SCCR's infancy. However, there are important differences between the English proportionality rule and our own.

Having dealt with the SCCR's new framework, we go on to describe some of the important changes to the SCCR. We have focused on the changes to the rules governing pleadings, case planning, document discovery, examinations for discovery, expert evidence and fast track litigation. We also include a summary of the transitional provisions in Part 24 of the SCCR. Next, we summarise some of the cases decided under the SCCR since July 1, 2010. Finally, we venture some observations about the likely effect of the rule changes on the conduct of complex litigation in British Columbia.

1 Chief Justice R.J. Bauman, "Foreword", Dillon and Turriff, British Columbia Annual Practice 2010-2011 (Aurora, Ont.: Canada Law

Book, 2010), p. xix. 2 David Beatty, The Ultimate Rule of Law (Oxford: Oxford University Press, 2004). 3 Donald Brenner and Craig Dennis eds., Civil Rules Transition Guide (Vancouver: Continuing Legal Education Society of British

Columbia, February 2010), p. 1-1.


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For further discussion of the SCCR, see Donald Brenner and Craig Dennis eds., Civil Rules Transition Guide (Vancouver: Continuing Legal Education Society of British Columbia, February 2010) and J. Kenneth McEwan, Q.C., "The New Supreme Court Civil Rules — 7 Major Changes", Civil Litigation Basics — 2010 Update (Vancouver: Continuing Legal Education Society of British Columbia, January 2010).

II. A New Framework: the Requirement of Proportionality

Proportionality

Proportionality: The Foundation of the SCCR

The object of the former civil rules was to secure the "just, speedy, and inexpensive determination of every case on its merits". This object has been carried forward in Rule 1-3, but has been given specific context and meaning through the elevation of proportionality to a position of central importance in the rules. Securing the just, speedy and inexpensive determination of a proceeding on its merits now includes conducting the proceeding in ways that are proportionate to the amount involved, the importance of the issues in dispute, and the complexity of the proceeding.4

According to the Ministry of the Attorney General, the principle of proportionality is intended to "provide judges with more authority to manage the adversarial process so as to reduce complexity, costs, and delay."5

Rule 1-3(2) is similar but not identical to the "overriding objective" of dealing with cases "justly", which guides the English Civil Procedure Rules (the "CPR"). Rule 1.1(2) of the CPR provides that dealing with a case justly means dealing with a case proportionately, as well as achieving other enumerated objectives, such as "saving expense" and "ensuring the parties are on an equal footing."

Proportionality is not a novel concept, and does not result in a wholesale revision of the British Columbia Civil Practice

While the explicit inclusion of proportionality as an overarching principle in the SCCR is new, the concept itself is not. Proportionality found expression in the old rules; for example, in Rule 26(1.2), pursuant to which a party could seek to be excused from compliance with the document disclosure obligations in Rule 26. Since the advent of the SCCR, Voith J. has noted that "while R. 1-3(2) establishes that proportionality is an over-arching consideration which informs the interpretation and implementation of the Rules, its significance, however, is greater for some Rules then for others." Voith J. referred to the document discovery rules as a specific example of the new importance of proportionality. However, for many other Rules, "the reality is that proportionality, though not expressed in precisely those terms, has historically and inherently already played a significant role."6

Additionally, Rule 1-3 continues the "just, speedy, and inexpensive determination of every case on its merits" as a fundamental objective of the SCCR. The SCCR do not contain express language claiming to be a "new procedural code", as does English CPR 1.1(1).

The creation of a new procedural "code" has been interpreted by the English courts as a clear signal that continuing with business as usual after the enactment of the CPR was not an option. Labelling the CPR a code of procedure "was intended to discourage practitioners from citing old authorities decided under the old rules... the courts have already received and acted upon the message about not referring to old authorities when seeking to apply or interpret the CPR."7 This message has led, in some cases, the English courts to find that previously binding appellate authorities on issues of procedure are no longer to be followed.

For example, regarding the relevance of "old" House of Lords authority on the issue of dismissing a case for want of prosecution, Judge Kennedy Q.C. said: 4 SCCR, R. 1-3(2) 5 "Key Features of the Civil Rules, Family Rules, and Court Fees" (July, 2009). 6 Kim v. Lin, 2010 BCSC 1386 at paras. 28-32. 7 Grainger, Fealy & Spencer, The Civil Procedure Rules in Action, 2nd ed. (Cavendish: London, 2000) at pp. 9-10. 8


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... it is my firm belief that authorities decided under the old procedure should not be taken as binding or probably even persuasive upon this court, any more than looking back to the old rules to interpret the new should be so. This is a new regime...

I have to say that this court's view after extensive training and a good deal of discussion and thought, is that the new order will look after itself and develop its own ethos and that references to old decisions and old rules are a distraction.8

On appeal, this approach was commended by Lord Woolf M.R. There was, he said, no need for judges to look "over their shoulders" at the old authorities:

[The judge] took the right course as to the previous authorities. The whole purpose of making the CPR a self-contained code was to send the message which now generally applies. Earlier authorities are no longer generally of any relevance once the CPR applies.9

More recently, Brooke L.J. followed this "seminal judgment", where Lord Woolf M.R. made it clear that "the new CPR had ushered in a new regime, and that it was no longer useful to look back at decisions under the pre-CPR regime because that was a different regime."10

Given the breadth of Lord Woolf and Lord Brooke's remarks on the irrelevance of earlier authorities under the CPR, it could be argued that the English courts have demolished their entire procedural superstructure and are starting again with a completely clean slate. However, it has been acknowledged by the English Court of Appeal that centuries of procedural case law have not become entirely irrelevant overnight, and that the "underlying thought process that informed prior judgments... should not be completely thrown overboard."11

Additionally, a question has arisen regarding the situation where the new rules are silent on a particular topic, or simply reproduce the "old" rule, using the same language. In these situations, "the practical outcome... is likely to be that the old practice will be applied, if only for want of anything better — unless, of course, it conflicts with the overriding objective."12

Given the differences between the SCCR and the English CPR, the English approach is distinguishable, and it would be improper to directly transplant it into our jurisdiction. Nevertheless, it essential to recognize that while proportionality has always played a role in judicial decision making in British Columbia, as in England, the principle of proportionality which "has long been a feature of judicial decision making [is] now given a specific identity and prominence in the Rules."13 This change can and should lead to substantive changes in British Columbia's civil practice. Bearing in mind the relevant differences, the English approach can still be instructive as British Columbia "develops its own ethos".

"Proportionality" requires balance, restraint and a contextual application of the SCCR

Before we describe the substantive changes which accompany the principle of proportionality, it is important to attempt to give this concept some shape and content.

8 Biguzzi v. Rank Leisure, [1999] 4 All E.R. 934 at 937-38. 9 Biguzzi, at pg. 941. Similarly, in Purdy v Cambran (unreported) 17 December 1999: Court of Appeal (Civil Division) Transcript No

2290 of 1999, May L.J. said that "when the court is considering, in a case to be decided under the CPR, whether or not it is just in accordance with the overriding objective to strike out a claim, it is not necessary or appropriate to analyse that question by reference to the rigid and overloaded structure which a large body of decisions under the former rules had constructed." This reasoning was cited with approval by Lord Hope in Three Rivers District Council v. Governor and Company of The Bank of England, [2001] UKHL 16, [2001] 2 All ER 513 at para. 92.

10 Price v Price, [2003] EWCA Civ 888, [2003] 3 All ER 911. 11 UCB Bank plc v Halifax (SW) Ltd 6 December 1999: Court of Appeal (Civil Division), [1999] The Times, 23 December, per

Ward L.J. 12 Grainger, Fealy & Spencer at pp. 15-16. 13 Nichia Corp. v. Argos Ltd, [2007] EWCA Civ. 741 at para. 89.


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Proportionality means "the achievement of the right result needs to be balanced against the expenditure of the time and money needed to achieve that result".14 Proportionality requires procedures which are tailored to the size and nature of a dispute. Proportionality acknowledges that "what causes cost is time: time spent by lawyers, experts, and the parties themselves." 15 Proportionality recognizes that "perfect justice" may be unattainable; in fact, "perfect justice" may come at too high a cost to even be desirable:

But a system which sought such "perfect justice" in every case would actually defeat justice. The cost and time involved would make it impossible to decide all but the most vastly funded cases. The cost of nearly every case would be greater than what it is about. Life is too short to investigate everything in that way. So a compromise is made: one makes do with a lesser procedure even though it may result in the justice being rougher. Putting it another way, better justice is achieved by risking a little bit of injustice.16

Describing proportionality in the abstract is not difficult. But what does this amorphous concept mean in practice? As one English court noted:

On a subject such as proportionality, there is no precise and correct answer. Arguments as to proportionality involve choosing a cut-off point in a range of possibilities and there is no single right answer as to where the cut-off point should be."17

Proportionality "does not require or justify a blanket approach which has no regard to the needs of the particular case."18 In fact, such an approach is the antithesis of proportionality. While "proportionality" will of necessity vary with each case that comes before the court, it is clear that achieving this goal will require a change in behaviour and thinking on the part of all justice system participants: parties, counsel, and the judiciary.

Accordingly, CPR Rule 1.2 requires the court to give effect to the overriding objective when it exercises any power or interprets any other provision of the CPR. CPR Rule 1.3 imposes an obligation on the parties to help the court in furthering the overriding objective.

Lord Justice May has described the manner in which the court should reach decisions in light of this obligation:

The effect of this is that, under the new procedural code of the CPR, the court takes into account all relevant circumstances and, in deciding what order to make, makes a broad judgment after considering the available possibilities... The decision depends on the justice in all the circumstances of the individual case... Lord Woolf MR in Biguzzi was not saying that the underlying thought processes of previous decisions should be completely thrown overboard. It is clear, in my view, that what Lord Woolf was saying was that reference to authorities under the former rules is generally no longer relevant. Rather is it necessary to concentrate on the intrinsic justice of a particular case in the light of the overriding objective.19

Similarly, Lord Justice Brooke has said that when determining a question of procedure under the English CPR, the court's "final duty is to decide whether [the proposed order] would be a disproportionate response... or whether it may be possible to fashion a more proportionate response."20

The imposition of positive duties on counsel and the judiciary are notably absent from British Columbia Rule 1-3(2). However, these obligations form part of the Canadian common law. Accordingly, as the Newfoundland Court of

14 Lord Woolf, Interim Report on Access to Justice (June, 1995), chapter 4, para. 6. 15 Nichia at para. 2. 16 Nichia at para. 51, per Jacob L.J. (dissenting). 17 Digicel (St. Lucia) Ltd v. Cable & Wireless PLC, [2008] EWHC 2522 (Ch.), [2009] All E.R. 1094 at para. 82. 18 Nichia at para. 89. 19 Purdy 20 Price at para. 38.


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Appeal recently stated, "a judge asked to exercise discretion with respect to the application of a particular rule and a party or his or her counsel when contemplating a procedural course of action should consider the principle of proportionality which underpins the rules relating to pre-trial procedures."21

We commend this approach. Every time the court exercises a discretion under the SCCR, it should ask whether the result promotes the object of the rules, and in particular, whether the result satisfies the proportionality principle in Rule 1-3(2). This approach would continue the application of well known and settled legal tests to questions of procedure (recognizing that the common law of procedure was not abolished on July 1, 2010), but would also require the court to ensure the order it is about to make achieves a proportional result, and through proportionality, "intrinsic justice".22

Without a change in culture, "proportionality" will remain a statement of principle rather than practice

The English CPR recognize that a change in culture is necessary if statements of principle are to have meaningful effect. In a foreword to the English CPR, the Lord Chancellor, Lord Irvine of Lairg, wrote that:

The message for all those involved in the civil justice system, judges, practitioners and court staff alike, is that the changes being introduced in April are as much changes of culture as they are changes in the Rules themselves. We have to be ready to be pro-active, not reactive. And we must see this as the beginning, not the end, of the process of change.

As this paper highlights, notwithstanding considerable revisions to the rules, the "old" culture of litigation remains a viable option, either by consent of the parties or through court order. The significance of this is that co-operation and professionalism among counsel is critical to the success of the rules. Unless counsel and their clients are prepared to endorse the principles underlying the SCCR, the result will be nil, as "it is those parties and their advisers who are in the best position to adopt procedures which are both commensurate and proportionate".23 For counsel, achieving the objective of proportionality and minimizing expense will mean getting on top of your case early and making focussed use of the tools that the rules provide. It will require cooperation and the avoidance of litigation by rote.

However, the fact remains that you cannot always choose your adversary (or its counsel). This is where the court is essential to the realization of proportionality. The promise of the SCCR and the proportionality principle can only be fully realised by an engaged judiciary that not only discourages unreasonable conduct, but that readily and actively participates in managing the litigation process.

The point has been made that achieving proportionality:

...requires the court to abandon its almost religious attachment to the one dimensional understanding of justice and accept that doing justice means more than delivering a judgment on the merits: that time and the use of resources are just as significant imperatives of justice.24

Both the court and counsel must abandon their attachment to a system where a litigant in any case (no matter the size or complexity) is entitled to a full panoply of pre-trial procedures. A new flexibility that critically examines what procedures are required to do justice in a particular case must be adopted. Lord Hobhouse has observed that the English overriding objective:

... represents an important shift in judicial philosophy from the traditional philosophy that previously dominated the administration of justice. Unless a party's conduct could be criticised as

21 Szeto v. Dwyer, 2010 NLCA 36 at para. 59. 22 This approach has been adopted in two British Columbia decisions discussed in greater detail below: Cayou v. Cayou, 2010

BCSC 1224 and Peck v. Peck, 2010 BCSC 1397. 23 Nichia, at para. 77. 24 Professor Adrian Zuckerman, quoted in The Rt. Honourable Lord Justice Jackson, Review of Civil Litigation Costs: Final

Report (January, 2010), at pg. 387.


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abusive or vexatious, the party was treated as having a right to his day in court in the sense of proceeding to a full trial after having fully exhausted the interlocutory pretrial procedures.25

This does not mean that a wide range of interlocutory procedures should never be available, particularly in a large and complicated case where much is at stake. However, in every case, only the process that is required should be made available, and no more. Lord Hobhouse noted that even where "complex" litigation is concerned:

There is always an exercise of judgment to be undertaken by the judge whether the perceived short-cut will turn out to have been beneficial and, inevitably in a proportion of cases expectations will be confounded. Caution is required. But it is simplistic to suppose that in complex litigation the exercise should never be attempted. The volume of documentation and the complexity of the issues raised on the pleadings should be the subject of critical scrutiny and should not without more deter the judge from considering whether it is really necessary to commit the parties and the court to a lengthy trial and all the preparatory steps which that will involve. Indeed it can be submitted with force that those are just the sorts of case which most strongly cry out for the exclusion of anything that is unnecessary for the achievement of a just outcome for the parties.26

Accordingly, a culture of change is required if proportionality is to be something more than a statement of principle. Parties must sensibly use the SCCR and follow their underlying policies, while judges must be receptive to novel applications, and more willing to restrain excesses than they were in the past.

Fundamentally, what proportionality requires is that the parties and decision making judge actively consider the features of a particular case with a view to making an order tailored to achieving a just outcome, which includes limiting, as far as possible, the costs incurred.27

III. Important changes to the SCCR

Pleadings

As a recent eulogy in the Advocate describes, "the Writ of Summons died peacefully in British Columbia on June 30, 2010, sometime between 4:00 p.m., when the registry closed, and midnight that evening, when the new rules of Court came into effect... the Statement of Claim, Endorsement, and Appearance joined the writ on the final journey."28 The Statement of Defence has also been discarded.

Under the present rules, other than matters initiated by way of petition or requisition, all actions must now be initiated by Notice of Civil Claim. A defendant must file and serve a Response to Civil Claim.

While much remains the same, in addition to changes in terminology and forms, the SCCR have substantively revised the nature and content of pleadings. The SCCR have been designed to force parties to move their cases forward more quickly than in the past. To that end, two key changes have been made. First, there are now mandatory timelines for the delivery of pleadings.

Second, a new style of pleading is required, which forces the parties to specifically turn their minds to the facts and issues in dispute at an early stage in the proceeding.

Timing

The SCCR require that a response to a claim served in Canada be filed within 21 days of service, unless the Court otherwise orders: Rule 3-3(3). Former Rule 14(4) expressly authorized a party to file an appearance after the time 25 Three Rivers District Council v. Governor and Company of The Bank of England, [2001] UKHL 16, [2001] 2 All E.R. 513 at

para. 153. 26 Three Rivers at para. 156. 27 Nichia, at para. 82. 28 The Advocate, Vol. 68 Pt. 5 (September 2010) at 760, 763.


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for doing so had expired. Additionally, a plaintiff often agreed to extend the time for filing a defence for months (and in some cases years). While the SCCR no longer permit late filings, Rule 22-4(3) has continued a mechanism whereby the period for filing or serving a pleading may be extended by consent; presumably, this will allow the current practice to continue, notwithstanding the mandatory language of Rule 3-3(3).29

Style and Content

The new style of pleadings is described in Part 3 of the SCCR. Rule 3-2(2) breaks the requirements of a Notice of Civil Claim into three parts: a concise statement of the material facts giving rise to the claim, the relief sought by the plaintiff against each named defendant, and a concise summary of the legal basis for the relief sought.

Rule 3-3(2) requires a Response to Civil Claim to indicate whether a fact is admitted, denied, or outside the knowledge of the defendant; concisely set out the defendant's version of any fact that is denied; set out any additional material facts that relate to the matters raised by the Notice of Civil Claim; indicate the defendant's position on the granting of the relief sought, and, if the defendant opposes any of the relief sought, set out a concise summary of the legal basis for that opposition.

A pleader has always been required to set out a concise version of the material facts. Perell J. has noted that "the pleader's first task and a pleading's prime function are to disclose the material facts to sustain a claim or defence".30° However, the new requirement that a party plead "a concise summary of the legal basis for the relief sought" appears to differ from the old practice; formerly, while the material facts pled had to disclose a cause of action, there was no requirement to identify by name the cause of action being advanced.31

Recognizing the need to balance fair notice against excessive demands for particularization,32 what the SCCR require is something that skilled practitioners have always provided in a pleading: a succinct statement of the facts grounding a party's theory of the case, followed by the legal conclusions flowing from those facts, "organized in a way that the court can understand from the pleadings what issues of fact and law it will be called upon to decide."33

Unfortunately, these objectives were not always accomplished by pleadings under the old rules, particularly those filed by defendants. Accordingly, the most radical changes to pleadings concern the Response, which require the defendant to provide more details of its case at an early stage of the proceedings. As former Rule 19(20) has not been carried forward, a general denial will no longer be a proper or sufficient response.34

Requiring a defendant to plead its version of the facts early in the day rather than filing a bare denial will hopefully narrow the issues in dispute. However, pleaders who attempt to comply with the SCCR by replying in minute detail to each allegation of fact and law raised by the other may miss the forest for the trees, sacrificing elegance and clarity for comprehensiveness. Additionally, directing the parties' minds to individual facts may magnify tendencies to "fight everything" and plead more than the bare material facts of a claim or defence.

Another important consequence of more substantive pleadings at an early stage of the proceedings relates to document discovery. As discussed below, under the SCCR the pleadings will govern document production, which was not always the case under the old rules, where the "train of inquiry" test required the disclosure of documents that were only of forensic importance. Accordingly, facts pleaded (and those not pleaded) can be expected to shape the scope of pre-trial disclosure to an even greater degree than they did in the past.

29 Even without consent, it is unclear whether these tighter timelines will in fact force parties to move their cases forward with greater

dispatch, as it has been held that a party is not required to apply for an extension of time if it has failed to plead within the period provided by the Rules, as a failure to comply is a mere irregularity: Saric v. Toronto Dominion Bank, 2000 BCSC 899 at para. 11.

30 The Honourable P.M. Perell, "The Essentials of Pleading" (1995), 17 Adv. Q. 205 at 207. 31 Alford v. Canada (Attorney General) (1997), 31 B.C.L.R. (3d) 228 at paras. 12-13 (S.C.), aff d [1998] B.C.J. No. 2965 (C.A.). 32 Three Rivers at para. 49, per Lord Hope. 33 Glenayre Manufacturing Ltd. v. Pilot Properties Inc., [2003] B.C.J. No. 456 at para. 63 (S.C.). 34 The validity of a general denial under the former rules was endorsed in Patym Holdings Ltd. v. Michalkis, 2005 BCCA 636 at

paras. 18-20.


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Case Planning and Case Management

Background

Part 5 of the SCCR addresses case planning conferences (CPCs), a significant new feature of the Rules. Part 5 is completely new, though it does bear some similarities to former Rules 35 (Pre- Trial Conferences) and 68 (Expedited Litigation Rule). Master Douglas Baker has written that the "purpose of a CPC is to give some structure and predictability to the process of a lawsuit and, thereby, make the process more expeditious (and of course, less expensive)."35

CPCs respond to concerns that parties who are left to their own devices will adopt a mode of proceeding which results in unendurable delay and expense. Lord Woolf M.R. has written:

Without effective judicial control... the adversarial process is likely to encourage an adversarial culture and to degenerate into an environment in which the litigation process is too often seen as a battlefield where no rules apply. In this environment, questions of expense, delay, compromise and fairness may have only low priority. The consequence is that expense is often excessive, disproportionate and unpredictable; and delay is frequently unreasonable...

...In the absence of any effective control by the court itself, however, the timetable [for completing steps under the rules] is frequently ignored, and the lack of firm supervision enables the parties to exploit the rules to their own advantage. Such exploitation is endemic in the system: the complexity of civil procedure itself enables the financially stronger or more experienced party to spin out proceedings and escalate costs, by litigating on technical procedural points or peripheral issues instead of focusing on the real substance of the case. All too often, such tactics are used to intimidate the weaker party and produce a resolution of the case which is either unfair or is achieved at a grossly disproportionate cost or after unreasonable delay. 36

The Ministry of the Attorney General notes that the present rules governing CPCs respond to concerns raised in the consultation process that requiring case plan orders before steps could be taken in the litigation might result in the holding of unnecessary CPCs and therefore the creation of unnecessary costs. To address these concerns, the SCCR do not automatically require a case plan order. Instead, the SCCR use a party driven model, which makes a CPC available on the request of one party to the litigation (there is no requirement that all parties consent), or where a CPC is directed by the Court: Rules 5-1(1) and (2). At the CPC, "the judge or master will set the parameters of the litigation, guided by proportionality principles."37

How it Works

Before the first CPC takes place, the parties must file case plan proposals that address discovery of documents; examinations for discovery; dispute resolution procedures; expert witnesses; witness lists; and trial type, estimated trial length, and preferred periods for the trial date.

The Court may order a party to attend a CPC, and counsel must attend the first CPC in person. Subsequent CPC's may be conducted by video or telephone. The Court is empowered to make a wide range of orders governing the proceedings, but must not hear applications supported by affidavit evidence or make an order for final judgement, except by consent or where there has been non-compliance with an order of the Court: Rule 5-3. At the conclusion of a CPC, the presiding Judge or Master must make a Case Planning Order ("CPO"): Rule 5-3(3) and (4).

Rule 5-4 sets out the mechanism for amending a CPO, which may be done by consent or on application, made by filing a requisition and supporting letter.

35 The Honourable Douglas C. Baker, "A New Chambers Day Dawning or What's up With the New Civil Rules?" in Civil Litigation Basics

— 2010 Update (Continuing Legal Education Society, 2010) at 3.2.1. 36 Lord Woolf, Access to Justice: Interim Report, Chapter 3, para. 4 and Chapter 5, para. 5. 37 "Key Features of the New Civil Rules, Family Rules and Court Fees" (July, 2009).


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Early Preparation is Essential

The CPC regime means that "figuring it out as you go along" is no longer a viable option. Parties will be required to know their case early, and those who are capable of moving quickly and who desire a speedy resolution will have an incentive to seek a CPC, to obtain an advantage from their early readiness for litigation.

Master Baker notes that an additional attraction of a CPC is that it offers "a very stripped-down, efficient means of seeking and obtaining procedural orders". The relief sought does not need an affidavit in support, and the preclusion of affidavits should reduce the expense and complexity of process for typical procedural orders. 38

While the consolidation of these orders may reduce costs by limiting interlocutory applications, the fact that the court may not hear and dispose of any application that requires disputed evidence is a serious limitation on the case management power, which will ensure that chambers remains a busy place.

One significant drawback of the CPC process is the larger upfront investment in litigation it requires. A CPC may require too much too early in the process, and may have the unintended consequence of fully committing the parties to litigation. However, it has been pointed out that even a basic understanding of the "big picture" may be sufficient to make some fundamental decisions about the requirements of a particular case and the various paths the litigation might follow.39

What is perhaps an unintended bonus of the CPC process is the fact that both parties and their counsel will likely be concerned at the prospect of an interventionist Case Management Judge dictating the terms and parameters of litigation, particularly since a Judge presiding at a CPC will have to make decisions without the context provided by affidavit evidence. Additionally, many lawyers may try to avoid a CPC, as they are "new" and require extra work.

These fears may encourage informal meetings between counsel, who will have an incentive to reach agreement. Along these lines, it will be interesting to see whether a practice will develop allowing parties to consent to a standard form CPO. No express provision is made for this in the rules, but such a practice may be accomplished by varying a CPO on consent. What this means is that if the parties come to an agreement that they prefer some other procedure than that envisioned by the presiding Judge, they have the final say on the course of proceeding.

Discovery

Former Rule 26 (Discovery of Documents), Rule 27 (Examination for Discovery), Rule 28 (Pretrial Examination of Witness), Rule 29 (Discovery by Interrogatories), Rule 30 (Physical Examination and Inspection), Rule 31 (Admissions), and Rule 38 (Depositions) are all now represented in Part 7 of the Rules, entitled "Procedures for Ascertaining Facts". While many of these subtopics remain unchanged, Part 7 as a whole represents a significant shift away from broad and relatively unfettered rights of discovery. The changes to the document discovery and examination for discovery rules are addressed below.

Discovery of Documents

What has Changed?

Formerly, discovery practice in British Columbia was governed by the broad standard of relevance described in Compagnie Financiere et Commerciale du Pacifique v. Peruvian Guano Co. (1882), 11 Q.B.D. 55, and embodied in former Rule 26, which required production of every document "relating to any matter in question." This test encompassed any document that might indirectly enable the party to advance her own case or hurt that of her adversary, or that might fairly lead her "on a train of enquiry" that might have either of these consequences. A party no longer has a prima facie right to obtain discovery of all relevant documents: Rule 7-1. The starting point of

38 Master Baker, "A New Chambers Day Dawning or What's up With the New Civil Rules?" at 3.2.2. 39 M. Bramley & A. Gouge, The Civil Justice Reforms One Year On - Freshfields Assess their Progress, (Butterworths: London,

2000) at p. 84.


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document discovery is much narrower, encompassing documents that can be used to prove or disprove a material fact and documents which a party intends to refer to at trial.

The objective of the SCCR is targeted discovery, intended to reduce the expense of producing and inspecting reams of marginally relevant material. Excessive document production is responsible for much of the delay and expense in civil litigation, and it has been determined that Peruvian Guano is no longer workable in the context of proliferating electronic information and the increasing complexity of modern litigation.40 A submission made by the Law Society of the City of London to the rules revision body in England noted that these problems are particularly acute in complex commercial litigation:

In major commercial litigation in particular, discovery can be a huge task and the resources required to be deployed in carrying it through are often the single most costly item for which the litigant will have to pay in bringing his case to trial... the present consultation on the efficiency of our procedural systems is bound to raise, as a key issue, whether the value of discovery, as we know it, justifies the disadvantage it brings.41

One English Judge has written that changes made in response to these concerns "do not require that no stone should be left unturned. This may mean that a relevant document, even "a smoking gun" is not found." This approach is said to be "justified by proportionality".42 However, reducing the costs of discovery must be balanced against the goal of ensuring disclosure of information which is important to the outcome of a case. The Law Society also submitted that:

We believe, therefore, that discovery and the associated correspondence have become one of the major contributors to wasted cost and delay. This is a great pity because, properly used, discovery is a vital contributor to achieving a just result. It is not mere anecdote that discovery wins cases... 43

Mechanics

The Starting Point

The obligation to list and produce documents is no longer triggered by the delivery of a pro forma demand by an adverse party. Rule 7-1 provides that every party must produce and serve a list of documents within 35 days of the end of the "pleading period".44 Thus, in accordance with the overall concern for expediting proceedings expressed in the SCCR, it is no longer left to a litigant to determine the date on which discovery should begin.

What documents must be listed? There is no definition of a "material fact" in the rules. Some guidance may be obtained from the use of this term in other contexts. In the context of pleadings, a material fact has been defined as a fact "necessary to formulate a cause of action or a defence". Lord Selborne L.C. defined a material fact as not only those which are material to a cause of action, but as including "any facts which the party pleading is entitled to prove at the trial."45 When addressing the level of disclosure required on an ex parte application, material facts have been described as those "which may or might have influenced the court".46

While it is clear that the SCCR do not require disclosure of documents that are not probative of any fact but have only forensic or investigative value such that they will lead the adverse party on a "train of enquiry", it is unclear

40 "Key Features of the New Civil Rules, Family Rules and Court Fees" (July, 2009). 41 Lord Woolf, Access to Justice: Interim Report, chapter 21, para. 4. 42 Digicel (St Lucia) Ltd at para. 46. 43 Lord Woolf, Access to Justice: Interim Report, chapter 21, para. 8. 44 "pleading period" is defined in Rule 1-1 as "the period for filing a responding pleading to the pleading that was most recently

filed in the action" 45 Millington v Loring (1880), 6 Q.B.D. 190 at 194. 46 Pacific Railway v. United Transportation Union, Local 144 (1970), 14 D.L.R. (3d) 497 at 501 (B.C.S.C.).


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whether documents that relate to collateral issues are encompassed in the definition of a "material fact".47 Additionally, it is unclear whether the proviso that a document must be capable of "use" "at trial" means that only documents which will be admissible as evidence must be disclosed. It seems unlikely that the court will permit litigants to unilaterally determine questions of admissibility at the discovery phase of proceedings, particularly in light of the fact that documents which may not be admissible as evidence may still be used for the purposes of cross examination.

In addition to the obligation to disclose "material" documents that are or have been in the party's possession or control, a party must list the documents it intends to rely upon at trial. Presumably, this obligation encompasses documents which a party only intends to use in cross-examination for the purposes of impeachment.

A party must also list all documents over which it asserts a claim of privilege: Rule 7-1(6). There is an obligation to issue a supplementary document list if it is discovered that an original list is inaccurate or incomplete: Rule 7-1(9).

Obtaining Further Disclosure

While the starting point of document discovery has been considerably narrowed, a demand driven process is contemplated by the SCCR, through which a party may obtain further disclosure. In this manner, opportunities for Peruvian Guano type disclosure remain, and the scope of discovery can reflect the requirements of an individual case. Two key mechanisms are available.

Pursuant to Rule 7-1(10), if a party believes that an original list omits documents that should have been disclosed, it may demand a supplementary list of documents. The advantage of issuing a demand under this sub-rule in comparison to the process discussed below is that the party need not describe the "missing" documents with specificity.

Alternatively, if the demanding party wishes to obtain disclosure which goes beyond the relevancy standards described in Rule 7-1(1), it may serve a demand for production pursuant to Rule 7-1(11), for any documents "that refer to any or all matters in question in the action". The demand must identify the documents sought "with reasonable specificity" and indicate the reason why such additional documents should be disclosed. If the requested documents are not disclosed within 35 days, an application may be made to the Court to compel production.

While the language of former Rule 26 and the Peruvian Guano scope of production are continued in Rule 7-1(11), Rule 7-1(14) provides the court with discretion as to what (if any) documents should be produced, leaving the legal test for production a work in progress to be defined in subsequent case law, in light of proportionality considerations. Even under the old rules, a variation of this standard was adopted where thousands of documents of only possible relevance were in question.48

An additional and important limitation on this procedure is the requirement that a demand for disclosure be specific; a broad and unfocussed request seems doomed to failure under the SCCR. In this regard, the demand driven system is somewhat similar to the document discovery regime found in the United States Federal Rules of Civil Procedure, Rules 26 and 34.

The new disclosure regime will only reduce costs if all parties "buy-in"

The SCCR recognize and attempt to remedy the unmanageable scope and expense of document discovery in the modern era. As Lord Woolf M.R. noted, the Peruvian Guano regime "is a monumentally inefficient process, especially in the larger cases. The more conscientiously it is carried out, the more inefficient it is."49

47 See the discussion of the two cases that have considered document production under the SCCR to date (Biehl v. Strang, 2010 BCSC 1391

and N.B. v. S.B., 2010 BCSC 1487) in Part W of this paper. 48 See for example Peter Kiewit Sons Co. of Canada Ltd. v. British Columbia Hydro and Power Authority (1982), 36 B.C.L.R. 58

(S.C.). 49 Lord Woolf, Access to Justice: Interim Report, chapter 21, para. 17.


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Notwithstanding the circumscribed scope of discovery found in the SCCR, it likely remains the case that producing counsel will have to conduct a Peruvian Guano style search to ensure that all material documents are listed and disclosed, even though the list they ultimately create will be much shorter. If this is the case, the costs of reviewing and listing documents will not be reduced, but the opposing party's costs certainly will be, and downstream savings will be realized by both parties. Jacob L.J. has noted:

...It is wrong just to disclose a mass of background documents which do not really take the case one way or another. And there is a real vice in doing so: it compels the mass reading by the lawyers on the other side, and is followed usually by the importation of the documents into the whole case thereafter — hence trial bundles most of which are never looked at.

Now it might be suggested that it is cheaper to make this sort of mass disclosure... But that is not the point. For it is the downstream costs caused by overdisclosure which so often are so substantial and so pointless. It can even be said, in cases of massive overdisclosure, that there is a real risk that the really important documents will get overlooked — where does a wise man hide a leaf? 50

Accordingly, unfocused disclosure can be as detrimental as insufficient discovery, and the production of inessential documents can add to the costs of every stage of the proceedings, resulting in massive files which have to be reviewed at the client's expense. In addition, the length of trial increases because the time spent in dealing with the paper mountain and cross- examination on peripheral issues is greater.

Perhaps more so than any other rule change, whether or not the new document discovery regime will in fact reduce costs and achieve efficiencies will depend on the actions of the parties and their counsel. As Rix L.J. has noted, "it is the parties and their advisers who are in the best position to adopt [discovery] procedures which are both commensurate and proportionate."51 Efficiency will thus require the early attention of each party to what is required for the prosecution of its case, and communication and reasonable accommodation between counsel.

Agreements between counsel at an early stage of the proceedings may reduce the risk of incurring substantial costs down the road.

However, the court also has a role to play in achieving efficiencies and reducing expenses, by limiting discovery to its proper scope through its case planning powers, and through the award of costs in appropriate cases to deter parties from using unnecessary disclosure to strain the capacity of the other to conduct litigation.52

Examinations for Discovery

What's New?

There are two primary changes to the Rules regarding oral discovery: limits on the length of an examination for discovery, and a new procedure for a witness to provide written answers.

Under former Rule 27, there was no limit on the duration of an examination for discovery. There was widespread concern about the length of examinations for discovery, and the apparent failure of some counsel to recognize that much of what was done on discovery was unnecessary, and would not be useful at trial. For example, Chief Justice McEachern wrote in 1981 that:

Unfortunately, it has become the practice in this Court for counsel to indulge themselves in interminable examinations before they decide what the case is about. It has become, in many cases, a learning experience for counsel about the case in which he is engaged.53

50 Nichia at paras. 46-47. 51 Nichia at para. 77. 52 Rule 5-3(1)(f) vests a judge with the power to limit document disclosure at a CPC, and rule 5-3(6) sets out the costs consequences of

failing to abide by such an order. Where no CPC is held, the authority to make such an award of costs was referred to in Nova West Resources Inc. v. Anglo American Exploration (Canada) Ltd., 2005 BCSC 1013 at para. 29.


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Thirty years later, these concerns have been addressed. Unless the examinee otherwise consents, the SCCR limit oral discovery to seven hours, and to two hours in fast-track cases: Rules 7-2(2), 15-1(11). The seven hours include any re-examination conducted on behalf of the party or on behalf of a party not adverse in interest, as well as any further discovery with respect to written answers given in response to questions upon which the witness had to inform themselves.

A party may apply to the court under Rule 7-2(2) for an extension of the seven hour time limit. When exercising its discretion under this rule, the Court must consider factors including the conduct of the witness (including the "provision of answers that are evasive, irrelevant, unresponsive, or unduly lengthy"); any unreasonable refusal to make an admission; the conduct of the examining party; whether it was reasonably practicable to complete the examination within the time limits; and the number of parties and discoveries and the proximity of the interests of those parties.

The second change to the discovery regime is found in Rules 7-2(23) and (24), which formalize the procedure for having written questions answered by a party whose examination is adjourned so she can inform herself in order to answer the question. This practice was already followed by the profession; rather than having a party appear at a subsequent examination for discovery, counsel frequently agreed to have the information sent to the requesting party in writing.

The formalization of this practice means that the time spent compiling written answers will count against the seven hour limit imposed on discoveries: See Rules 7-2(2) and (24).

Strict time limits may save costs but require the cooperation of opposing counsel

The introduction of strict time limits on examinations for discovery will likely prove a significant source of potential cost savings in the SCCR. In the past, discoveries could extend interminably. Much time was consumed addressing historical or marginally relevant matters. Additionally, discoveries could get bogged down in an intensive analysis of detailed facts. Because a witness was often incapable of answering such questions, the examination was often adjourned to allow the witness to make inquiries.

The time limit requires the cooperation of both counsel. The court has already recognized that while the time limit imposes an incentive on examining counsel to be focused, it unfortunately also creates a risk that counsel for the examinee will be obstructive, for the purpose of wasting the limited time available. Accordingly, the proper conduct of a discovery relies on the professionalism of counsel for the party being examined. A "hands off' approach to examinations for discovery is in accord with the object of proportionality, and a practice that encourages objections and resulting chambers applications must be discouraged. It is not in accord with the object of proportionality to make it the function of the court to become involved in micro-managing examination for discovery questions; it is far more efficient for counsel for the examinee to raise objections to the admissibility of evidence at trial, rather than on examination for discovery.54

Experts

There is general recognition that expert evidence can add significantly to cost and delay in litigation, while having a crucial impact on the outcome of cases. Lord Woolf M.R. has noted that the large litigation support industry which has grown up among professional witnesses goes against all principles of proportionality and access to justice:

In my view, its most damaging effect is that it has created an ethos of what is acceptable which has in turn filtered down to smaller cases. Many potential litigants do not even start litigation because of the advice they are given about cost, and in my view this is as great a social ill as the actual cost of pursuing litigation.55

53 Allarco Broadcasting Ltd. v. Duke (1981), 34 B.C.L.R. 7 (S.C.). 54 Kendall v. Sun Life Assurance Company of Canada, 2010 BCSC 1556. 55 The Right Honourable Lord Woolf, Master of the Rolls, Access to Justice: Final Report (July, 1996) Chapter 13, para. 2.


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The following changes to the expert evidence rules reflect frustration over the use and abuse of expert evidence at trial, and seek to limit the use of experts to appropriate situations. For example, the SCCR now expressly state the common law rule that an expert's duty is to assist the court and not to advocate for any party; experts must certify their understanding of this duty in any report they create (Rule 11-2); reports must be filed earlier and contain more specific information, including the instructions provided to the expert in relation to the proceeding (Rule 11-6); unless the Court otherwise orders, expert opinion evidence may not be tendered at trial except in accordance with the CPO applicable to the action (Rule 11-1(2)); in appropriate cases, the Court may order that experts confer with one another to help focus the technical issues in dispute (Rule 5-3(1)(k)(ii); Rule 12-2(9)(i)); a detailed framework is set out for the use of joint experts (Rule 11-3); on request, an opposing party may review an expert's file before the trial (Rule 11-6(8)); and, on its own motion, the Court may appoint an expert witness (Rule 11-5).

Will the SCCR Actually Improve the Use and Deter the Misuse of Expert Evidence?

One key change that may result in considerable costs savings is the rule that expert opinion evidence must not be tendered at trial unless it is provided for in a CPO. As a result, the type and quantity of expert evidence required at trial must be considered (and judicially approved) early in the proceedings. The use of expert witnesses will be the subject of much greater judicial scrutiny, and the parties will no longer be able to file as many expert reports as they see fit: Rule 5-3(1)(k). Of course, this limitation only applies if a CPC is actually held.

Early disclosure of an expert's file should also reduce litigation costs from those that were incurred under the old regime, where an expert's working notes and papers were privileged until he or she was tendered as a witness at tria1.56 Pre-trial disclosure will enable focussed and efficient cross examination, without requiring an adjournment of the trial for counsel to review the file, which causes delay and drives up costs.

The rules have always made provision for joint and court appointed experts. However, the case law approached the court's power to appoint an expert conservatively, recognizing that it is potentially unfair to pre-empt a party's control over her own case and may undermine the adversarial process.57 It remains to be seen whether the guiding principle of proportionality will change the judicial reticence regarding court appointed experts.

Reluctance amongst the bar poses the biggest obstacle to the use of joint experts. An Australian Judge has noted that members of the Australian Bar were "implacably opposed" to joint experts, fearing the substantial reduction in party control such a system would entail.58 Despite this opposition, it is clear that considerable benefits may accrue from the use of joint experts: A single expert is much more likely to be impartial than a party's expert can be. Appointing a single expert is likely to save time and money, and to increase the prospects of settlement. The use of a single expert may also be an effective way of levelling the playing field between parties of unequal resources.59

Under the SCCR, counsel's reluctance to utilize a joint expert cannot completely frustrate these objectives, as Rule 5-3(1)(k)(i) empowers the Court to direct the appointment of a joint expert at a CPC. However, it is trite to say that an expert's opinion is only as good as the facts and assumptions on which it is based. It is difficult to imagine that parties who cannot agree using a joint expert will be able to agree on the facts underlying his or her instructions. While Rule 113(3) provides a mechanism for the Court to state these facts, it may be extremely difficult for the court to do so in a way that is useful, even-handed and anticipates the evidence that will be led and the findings made at trial. There are undoubtedly cases where a joint expert is appropriate, but there are also serious risks and practical problems in doing so.

56 Vancouver Community College v. Phillips, Barratt (1987), 20 B.C.L.R. (2d) 289 (S.C.). 57 Hiebert v. Hiebert, 2006 BCSC 231 at para. 21. 58 Hon. Geoffrey Davies, "Court Appointed Experts" (2005), QUT Law and Justice Journal, Vol. 5, no. 1 at V. 59 The Right Honourable Lord Woolf, Master of the Rolls, Access to Justice: Final Report (July, 1996) Chapter 13, para. 21.


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However, even where a joint or court appointed expert is not utilized, court ordered expert conferences may be a beneficial step tending to reduce costs, as they "eliminate extreme views, views which might otherwise have been given but which would not withstand peer review".60

Fast Track Litigation

The new Fast Track Litigation Rule combines former Rules 68 (expedited litigation) and 66 (the fast track rule). This rule is largely irrelevant where complex litigation is involved, but it is mandatory, subject to the court ordering otherwise, for matters involving $100,000 or less or cases in which a trial can be completed in 3 days or less.61 Fast Track is also available in cases where the parties consent to applying the rule, or the court orders that it will apply to a proceeding. The Fast Track rules do not apply to class proceedings, and no jury trial is possible where the rule applies: Rule 15-1(4) and (10).

The object of Rules 66 and 68 was to provide for the quick and inexpensive resolution of relatively simple actions. Proportionality was a specified objective underpinning Rule 68. As Brooke J. noted, these rules responded to "the concern of the profession and of the court that the high cost of litigation of relatively modest claims is something to be addressed and if possible corrected."62

This concern also underpins the Fast Track Rule. As such, the procedures governing a Fast Track proceeding differ from a "standard" case in a few ways: a case planning conference is mandatory, and must occur before a party can serve a notice of application;63 oral discovery is limited to two hours;64 and, costs are limited and fixed.65 Additionally, the Fast Track procedure aims to have a trial within eight months of an action being commenced: Rule 15-1(13).

Despite these differences, Fast Track Litigation is very similar to a "standard" action. Given the priority trial dates available and the reduced costs involved in proceedings conducted under Rule 15-1, more actions should be properly brought as fast track proceedings, freeing up time and judicial resources to address more complex litigation.

Transitional Provisions

Part 24 sets out transitional rules for proceedings commenced prior to July 1, 2010, the date the SCCR took effect. A transitional proceeding is deemed to be a proceeding started under the SCCR: Rule 24-1(2).

While pleadings filed under the former rules of court are deemed to be pleadings under the SCCR, Rule 24-1(10) enables a party to demand that the other party amend a pleading to make it accord with the SCCR. If such a demand is made, the party who receives it has 21 days to amend its pleading, failing which the demanding party is at liberty to strike the other's pleading: Rule 24-1(11) and (12).

Rule 24-1(14) provides that if any step in a proceeding was taken before July 1, 2010, the former rules apply to any right or obligation related to that step, if and to the extent that right or obligation is to have effect prior to September 1, 2010.

Even though September 1 has come and gone, the old rules remain of some relevance in certain situations.

For example, the court held that where a demand was delivered and an obligation to comply arose before September 1, 2010, the duty imposed on a party to draft and deliver a witness statement pursuant to former Rule 68 survived the

60 Hon. Geoffrey Davies, "Court Appointed Experts" at IBD. 61 Rule 15-1 is worded similarly to former Rule 68; accordingly, its application is likely mandatory: Berenjian V. Primus, 2009 BCSC

1507; Singleton v. O'Neil, 2010 BCSC 298. 62 Giesbrecht v. Shepherd, 2009 BCSC 128 at para. 1. 63 Rules 15-1(7) to (9). 64 Rule 15-1(11). 65 Rule 15-1(15).


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change in rules, notwithstanding the fact that the ultimate trial of the action would not occur until after September 1, 2010.66

Additionally, when addressing costs arising from the dismissal of an application for an interlocutory injunction, the court held that even though the SCCR had come into force by the time the application for costs was heard, for the purposes of the costs application "the old Rule still applies because the underlying proceedings took place before the SCCR came into force."67

If the parties are uncertain as to which procedural regime governs a particular issue, a general provision in Rule 24-1(16) enables a party to seek directions.

IV. Experiences to date under the SCCR

Proportionality in Practice

Since the advent of the SCCR, Voith J. has noted that "while R. 1-3(2) establishes that proportionality is an over-arching consideration which informs the interpretation and implementation of the Rules, its significance, however, is greater for some Rules then for others." He referred to the document discovery rules as a specific example of the new importance of proportionality. However, for many other rules, "the reality is that proportionality, though not expressed in precisely those terms, has historically and inherently already played a significant role".68

A review of recent cases suggests that the Court is applying the SCCR in the same fashion as the former rules, without making explicit reference to the overarching principle of proportionality. In fact, a QuickLaw search conducted on October 21, 2010 for the use of the word "proportionality" in British Columbia civil decisions decided since the coming into force of the SCCR returned only seven results.

For example, courts have continued to apply the same legal test and considerations to determining the appropriateness of a matter for summary tria1;69 applications to dismiss a proceeding for want of prosecution;70 the renewal of an expired writ or notice of civil claim;71 applications for summary judgment and to strike pleadings as disclosing no cause of action;72 the withdrawal of deemed admissions;73 whether a plaintiff should attend and submit to an independent medical examination;74 the manner in which offers to settle or recovery of sums within the Small Claims court jurisdiction affects costs;75 and, the rules regarding the examination for discovery of a person who is mentally incompetent.76

66 Easton v. Cooper, 2010 BCSC 1079. 67 Preferred Nutrition Inc. v. Vanderhaeghe, 2010 BCSC 1206 at para. 3. 68 Kim v. Lin, 2010 BCSC 1386 at paras. 28-32. 69 Formerly Rule 18A, now Rule 9-7. See Mayer v. Osborne Contracting Ltd., 2010 BCSC 1249; Bosa Properties (Claremont) Inc. v.

Mossabeh, 2010 BCSC 1326; Harwood Lumber Ltd. v. Grewal, 2010 BCSC 1446; but see Peck v. Peck, 2010 BCSC 1397, discussed below.

70 Formerly Rule 2(7), now Rule 22-7(7). See Aker Kvaerner Canada Inc. v. Twardowski, 2010 BCSC 1153. 71 Formerly Rule 9(1), now Rule 3-2. See Stuart v. Patterson, 2010 BCSC 1236. 72 Formerly Rules 18(6) and 19(24)(a), now Rules 9-6(5)(a) and 9-5(1)(a). See International Taoist Church of Canada v Ching

Chung Taoist Association of Hong Kong Ltd., 2010 BCSC 1164; Jones v. Donaghey, 2010 BCSC 1498. 73 Formerly Rule 31, now Rule 7-7(5). See Weiss v. Koenig, 2010 BCSC 1292. 74 Formerly Rule 30, now Rule 7-6(1). See Imeri v. Janczukowski, 2010 BCSC 1383. 75 Formerly Rules 37B and 57(10), now Rules 9-1 and 14-1(10). See Gregory v. Insurance Corporation of British Columbia, 2010 BCSC

1369; Cue v. Breitkreuz, 2010 BCSC 1323. But see Aubin v. Aubin, 2010 BCSC 1425, where Cole J. held that the principle of proportionality codified in the Supreme Court Family Rules should be taken into account when the court makes an order of costs.

76 Formerly Rule 27(11), now Rule 7-2(9). See DeMerchant v. Chow and A-1 Fire Supplies, 2010 BCSC 1447.


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It has also been accepted that the SCCR and the principle of proportionality have not "overruled" well established common law principles such as the law on litigation privilege as stated in Hodgkinson v. Simms (1988), 33 B.C.L.R. (2d) 129 (C.A.).77

However, in two decisions, Mr. Justice R.D. Wilson has made explicit reference to the principle of proportionality as a factor to consider in addition to those that are already provided for in the leading cases pertaining to a particular procedural issue. In our view, this is the correct approach to applying the SCCR.

In Cayou v. Cayou, 2010 BCSC 1224, the plaintiff brought an application to adjourn a trial and sever the issues of quantum and liability. In addressing these issues, Wilson J. concluded that the relevant powers conferred under the new rules were the same as the old rules, and that the governing principles for the exercise of this power were well settled. However, after considering the factors set out in the pre-existing legal tests for severance and an adjournment, Mr. Justice Wilson stated at paragraph 48 that "to the framework of analysis under the pre-existing rule, must be added a consideration of the objective of proportionality mandated by Rule 1-3(2)." Thus, proportionality is used as a check on the decision making process, requiring a Judge to step back and view his or her proposed order holistically to determine whether it achieves proportionality in practice.

In Peck v. Peck, 2010 BCSC 1397, the claimant sought a summary trial of issues in a family law case. After citing the summary trial provisions in the rules, Wilson J. stated at paragraph 5 that "with the advent of the Supreme Court Rules, on 1 July 2010, and the Supreme Court Family Rules, it seems to me that there must be added, to an inquiry into the suitability of an issue for summary determination, the notion of proportionality, introduced in R. 1-3 of the Rules." In light of this overarching principle, the court concluded that in the specific circumstances of the case (including its small monetary value), the matter was suitable for summary trial, notwithstanding several conflicts in the evidence, which may have rendered the matter inappropriate for summary trial under a strict application of the old jurisprudence.

Discovery of Documents

Two cases have addressed the required scope of production under the new document discovery regime. In Mehl v. Strang, 2010 BCSC 1391, the plaintiff advanced claims of breach of contract, unjust enrichment, and in quantum meruit. The defendants alleged that the plaintiff's drug use may have impaired the reliability of his memory. In order to render an opinion on this issue, the defendant's expert required documentation and information concerning the plaintiff's past history of drug use. The plaintiff declined to produce these documents, leading to an application being brought pursuant to Rule 7-1 for production before Punnett J.

The defendants submitted that the plaintiff's memory (or lack thereof) was a "material fact" at issue in the litigation. Accordingly, the documents should be produced. The plaintiff's primary submission resisting production was based on the fact that documents concerning the plaintiff s history of drug use could not be used to prove a material fact, as the information sought went solely to credibility.

Punnett J. noted that pursuant to Rule 7-1 "the initial production obligation is limited to what is required to prove or disprove a material fact rather than what relates to every matter in question. The assumption appears to be that in many, if not most cases, such production will be sufficient. This change in scope is consistent with Rule 1-3(2)."

In determining whether the documents sought related to "material facts," the court noted that "relevancy" is broader in scope than "materiality". The defendants submitted that the plaintiff's ability to remember was a material fact, given that the contractual claim was substantially based on oral terms which by their nature rely on the memory of the parties. Accordingly, the reliability of his evidence on this "material fact" would be sharply limited if he had suffered memory loss, requiring production of the documents sought. Punnett J. accepted this submission, concluding that:

77 Benning v. The Trustees of the IWA, 2010 BCSC 1422.


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[27] In my view, the error in the plaintiffs position is conflating reliability and credibility when the former is but part of the latter. The ability of the plaintiff to remember is, in my opinion, relevant to proof of a material fact, namely the existence of a contract based on oral terms.

[28] Frequently courts take into account factual considerations, such as the ability of a witness to see or hear what occurred, in determining whether evidence is reliable and should be accepted. Surely, if an individual has suffered damage to his cognitive or memory functions, that is equally a relevant fact.

[29] I am satisfied that, if otherwise admissible, the requested production is relevant and could prove or disprove a material fact. Rule 7-1 does not restrict production to documents that in themselves prove a material fact. It includes evidence that can assist in proving or disproving a material fact.

With respect, this analysis is not entirely persuasive. While the plaintiff's cognitive functioning may be a relevant fact, as Punnett J. noted earlier in his reasons, the proper question to ask is whether it is a material fact. According to the textbooks cited by the court, "evidence is material if it is offered to prove or disprove a fact in issue". Clearly, the terms of any contract are material to the plaintiff's claims. But can the same be said of the plaintiff's mental competency?

In stating that Rule 7-1 does not restrict production to documents that in themselves prove a material fact but includes evidence that can assist in proving or disproving a material fact, the court appears to have endorsed the "train of inquiry" approach which was at the heart of the Peruvian Guano test, which the new rules have abolished. As Punnett J. noted at paragraph 15, Rule 7-1(14) provides for wider disclosure upon application to the court, including documents "relating to any or all matters in question in the action". In our view, this would have been the appropriate rule to invoke in the circumstances of Biehl, as the documents sought cannot be seen as "material", given that they only collaterally relate to any fact put in issue by the pleadings.

Biehl was discussed in N.B. v. S.B., 2010 BCSC 1487, where the respondent brought an application for production of documents in the possession and control of a third party bank and mortgage broker pursuant to the Supreme Court Family Rules. It was alleged that all of the documents were relevant to the issue of spousal support, as they would disclose the quantum of income the claimant reported to these third parties. Pursuant to Rule 9-1, the production of documents under the Supreme Court Family Rules is governed by the same materiality and reliance test as the SCCR.

Master Bouck cited Biehl, noting at para. 32 that this decision "reaffirms the principle that discovery on the issue of credibility is not permitted. Or, put another way, credibility is not a material fact." While noting that the claimant's capacity or ability to earn income was a material fact, Master Bouck concluded that the claimant's reporting of income to a third party did not go to a material fact at issue in the proceeding. Rather, such reporting related to the claimant's truthfulness or credibility, which was not a material fact in issue. Accordingly, the application was dismissed.

Whether the distinction between the collateral issue of "credibility" and the material issue of "reliability" drawn in these decisions is valid will likely be the subject of further litigation.

V. The Implications of SCCR for Complex Litigation

The changes reflected in the SCCR will have important consequences for complex litigation. Because the SCCR are still very new, there is little experience and few reported cases to draw from. Nevertheless, some reasonable hypotheses can be ventured.

First, the application of the proportionality principle should have salutary effects in cases where there is a disparity of size, resources and information. On the one hand, large defendants should have less scope to employ discovery and pre-trial measures which, in effect if not purpose, increase cost and delay and wear down smaller plaintiffs. On the other hand, smaller plaintiffs will have less scope to take advantage of the disparate burden discovery places on


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large defendants with vast volumes of documents and many potential witnesses. In such disparate burden cases, plaintiffs or defendants may abandon the action or enter into settlements that reflect the economics of the litigation and not the underlying merits of the dispute. This should happen less often now, with the recognition that the test for limiting pre-trial procedures is not abusiveness but proportionality. Process should fit the case, rather than the case conforming to all conceivably available process.

At the same time, it is interesting to note that the expression of the proportionality principle in the SCCR does not include important features of the English "overriding objective". The SCCR does not refer to "ensuring the parties are on an equal footing". And unlike the "overriding objective", proportionality does not include dealing with cases in ways proportionate to the financial position of each party. These differences must reflect deliberate policy choices. They are only relevant where there is a material difference in the parties' financial or other relevant positions. Certainly the omission of the parties' relative financial positions suggests this is not a relevant consideration, and that smaller, less wealthy parties will not be excused from process on that ground alone. Similarly, large or wealthy parties will not be subject to more process simply because they can better absorb the cost. Put simply, proportionality is case-specific and not party-specific.

Second, coupled with the other rule changes, proportionality means that the use of pre-trial procedures may be more strictly controlled than in the past. Their use may be subject to having to be justified in advance (for example, at a case planning conference). The decision about whether they should be available will be measured against a standard that takes into account their time and cost and compares it to what is at stake in the litigation: a cost-benefit analysis.

Under the SCCR, the baseline procedures available are somewhat more limited than under the previous Rules of Court. The initial document production standard is narrower and examinations for discovery are much more limited. At the same time, the court has a discretion to expand or collapse the baseline procedures. The court has always had this discretion, but if the intent and promise of the SCCR are realised, it will now be exercised in a more liberal fashion. For complex litigation, consistent with the proportionality principle, this means that more complex cases deserve, and should receive, more process. But absent agreement of the parties, this will still be subject to justification. Proportionality means not treating cases categorically, such that a case involving a large sum but which is not otherwise complex will automatically be given Cadillac process.

Third, the case planning rules have great potential to affect complex litigation. Case planning is not mandatory: it can be initiated by a party or ordered by the court. Parties without a case plan who appear in chambers may well fmd themselves ordered to attend a case planning conference in addition to or even instead of the order they were there to contest. An agreement may be preferable to the uncertainty of a case plan order, particularly one made by a judge or master unfamiliar with the action or with strong views about how litigation should be managed. Whether done by agreement or order, we suggest that there will be few complex cases where the ability to obtain, or conversely, limit, pre-trial procedures ex ante will not be desirable. The same is true of time limits for procedural steps.

Case planning orders are valuable in complex litigation for further reasons. They contribute to certainty. They aid in the planning, budgeting and risk assessment that is now a feature of major litigation. They promote coordination with parallel or related proceedings, another common feature of complex litigation, avoiding duplicative discovery and other pre-trial procedures.

Case planning also makes early case assessment essential. This is consistent with current best practices for managing complex litigation. It is simply not an option for counsel to figure out the case as they go. There is too much risk the case plan order will not contain what is necessary to prove or defend the case, and that the court will not permit multiple attempts to amend the case plan. This is particularly so if the issues were foreseeable had counsel prepared, or if the other parties have relied on the case plan to their prejudice. Case planning offers particular advantages if counsel can identify an issue on which the case turns and that can be decided in some fashion without incurring substantial costs or delay. While the B.C. courts' reluctance to permit "litigation in slices" already reflects proportionality considerations (including the fact that deciding single issues may result in more and not less expense and delay), it will be interesting to see if the proportionality principle results in a more liberal approach to applications for trial of an issue or severance, consistent with the result in Peck v. Peck, supra.

Early case assessment also promotes settlement. It forces the parties, at an early stage, to carefully examine the merits of the case, the amount at issue, the anticipated cost of the litigation and options for resolving the dispute


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short of a full trial. With this information, the gap between the parties' positions usually narrows and they can negotiate more meaningfully with the information the case assessment process produces. This also allows them to factor the savings from the unrecoverable costs (but as yet not incurred) of litigation into their bargaining positions.

The case planning rules are not without potential disadvantages. They require greater front-end loading of costs. They require parties to make decisions about the shape of the case with limited information, when they have had little or no discovery. They may force parties to undertake steps and deadlines where, for a variety of reasons external to the action, the dispute is not fully ripe and might more efficiently be allowed to stand in abeyance. The answer to these criticisms, of course, is that case plan orders can be varied by consent or by court order. But that relief may not be forthcoming. Case plan orders can be potential instruments of unfairness if they are applied too rigidly. They can also be unfair if not applied strictly enough, and parties are able to undo the benefits of coordination, predictability, expedition and cost-savings by making late or substantial changes to case plans.

These are not criticisms of the rules, which are salutary. We are merely pointing out the risks inherent in trying to apply discretionary rules in a just and proportional manner over many cases. One feature of the case planning rules that adds to this risk is the fact that these decisions will often be made by a judge or master who is not familiar with the case. In our view, case planning is not a substitute for case management of complex actions by the trial judge. The case management judge will have the familiarity with the case to make nuanced discretionary decisions, particularly as he or she watches the case unfold through the discovery process and up to trial.

Fourth and finally, the SCCR changes are designed to reduce cost and delay. While the relative cost of litigation may be more of a concern in marginal cases that are too big for Small Claims Court or too long and complicated for the Fast Track rule, cost remains an important issue in complex litigation, where absolute costs are at their highest. If the rule changes are successful in reducing cost and delay (recalling that "what causes cost is time"), this will be a significant improvement in how complex cases are conducted.

VI. Conclusion

This is a time of promise and expectation. The changes reflected in the SCCR have the potential to reshape litigation in B.C. around the ideas that time and cost, together with correctness, are significant imperatives of justice and that justice and proportionality require that parties should have so much procedure as the justice of the case requires but no more. The full realisation of this shift requires a change in culture on the part of parties, counsel and the court. Nowhere is this more apparent than in complex litigation, where the temptation to fall back on old practices will be great. But so too will be the rewards in absolute cost reduction and efficiencies for those who creatively embrace the spirit of the new rules and the opportunities they create.

WEEK 2: Murphy

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Murphy v. Dodd

(1989), 63 DLR (4th) 515 (Ont. HC)

GRAY J (orally): In the Supreme Court of Ontario, Court File No. 1566/89 between Gregory Murphy, applicant, and Barbara Dodd, Women’s College Hospital, John Doe, Jane Doe and other persons unknown, respondents.

In these reasons for judgment I will refer to Gregory Murphy as the applicant and Barbara Dodd as the respondent because that was their status on the proceeding before O’Driscoll J, on July 4, 1989. In the present motion before me the respondent Barbara Dodd seeks leave to bring this motion on short notice and seeks an order setting aside the order of O’Driscoll J, dated July 4, 1989. After hearing submissions I granted leave to her to bring this motion on short notice. The disposition of her motion to set aside the order aforesaid will be dealt with later.

The Canadian Hearing Society sought an order permitting it to intervene, pursuant to Rule 13.02 of the Rules of Civil Procedure in the present motion. It also sought leave to bring its motion on short notice together with an order permitting the filing of the affidavits of Joseph Regan and Denis Morrice as evidence in the respondent’s motion. After hearing submissions I granted leave to bring its motion on short notice and I make an order permitting the Canadian Hearing Society to intervene and I made a further order permitting the filing of the affidavits of Joseph Regan and Denis Morrice.

Rule 13.02 reads thus:

Any person may, with leave of a judge or at the invitation of the presiding judge or Master, and without becoming a parry to the proceeding, intervene as a friend of the court for the purpose of rendering assistance to the court by way of argument.

It is to be noted that the leave to intervene as a friend of the court would be granted for the purpose of rendering assistance to the court by way of argument. The Canadian Hearing Society takes no position with respect to the principal argument between the parties and limited its submissions to a consideration of the applicability of Rule 38.12(1) in the present motion between the parties. I made the order permitting the society to intervene because I was convinced that the society as a friend of the court could render assistance to the court by way of argument.

The next matter I mention is of great importance. Notwithstanding certain publicity which has been given to this motion, I must make it very clear that this motion is not an appeal from the order of O’Driscoll J. This motion is expressed in the notice of motion as a motion to set aside the said order. The two rules upon which the motion is based are rules 38.12(1) and 59.06(2)(a). For the sake of completeness, I will set forth rule[s] 38.12(1) and (3) and 59.06(2)(a):

38.12(1) A person who is affected by a judgment on an application made without notice or who fails to appear at the hearing of an application through accident, mistake or insufficient notice may move to set aside or vary the judgment, by a notice of motion that is served forthwith after the judgment comes to the person’s attention and names the first available hearing date that is at least three days after service of the notice of motion. [Emphasis added.] …

(3) On a motion under subrule (I), the judgment may be set aside or varied on such terms as are just. …

59.06(2) A party who seeks to,

(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made; ..........

[m]ay make a motion in the proceeding for the relief claimed.

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To fit within rule 38.12(1) the respondent must prove that she failed to appear on July 4, 1989, “through accident, mistake or insufficient notice,” and to fit within rule 59.06(2) the respondent must prove the ground of fraud or facts arising or discovered after the order was made on July 4, 1989.

This is the endorsement made by O’Driscoll J, on July 4, 1989.

The time is 10:40 a.m.; counsel for the Applicant advises me that she has had indirect communication with the Respondent Dodd; neither Respondent appears nor does Dodd intend to appear by counsel. No-one is here to represent the hospital.

Order to go as requested in paragraphs 1(a), (b), (c) and (d) of the within Notice of Motion.

Counsel for the Applicant asks that I state that the order is granted on the grounds set out in para. 2(a) to (e) inclusive of the Notice of Motion. Assuming that I did agree with some or all of the said grounds, I do not find it necessary to volunteer opinion or obiter dicta on matters not necessary for the granting of injunctive relief.

No order as to costs. July 4/89, J O’Driscoll J.

This is the order of Mr. Justice O’Driscoll of that date, or I should say this is the substance of part of the order:

1. THIS COURT ORDERS that the Applicant is hereby granted leave to bring this application on short notice.

2. THIS COURT ORDERS that the Respondents, their servants, or agents are hereby restrained from taking the life of the infant Dodd-Murphy, either by performing or undergoing an abortion or a Caesarean operation or otherwise and from committing a trespass to the person of the infant Dodd-Murphy by assault or battery or otherwise.

3. THIS COURT DECLARES that the said infant Dodd-Murphy en ventre sa mere is under the protection of this honourable Court.

4. THIS COURT ORDERS THAT THERE BE NO ORDER AS TO COSTS.

I feel that O’Driscoll J was in a very, very difficult position. This is quite apparent from the wording of the endorsement and the short time which elapsed between the opening of weekly court and the time of 10:40 a.m.

I turn now to rule 38.12(1) and observe its wording. If the respondent is to succeed, she must convince me that she failed to appear through accident, mistake or insufficient notice. It would seem to me that the important words in this regard are the words “insufficient notice.” Those words permit me to take into account all the circumstances surrounding the service. It is true that the parties were together for some considerable period of time on June 29, 1989, in the circumstances set forth in para. 29 of the applicant’s most recent affidavit, together with the further facts set forth in paras. 30 and 31 thereof. The respondent’s version is best understood by paras. 25 to 21 of her affidavit which reads thus:

25. On Thursday, June 29th, 1989, Greg came to me at Filmore’s where I was working. I asked him to leave because he had made such a big scene at Elaina’s recently. He made it clear that his family did not like the idea of my having an abortion and that he wanted me to go see a Father Lombardi who would try to persuade me to go through with the pregnancy. He also showed me what looked to me to be legal papers, the same legal papers.

26. Greg said to me on Thursday night at Filmore’s, “I can spend thousands of dollars a day to prevent you having an abortion.” This was the first time Greg actually stated to me that he opposed my abortion.

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27. That on Friday, June 20, 1989, I was downstairs in my own home when Angela Costigan knocked at the door. I answered the door and she presented to me some papers and I asked her what are these. She answered me by speaking to me but she did not use the sign language of the deaf. I tried to follow her words and she said that it was something about the abortion. She did not explain to me anything about the proceeding, that I had to appear in Court, and I took the papers and glanced at them feeling very upset and shot the door. Over that weekend I had an opportunity to read the documents and understood that they were about trying to stop me from having an abortion. I was confused and afraid when I read these documents. I do not know any lawyers and I did not speak with members of my family nor did I have anyone to give me any advice. My abortion was scheduled for Tuesday July 4, 1989 and now the court date was also scheduled for the same time. I was torn between these two events and did not know what to do. At no time did I appreciate the significance of this court hearing and that it could affect my own choice to end my pregnancy. I was too frightened and confused and alone to appreciate this fact. If I had understood this fact, I would have spoken to my family and retained the services of counsel immediately to defend this injunction. To add to this problem, I felt that it was the long weekend and I could not get an interpreter or a lawyer to go to court with me. It was all muddled in my mind.

I accept that the respondent has some knowledge of courts from her earlier experiences in the Provincial Court (Criminal Division) and in matrimonial matters. The facts surrounding the service, however, are that the applicant's counsel served her on Friday, June 30, at 1225 p.m., with the notice of application which in part reads thus (quoting from a portion of the printed form of the notice of application, there are three paragraphs to this):

IF YOU WISH TO OPPOSE THIS APPLICATION, you or an Ontario lawyer acting for you must forthwith prepare a Notice of Appearance in Form 38C prescribed by the Rules of Civil Procedure, serve it on the Applicant(s) lawyer(s) or, where the Applicant(s) do(es) not have a lawyer, serve it on the Applicant(s), and file it, with proof of service, in this court office, and you or your lawyer(s) must appear at the hearing. IF YOU WISH TO PRESENT AFFIDAVIT OR OTHER DOCUMENTARY EVIDENCE TO THE COURT OR TO EXAMINE OR CROSS-EXAMINE WITNESSES ON THE APPLICATION, you or your lawyer(s) must, in addition to serving your Notice of Appearance, serve a copy of the evidence on the Applicant(s) lawyer(s) or, where the applicant(s) do(es) not have a lawyer, serve it on the applicant(s), and file it, with proof of service, in the court office where the application is to be heard as soon as possible, but not later than 2:00 p.m. on the day before the hearing.

IF YOU FAIL TO APPEAR AT THE HEARING, JUDGMENT MAY BE GIVEN IN YOUR ABSENCE AND WITHOUT FURTHER NOTICE TO YOU. IF YOU WISH TO OPPOSE THIS APPLICATION BUT ARE UNABLE TO PAY LEGAL FEES, LEGAL AID MAY BE AVAILABLE TO YOU BY CONTACTING A LOCAL LEGAL AID OFFICE.

I also accept that the respondent is an intelligent person and that there are no special rules in the Rules of Civil Procedure covering service of documents on deaf persons. I do not intend to establish any special procedure in that regard because that is a matter for the legislature or the rules committee. The fact that the respondent has a hearing deficiency or is almost totally deaf, in itself, does not assist. This notice was served on Friday at 12:25 pm., and the respondent required to take action not later than 2:00 p.m. on the same day. The Monday following was a statutory holiday and the application came on in weekly court at 10:00 a.m. on Tuesday, July 4, 1989. I ask myself whether the respondent would understand the significance of such things as an injunction, an interim injunction, a declaration or leave to bring the application on short notice.

I am not prepared to hold that the respondent is a person lost in the justice system, but in all of the circumstances on the special facts of this case, it is my view that the notice in this case is an insufficient notice under rule 38.12(1). I emphasize the special facts of this case as to the matters referred to in the Regan affidavits, the time factors, the nature of the application and all the surrounding circumstances.

I turn now to rule 59.06(2). The position of the respondent is that O’Driscoll J would not have made the injunction order if these had not been what is called a fraud so far as the court was concerned. It is urged that the

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applicant misled the court by leaving the impression that he is the father of the fetus in question. He described the fetus as “our child” and “my child” throughout and spoke of “the infant Dodd-Murphy.” Counsel for the applicant stresses the fact that on this branch the applicant cannot be accused of any fraud on the court by stating matters which he believes to be true or by stating matters which are the opinions of medical experts. The applicant’s affidavit clearly left the impression that he is the father. He did not allow O’Driscoll J to have the knowledge that another man might be responsible for the paternity of the fetus in question.

Another factor concerns “danger to the respondent.” There is a direct conflict in the evidence of Doctor Morad Sarref and the applicant, and there is good reason to believe that the order of O’Driscoll J would not have been made if this evidence of “danger to the respondent” had been put forward in Doctor Sarref’s words. I cannot be expected in oral reasons for judgment to summarize all of the affidavit evidence, hut there is considerable evidence to support the allegations concerning Doctor Sarref’s position, he, being the respondent’s gynecologist.

The respondent’s position on para. 15 of her factum reads thus:

It is respectfully submitted that had the Honourable Mr. Justice O’Driscoll been aware that the hearsay assertion respecting medical advice that the Respondent’s life was at “serious risk“ by the prospective abortion was a bold-faced lie, he would never have acted upon the request for an injunction.

I have reached the conclusion that there was a fraud on the court within rule 59.06(2) within the learning set forth in 100 Main Street West v. Sakas (1975), 8 OR (2d) 385 at p. 389, 58 DLR (3d) 161 at p. 165 (CA), and that the fraud related to issues that were material as that word was considered by Osborne J, in International Corona Resources Ltd. v. LAC Minerals Ltd. (1988), 66 OR (2d) 610 at pp. 622-3, 54 DLR (4th) 647 at pp. 658-9 (HCJ).

For these reasons, an order will issue setting aside the order of O’Driscoll J dated July 4, 1989.

As I stated in open court, I am obliged to counsel for their assistance in this matter, which was brought on with great expedition and is a credit to the administration of justice in Ontario.

I do not choose to deal with the subject of motive or the questions concerning injunctive relief, namely (1) whether standing should be granted to the applicant; (2) the status of the fetus on the present applicable law; and (3) whether injunctive relief to prevent abortion is to be granted in Ontario following the recent leading cases. Nor do I get into the classic learning concerning the granting of injunctions generally. I have been advised that until a few days ago, no injunction has been granted against a woman to prevent abortion, except the case at bar.

It may be that the matters with which we are concerned are matters for Parliament.

In the result, therefore, as stated earlier, an order will issue setting aside the order herein of O’Driscoll J dated July 4, 1989.

I was going to ask counsel if they have any submissions with respect to the question of costs. I should say at the outset while my mind is open, I, at the present time, would not be inclined to do anything with respect to the order of costs made by Mr. Justice O’Driscoll which was, no order as to casts.

[Submissions re costs.]

The disposition with respect to costs in civil matters .......... is that costs normally follow the event and normally follow the event on a party-and-party basis. However, since the new rules have come into effect, there was a great deal of learning that decided in certain instances, if there were unusual situations of some misconduct, solicitor-and-client costs can be ordered. I am relatively experienced in the question of costs. This is a matter on which there should not be costs on a solicitor-and-client basis and the question I put to myself is whether there should be no order as to costs for one or two reasons. One, because it is as a matrimonial matter, although strictly speaking not a matrimonial matter. .......... Secondly, it is a rather unique case, which is difficult. No one knows more than I do since I started it yesterday morning. In the circumstances, it is my view that there should be no order as to costs.

WEEK 2: Meek

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Meek v. Fleming

[1961] 2 QB 366 (CA)

Appeal from Streatfeild J and a jury.

Motion for leave to adduce fresh evidence.

Alan Sidney Charles Meek, a press photographer, the plaintiff in an action for damages for alleged assault and wrongful imprisonment against Richard Fleming as a chief inspector of the Metropolitan Police, appealed from a judgment entered for the defendant on the verdict of a jury and asked for a new trial on the grounds, inter alia, of misdirection by the judge and that the verdict was against the weight of the evidence. Paragraph (6) of his notice of appeal was as follows: “That at the trial the rank and status of the defendant was by implication represented to be that of a chief inspector when in fact between the date of the matters complained of in the action and the date of the trial he had been reduced to the rank of a station sergeant by reason of misconduct and that the credit of the parties was a crucial issue at the trial.”

…

[HOLROYD PEARCE LJ: The clearest evidence that it would have had an impact is the trouble that was taken to conceal it.]

There is no duty to disclose the defendant’s character or rank and no rule concerning his dress in a civil court. There is a rule that in a criminal court a police officer must appear in uniform, but it is not always obeyed. In the civil court he is sued as a person and his rank and character are quite irrelevant. To address a police officer as “Mr.” is common practice among advocates. Even if the court had assumed that the defendant was of the highest character and had acted on that assumption, it is not the duty of counsel to correct that assumption. The belief that he was a chief inspector was irrelevant at the trial, and at no stage was the evidence weighted in favour of the defendant’s behaviour by reason of his accepted rank.

HOLROYD PEARCE LJ: The plaintiff appeals from the judgment of Streatfeild J sitting with a jury given on October 21, 1960, after a trial lasting five days. The jury, after an absence of four hours, gave answers to certain questions on which the judge dismissed the action and entered judgment for the defendant. The plaintiff by his notice of appeal complains that the verdict was against the weight of evidence, and makes certain unsubstantial criticisms of the summing-up. These have not been stressed, and in my judgment no criticism can be made of the conduct of the judge or the verdict of the jury on the evidence before them. The real ground of this appeal is stated in the notice of appeal as follows: “(6) That at the trial the rank and status of the defendant was by implication represented to be that of a chief inspector when in fact between the date of the matters complained of in the action and the date of the trial he had been reduced to the rank of a station sergeant by reasons of misconduct and that the credit of the parties was a crucial issue at the trial.” A further notice of motion for leave to give fresh evidence alleges that on the question of credit the defendant deceived or misled the court, and thereby occasioned a miscarriage of justice.

The plaintiff was claiming damages for assault and wrongful imprisonment in respect of an incident that happened on Guy Fawkes night, November 5, 1958. There was disorderly crowd in Trafalgar Square, and many police officers had been detailed to deal with it. They made a number of arrests that night, and removed the arrested persons in a police tender to Cannon Row police station where they charged them and then, as a rule, released them. The defendant was the chief inspector at Cannon Row police station, and was actively engaged in helping to control the disorder in Trafalgar Square.

The plaintiff, a press photographer with a good record, was there with his camera for the purpose of taking photographs. At about 9:40 p.m. the defendant arrested him on a charge of obstructing the police, and took him in a tender to Cannon Row police station where he was kept in a cell until 1:30 a.m.

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If the plaintiff’s story was correct, the defendant arrested him without proper cause, used considerable violence to him which caused physical injury, and without justification locked him up for some hours instead of charging him straight away and releasing him. If the defendant’s story was correct, he acted with propriety; he was justified in arresting the plaintiff, and the subsequent violence (which was far less than the plaintiff alleged) was wholly occasioned by the plaintiff’s own violence and resistance.

On November 17, 1958, the plaintiff issued the writ in this action. On December 17 he appeared at the magistrates’ court and was convicted of obstructing the police and fined £5. Another charge was dismissed. On December 16, 1959, while this action was pending, certain events occurred which at the trial were unknown to the plaintiff’s advisers, and which they had no reason to know or to suspect. These events were deliberately concealed at the trial by the defendant and his legal advisers. It is on this concealment that the plaintiff relies in this appeal. He asks for a new trial in order that these facts may be proved by fresh evidence.

The facts have been agreed between the parties for the purpose of this appeal in the following terms: “(1) At the date when the defendant gave evidence at the trial of the action, his true rank in the Metropolitan Police Force was station sergeant. (2) The defendant was reduced from rank of chief inspector to station sergeant on December 16, 1959. (3) On December 16, 1959, the defendant appeared before a disciplinary board on the following charges: (i) Acting in a manner prejndicial to discipline by being a party to an arrangement with a police constable, whereby that officer purported to have arrested a street bookmaker on October 26, 1959, when in fact you were the officer who made the arrest. (ii) Without good and sufficient cause did omit promptly and diligently to attend to a matter which was your duty as a constable, that is to say having arrested … for street betting on October 26, 1959, you did not attend the hearing of the case against him at Thames Metropolitan Magistrates’ Court on October 27, 1959.”

The defendant was reduced in rank to station sergeant on each charge, hut on appeal to the commissioner on December 30, the punishment on the second charge was reduced to a reprimand, but there was no variation in the first punishment.

It is conceded that those facts were known to the defendant’s legal advisers and his counsel, and that as a matter of deliberate policy they were not put before the court. A letter written by the defendant’s solicitor on November 21, 1960, pending the appeal, says: “The learned Queen’s Counsel instructed by me was throughout, as I believe you are aware, in full possession of all the facts relating to my client’s past and present status and the reasons for his reduction in rank, and conducted the case in full knowledge of these facts in the manner he felt was consistent with his duty to his client and the court, and he is fully prepared to defend and justify his handling of the case at the proper time if called upon to do so.”

It having been decided not to reveal these facts, the following things occurred at the trial. The defendant attended the trial not in uniform, but in plain clothes, whereas all the other police witnesses were in uniform. Thus there was no visible sign of the defendant’s altered status. He was constantly addressed by his counsel as “Mr.” and not by his rank of sergeant. Counsel tells us that he would so address a sergeant in the normal case. When the defendant entered the witness-box, he was not asked his name and rank in the usual manner. No suspicions were aroused since no one had any reason to suspect. The plaintiff’s counsel, however, and the judge frequently addressed the defendant, or referred to him, as “inspector” or “chief inspector,” and nothing was done to disabuse them.

The defendant started his evidence with a brief summary of his career up to the time when he was chief inspector at Cannon Row police station, hut no reference was made to his reduction in rank. In cross-examination he was asked: “You are a chief inspector, and you have been in the force, you told us, since 1938? (A) Yes, that is true.” That answer was a lie. Later: “(Q) You realise, as chief inspector, the importance of the note being accurate? (A) The importance of it conveying to me what I want to give in evidence.” He was asked further: “Let us understand this. You are a chief inspector. How old are you? (A) I am forty-six years of age.” And again: “(Q) I am not asking you whether you took part in the inquiries, but whether you as a responsible and senior adult man-never mind about your being a chief inspector-bad no anxiety about this case, no concern or interest? (A) No. I can only repeat I have nothing to fear.”

The judge referred to the defendant as “inspector” or “chief inspector Fleming” many times in his summing-up to the jury. It is clear that he reasonably considered that the defendant’s rank and status were relevant

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on credibility in a case where there was oath against oath, and where there was a question of the defendant’s conduct in the course of his duty. No doubt he felt what Singleton LJ expressed in Mohahir Ali v. Ellmore, [1953] 1 WLR 1300, when, in dealing with a matter concerning evidence, he said: “It appears to me that that evidence was irrelevant and unnecessary. The fact that a witness who is also a defendant is a superintendent of Leeds City Policy shows that he is of good standing, and that he has the confidence of his superior officers.”

Nor was the defendant’s counsel prepared to forgo the advantage to be derived from the status in the police force of his witnesses in general. The parties have, fortunately, in the interests of economy been able to use the reports of the case in “The Times” newspaper. These show that in his opening speech for the defence, counsel stated that the jury had not yet had an opportunity of listening to persons against whom it was at times fashionable to make wild hysterical allegations, but who could not have reached their positions unless they had shown to those who controlled the Metropolitan Police a substantial degree of responsibility. They were not concerned here with some newcomer to the force who had only just finished his course, and was out on the street full of enthusiasm to arrest the first person he could.

“The Times” report of the final speech of defendant’s counsel shows that he said in reference to the allegations of the plaintiff: “That was un-English, and not what the jury would expect of any police officer who had passed through the sieve, been trained and risen to any rank in the Metropolitan Police.” He then went on to contrast unfavourably the plaintiff’s background in Fleet Street where “words come out in very large letters, and the range of adjectives and description is so wide as to make us callous.” I accept from counsel that he was intending to refer to the generality of his seven or eight witnesses, all of whom had attained some rank above that of constable. Nevertheless, such references must inevitably have connoted in the minds of judge and jury a reference to the status of the defendant, who was the leading person in the case, and held (in their erroneous belief) the highest rank of all the witnesses.

The fact that the defendant’s advisers were prepared to act as they did showed the great importance which they attached to the facts concealed. If one leaves aside for the moment any question of ethics, the hazards of such a course were extremely great. With so many police witnesses who might well know the truth (since the defendant’s demotion was circulated in police orders) the chance of somebody in cross-examination referring to the defendant by his present rank of sergeant, or letting the truth out in some other way, was not negligible. Had that occurred, or had the plaintiffs counsel known the facts, and elicited them in cross-examination, it seems very unlikely that the jury would accept the defendant’s case when they found how they had been deceived. Even without hawing the facts, the jury took four hours for their deliberations; and since the plaintiffs evidence was, broadly speaking, that of one against so many, one must, I think, conclude that he did well in the witness-box.

How then does the matter stand now that the truth has come out? This court is rightly loth to order a new trial on the ground of fresh evidence. Interest reipublicae ut sit finis litium. The cases show that this court has given great weight to that maxim. There would be a constant succession of retrials if judgments were to be set aside merely because something fresh that might have been material has come to light. In the case of fresh evidence relating to an issue in the case, the court will not order a new trial unless such evidence would probably have an important influence on the result of the case, though such evidence need not be decisive: Rex v. Copestake, Ex parte Wilkinson, [1927] 1 KB 468, 477 (CA) per Scrutton LJ, and Ladd v. Marshall, [1954] 1 WLR 1489 (CA). Such evidence must also, of course, be apparently credible and such that it could not have been obtained with due diligence, [1954] 1 WLR 1489, 1491. But in the present case the fresh evidence is agreed, and it could not have been found out with due diligence since there was no reason to suspect it. In the present case, therefore, these two latter considerations are not in issue.

Where, however, the fresh evidence does not relate directly to an issue, but is merely evidence as to the credibility of an important witness, this court applies a stricter test. It will only allow its admission (if ever) where “the evidence is of such a nature and the circumstances of the case are such that no reasonable jury could be expected to act upon the evidence of the witness whose character had been called in question” (per Tucker LJ in Braddock v. Tillotson’s Newspapers Ltd., [1950] 1 KB 47, 53) or “where the court is satisfied that the additional evidence must have led a reasonable jury to a different conclusion from that actually arrived at in the case”: per Cohen LJ. Mr. Neville Faulks claims that the fresh evidence in the present case satisfies even that strict test. But whether that be so, it is not necessary for us to decide.

WEEK 2: Meek

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Where the judge and jury have been misled, another principle makes itself felt. Lord Esher MR in Praed v. Graham (1889), 24 QBD 53, 55, said: “If the court can see that the jury in assessing damages have been guilty of misconduct, or made some gross blonder, or have been misled by the speeches of the counsel, those are undoubtedly sufficient grounds for interfering with the verdict.”

In Tombling v. Universal Bulb Co. Ltd., [1951] WN 247 it was sought to adduce fresh evidence on the ground that there had not been revealed to the judge the fact that a highly material witness was at the time of the trial serving a prison sentence for a motoring offence. Counsel had allowed him to give in evidence a residential address which was his normal home, and asked him questions which indicated that he had in the past held a responsible position. The appeal was dismissed; but Singleton LJ described the case as ’hear the line.” Denning LJ there said: “This raises an important question of professional duty. I do not doubt that, if a favourable decision has been obtained by any improper conduct of the successful party, this court will always be ready to grant a new trial. The duty of counsel to his client in a civil case—or in defending an accused person—is to make every honest endeavour to succeed. He must not, of course, knowingly mislead the court, either on the facts or on the law, but, short of that, he may put such matters .......... as in his discretion he thinks will be most to the advantage of his client.” I respectfully agree with those words. He then discussed the facts of that case, and came to the conclusion that there had been nothing improper in the conduct of the case for the plaintiffs. In that case the failure to reveal was not a premeditated tine of conduct. Nor was conviction for a motoring offence so relevant in credibility as the demotion of a chief inspector (who is a party to the case) for an offence which consisted in deceiving a court of law as to the accurate facts relating to an arrest. There is no authority where the facts have been at all similar to those of the present case, hut in my judgment the principles on which we should act are clear.

Where a party deliberately misleads the court in a material matter, and that deception has probably tipped the scale in his favour (or even, as I think, where it may reasonably have done so), it would be wrong to allow him to retain the judgment thus unfairly procured. Finis litium is a desirable object, hut it must not be sought by so great a sacrifice of justice, which is and must remain the supreme object. Moreover, to allow the victor to keep the spoils so unworthily obtained would be an encouragement to such behaviour, and do even greater harm than the multiplication of trials.

In every case it must be a question of degree, weighing one principle against the other. In this case it is clear that the judge and jury were misled on an important matter. I appreciate that it is very hard at times for the advocate to see his path clearly between failure in his duty to the court, and failure in his duty to his client. I accept that in the present case the decision to conceal the facts was not made lightly, but after anxious consideration. But in my judgment the duty to the court was here unwarrantably subordinated to the duty to the client. It is no less surprising that this should be done when the defendant is a member of the Metropolitan Police Force on whose integrity the public are accustomed to rely.

It was argued that there were several other police witnesses against the plaintiff’s story; that although part of the issue depended on the evidence of the parties alone, the greater part of the defence depended on other witnesses than the defendant, and that therefore the concealment did not have any substantial result. But since the defendant and his advisers thought fit to take so serious a step, they must, in the light of their own intimate knowledge of their case, have regarded the concealment as being of overwhelming importance to their success. Therefore I am not prepared to countenance their present argument that it may have made no difference to the result.

It was argued that the defendant was justified in that a party need not reveal something to his discredit; hut that does not mean that he can by implication falsely pretend (where it is a material matter) to a rank and status that are not his, and, when he knows that the court is so deluded, foster and confirm that delusion by answers such as the defendant gave. Suggestio falsi went hand in hand with suppressio veri. It may well be that it was not so clear in prospect as it is in retrospect how wide the web of deceit would be woven before the verdict came to be given. But in the event it spread over all the evidence of the defendant. It affected the summing-up of the judge, and it must have affected the deliberations of the jury. The defendant and his legal advisers, and probably some at least of his witnesses, on the one hand, were aware of the facts, and intent not to reveal them, in order that on the other hand the plaintiff and his counsel and the jury and the judge might remain in ignorance, and that the defendant might be thereby enabled to masquerade as a chief inspector of unblemished reputation enjoying such advantage as that status and character would give him at the trial. It would be an intolerable infraction of the principles of justice to allow

WEEK 2: Meek

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the defendant to retain a verdict thus obtained. I would, accordingly, allow the appeal with costs, and order a new trial.

WILLMER LJ: In the present case there is no doubt that the course taken, which had the effect of deceiving the court, was taken deliberately. Counsel for the defendant has so informed us with complete candour. I accept his assurance that the decision was proper in all the circumstances. But for my part I am in no doubt that it was not taken lightly, hut after careful consideration, and in the belief that the course taken was a wrong decision. I would venture to follow the example of Singleton LJ in Tombling’s case in quoting from Lord Macmillan on “The Ethics of Advocacy.” This is what Lord Macmillan said: “In the discharge of his office the advocate has a duty to his client, a duty to his opponent, a duty to the court, a duty to the State and a duty to himself.” It seems to me that the decision which was taken involved insufficient regard being paid to the duty owed to the court and to the plaintiff and his advisers.

The result of the decision that was taken was that the trial proceeded in a way that it should not have done. Where the court has been thus deceived in relation to what I conceive to be a matter of vital significance, I think it would be a miscarriage of justice to allow a verdict obtained in this way to stand. For these additional reasons, as well as for the reasons already stated by my Lord, I agree that this appeal must be allowed.

PEARSON LJ: It was decided, after very careful consideration, that the defendant’s case should be conducted in such a way as not to reveal to the judge and jury the fact that the defendant had been demoted from the rank of chief inspector to the rank of station sergeant. Well-devised and effective steps were taken to carry out the decision, with the consequences that the defendant appeared to the judge and jury throughout the trial as a person still holding the rank of chief inspector, and therefore as a highly credit-worthy person, whereas in fact he had been demoted for an offence involving deception of a court. Whatever erroneous analogies may have prompted the decision, which was well intentioned, it was, in my view, utterly wrong, and it had deplorable results. There was, in the result, at the trial of this action a deception of the court, and the defendant in cross-examination was giving uncandid (and at one point false) evidence in order to preserve the concealment of the truth.

Having regard to the deception of the court and the materiality of the fresh evidence, I agree that the appeal should be allowed with costs, and that there should be an order for a new trial.

DURAND QC: I indicated last week in the course of my argument before your Lordships that I took responsibility for the decision; I hope that the words I used then left the court under no misunderstanding as to my personal responsibility. It is right that I should say as emphatically and clearly as I can that the decision not to make disclosure of the defendant’s change of status was mine, and mine alone. Having come to the conclusion that this course was justifiable, I determined and dictated the policy which was thereafter followed during the course of the trial. Neither my learned junior counsel, Mr. Stabb, nor my instructing solicitor was responsible for initiating or pursuing that policy, and indeed they expressed their disapproval of it. I thought it right, having regard to the observations made last week, to make that statement before your Lordships in open court, and I am very grateful to your Lordships for allowing me to make it.

WEEK 2: BC v. Imperial Tobacco

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British Columbia v. Imperial Tobacco Canada

2005 SCC 49

The judgment of the Court was delivered by

1 MAJOR J. — The Tobacco Damages and Health Care Costs Recovery Act, S.B.C. 2000, c. 30 (the “Act”), authorizes an action by the government of British Columbia against a manufacturer of tobacco products for the recovery of health care expenditures incurred by the government in treating individuals exposed to those products. Liability hinges on those individuals having been exposed to tobacco products because of the manufacturer’s breach of a duty owed to persons in British Columbia, and on the government of British Columbia having incurred health care expenditures in treating disease in those individuals caused by such exposure.

2 These appeals question the constitutional validity of the Act. The appellants, each of which was sued by the government of British Columbia pursuant to the Act, challenge its constitutional validity on the basis that it violates: (1) territorial limits on provincial legislative jurisdiction; (2) the principle of judicial independence; and (3) the principle of the rule of law.

3 For the reasons that follow, the Act is constitutionally valid. The appeals are dismissed, with costs to the respondents throughout.

I. Background

A. The Legislation

4 The Act, in its entirety, is reproduced in the Appendix. Its essential aspects are summarized below.

5 Section 2(1) is the keystone of the Act. It reads:

The government has a direct and distinct action against a manufacturer to recover the cost of health care benefits caused or contributed to by a tobacco related wrong.

6 The terms “manufacturer”, “cost of health care benefits” and “tobacco related wrong” are defined in s. 1(1) of the Act. Their definitions in turn refer to other defined terms. Incorporating the definitions into s. 2, then paraphrasing to some degree, the section provides as follows:

The government has a direct and distinct action against a manufacturer for the present value of existing and reasonably expected future expenditures by the government for

(a) benefits as defined under the Hospital Insurance Act or the Medicare Protection Act;

(b) payments under the Continuing Care Act; and

(c) programs, services or benefits associated with disease,

where

(a) such expenditures result from disease or the risk of disease caused or contributed to by exposure to a tobacco product; and

(b) such exposure was caused or contributed to by

(i) a tort committed in British Columbia by the manufacturer; or


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(ii) a breach of a common law, equitable or statutory duty or obligation owed by the manufacturer to persons in British Columbia who have been or might have become exposed to a tobacco product.

7 Viewed in this light, s. 2(1) creates a cause of action by which the government of British Columbia may recover from a tobacco manufacturer money spent treating disease in British Columbians, where such disease was caused by exposure to a tobacco product (whether entirely in British Columbia or not), and such exposure was caused by that manufacturer’s tort in British Columbia, or breach of a duty owed to persons in British Columbia.

8 The cause of action created by s. 2(1), besides being “direct and distinct”, is not a subrogated claim: s. 2(2). Nor is it barred by the Limitation Act, R.S.B.C. 1996, c. 266, s. 6(1). Crucially, it can be pursued on an aggregate basis — i.e., in respect of a population of persons for whom the government has made or can reasonably be expected to make expenditures: s. 2(4)(b).

9 Where the government’s claim is made on an aggregate basis, it may use statistical, epidemiological and sociological evidence to prove its case: s. 5(b). It need not identify, prove the cause of disease or prove the expenditures made in respect of any individual member of the population on which it bases its claim: s. 2(5)(a). Furthermore, health care records and related information in respect of individual members of that population are not compellable, except if relied upon by an expert witness: s. 2(5)(b) and (c). However, the court is free to order the discovery of a “statistically meaningful sample” of the health care records of individual members of that population, stripped of personal identifiers: s. 2(5)(d) and (e).

10 Pursuant to s. 3(1) and (2), the government enjoys a reversed burden of proof in respect of certain elements of an aggregate claim. Where the aggregate claim is, like the one brought against each of the appellants, to recover expenditures in respect of disease caused by exposure to cigarettes, the reversed burden of proof operates as follows. Once the government proves that

(a) the defendant manufacturer breached a common law, equitable or statutory duty or obligation it owed to persons in British Columbia who have been or might become exposed to cigarettes;

(b) exposure to cigarettes can cause or contribute to disease; and

(c) during the manufacturer’s breach, cigarettes manufactured or promoted by the manufacturer were offered for sale in British Columbia,

the court will presume that

(a) the population that is the basis for the government’s aggregate claim would not have been exposed to cigarettes but for the manufacturer’s breach; and

(b) such exposure caused or contributed to disease in a portion of the population that is the basis for the government’s aggregate claim.

11 In this way, it falls on a defendant manufacturer to show that its breach of duty did not give rise to exposure, or that exposure resulting from its breach of duty did not give rise to the disease in respect of which the government claims for its expenditures. The reversed burden of proof on the manufacturer is a balance of probabilities: s. 3(4).

12 Where the aforementioned presumptions apply, the court must determine the portion of the government’s expenditures after the date of the manufacturer’s breach that resulted from exposure to cigarettes: s. 3(3)(a). The manufacturer is liable for such expenditures in proportion to its share of the market for cigarettes in British Columbia, calculated over the period of time between its first breach of duty and trial: ss. 3(3)(b) and 1(6).

13 In an action by the government, a manufacturer will be jointly and severally liable for expenditures arising from a joint breach of duty (i.e., for expenditures caused by disease, which disease was caused by exposure, which exposure was caused by a joint breach of duty to which the manufacturer was a party): s. 4(1).


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14 Pursuant to s. 10, all provisions of the Act operate retroactively.

15 The Act is the second British Columbia statute designed to enable the government to sue tobacco manufacturers for tobacco-related health care costs that has been challenged on the basis of its constitutionality. The Supreme Court of British Columbia struck down the earlier statute, the Tobacco Damages Recovery Act, S.B.C. 1997, c. 41, as being in pith and substance legislation in relation to extra-provincial civil rights and therefore ultra vires the Legislative Assembly of British Columbia: see JTI-Macdonald Corp. v. British Columbia (Attorney General) (2000), 184 D.L.R. (4th) 335, 2000 BCSC 312.

16 The legislative history of the Act confirms that it was drafted to address concerns about the extra-territorial aspects of the earlier statute and to avoid any further challenges with respect to extra-territoriality: see Debates of the Legislative Assembly, vol. 20, No. 6, 4th Sess., 36th Parl., June 7, 2000, at p. 16314.

B. Procedural History

17 On January 24, 2001, the Act came into force. On the same day, the government sued 14 entities in the tobacco industry in the Supreme Court of British Columbia, pursuant to s. 2 of the Act.

18 The appellants are among the 14 entities sued by the government. The appellants Imperial Tobacco Canada Limited, Rothmans, Benson & Hedges Inc., JTI-Macdonald Corp. and Canadian Tobacco Manufacturers’ Council are Canadian corporations, and were served in British Columbia. The appellants Philip Morris Incorporated (now Philip Morris USA Inc.) and Philip Morris International Inc. are incorporated under the laws of Virginia and Delaware, respectively, and were served ex juris. The appellant British American Tobacco (Investments) Limited is incorporated under the laws of the United Kingdom, and was also served ex juris.

19 The Canadian appellants applied for a declaration that the Act is unconstitutional. The appellants served ex juris applied to set aside service on the basis that the Act is unconstitutional, and thus that the government’s actions founded on it were bound to fail.

20 Throughout the proceedings, the appellants’ constitutional attack has been essentially tripartite. They argue that the Act exceeds the territorial limits on provincial legislative jurisdiction, violates judicial independence and infringes the rule of law.

II. Judicial History

A. Supreme Court of British Columbia (2003), 227 D.L.R. (4th) 323, 2003 BCSC 877

21 Holmes J. rejected the appellants’ submissions concerning judicial independence and the rule of law, but accepted their submissions concerning extra-territoriality. He concluded that the Act fails to respect territorial limits on provincial legislative jurisdiction because, in his view, the exposure to tobacco products giving rise to liability is territorially unconfined, and the aim of the Act is recovery of health care costs “from the tobacco industry nationally and internationally” (para. 222).

22 In the result, Holmes J. declared the Act invalid, dismissed the government’s actions brought pursuant to the Act and set aside all ex juris service by the government.

B. Court of Appeal for British Columbia (2004), 239 D.L.R. (4th) 412, 2004 BCCA 269

23 The Court of Appeal for British Columbia allowed the respondents’ appeals. Lambert, Rowles and Prowse JJ.A. each gave reasons concluding that the Act’s pith and substance is “Property and Civil Rights in the Province” within the meaning of s. 92(13) of the Constitution Act, 1867; that the extra-territorial aspects of the


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Act, if any, are incidental to it; and therefore that the Act is not invalid by reason of extra-territoriality. All agreed that the Act does not offend judicial independence or the rule of law.

24 In the result, the court dismissed the appellants’ applications for declarations that the Act is invalid, set aside Holmes J.’s orders dismissing the government’s actions and remitted to the Supreme Court of British Columbia the applications of the appellants served ex juris to have service set aside, with such applications to be decided on the basis that the Act is constitutionally valid.

III. Issues

25 McLachlin C.J. stated the following constitutional questions:

1. Is the Tobacco Damages and Health Care Costs Recovery Act, S.B.C. 2000, c. 30, ultra vires the provincial legislature by reason of extra-territoriality?

2. Is the Tobacco Damages and Health Care Costs Recovery Act, S.B.C. 2000, c. 30, constitutionally invalid, in whole or in part, as being inconsistent with judicial independence?

3. Is the Tobacco Damages and Health Care Costs Recovery Act, S.B.C. 2000, c. 30, constitutionally invalid, in whole or in part, as offending the rule of law?

IV. Analysis

A. Extra-territoriality

26 Section 92 of the Constitution Act, 1867 is the primary source of provincial legislatures’ authority to legislate. Provincial legislation must therefore respect the limitations, territorial and otherwise, on provincial legislative competence found in s. 92. The opening words of s. 92 — “In each Province” — represent a blanket territorial limitation on provincial powers. That limitation is echoed in a similar phrase that qualifies a number of the heads of power in s. 92: “in the Province”.

27 The territorial limitations on provincial legislative competence reflect the requirements of order and fairness underlying Canadian federal arrangements and discussed by this Court in Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, at pp. 1102-3, Hunt v. T&N plc, [1993] 4 S.C.R. 289, at pp. 324-25, and Unifund Assurance Co. v. Insurance Corp. of British Columbia, [2003] 2 S.C.R. 63, 2003 SCC 40, at para. 56. They serve to ensure that provincial legislation both has a meaningful connection to the province enacting it, and pays respect to “the sovereignty of the other provinces within their respective legislative spheres”: Unifund, at para. 51. See also, generally, R. E. Sullivan, “Interpreting the Territorial Limitations on the Provinces” (1985), 7 Sup. Ct. L. Rev. 511.

28 Where the validity of provincial legislation is challenged on the basis that it violates territorial limitations on provincial legislative competence, the analysis centres on the pith and substance of the legislation. If its pith and substance is in relation to matters falling within the field of provincial legislative competence, the legislation is valid. Incidental or ancillary extra-provincial aspects of such legislation are irrelevant to its validity. See Reference re Upper Churchill Water Rights Reversion Act, [1984] 1 S.C.R. 297 (“Churchill Falls”), at p. 332, and Global Securities Corp. v. British Columbia (Securities Commission), [2000] 1 S.C.R. 494, 2000 SCC 21, at para. 24.

29 In determining the pith and substance of legislation, the court identifies its essential character or dominant feature: see Global Securities Corp., at para. 22, and Reference re Firearms Act (Can.), [2000] 1 S.C.R. 783, 2000 SCC 31, at para. 16. This may be done through reference to both the purpose and effect of the legislation: see Kitkatla Band v. British Columbia (Minister of Small Business, Tourism and Culture), [2002] 2 S.C.R. 146, 2002 SCC 31, at para. 53. See also Fédération des producteurs de volailles du Québec v. Pelland, [2005] 1 S.C.R. 292, 2005 SCC 20, at para. 20.


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30 Where the pith and substance of legislation relates to a tangible matter — i.e., something with an intrinsic and observable physical presence — the question of whether it respects the territorial limitations in s. 92 is easy to answer. One need only look to the location of the matter. If it is in the province, the limitations have been respected, and the legislation is valid. If it is outside the province, the limitations have been violated, and the legislation is invalid.

31 Where legislation’s pith and substance relates to an intangible matter, the characterization is more complicated. That is the case here.

32 The pith and substance of the Act is plainly the creation of a civil cause of action. More specifically, it is the creation of a civil cause of action by which the government of British Columbia may seek compensation for certain health care costs incurred by it. Civil causes of action are a matter within provincial legislative jurisdiction under s. 92(13) of the Constitution Act, 1867: “Property and Civil Rights in the Province”. See General Motors of Canada Ltd. v. City National Leasing, [1989] 1 S.C.R. 641, at p. 672.

33 But s. 92(13) does not speak to “Property and Civil Rights” located anywhere. It speaks only to “Property and Civil Rights in the Province”. And, to reiterate, it is, like all provincial heads of power, qualified by the opening words of s. 92: “In each Province”. The issue thus becomes how to determine whether an intangible, such as the cause of action constituting the pith and substance of the Act, is “in the Province”.

34 Churchill Falls dealt with a similar issue. In that case, McIntyre J. was confronted with a Newfoundland statute, the pith and substance of which was the modification of rights existing under a contract between Churchill Falls (Labrador) Corporation Limited and Quebec Hydro-Electric Commission. Since the entity possessing those rights (namely, the Commission) was constituted in Quebec, and the parties had agreed that the Quebec courts had exclusive jurisdiction to adjudicate disputes concerning their contract, McIntyre J. regarded the rights created by that contract as situated in Quebec. The Newfoundland law that purported to modify them was thus invalid. It related to civil rights, but not to civil rights “in the Province”.

…

36 From the foregoing it can be seen that several analytical steps may be required to determine whether provincial legislation in pith and substance respects territorial limits on provincial legislative competence. The first step is to determine the pith and substance, or dominant feature, of the impugned legislation, and to identify a provincial head of power under which it might fall. Assuming a suitable head of power can be found, the second step is to determine whether the pith and substance respects the territorial limitations on that head of power — i.e., whether it is in the province. If the pith and substance is tangible, whether it is in the province is simply a question of its physical location. If the pith and substance is intangible, the court must look to the relationships among the enacting territory, the subject matter of the legislation and the persons made subject to it, in order to determine whether the legislation, if allowed to stand, would respect the dual purposes of the territorial limitations in s. 92 (namely, to ensure that provincial legislation has a meaningful connection to the enacting province and pays respect to the legislative sovereignty of other territories). If it would, the pith and substance of the legislation should be regarded as situated in the province.

37 Here, the cause of action that is the pith and substance of the Act serves exclusively to make the persons ultimately responsible for tobacco-related disease suffered by British Columbians — namely, the tobacco manufacturers who, through their wrongful acts, caused those British Columbians to be exposed to tobacco — liable for the costs incurred by the government of British Columbia in treating that disease. There are thus strong relationships among the enacting territory (British Columbia), the subject matter of the law (compensation for the government of British Columbia’s tobacco-related health care costs) and the persons made subject to it (the tobacco manufacturers ultimately responsible for those costs), such that the Act can easily be said to be meaningfully connected to the province.

38 The Act respects the legislative sovereignty of other jurisdictions. Though the cause of action that is its pith and substance may capture, to some extent, activities occurring outside of British Columbia, no territory could possibly assert a stronger relationship to that cause of action than British Columbia. That is because there


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is at all times one critical connection to British Columbia exclusively: the recovery permitted by the action is in relation to expenditures by the government of British Columbia for the health care of British Columbians.

39 In assessing the Act’s respect for the territorial limitations on British Columbia’s legislative competence, the appellants and the Court of Appeal placed considerable emphasis on the question of whether, as a matter of statutory interpretation, the breach of duty by a manufacturer that is a necessary condition of its liability under the cause of action created by the Act must occur in British Columbia. That emphasis was undue, for two reasons.

40 First, the driving force of the Act’s cause of action is compensation for the government of British Columbia’s health care costs, not remediation of tobacco manufacturers’ breaches of duty. While the Act makes the existence of a breach of duty one of several necessary conditions to a manufacturer’s liability to the government, it is not the mischief at which the cause of action created by the Act is aimed. The Act leaves breaches of duty to be remedied by the law that gives rise to the duty. Thus, the breaches of duty to which the Act refers are of subsidiary significance to the cause of action created by it, and the locations where those breaches might occur have little or no bearing on the strength of the relationship between the cause of action and the enacting jurisdiction.

41 Second, and in any event, the only relevant breaches under the Act are breaches of duties (or obligations) owed “to persons in British Columbia” (s. 1(1) “tobacco related wrong” and s. 3(1)(a)) that give rise to health care expenditures by the government of British Columbia. Thus, even if the existence of a breach of duty were the central element of the Act’s cause of action (it is not), the cause of action would remain strongly related to British Columbia.

42 The question of whether other matters, such as exposure and disease, to which the Act refers, must occur or arise in British Columbia is equally or more irrelevant to the Act’s validity. Those matters too are conditions precedent to success in an action brought pursuant to the Act and of subsidiary significance to it.

43 It follows that the cause of action that constitutes the pith and substance of the Act is properly described as located “in the Province”. The Act is not invalid by reason of extra-territoriality, being in pith and substance legislation in relation “Property and Civil Rights in the Province” under s. 92(13) of the Constitution Act, 1867.

B. Judicial Independence

44 Judicial independence is a “foundational principle” of the Constitution reflected in s. 11(d) of the Canadian Charter of Rights and Freedoms, and in both ss. 96-100 and the preamble to the Constitution Act, 1867: Reference re Remuneration of Judges of the Provincial Court of Prince Edward Island, [1997] 3 S.C.R. 3, at para. 109. It serves “to safeguard our constitutional order and to maintain public confidence in the administration of justice”: Ell v. Alberta, [2003] 1 S.C.R. 857, 2003 SCC 35, at para. 29. See also Application under s. 83.28 of the Criminal Code (Re), [2004] 2 S.C.R. 248, 2004 SCC 42, at paras. 80-81.

45 Judicial independence consists essentially in the freedom “to render decisions based solely on the requirements of the law and justice”: Mackin v. New Brunswick (Minister of Finance), [2002] 1 S.C.R. 405, 2002 SCC 13, at para. 37. It requires that the judiciary be left free to act without improper “interference from any other entity” (Ell, at para. 18) — i.e., that the executive and legislative branches of government not “impinge on the essential ‘authority and function’ . . . of the court” (MacKeigan v. Hickman, [1989] 2 S.C.R. 796, at p. 828). See also Valente v. The Queen, [1985] 2 S.C.R. 673, at pp. 686-87; Beauregard v. Canada, [1986] 2 S.C.R. 56, at pp. 73 and 75; R. v. Lippé, [1991] 2 S.C.R. 114, at pp. 152-54; Babcock v. Canada (Attorney General), [2002] 3 S.C.R. 3, 2002 SCC 57, at para. 57; and Application under s. 83.28 of the Criminal Code (Re), at para. 87.

46 Security of tenure, financial security and administrative independence are the three “core characteristics” or “essential conditions” of judicial independence: Valente, at pp. 694, 704 and 708, and Reference re Remuneration of Judges of the Provincial Court of Prince Edward Island, at para. 115. It is a precondition to judicial independence that they be maintained, and be seen by “a reasonable person who is fully informed of all


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the circumstances” to be maintained: Mackin, at paras. 38 and 40, and Provincial Court Judges’ Assn. of New Brunswick v. New Brunswick (Minister of Justice), [2005] 2 S.C.R. 286, 2005 SCC 44, at para. 6.

47 However, even where the essential conditions of judicial independence exist, and are reasonably seen to exist, judicial independence itself is not necessarily ensured. The critical question is whether the court is free, and reasonably seen to be free, to perform its adjudicative role without interference, including interference from the executive and legislative branches of government. See, for example, Application under s. 83.28 of the Criminal Code (Re), at paras. 82-92.

48 The appellants submit that the Act violates judicial independence, both in reality and appearance, because it contains rules of civil procedure that fundamentally interfere with the adjudicative role of the court hearing an action brought pursuant to the Act. They point to s. 3(2), which they say forces the court to make irrational presumptions, and to ss. 2(5)(a), 2(5)(b) and 2(5)(c), which they say subvert the court’s ability to discover relevant facts. They say that these rules impinge on the court’s fact-finding function, and virtually guarantee the government’s success in an action brought pursuant to the Act.

49 The rules in the Act with which the appellants take issue are not as unfair or illogical as the appellants submit. They appear to reflect legitimate policy concerns of the British Columbia legislature regarding the systemic advantages tobacco manufacturers enjoy when claims for tobacco-related harm are litigated through individualistic common law tort actions. That, however, is beside the point. The question is not whether the Act’s rules are unfair or illogical, nor whether they differ from those governing common law tort actions, but whether they interfere with the courts’ adjudicative role, and thus judicial independence.

50 The primary role of the judiciary is to interpret and apply the law, whether procedural or substantive, to the cases brought before it. It is to hear and weigh, in accordance with the law, evidence that is relevant to the legal issues confronted by it, and to award to the parties before it the available remedies.

51 The judiciary has some part in the development of the law that its role requires it to apply. Through, for example, its interpretation of legislation, review of administrative decisions and assessment of the constitutionality of legislation, it may develop the law significantly. It may also make incremental developments to its body of previous decisions — i.e., the common law — in order to bring the legal rules those decisions embody “into step with a changing society”: R. v. Salituro, [1991] 3 S.C.R. 654, at p. 666. See also Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, at paras. 91-92. But the judiciary’s role in developing the law is a relatively limited one. “[I]n a constitutional democracy such as ours it is the legislature and not the courts which has the major responsibility for law reform”: Salituro, at p. 670.

52 It follows that the judiciary’s role is not, as the appellants seem to submit, to apply only the law of which it approves. Nor is it to decide cases with a view simply to what the judiciary (rather than the law) deems fair or pertinent. Nor is it to second-guess the law reform undertaken by legislators, whether that reform consists of a new cause of action or procedural rules to govern it. Within the boundaries of the Constitution, legislatures can set the law as they see fit. “The wisdom and value of legislative decisions are subject only to review by the electorate”: Wells v. Newfoundland, [1999] 3 S.C.R. 199, at para. 59.

53 In essence, the appellants’ arguments misapprehend the nature and scope of the courts’ adjudicative role protected from interference by the Constitution’s guarantee of judicial independence. To accept their position on that adjudicative role would be to recognize a constitutional guarantee not of judicial independence, but of judicial governance.

54 None of this is to say that legislation, being law, can never unconstitutionally interfere with courts’ adjudicative role. But more is required than an allegation that the content of the legislation required to be applied by that adjudicative role is irrational or unfair, or prescribes rules different from those developed at common law. The legislation must interfere, or be reasonably seen to interfere, with the courts’ adjudicative role, or with the essential conditions of judicial independence. As McLachlin C.J. stated in Babcock, at para. 57:


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It is well within the power of the legislature to enact laws, even laws which some would consider draconian, as long as it does not fundamentally alter or interfere with the relationship between the courts and the other branches of government.

55 No such fundamental alteration or interference was brought about by the legislature’s enactment of the Act. A court called upon to try an action brought pursuant to the Act retains at all times its adjudicative role and the ability to exercise that role without interference. It must independently determine the applicability of the Act to the government’s claim, independently assess the evidence led to support and defend that claim, independently assign that evidence weight, and then independently determine whether its assessment of the evidence supports a finding of liability. The fact that the Act shifts certain onuses of proof or limits the compellability of information that the appellants assert is relevant does not in any way interfere, in either appearance or fact, with the court’s adjudicative role or any of the essential conditions of judicial independence. Judicial independence can abide unconventional rules of civil procedure and evidence.

56 The appellants’ submission that the Act violates the independence of the judiciary and is therefore unconstitutional fails for the reasons stated above.

C. Rule of Law

57 The rule of law is “a fundamental postulate of our constitutional structure” (Roncarelli v. Duplessis, [1959] S.C.R. 121, at p. 142) that lies “at the root of our system of government” (Reference re Secession of Quebec, [1998] 2 S.C.R. 217, at para. 70). It is expressly acknowledged by the preamble to the Constitution Act, 1982, and implicitly recognized in the preamble to the Constitution Act, 1867: see Reference re Manitoba Language Rights, [1985] 1 S.C.R. 721, at p. 750.

58 This Court has described the rule of law as embracing three principles. The first recognizes that “the law is supreme over officials of the government as well as private individuals, and thereby preclusive of the influence of arbitrary power”: Reference re Manitoba Language Rights, at p. 748. The second “requires the creation and maintenance of an actual order of positive laws which preserves and embodies the more general principle of normative order”: Reference re Manitoba Language Rights, at p. 749. The third requires that “the relationship between the state and the individual . . . be regulated by law”: Reference re Secession of Quebec, at para. 71.

59 So understood, it is difficult to conceive of how the rule of law could be used as a basis for invalidating legislation such as the Act based on its content. That is because none of the principles that the rule of law embraces speak directly to the terms of legislation. The first principle requires that legislation be applied to all those, including government officials, to whom it, by its terms, applies. The second principle means that legislation must exist. And the third principle, which overlaps somewhat with the first and second, requires that state officials’ actions be legally founded. See R. Elliot, “References, Structural Argumentation and the Organizing Principles of Canada’s Constitution” (2001), 80 Can. Bar Rev. 67, at pp. 114-15.

60 This does not mean that the rule of law as described by this Court has no normative force. As McLachlin C.J. stated in Babcock, at para. 54, “unwritten constitutional principles”, including the rule of law, “are capable of limiting government actions”. See also Reference re Secession of Quebec, at para. 54. But the government action constrained by the rule of law as understood in Reference re Manitoba Language Rights and Reference re Secession of Quebec is, by definition, usually that of the executive and judicial branches. Actions of the legislative branch are constrained too, but only in the sense that they must comply with legislated requirements as to manner and form (i.e., the procedures by which legislation is to be enacted, amended and repealed).

61 Nonetheless, considerable debate surrounds the question of what additional principles, if any, the rule of law might embrace, and the extent to which they might mandate the invalidation of legislation based on its content. P. W. Hogg and C. F. Zwibel write in “The Rule of Law in the Supreme Court of Canada” (2005), 55 U.T.L.J. 715, at pp. 717-18:


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Many authors have tried to define the rule of law and to explain its significance, or lack thereof. Their views spread across a wide spectrum. . . . T.R.S. Allan, for example, claims that laws that fail to respect the equality and human dignity of individuals are contrary to the rule of law. Luc Tremblay asserts that the rule of law includes the liberal principle, the democratic principle, the constitutional principle, and the federal principle. For Allan and Tremblay, the rule of law demands not merely that positive law be obeyed but that it embody a particular vision of social justice. Another strong version comes from David Beatty, who argues that the ‘ultimate rule of law’ is a principle of ‘proportionality’ to which all laws must conform on pain of invalidity (enforced by judicial review). In the middle of the spectrum are those who, like Joseph Raz, accept that the rule of law is an ideal of constitutional legality, involving open, stable, clear, and general rules, even-handed enforcement of those laws, the independence of the judiciary, and judicial review of administrative action. Raz acknowledges that conformity to the rule of law is often a matter of degree, and that breaches of the rule of law do not lead to invalidity.

See also W. J. Newman, “The Principles of the Rule of Law and Parliamentary Sovereignty in Constitutional Theory and Litigation” (2005), 16 N.J.C.L. 175, at pp. 177-80.

62 This debate underlies Strayer J.A.’s apt observation in Singh v. Canada (Attorney General), [2000] 3 F.C. 185 (C.A.), at para. 33, that “[a]dvocates tend to read into the principle of the rule of law anything which supports their particular view of what the law should be.”

63 The appellants’ conceptions of the rule of law can fairly be said to fall at one extreme of the spectrum of possible conceptions and to support Strayer J.A.’s thesis. They submit that the rule of law requires that legislation: (1) be prospective; (2) be general in character; (3) not confer special privileges on the government, except where necessary for effective governance; and (4) ensure a fair civil trial. And they argue that the Act breaches each of these requirements, rendering it invalid.

64 A brief review of this Court’s jurisprudence will reveal that none of these requirements enjoy constitutional protection in Canada. But before embarking on that review, it should be said that acknowledging the constitutional force of anything resembling the appellants’ conceptions of the rule of law would seriously undermine the legitimacy of judicial review of legislation for constitutionality. That is so for two separate but interrelated reasons.

65 First, many of the requirements of the rule of law proposed by the appellants are simply broader versions of rights contained in the Charter. For example, the appellants’ proposed fair trial requirement is essentially a broader version of s. 11(d) of the Charter, which provides that “[a]ny person charged with an offence has the right . . . to . . . a fair and public hearing.” But the framers of the Charter enshrined that fair trial right only for those “charged with an offence”. If the rule of law constitutionally required that all legislation provide for a fair trial, s. 11(d) and its relatively limited scope (not to mention its qualification by s. 1) would be largely irrelevant because everyone would have the unwritten, but constitutional, right to a “fair . . . hearing”. (Though, as explained in para. 76, the Act provides for a fair trial in any event.) Thus, the appellants’ conception of the unwritten constitutional principle of the rule of law would render many of our written constitutional rights redundant and, in doing so, undermine the delimitation of those rights chosen by our constitutional framers. That is specifically what this Court cautioned against in Reference re Secession of Quebec, at para. 53:

Given the existence of these underlying constitutional principles, what use may the Court make of them? In [Reference re Remuneration of Judges of the Provincial Court of Prince Edward Island], at paras. 93 and 104, we cautioned that the recognition of these constitutional principles . . . could not be taken as an invitation to dispense with the written text of the Constitution. On the contrary, we confirmed that there are compelling reasons to insist upon the primacy of our written constitution. A written constitution promotes legal certainty and predictability, and it provides a foundation and a touchstone for the exercise of constitutional judicial review. [Emphasis added.]

66 Second, the appellants’ arguments overlook the fact that several constitutional principles other than the rule of law that have been recognized by this Court — most notably democracy and constitutionalism — very


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strongly favour upholding the validity of legislation that conforms to the express terms of the Constitution (and to the requirements, such as judicial independence, that flow by necessary implication from those terms). Put differently, the appellants’ arguments fail to recognize that in a constitutional democracy such as ours, protection from legislation that some might view as unjust or unfair properly lies not in the amorphous underlying principles of our Constitution, but in its text and the ballot box. See Bacon v. Saskatchewan Crop Insurance Corp. (1999), 180 Sask. R. 20 (C.A.), at para. 30; Elliot, at pp. 141-42; Hogg and Zwibel, at p. 718; and Newman, at p. 187.

67 The rule of law is not an invitation to trivialize or supplant the Constitution’s written terms. Nor is it a tool by which to avoid legislative initiatives of which one is not in favour. On the contrary, it requires that courts give effect to the Constitution’s text, and apply, by whatever its terms, legislation that conforms to that text.

68 A review of the cases showing that each of the appellants’ proposed requirements of the rule of law has, as a matter of precedent and policy, no constitutional protection is conclusive of the appellants’ rule of law arguments.

(1) Prospectivity in the Law

69 Except for criminal law, the retrospectivity and retroactivity of which is limited by s. 11(g) of the Charter, there is no requirement of legislative prospectivity embodied in the rule of law or in any provision of our Constitution. Professor P. W. Hogg sets out the state of the law accurately (in Constitutional Law of Canada (loose-leaf ed.), vol. 2, at p. 48-29):

Apart from s. 11(g), Canadian constitutional law contains no prohibition of retroactive (or ex post facto) laws. There is a presumption of statutory interpretation that a statute should not be given retroactive effect, but, if the retroactive effect is clearly expressed, then there is no room for interpretation and the statute is effective according to its terms. Retroactive statutes are in fact common.

70 Hence, in Air Canada v. British Columbia, [1989] 1 S.C.R. 1161, at p. 1192, La Forest J., writing for a majority of this Court, characterized a retroactive tax as “not constitutionally barred”. And in Cusson v. Robidoux, [1977] 1 S.C.R. 650, at p. 655, Pigeon J., for a unanimous Court, said that it would be “untenable” to suggest that legislation reviving actions earlier held by this Court (in Notre-Dame Hospital v. Patry, [1975] 2 S.C.R. 388) to be time-barred was unconstitutional.

71 The absence of a general requirement of legislative prospectivity exists despite the fact that retrospective and retroactive legislation can overturn settled expectations and is sometimes perceived as unjust: see E. Edinger, “Retrospectivity in Law” (1995), 29 U.B.C. L. Rev. 5, at p. 13. Those who perceive it as such can perhaps take comfort in the rules of statutory interpretation that require the legislature to indicate clearly any desired retroactive or retrospective effects. Such rules ensure that the legislature has turned its mind to such effects and “determined that the benefits of retroactivity [or retrospectivity] outweigh the potential for disruption or unfairness”: Landgraf v. USI Film Products, 511 U.S. 244 (1994), at p. 268.

72 It might also be observed that developments in the common law have always had retroactive and retrospective effect. Lord Nicholls recently explained this point in In re Spectrum Plus Ltd., [2005] 3 W.L.R. 58, [2005] UKHL 41, at para. 7:

A court ruling which changes the law from what it was previously thought to be operates retrospectively as well as prospectively. The ruling will have a retrospective effect so far as the parties to the particular dispute are concerned, as occurred with the manufacturer of the ginger beer in Donoghue v Stevenson [1932] AC 562. When Mr Stevenson manufactured and bottled and sold his ginger beer the law on manufacturers’ liability as generally understood may have been as stated by the majority of the Second Division of the Court of Session and the minority of their Lordships in that case. But in the claim Mrs Donoghue brought against Mr Stevenson his legal


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obligations fell to be decided in accordance with Lord Atkin’s famous statements. Further, because of the doctrine of precedent the same would be true of everyone else whose case thereafter came before a court. Their rights and obligations would be decided according to the law as enunciated by the majority of the House of Lords in that case even though the relevant events occurred before that decision was given.

This observation adds further weight, if needed, to the view that retrospectivity and retroactivity do not generally engage constitutional concerns.

(2) Generality in the Law, Ordinary Law for the Government and Fair Civil Trials

73 Two decisions of this Court defeat the appellants’ submission that the Constitution, through the rule of law, requires that legislation be general in character and devoid of special advantages for the government (except where necessary for effective governance), as well as that it ensure a fair civil trial.

74 The first is Air Canada. In it, a majority of this Court affirmed the constitutionality of 1981 amendments to the Gasoline Tax Act, 1948, R.S.B.C. 1960, c. 162, that retroactively taxed certain companies in the airline industry. The amendments were meant strictly to defeat three companies’ claims, brought in 1980, for reimbursement of gasoline taxes paid between 1974 and 1976, the collection of which was ultra vires the legislature of British Columbia. The legislative amendments, in addition to being retroactive, were for the benefit of the Crown, aimed at a particular industry with readily identifiable members and totally destructive of that industry’s ability to pursue successfully their claims filed a year earlier. Nonetheless, the constitutionality of those amendments was affirmed by a majority of this Court.

75 The second is Authorson v. Canada (Attorney General), [2003] 2 S.C.R. 40, 2003 SCC 39, in which this Court unanimously upheld a provision of the Department of Veterans Affairs Act, R.S.C. 1985, c. V-1, aimed specifically at defeating certain disabled veterans’ claims, the merits of which were undisputed, against the federal government. The claims concerned interest owed by the government on the veterans’ benefit accounts administered by it, which interest it had not properly credited for decades. Though the appeal was pursued on the basis of the Canadian Bill of Rights, S.C. 1960, c. 44, the decision confirmed that it was well within Parliament’s power to enact the provision at issue — despite the fact that it was directed at a known class of vulnerable veterans, conferred benefits on the Crown for “undisclosed reasons” (para. 62) and routed those veterans’ ability to have any trial — fair or unfair — of their claims. See para. 15:

The Department of Veterans Affairs Act, s. 5.1(4) takes a property claim from a vulnerable group, in disregard of the Crown’s fiduciary duty to disabled veterans. However, that taking is within the power of Parliament. The appeal has to be allowed.

76 Additionally, the appellants’ conception of a “fair” civil trial seems in part to be of one governed by customary rules of civil procedure and evidence. As should be evident from the analysis concerning judicial independence, there is no constitutional right to have one’s civil trial governed by such rules. Moreover, new rules are not necessarily unfair. Indeed, tobacco manufacturers sued pursuant to the Act will receive a fair civil trial, in the sense that the concept is traditionally understood: they are entitled to a public hearing, before an independent and impartial court, in which they may contest the claims of the plaintiff and adduce evidence in their defence. The court will determine their liability only following that hearing, based solely on its understanding of the law as applied to its findings of fact. The fact that defendants might regard that law (i.e., the Act) as unjust, or the procedural rules it prescribes as unprecedented, does not render their trial unfair.

77 The Act does not implicate the rule of law in the sense that the Constitution comprehends that term. It follows that the Act is not unconstitutional by reason of interference with it.

V. Conclusion


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78 The Act is constitutionally valid. The appeals are dismissed, with costs to the respondents throughout. Each constitutional question is answered “no”. The stay of proceedings granted by McLachlin C.J. on January 21, 2005 is vacated.

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Cojocaru v. British Columbia Women’s Hospital and Health Centre

2013 SCC 30

The judgment of the Court was delivered by

THE CHIEF JUSTICE —

I. Introduction

[1] The main question on this appeal is whether a trial judge’s decision should be set aside because his reasons for judgment incorporated large portions of the plaintiffs’ submissions. For the reasons that follow, I conclude that while it is desirable that judges express their conclusions in their own words, incorporating substantial amounts of material from submissions or other legal sources into reasons for judgment does not without more permit the decision to be set aside. Only if the incorporation is such that a reasonable person would conclude that the judge did not put her mind to the issues and decide them independently and impartially as she was sworn to do, can the judgment be set aside.

[2] This result, as we shall see, is consistent with longstanding practice in Canada and abroad. Yet, as the disagreement in the courts below and the arguments before us make clear, the jurisprudential framework and the governing principles involved are far from clear. This suggests the need to look carefully at the nature and function of reasons for judgment and the long tradition of judicial copying.

[3] Applying the principles discussed below, I conclude that the incorporation of large portions of the plaintiffs’submissions in the reasons in this case does not justify overturning the trial judge’s decision. The presumption of judicial integrity and impartiality has not been displaced. On the contrary, the reasons demonstrate that the trial judge addressed his mind to the issues he had to decide. This said, aspects of the reasons disclose palpable and overriding error and must be set aside. In the result, I would allow the appeal, but vary the trial judgment.

II. Statement of Facts

[4] Eric Victor Cojocaru, the son of Monica Cojocaru, suffered brain damage during his birth at the British Columbia Women’s Hospital and Health Care Centre (“Hospital”). Ms. Cojocaru had previously given birth to a child by caesarean section performed in Romania. On the recommendation of Dr. Yue, Ms. Cojocaru’s prenatal care obstetrician, Ms. Cojocaru attempted to deliver Eric by “vaginal birth after caesarean section” or “VBAC”. Ms. Cojocaru’s labour was induced by Dr. Edris, an obstetrical resident, with prostaglandin gel at the Hospital in the morning of May 21, 2001. May 21 was a holiday, and Dr. Yue’s patients — including Ms. Cojocaru — were under the care of the on-call obstetrician for that day, Dr. Steele. As Ms. Cojocaru was a high-risk patient, she remained at the Hospital during the day. In the afternoon, she was attended to by Nurses Verwoerd and Bellini. During her labour later that day, Ms. Cojocaru experienced a uterine rupture, which restricted Eric’s oxygen supply. The parties have accepted that the scar from the previous caesarean section was implicated in the rupture. An emergency caesarean section was then performed. Eric suffered brain damage, which has given rise to cerebral palsy.

[5] Eric and his mother brought an action in negligence against the Hospital; attending Nurses Bellini, MacQueen and Verwoerd; and Drs. Dale R. Steele, Jenise Yue and Fawaz Edris.

III. Judgments

[6] The trial judge found the Hospital, Nurse Bellini and three doctors liable in negligence and awarded damages to the plaintiffs in the amount of $4 million (2009 BCSC 494, 65 C.C.L.T. (3d) 75). The trial judge’s reasons reproduced large portions of the submissions of the plaintiffs. However, he did not accept all the

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submissions of the plaintiffs, discussed a number of issues and stated his final conclusions in his own words. He dismissed the claims against Nurse MacQueen and Nurse Verwoerd, and varied the quantum of damages from that suggested by the plaintiffs.

[7] The majority of the Court of Appeal, Levine and Kirkpatrick JJ.A., held that the trial judge’s decision should be set aside and a new trial ordered. The “form of the reasons, substantially a recitation of the [plaintiffs’] submissions” constituted cogent evidence displacing the presumption of judicial integrity and impartiality (2011 BCCA 192, 17 B.C.L.R. (5th) 253, at para. 127). The majority of the Court of Appeal also found that the reasons failed to fulfill the functions of advising the parties and the public of the reasons for his decision and of providing a basis for appellate review.

[8] Justice K. J. Smith dissented. The issue was whether the presumption of judicial integrity and impartiality was rebutted. The question was “whether a reasonable and informed person, considering all the circumstances, would apprehend that the trial judge failed to independently and impartially consider the evidence and the law and to arrive at his own conclusions on the issues” (para. 29). He concluded this test was not met. While the copying was “troubling” (para. 22), the reasons showed that the trial judge had applied his mind to the issues, done his own analysis and reached his own conclusions. This said, the trial judge had “overlooked and misapprehended important evidence, made errors in his legal analysis, and failed entirely to deal with a cogent defence argument” (para. 31). Reviewing the case on its merits, the dissenting Justice determined that the actions against Dr. Steele, Dr. Edris, the Hospital and Nurse Bellini should be dismissed. He indicated that he would also have reduced the damage award against the remaining defendant, Dr. Yue, but did not pursue this issue in light of the majority’s order for a new trial.

IV. Issues

[9] A. Should the trial judge’s decision be set aside because it copied large portions of the plaintiffs’ submissions?

B. If the judgment is not set aside for copying, does it disclose palpable errors of fact or legal errors?

A. Should the Trial Judge’s Decision Be Set Aside Because it Copied Large Portions of the Plaintiffs’ Submissions?

[10] This was a complex case involving many issues. The trial judgment, rendered some time after a lengthy trial, consisted of 368 paragraphs. Only 47 were predominantly in the judge’s own words; the balance of 321 paragraphs was copied from the plaintiffs’ submissions. This raises the concern that the trial judge did not put his mind to the issues, the evidence and the law as he was sworn to do, but simply incorporated the plaintiffs’submissions.

[11] The question before us is whether a trial judge’s decision should be set aside because his reasons incorporate large portions of material prepared by others, in this case the plaintiffs.

1. A Matter of Procedure

[12] Judicial decisions can be set aside either for substantive errors or procedural errors. A complaint that a judge’s decision should be set aside because the reasons for judgment incorporate materials from other sources is essentially a procedural complaint. It goes not to whether the decision is correct on the merits having regard to the evidence and the law, but to whether the process by which it was reached is procedurally fair. A fair process requires not only that the parties be allowed to submit evidence and arguments to the judge, but that the judge decide the issues independently and impartially as the judge is sworn to do. Extensive incorporation may raise concerns that the judge has not done so.

[13] To determine whether a defect relating to reasons for judgment is evidence of procedural error negating a fair process, the alleged deficiency must be viewed objectively, through the eyes of a reasonable observer, having regard to all relevant matters: see e.g. R. v. Teskey, 2007 SCC 25, [2007] 2 S.C.R. 267. Reasons need not be extensive or cover every aspect of the judge’s reasoning; in some cases, the basis of the reasons may be found in the record. The question is whether a reasonable person would conclude that the alleged deficiency, taking into account

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all relevant circumstances, is evidence that the decision-making process was fundamentally unfair, in the sense that the judge did not put her mind to the facts, the arguments and the issues, and decide them impartially and independently.

2. The Presumption of Judicial Impartiality

[14] Society entrusts to the judge the weighty task of deciding difficult issues of fact and law in order to resolve disputes between citizens. Judges are appointed from among experienced lawyers and are sworn to carry out their duties independently and impartially.

[15] Judicial decisions benefit from a presumption of integrity and impartiality — a presumption that the judge has done her job as she is sworn to do. This reflects the fact that the judge is sworn to deliver an impartial verdict between the parties, and serves the policy need for finality in judicial proceedings.

[16] Courts have repeatedly affirmed that the starting point in an inquiry such as this is the presumption of judicial integrity and impartiality. In Teskey, Charron J., for the majority, stated, at para. 19:

Trial judges benefit from a presumption of integrity, which in turn encompasses the notion of impartiality. … Hence, the reasons proffered by the trial judge in support of his decision are presumed to reflect the reasoning that led him to his decision.

[17] Justice Abella, in dissent, agreed, writing at length about the judicial history of the presumption of integrity and the purposes it serves:

The presumption of integrity acknowledges that judges are bound by their judicial oaths and will carry out the duties they have sworn to uphold. This includes not only a presumption — and duty — of impartiality but also of legal knowledge. … [J]udges are presumed to know and act in accordance with their legal responsibilities …. [para. 29]

[18] The presumption of judicial integrity and impartiality means that the party seeking to set aside a judicial decision because the judge’s reasons incorporated the material of others bears the burden of showing that a reasonable person, apprised of the relevant facts, would conclude that the judge failed to come to grips with the issues and deal with them independently and impartially. In Teskey, Charron J. wrote, at para. 21:

Even though there is a presumption that judges will carry out the duties they have sworn to uphold, the presumption can be displaced. The onus is … on the appellant to present cogent evidence showing that, in all the circumstances, a reasonable person would apprehend that the [presumption is rebutted by the reasons].

[19] Similarly, Abella J. in Teskey stated, at para. 33:

The test for displacing the presumption, therefore, requires that the apprehension of bias be reasonable in the eyes of someone who is reasonably informed about all the relevant circumstances. Those circumstances include “the traditions of integrity … and … the fact that impartiality is one of the duties the judges swear to uphold”. [Citations omitted.]

[20] The threshold for rebutting the presumption of judicial integrity and impartiality is high. The presumption carries considerable weight, and the law should not carelessly evoke the possibility of bias in a judge, whose authority depends upon that presumption: R. v. S. (R.D.), [1997] 3 S.C.R. 484, at para. 32, per L’Heureux-Dubé and McLachlin JJ., cited in Wewaykum Indian Band v. Canada, 2003 SCC 45, [2003] 2 S.C.R. 259, at para. 59.

[21] Teskeyillustrates how attacks on judicial decisions on the basis of defects relating to the judgment process should be approached. In that case, the trial judge had convicted the accused, with reasons to follow. No reasons were forthcoming. Finally, the trial judge delivered elaborate reasons 11 months after the convictions, and only after repeated requests from counsel. The defence argued on appeal that the reasons were after-the-fact justifications of

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the verdict, raising concerns about whether the judge at the time of the convictions had considered the law and applied it to the evidence as he was sworn to do. A majority of this Court, per Charron J., set aside the convictions. The minority, per Abella J., would have upheld the convictions. Both judgments agreed that the starting point was the presumption of judicial integrity, and that the onus is on the party assailing the reasons to present cogent evidence to displace the presumption.

[22] The basic framework for assessing a claim that the judge failed to decide the case independently and impartially may be summarized as follows. The claim is procedural, focussing on whether the litigant’s right to an impartial and independent trial of the issues has been violated. There is a presumption of judicial integrity and impartiality. It is a high presumption, not easily displaced. The onus is on the person challenging the judgment to rebut the presumption with cogent evidence showing that a reasonable person apprised of all the relevant circumstances would conclude that the judge failed to come to grips with the issues and decide them impartially and independently.

[23] I add this. The Court of Appeal proposed, and it was argued before this Court, that the problem of copying attracts a“functional” inquiry into whether the reasons are adequate to advise the parties and the public of the reasons for the decision and to provide a basis for appeal.

[24] In the criminal context, it has been held that reasons for judgment that do not fulfill these basic functions may result in a judgment being set aside if the appellate court concludes that it is a case of unreasonable verdict, error of law, or a miscarriage of justice within the scope of s. 686(1)(a) of the Criminal Code, R.S.C. 1985, c. C-46:R. v. Sheppard, 2002 SCC 26, [2002] 1 S.C.R. 869.

[25] This Court has not explored whether, and if so how, this approach applies in civil cases, although it has twice considered and rejected the argument that reasons were functionally insufficient: F.H. v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41; Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41, [2007] 3 S.C.R. 129. In the administrative law context, it has held that challenges to the reasoning or result of a decision do not attract an independent sufficiency analysis and should be dealt with within the overall reasonableness analysis: Newfoundland and Labrador Nurses’ Union v. Newfoundland and Labrador (Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708.

[26] In a case such as this, the essence of the complaint is not that the reasons are functionally insufficient — the parties agree that on their face, the reasons explain what was decided and provide a basis for appellate review — but rather that the judge’s wholesale incorporation of the material of others shows that he did not put his mind to the issues and decide them impartially. It is a complaint not about sufficiency, but about process, and stands to be resolved on the basis of the core analysis in Teskey — whether the presumption of judicial impartiality has been rebutted.

3. When Is the Presumption of Judicial Integrity and Impartiality Rebutted?

[27] The presumption of judicial integrity and impartiality is a high one, which can be rebutted only by cogent evidence.

[28] Procedural defects relating to reasons for judgment are many and varied. In all cases, the underlying question is the same: would a reasonable person, apprised of all the relevant circumstances, conclude that the judge failed to come to grips with the issues and make an impartial and independent decision, thereby defeating the presumption of judicial integrity and impartiality?

[29] Evidence capable of displacing the presumption of judicial integrity and impartiality may take different forms. It may be intrinsic,arising on the face of the reasons themselves. For example, no reasons or unintelligible reasons may be challenged by the form of the reasons themselves. Or it may be extrinsic: for example, evidence that the judge issued a decision before receiving the submissions of counsel touching on an important issue; that the judge was overheard telling someone that he was determined to find in favour of one of the parties regardless of the evidence; or that there was delay in issuing the reasons or extensive incorporation of material. The analysis is holistic and contextual. The question is whether the evidence presented by the party challenging the judgment

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convinces the reviewing court that a reasonable person would conclude that the judge did not perform her sworn duty to review and consider the evidence with an open mind: Teskey.

4. Copying in Reasons for Judgment

[30] The issue before us is not whether the practice of incorporating what others have written into judgments is a good thing. As we will see, judicial copying is a longstanding and accepted practice, yet one that, carried to excess, may raise problems. Rather, the issue is when, if ever, copying displaces the presumption of judicial integrity and impartiality.

[31] Approached from this perspective, a number of the criticisms advanced against copying fall by the wayside. One such criticism, made by the majority of the Court of Appeal in this case, is the judge’s failure to attribute the incorporated material to the original author. This criticism is connected to the idea that the reasons should be the“original” product of the judge’s mind, and that to the extent they are not, the judge should acknowledge her sources. Failure to attribute sources and lack of originality, without more, do not assist in answering the ultimate question — whether a reasonable person would conclude from the copying that the judge did not put her mind to the issues to be decided, resulting in an unfair trial. The fact that a judge attributes copied material to the author tells us nothing about whether she put her mind to the issues addressed in that copying. Nor is lack of originality alone a flaw in judgment-writing; on the contrary, it is part and parcel of the judicial process. It may not be best practice for judges to bulk up their judgments with great swaths of borrowed material. But the fact remains that borrowed prose, attributed or otherwise, does not, without more, establish that the judge has failed to come to grips with the issues required to be decided.

[32] To set aside a judgment for failure to attribute sources or for lack of originality alone would be to misunderstand the nature of the judge’s task and the time-honoured traditions of judgment-writing. The conventions surrounding many kinds of writing forbid plagiarism and copying without acknowledgement. Term papers, novels, essays, newspaper articles, biographical and historical tomes provide ready examples. In academic and journalistic writing, the writer is faced with the task of presenting original ideas for evaluation by an instructor or by peers, or of engaging in principled debate in the press. The task of judgment-writing is much different. As Simon Stern puts it:

Judges are not selected, and are only rarely valued, because of their gift for original expression. Just as most lawyers would rather present their arguments as merely routine applications of settled doctrine, yielding the same legal results that other courts have delivered repeatedly, judges usually prefer to couch their innovations in familiar forms, borrowing well-worn phrases to help the new modifications go down smoothly. The bland, repetitive, and often formulaic cadences of legal writing in general, and judicial writing in particular, can be explained in large part by a commitment to the neutral and consistent application of the law…. [T]he effort to demonstrate that similar cases are being treated alike often finds its rhetorical manifestation in a penchant for analyses that have a déja lu quality — usually because the words havebeen read before. This tendency, though visible throughout the legal system, is most pronounced at the trial level. [Emphasis in original; p.1.]

(“Copyright Originality and Judicial Originality” (2013), 63 U.T.L.J. 1)

And again:

It is hardly news that legal writing is embedded in a network of precedent, formulas, and boilerplate, that it reflects a general preference for the tried and true over the novel, and that it routinely depends on practices — verbatim repetition of others’ words, adoption of others’ prose and arguments — that might trigger infringement claims in an intellectual property dispute. [p. 6]

[33] The scope for judicial creativity is narrow, but not non-existent. It finds expression in the ordering of the reasons and the disposition of the arguments and issues, and in the occasional eloquent statement of the facts or restatement of the law. Nevertheless, it remains the case that judicial opinions, especially trial judgments, differ from the kind of writings that traditionally attract copyright protection, with the concomitant demands of originality and attribution of sources. Judgments are“usually collaborative products that reflect a wide range of imitative

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writing practices, including quotation, paraphrase, and pastiche” (Stern, at p. 2). Judgments routinely incorporate phrases and paragraphs from a variety of sources, such as decided cases, legal treatises, pleadings, and arguments of the parties. Appellate judges may incorporate paragraphs borrowed from another judge on the case or from a helpful law clerk. Often the sources are acknowledged, but often they are not. Whether acknowledged or not, they are an accepted part of the judgment-writing process and do not, without more, render the proceeding unfair.

[34] In this spirit, and in the interests of expediting judicial business, courts actively encourage parties to submit written arguments and proposed orders. This process is accelerating. In the United States, and more and more in Canada, courts welcome electronic submissions. Such submissions help the judge get the decision right, facilitate the task of judgment writing and speed the judicial process. As Gregory M. Silverman frankly observes, the “benefits provided by electronic filing” include “reduced time for … retyping as portions of one document can be easily transferred to another using the cut-and-paste operation of word processing software” (“Rise of the Machines: Justice Information Systems and the Question of Public Access to Court Records over the Internet” (2004), 79 Wash. L. Rev. 175, at p. 196).

[35] The concern about copying in the judicial context is not that the judge is taking credit for someone else’s prose, but rather that it may be evidence that the reasons for judgment do not reflect the judge’s thinking. They are not the judge’s reasons, but those of the person whose prose the judge copied. Avoiding this impression is a good reason for discouraging extensive copying. But it is not the copying per se that renders the process of judgment-writing unfair. A judge may copy extensively from the briefs in setting out the facts, the legal principles and the arguments, and still assess all the issues and arguments comprehensively and impartially. No one could reasonably contend that the process has failed in such a case.

[36] To sum up, extensive copying and failure to attribute outside sources are in most situations practices to be discouraged. But lack of originality and failure to attribute sources do not in themselves rebut the presumption of judicial impartiality and integrity. This occurs only if the copying is of such a character that a reasonable person apprised of the circumstances would conclude that the judge did not put her mind to the evidence and the issues and did not render an impartial, independent decision.

5. The Permissibility of Judicial Copying: A Look at the Cases

[37] Judges are busy. A heavy flow of work passes through the courts. The public interest demands that the disputes and legal issues brought before the courts be resolved in a timely and effective manner, all the while maintaining the integrity of the judicial process. In an ideal world, one might dream of judges recasting each proposition, principle and fact scenario before them in their own finely crafted prose. In reality, courts have recognized that copying is acceptable, and does not, without more, require the judge’s decision to be set aside. While the theoretical basis on which the result is explained varies, this is the position in England, various commonwealth countries, the U.S. and in Canada.

[38] In England, the Court of Appeal has affirmed that copying does not invalidate a decision: English v. Emery Reimbold& Strick Ltd., [2002] EWCA Civ 605, [2002] 3 All E.R. 385. This view appears to be generally accepted. For example, in 2006, a British tribunal, applying Emery, explained that “there is nothing to prevent a Tribunal from adopting the arguments advanced on behalf of one of the parties if it accepts those arguments and has nothing to add to them”: Meadowstone (Derbyshire) Ltd. v. Kirk, 2006 WL 690588 (U.K. Employment Appeal Tribunal), at para. 21. Although the tribunal acknowledged that “[i]t is better practice for a Tribunal to spell out in its own words the reasons for any conclusion which it reaches”, if it chooses to repeat a party’s language, it cannot be said that this practice “fail[s] to meet … the minimum standards by which every judgment should be measured” (para. 21).

[39] Emery was applied by the Hong Kong Court of Appeal in a case where the trial judge incorporated extensive portions of counsel’s submissions in the judgment, and the losing party appealed on grounds of procedural fairness and adequacy: Shin v. Kung, [2004] HKCA 205, at paras. 366-69 and 377. The court dismissed the appeal, holding that a judge is entitled to accept or reject a party’s case in its entirety. “A judge’s total adoption or rejection of counsel’s submissions per se does not imply the lack of independent adjudication, nor does it constitute a valid ground for upsetting the judgment on the basis of an unfair trial”, the court stated (para. 367). Applying the test of “a fair-minded and informed observer” (at para. 377), it dismissed concerns about adequacy and bias.

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[40] In Australia, it has been held that “[a]doption of one party’s submissions by a judge … is one method of providing adequate reasons”, adding that “[i]t may not be the choice of every judge but it is impossible to say that it necessarily …. falls short of the judicial duty to provide reasons”: James v. Surf Road Nominees Pty Ltd., [2004] NSWCA 475, at para. 168. In Fletcher Construction Australia Ltd. v. Lines MacFarlane & Marshall Pty Ltd. (No. 2), [2002] VSCA 189, [2002] 6 V.R. 1, at para. 163, the Victorian Supreme Court of Appeal, reviewing a trial judgment for adequacy, remarked that “[a] careful examination of the reasons for judgment shows that the judge adopted [the plaintiff’s] closing submissions almost in their entirety.” But it did not set the judgment aside for copying alone.

[41] The United States Supreme Court ruled almost 50 years ago that when a trial judge “adopt[s] verbatim” the findings of fact submitted by counsel, “[t]hose findings, though not the product of the workings of the … judge’s mind, are formally his; they are not to be rejected out-of-hand, and they will stand if supported by evidence”: United States v. El Paso Natural Gas Co., 376 U.S. 651 (1964), at p. 656. This rule appears to have been consistently followed in the United States although not without occasional adverse comment in extreme cases, as in United States v. Marine Bancorporation, Inc. 418 U.S. 602 (1974), at p. 615, where extensive copying without citations to transcripts hampered appellate review and added to the appellate court’s burden. (See Stern, at p. 9, fn. 24.)

[42] The Supreme Court of Canada has never ruled on the matter. However, the two leading cases, Sorger v. Bank of Nova Scotia (1998), 39 O.R. (3d) 1 (C.A.), and R. v. Gaudet (1998), 40 O.R. (3d) 1 (C.A.), support the view that copying does not in itself establish procedural unfairness, and that the question is whether the copying shows that the trial judge did not consider the evidence and issues and render an impartial, independent decision.

[43] In Gaudet, the trial decision was upheld despite the fact that over 90 percent of its content was adopted from the Crown’s submissions (Stern, at p. 34). The trial judge had expressly stated that he had conducted an independent review, and the Ontario Court of Appeal said that there was “no reason to conclude that the trial judge did not do what he stated he had done — conduct an independent review of the evidence and carefully consider both the defence and Crown submissions” (p. 16).

[44] In Sorger, the Ontario Court of Appeal approached the issue of extensive copying in reasons for judgment as a matter of procedural fairness. It was faced with a 128-page trial judgment consisting of nearly 125 pages transcribed from the parties’ submissions — 55 pages from the plaintiffs’ submissions and 70 pages from the defendants’ submissions (Stern, at p. 34). The trial judge devoted only two pages to findings of fact, all copied verbatim from the defendants’ material without any analysis of the evidence and no consideration of the jurisprudence. Evoking concerns about the fairness of the trial, the Court of Appeal concluded that the trial judgment offered “nothing to indicate that the trial judge attempted to grapple fairly and impartially with the case presented by the plaintiffs or decide it independently”. It concluded that “[a] reasonable and informed observer would have a reasonable apprehension that the mind of the trial judge was closed to a fair and impartial consideration of the appellants’ case” (pp. 8-9). The trial judge’s decision was set aside and a new trial ordered, not on the ground that the copying in itself vitiated the judgment, but on the ground that the copying, viewed in terms of the judgment as a whole, would satisfy a reasonable observer that the judge failed to grapple independently and impartially with the issues before him.

[45] Subsequent cases affirmed that copying alone is not grounds for appellate intervention. The Ontario Court of Appeal upheld a decision on an application for a search warrant where the judge’s entire reasons consisted of a reference to one party’s arguments by paragraph number: Canada (Attorney General) v. Ni-Met Resources Inc. (2005), 74 O.R. (3d) 641. The losing party argued that the reasons were insufficient to fulfill their functions because they simply adopted paragraphs from the other party’s argument. The court rejected this submission.

[46] In 2878852 Canada Inc. v. Jones Heward Investment Counsel Inc., 2007 ONCA 14 (CanLII), the same court, in a divided judgment and with some criticism, upheld reasons that incorporated the parties’ submissions by identifying them solely by paragraph number, lending a“writing by numbers” effect (Stern, at p. 24).

[47] In R. v. Dastous (2004), 181 O.A.C. 398, where the trial judgment consisted of five paragraphs in which the trial judge stated he accepted all the Crown’s submissions, the Ontario Court of Appeal in a short judgment set the decision aside in part because the trial judge had given no reasons for his rejection of the accused’s evidence. In R. v. Kendall (2005), 75 O.R. (3d) 565, leave to appeal refused, [2006] 1 S.C.R. x, the same court rejected a trial

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judgment that consisted only of an expression of agreement with and adoption of the defence submissions at trial, again because it was impossible to know why the judge decided as he did.

[48] The Federal Court of Appeal considered a judgment that reproduced verbatim 100 paragraphs of a trial judgment complete with original underlining, footnotes and references in Janssen-Ortho Inc. v. Apotex Inc., 2009 FCA 212, 392 N.R. 71. After recommending that judges should attribute sources, the court nevertheless concluded that the judgment afforded “[no] basis to . . . conclude . . . that the Judge did not perform his duty to examine the evidence as he was called upon to do” (para. 79).

[49] In summary, courts in Canada and elsewhere have held that copying in reasons for judgment is not, in itself, grounds for setting the judge’s decision aside. However, if the incorporation of the material of others would lead a reasonable person apprised of all the relevant facts to conclude that the trial judge has not put his or her mind to the issues and made an independent decision based on the evidence and the law, the presumption of judicial integrity is rebutted and the decision may be set aside.

[50] This does not negate the fact that, as a general rule, it is good judicial practice for a judge to set out the contending positions of the parties on the facts and the law, and explain in his or her own words her conclusions on the facts and the law. The process of casting reasons for judgment in the judge’s own words helps to ensure that the judge has independently considered the issues and come to grips with them. As the cases illustrate, the importance of this may vary with the nature of the case. In some cases, the issues are so clear that adoption of one party’s submissions or draft order may be uncontroversial. By contrast, in complex cases involving disputed facts and legal principles, the best practice is to discuss the issues, the evidence and the judge’s conclusions in the judge’s own words. The point remains, however, that a judge’s failure to adhere to best practices does not, without more, permit the judge’s decision to be overturned on appeal.

6. Application to this Appeal

[51] The question is whether the extensive copying from the plaintiffs’ submissions requires the trial judge’s decision to be set aside. The starting point is the presumption of judicial integrity and impartiality. To reframe the matter in the words of Teskey, the onus is on the party challenging the decision to show that a reasonable person apprised of all the circumstances would conclude that the judge did not put his mind to the issues and decide them impartially and independently, as his duty required. The bar is high, and cogent evidence is required to hurdle it. The reviewing court should not approach copying from a sceptical perspective, but from the perspective imposed by the presumption of judicial integrity and impartiality. In deciding whether the presumption is rebutted the court should consider the nature of the case, what was copied, the extent of the copying, how it functions in the reasons as a whole, and any other relevant circumstances.

[52] In this case, the defendants rely on the extent of the copying, the quality of the copying, the lack of attribution for the copying, the nature of the case and the failure to fulfill the basic functions of reasons for judgment.

(a) Extent of the Copying

[53] The copying, as already discussed, was extensive. The judgment consisted of 368 paragraphs. Only 47 were predominantly in the judge’s own words; the balance of 321 paragraphs was copied (with editorial changes) from the plaintiffs’ submissions.

[54] As discussed, extensive copying does not in itself show that the reasons were not those of the judge. It may simply reflect the judge’s decision that he was persuaded by the material he copied and found it important. However, taken with other considerations, it may be a factor tending to show that the judge did not engage with the issues and make an impartial and independent decision on the evidence and the law, as his oath required him to do.

[55] In this case, the trial judge wrote some original paragraphs and made findings contrary to the submissions of the plaintiffs, the party from which he copied. Although most of what the trial judge wrote in his own words

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concerned uncontroversial facts, the fact that he did so makes it more difficult to infer that the judge failed to consider the issues impartially and that the reasons do not reflect the thinking of the trial judge.

(b) Quality of the Copying

[56] It is argued that errors in and omissions from what the judge copied show that he did not put his mind to the issues and decide the case impartially on the evidence and the law.

[57] First, the defendants point to the fact that the trial judge copied a portion of the plaintiffs’ submissions that contained an error (the date of Dr. Yue’s consultation letter) that the judge had pointed out in open court. This shows, it is argued, that he was simply cutting and pasting in a mechanical fashion, and not putting his mind to the contents.

[58] Had the error been one of substance, this would be troubling. However, it is of a more technical nature. Making a mistake as to the date of a letter does not offer convincing evidence that the trial judge did not put his mind to the substance of what was copied.

[59] Second, the defendants contend that the trial judge’s incorporation of the plaintiffs’ arguments on causation without discussing the defendants’ criticism of them shows that he did not perform an independent causation analysis. They argue that the judge was simply cutting and pasting, and not putting his mind to the content of the material.

[60] As the cases show, adopting the arguments of one of the parties without referring to the other party’s critique of them does not, without more, rebut the presumption of judicial impartiality. Nor are trial judges required to discuss every argument or alleged problem in arriving at a particular conclusion. Here the reasons, although in borrowed language, make it clear that the judge considered causation and made a decision on the issue. Any error in that conclusion goes to the merits rather than the process.

[61] Third, the defendants argue that the failure of the judge to consider virtually any of the defendants’ submissions (except those quoted in the plaintiffs’ submissions) shows that he did not come to grips with the issues and the reasons do not reflect his own decision on them.

[62] Again, this criticism is inconclusive. Indeed, the fact that the judge accepted some of the defendants’ submissions negates this inference. A comparison of the submissions of the plaintiffs and the reasons for judgment shows that the portions of the plaintiffs’ submissions that the judge copied were edited before being published in the reasons. This suggests that the judge did not uncritically accept the material and put his mind to its contents and whether they reflected his views.

[63] I conclude that the quality of the copying would not lead a reasonable person to conclude that the copied material did not reflect the trial judge’s own thinking and views.

(c) Lack of Attribution

[64] It is argued that the fact that the trial judge did not attribute the copied material to the plaintiffs supports the view that the reasons do not reflect the reasoning of the trial judge and undermines confidence that the portions copied reflect his own reasoning.

[65] As the previous discussion establishes, judicial writing is highly derivative and copying a party’s submissions without attribution is a widely accepted practice. The considerations that require attribution in academic, artistic and scientific spheres do not apply to reasons for judgment. The judge is not expected to be original.

[66] Beyond this, it is difficult to understand how attributed copying is more likely to reflect the judge’s thinking — or lack of thinking — than unattributed copying. In both cases, the judge has adopted the copied material as his own by putting it in his reasons.

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(d) Nature of the Case

[67] The nature of the case is relevant in assessing whether incorporation of the material of others rebuts the presumption of judicial integrity and impartiality and justifies setting aside the judge’s decision. Criminal cases, where the liberty of the accused is at stake, demand the high level of scrutiny described in Teskey. At the other end of the spectrum, straightforward motions in a civil case may require little more than a yes or no from the judge.

[68] The case before us is a civil case, but one of considerable complexity. Moreover, the judge’s conclusions bore heavy consequences for the parties — a great deal of money was at stake, and the reputations of the doctors and Hospital staff were on the line.

[69] However, it does not follow from the fact that a case is complex and the judge’s findings are important that the judicial incorporation of the material of others necessarily displaces the presumption of integrity. As discussed above, it is good practice in such cases for the judge to put the issues and his conclusions in his own words. But the question is not whether best practices were followed, but whether the copying constitutes cogent evidence that the judge failed to come to grips with the issues and decide them impartially and independently, as his oath required. If the answer to that question is yes, then the presumption of judicial integrity and impartiality is rebutted. If the answer is no, the judge’s decision stands.

[70] In this case, we agree with Smith J.A., dissenting, that despite the judge’s extensive adoption of the plaintiffs’argument, the evidence does not show that he failed to put his mind to the critical issues and decide them independently and impartially. The reasons, read as a whole, show that the trial judge considered the issues and the arguments on both sides, and came to a conclusion on each of the main issues.

(e) Functions Not Fulfilled

[71] The Court of Appeal in this case correctly recognized that the issue was whether the trial judge’s extensive incorporation of the plaintiffs’ submissions rebutted the presumption of judicial integrity and impartiality. However, the majority of the Court of Appeal and the parties before this Court also discussed whether the reasons satisfied the basic functional requirements of informing the parties and the public of the reasons for the judge’s decision and providing a basis for appellate review.

[72] As discussed above, this analysis is not applicable when the complaint, as here, is that the judge’s wholesale incorporation of the material of others in reasons for judgment shows that he did not put his mind to the issues and decide them independently and impartially.

(f) Summary

[73] Despite extensive copying of the plaintiffs’closing arguments, the defendants’ arguments do not rebut the presumption of judicial impartiality.

[74] Taking full account of the complexity of the case, and accepting that it would have been preferable for the trial judge to discuss the facts and issues in his own words, I cannot conclude that the trial judge failed to consider the issues and make an independent decision on them. On the contrary, the fact that he rejected some of the plaintiffs’ key submissions demonstrates that he considered the issues independently and impartially. The absence in the reasons of an analysis of causation, and the alleged errors the reasons contain go, not to procedural unfairness, but to the substance of the reasons — whether the trial judge, having made his own decision, erred in law or made palpable and overriding errors of fact.

[75] It would have been better if the reasons had not copied extensively from the plaintiffs’ submissions. However, to set aside the decision of the trial judge requires more. To rebut the presumption of judicial integrity, the defendants must establish that a reasonable person apprised of all the circumstances would conclude that the trial judge failed to consider and deal with the critical issues before him in an independent and impartial fashion. The defendants have not done so.

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[76] The majority of the Court of Appeal acknowledged the need to displace the presumption of judicial integrity and impartiality before setting aside the judgment. It stated that “[t]he form of the reasons, substantially a recitation of the [plaintiffs’] submissions, is in itself‘cogent evidence’ displacing the presumption of judicial integrity, which encompasses impartiality” (para. 127). In effect, the Court of Appeal held that the extensive copying in itself rebutted the presumption. The reasons of the trial judge, while imperfect, deal with all the salient aspects of the case. The fact that large portions were copied from the plaintiffs’submissions does not displace the presumption that the trial judge engaged with the issues and decided them in accordance with the law. I conclude that the judgment should not be set aside on the ground that the trial judge incorporated large parts of the plaintiffs’ submissions in his reasons.

B. Does the Judgment Disclose Errors of Law or Palpable and Overriding Errors of Fact?

[77] Having concluded that the decision of the trial judge should not be set aside because his reasons incorporated large portions of the plaintiffs’ submissions, the question is whether the trial judge’s conclusions on the liability of the various defendants disclose error and should be set aside. It is common ground that to set aside the trial judge’s conclusions, the party impugning the decision must demonstrate error of law or palpable and overriding error on questions of fact.

[78] The trial judge, to recap, found the Hospital, Nurse Bellini and Drs. Yue, Edris and Steele liable in negligence. He dismissed the claims against Nurse MacQueen and Nurse Verwoerd.

[79] The majority of the Court of Appeal, having concluded that the case must be returned for a new trial, did not deal with these issues. However, Smith J.A. in dissent considered the trial judge’s findings on liability. He was of the view that the claim against Dr. Yue should be maintained on one of the grounds advanced, and that the claims against Dr. Edris, Dr. Steele, Nurse Bellini and the Hospital should be dismissed in their entirety. He suggested that he would have reduced damages, but declined from considering this issue in view of the new trial ordered by the majority.

[80] The plaintiffs argue that Smith J.A. erred in concluding that its claims against the defendants other than Dr. Yue should be dismissed. The defendant nurse and the Hospital cross-appeal and ask this Court to resolve the issues of liability and damages on the record before us, rather than send them back for a new trial. The defendant doctors asked for a new trial, but agreed during the oral hearing that it was open to this Court to substitute its own findings in the course of ordinary appellate review.

1. Liability of Dr. Yue

[81] The trial judge found Dr. Yue negligent for recommending a vaginal birth after caesarean section, or VBAC procedure, without verifying the orientation of the caesarean scar; for failing to obtain Ms. Cojocaru’s informed consent to the VBAC procedure; and for failing to obtain her informed consent to induction of the birth.

(a) Recommending the VBAC Procedure

[82] The trial judge found that Dr. Yue breached the standard of care by failing to verify the orientation of the previous caesarean scar before recommending VBAC as a delivery option (para. 154).

[83] The issue is whether this conduct caused the harm Eric Cojocaru suffered. The trial judge concluded that causation was established because Ms. Cojocaru would not have attempted VBAC had Dr. Yue not recommended it (para. 216).

[84] Justice Smith held that the trial judge asked the wrong question. The proper question was whether Dr. Yue’s failure to investigate the orientation of the scar caused the injury and loss. Had Dr. Yue investigated the scar, she would still have recommended VBAC. Hence, in his view, no causal connection was established between the negligence alleged and the injury.

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[85] I agree with Smith J.A. The trial judge short-circuited the causation analysis when he found that “[t]he negligence complained of is negligence in recommending VBAC as a delivery option. Had Dr. Yue not done this, Ms. Cojocaru would have had a repeat caesarean section and the injury would indeed have been avoided” (para. 216). Rather, the trial judge should have asked himself what harm flowed from Dr. Yue’s alleged negligent act: failing to verify the orientation of the scar.

[86] VBAC is contra-indicated in patients who have a classical or inverted T incision uterine scar from a previous caesarean section. Dr. Yue formed the opinion that Ms. Cojocaru’s uterine scar was low transverse, and that Ms. Cojocaru was thus a candidate for VBAC. Dr. Yue’s only omission was her alleged failure to verify the orientation of the scar by obtaining the report from the Romanian operation.

[87] The purpose of obtaining the operative report was to verify that the uterine scar was low transverse. Since Ms. Cojocaru’s uterine scar was, in fact, low transverse, no harm flowed from Dr. Yue’s omission.

(b) Liability for Failure to Obtain Informed Consent to the VBAC Procedure

[88] The trial judge found Dr. Yue negligent in failing to obtain Ms. Cojocaru’s informed consent to the VBAC procedure. I would not interfere with this conclusion.

[89] The defendants argue that the trial judge made errors in assessing Dr. Yue’s evidence. In my view, while the trial judge made such errors, they could not have affected the result.

[90] Dr. Yue had little memory of Ms. Cojocaru, and instead testified as to her “invariable routine”. In finding that he could not rely on Dr. Yue’s “invariable routine”, the trial judge stated that Dr. Yue failed to chart any aspect of “her alleged conversation regarding the risks that she says were explained to Ms. Cojocaru” (para. 98(d)). This was an overstatement. Ms. Cojocaru’s chart indicates that modes of delivery were discussed, and Dr. Yue’s consultation letter — written to the physician who referred Ms. Cojocaru — noted that the chance of success of VBAC was 80 percent, and the risk of uterine rupture was 1 in 200. However, the trial judge’s concern was not that the statistical risks were not discussed, but that“there is no indication that the significance of that statistic was brought home to Ms. Cojocaru” (para. 93). In fact, the trial judge concluded that even if Dr. Yue did convey the risk of 1 in 200, this was insufficient to obtain informed consent (para. 107). The trial judge’s misstatement with respect to the charts does not undermine his finding that Ms. Cojocaru’s consent was not sufficiently informed.

[91] Similarly, the trial judge was entitled to ignore the note “wants VBAC” written by Dr. Yue on Ms. Cojocaru’s chart. Although the defendants argue that this note is evidence that Ms. Cojocaru consented to the VBAC procedure, the note is ambiguous on the issue of whether the risks were sufficiently conveyed to Ms. Cojocaru. The trial judge was not required to minutely dissect every piece of evidence in his reasons.

[92] The trial judge also erred in his assessment of the consultation letter. As noted by the trial judge during oral argument, it was dictated the same day as Ms. Cojocaru’s appointment, not two days later. Furthermore, the trial judge erred by expecting that a letter to Ms. Cojocaru’s physician should detail Ms. Cojocaru’s language difficulties or explain the significance of statistical risks (see C.A. reasons, at paras. 65-67). However, the trial judge did not rely on this letter for an adverse finding of credibility; rather, he found that Dr. Yue’s “invariable routine” was not corroborated by this letter. The trial judge simply preferred the evidence of Ms. Cojocaru over that of Dr. Yue. His misapprehension of the letter is insufficient to overturn this finding.

[93] The evidence supports the trial judge’s conclusion that Dr. Yue failed to adequately inform Ms. Cojocaru of the risks of VBAC.

[94] The evidence shows that Dr. Yue based her assessment of the risk of VBAC on an incorrect assumption about the reason for the Romanian caesarean section. Accordingly, she could not have fully informed her patient of the risks of VBAC.

[95] Dr. Yue concluded that Ms. Cojocaru’s previous caesarean had been elective. On this basis, Dr. Yue advised Ms. Cojocaru that VBAC would have an 80 percent chance of success (trial reasons, at para. 103). This was

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in error. As found by the trial judge and supported by both the operative report and the Romanian obstetrician, Dr. Clepce, the Romanian caesarean section was undertaken for failure to progress (paras. 104-5). As Dr. Yue admitted, after a caesarean section for failure to progress, the likelihood of a successful VBAC is “significantly less than 80%” (accepted by the trial judge, at para. 106). Thus, Dr. Yue could not have properly advised her patient of the risks associated with VBAC.

[96] For these reasons, I conclude that the trial judge’s finding of liability against Dr. Yue for failing to obtain Ms. Cojocaru’s informed consent to VBAC should be affirmed.

(c) Liability for Informed Consent to Induction

[97] The trial judge found Dr. Yue liable for failure to obtain Ms. Cojocaru’s informed consent to induction of the birth. Justice Smith would have upheld this finding.

[98] I cannot agree. The trial judge failed to conduct a separate causation analysis for the failure to obtain informed consent to induction, as distinct from the failure to obtain informed consent to VBAC. In my view, there is no evidence to support a causal relationship between the induction and the harm suffered.

[99] There was no evidence to suggest that the alternative to induction — and, thus, the course of action that would have been followed had induction been refused — was a scheduled caesarean section. The most that can be said is that if Ms. Cojocaru had refused induction, her labour would not have been induced. The question is what harm flowed from the induction with prostaglandin gel.

[100] The trial judge neither explicitly not implicitly found that the prostaglandin gel over-stimulated the uterus and caused the uterine rupture. Although there is evidence to support his finding that induction increases the risk of uterine rupture, it does not go so far as to show a causal relationship between the induction and the rupture in this case.

[101] I would not sustain the finding of liability against Dr. Yue on this basis.

2. Liability of Dr. Edris

[102] The trial judge held that Dr. Edris’s conduct failed to meet the requisite standard of care because he induced labour without ascertaining the orientation of Ms. Cojocaru’s uterine scar (para. 172).

[103] Justice Smith held that this finding was in error because there was no causal connection between the alleged negligence —failure to ascertain the position of the scar — and the injury. I agree.

[104] Ms. Cojocaru had a low transverse scar, and was thus not contraindicated for either induction or VBAC. The trial judge’s findings that Dr. Edris was uncertain of the scar’s orientation and that he did not discuss this uncertainty with the on-call obstetrician, Dr. Steele, are of no moment. If Dr. Edris had ascertained the orientation of the scar, he would nevertheless have proceeded with the induction. Moreover, there is no evidence that the induction caused the uterine rupture.

3. Liability of Dr. Steele

[105] Dr. Steele was the on-call obstetrician. When Nurse Bellini spoke with him at 18:05 to report on Ms. Cojocaru’s condition, he was in his car and on his way to another hospital. He did not return to the B.C. Women’s Hospital until after the delivery.

[106] The trial judge found Dr. Steele negligent on two counts: first, for failing to assess Ms. Cojocaru earlier in the day (he criticized Dr. Steele for not having attended at any point between 10 a.m. and the emergency); and second, for failing to attend on her immediately when he spoke to Nurse Bellini. Instead, the trial judge said, “he left the hospital”(para. 173).

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[107] Justice Smith held that these conclusions were based on a misapprehension of the evidence and absolved Dr. Steele of liability. In his view, the evidence failed to establish a causal link between Dr. Steele’s actions and the injury. I agree.

[108] First, there was no evidence to support the view that Dr. Steele’s failure to assess Ms. Cojocaru earlier in the day was a departure from the prevailing professional practice. There were no signs of uterine rupture until after 17:45. All the evidence supports the view that as the on-call obstetrician, Dr. Steele was entitled to rely on the obstetrical residents, Dr. Edris and Dr. Green, and the nursing staff to care for Ms. Cojocaru. He expected to be called when needed.

[109] Second, as for his failure to attend on Ms. Cojocaru when he spoke with Nurse Bellini at 18:05 p.m., it is clear on the evidence that even if Dr. Steele had been present at that time — or at 18:00 when the trial judge found that the nurses first should have called a doctor —it would have made no difference. As discussed below, the Hospital’s only staffed operating room was occupied at that time — a fact which the trial judge failed to mention.

4. Liability of Nurse Bellini and the Hospital

[110] The trial judge found Nurse Bellini (and therefore the Hospital which employed her) liable in negligence for not observing and responding to the signs of uterine rupture earlier. He found that Nurse Bellini should have called Dr. Green, the obstetrical resident present at the Hospital, by 18:00 hours, and that had she done so, the injury would have been avoided.

[111] Justice Smith held that the evidence showed that even if Nurse Bellini had called Dr. Green at 18:00, the loss would not have been prevented, because the caesarean section could not have been performed in time to avoid the injury Eric suffered, due to lack of a staffed operating room. I agree.

[112] Eric was extruded from the ruptured uterus and deprived of oxygen and nutrients at 18:18 (trial reasons, at para. 206). The trial judge found (and, indeed, it was undisputed) that the baby needed to be delivered within 10-15 minutes of oxygen deprivation to avoid permanent brain damage (that is, by 18:28-18:33) (para. 220).

[113] The critical question is this: if Nurse Bellini had called Dr. Green at 18:00 as the trial judge found she should have, could Eric have been born before 18:28 to 18:33, when permanent brain damage occurred? The answer to this question, on the evidence before us, is no. The only operating room with an anaesthetist was not available until shortly before 18:30. Ms. Cojocaru’s operation commenced at the earliest possible time, 18:30, when the anaesthetist entered her operating room, and Eric was duly delivered at 18:41. Even if Nurse Bellini had sounded the alarm and called Dr. Green at 18:00 instead of having Nurse Verwoerd call him at 18:15, and if the caesarean section had been ordered within ten minutes of that call, as appears likely, the result would have been the same because the operation could not have commenced before it did.

[114] The trial judge appears to have reasoned that because it took 26 minutes from the time of Nurse Verwoerd’s call at 18:15 for Eric to be born, Eric would have been born by 18:26, before permanent brain damage, had Nurse Bellini made the call at 18:00 hours. However, this overlooked the fact that no operating room staffed with an anaesthetist was available until 18:30. On the evidence, it would not have been possible to get another anaesthetist in time to prevent the injury.

[115] I conclude that even if Nurse Bellini had observed and reacted to the signs of uterine rupture by 18:00, as the trial judge said she should have done, and even if Dr. Steele had attended personally when he was paged, Eric could not have been delivered in time to avoid permanent brain damage.

5. Conclusion

[116] The trial judge’s finding of liability against Dr. Yue for failing to obtain Ms. Cojocaru’s informed consent to VBAC should be affirmed. However, I agree with Smith J.A. that the trial judge’s findings of liability against Nurse Bellini, the Hospital, and Drs. Steele and Edris must be set aside.

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6. Damages

[117] The trial judge assessed damages against the defendants he found liable in the sum of $4,045,000.00, as follows (para. 367):

Non-Pecuniary Damages (Eric) $ 321,000 Non-Pecuniary Damages (Ms. Cojocaru) $ 40,000 Income Loss/Loss of Earning Capacity $ 850,000 Loss of Interdependent Relationship $ 25,000 Future Care Costs $ 2,665,000 “In Trust” Claim $ 144,000

TOTAL $ 4,045,000

[118] Justice Smith indicated that he would have reduced the damages against Dr. Yue (the only defendant found liable) but declined to go into the matter in light of the new trial ordered by the majority.

[119] The defendants challenge the trial judge’s conclusions on the quantum of damages.

[120] In my view, the trial judge’s findings on damages were supported by the evidence and disclose no palpable and overriding error that would justify appellate intervention. The defendants essentially ask this Court to re-weigh the evidence, something we cannot do.

[121] It is true that the trial judge overstated the matter when he referred to “clear and uncontradicted evidence” of “direct damage to Eric’s cerebral hemispheres” (para. 239). In fact, the evidence was contested; indeed, it seems arguable that the weight of the evidence was that there was no damage to the cerebral hemispheres. However, there was some evidence, particularly in the reports of Dr. Kaushansky and Dr. Hahn, on which the trial judge was entitled to find that Eric suffered damage to his cerebral hemispheres, Accordingly, I cannot conclude that the trial judge committed reversible error in his assessment of the nature of Eric’s injury.

[122] I am also of the view that the trial judge was entitled to give little weight to the defendant physicians’ cost of care expert, Ms. Mageau. The trial judge found that she relied on a number of incorrect assumptions in her report. In arguing that the assumptions were well-founded, the defendant physicians are asking this Court to re-weigh the evidence. Ms. Mageau based her assumptions on the findings of other experts, many of which were contradicted, and many of which the trial judge rejected. Accordingly, the trial judge was entitled to find that the assumptions underlying Ms. Mageau’s report were incorrect.

V. Disposition

[123] I would allow the appeal. I would also allow the cross-appeal and reverse the order of the trial judge in part. The plaintiffs are entitled to damages against Dr. Yue in the amount assessed by the trial judge and to costs in the courts below and on the appeal here, payable by Dr. Yue. The actions against Nurse Bellini, the Hospital and Drs. Steele and Edris are dismissed. The defendants, Nurse Bellini and the Hospital are entitled to their costs on the cross-appeal alone, payable by the plaintiffs. As Drs. Edris and Steele did not cross-appeal, they are not entitled to costs.

Appeal and cross-appeal allowed with costs.

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Orazio v. Ciulla

(1966) 59 DLR (2d) 208 British Columbia Supreme Court Chambers

KIRKE-SMITH, CO.CT.J.: - This action is one for damages arising out of a motor-vehicle collision on August 1, 1964. The writ was issued by counsel for the plaintiff on July 21, 1965, and the plaintiff’s position on this motion is that it was personally served on the defendant on or about July 20, 1966. The defendant disagrees, and moves here for an order setting aside this purported service as not constituting valid personal service.

If the order is made, the writ will no longer be in force for the purpose of service: O. VIII, r. 1 (M.R. 45).

The point raised is both important and interesting, involving as it does construing the circumlocutory terminology of O. IX, r. 2 (M.R. 49), which provides, in material part, as follows:

2. When service is required the writ shall, wherever it is practicable, be served in the manner in which personal service now made …

This Rule has been in its present form for many years, and the fact that those who originally drafted or adopted it were sufficiently familiar with “the manner in which personal service” was then effected to regard as supererogatory any attempt to further explain this manner for the benefit of their less learned successors has created problems of some difficulty for both practitioners and those unfortunate enough to have been called upon, from time to time, to lecture students in the esoteric field of practice and procedure.

I do not propose, where those wiser than I have, perhaps purposely, refrained from so doing, to attempt here an all-embracing explanation or definition of personal service, but the unusual facts of this case require some adumbration of certain relevant principles.

The facts on which the problem arises are, I think, unique. A solicitor, to whom I shall refer simply as the solicitor, has acted some years for the defendant in this action in his business and legal affairs. So far, however, as this action is concerned, the defendant carried automobile liability coverage, and both he and all other persons here involved were aware, at all material times, that the legal firm of which counsel for the defendant is a member were acting and would continue to act for him in this litigation.

The solicitor shared office space with counsel for the plaintiff, although no de facto or de jure business or partnership relation existed between them.

It appears that, at some time after the issuance of the writ, the solicitor took over from plaintiff’s counsel the negotiations with counsel for the defendant in an attempt to work out a settlement of the plaintiff’s claim. However, by letter of June 29th last addressed, not to counsel for the plaintiff, but to the solicitor, Mr. Johnson advised that the action, of which, to judge by search praecipes in the file, he was then aware, would have to proceed to examination for discovery before any recommendation could be made by him to his client.

The solicitor, who gave viva voce evidence, in addition to the affidavit sworn by him, on this hearing, said that he knew, on receipt of this letter, that he could “no longer act” for the plaintiff.

Despite his connection (which I gratefully find it unnecessary to conclusively define) with the plaintiff here, he took it upon himself, on July 19th or 20th, to advise the defendant, who had come to his office to see him on other legal matters, that “it was necessary to formally serve him with a writ of summons”. He deposes that he gave his secretary a copy of the writ in this action, and that she in turn handed this to the defendant. An affidavit of service in the form prescribed by the Rules was later sworn by the young lady, and filed. The defendant’s own recollection is that the solicitor himself handed him the copy of the writ, but the weight of the evidence supports the conclusion that he is mistaken in this.

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It is common ground that the solicitor explained to the defendant what the document was, and that the defendant did, in fact, read it over, at least to the point of seeing the names of the parties, and appreciating that it referred to the motor-vehicle accident.

It is further agreed that “a few moments later” he handed the copy of the writ to the solicitor, who, according to the defendant, “put it somewhere in his office”. The defendant has not seen the document since. Some days later, the solicitor informed Mr. Johnson, in the course of a telephone conversation, that the defendant had been served with the writ.

The defendant himself deposes that he did not report to his solicitors in this action what occurred on that day because he did not understand that the solicitor “was purporting to serve me with the writ”.

It remains only to add that no advantage has been or, I am advised, is proposed to be taken by counsel for the plaintiff by way of signing default judgment against the defendant.

My sole function here is to decide whether or not, on these facts, valid personal service was effected on the defendant, but I am impelled to say here that the ill-considered and, to me, incomprehensible position in which the solicitor unnecessarily placed himself here has not made this task an easier one.

Counsel for the defendant founds his attack, in essence, on the proposition that there are essentially two distinct and separate steps in effecting personal service. By s. 2 of the Supreme Court Act, R.S.B.C. 1960, c. 374, the forms set out in the various appendices to the Supreme Court Rules have the force of Rules. The affidavit of service of a writ of summons (Form No. 23A in Appendix B) requires the person serving the writ to depose, inter alia, that he or she did so “.......... by delivering to and leaving a true copy of the same with the said defendant”. Accordingly, says Mr. Johnson, delivery per se is insufficient; the copy must additionally be left with the defendant. This, he says, was not done here, since the handing back of the copy of the writ by the defendant to the solicitor undid what would otherwise have been valid personal service.

He derives support for this submission from the many English and Canadian practice texts and digests cited by him, although no case directly in point is cited in any of these works. The principle itself is, however, of undoubted antiquity, and cannot now be questioned; but there is no authority which determines what in fact constitutes leaving the writ with the defendant. It seems to me, therefore, necessary to determine the purpose of personal service as a preliminary to deciding, on the facts of the particular case, whether it has or has not been effected.

I start on the inquiry as to this purpose by expressing my respectful concurrence in the following statement of the Lord Chancellor, Lord Cranworth, in Hope v. Hope (1854), 4 De G.M. & G. 328 at p. 342, 43 E.R. 534:

The object of all service is of course only to give notice to the party on whom it is made, so that he may be made aware of and may be able to resist that which is sought against him; and when that has been substantially done, so that the Court may feel perfectly confident that service has reached him, everything has been done that is required.

This statement was applied by Wilson, J. (now C.J.S.C.), in his judgment in Barner v. Barner (1952) 7 W.W.R. (N.S.) 331.

It is, I think, clearly established by decisions such as Petit v. Ambrose (1817), 6 M. & S. 274, 105 E.R. 1245, that it is not necessary to show the original writ or other process being served a defendant unless he demands to see it.

It is also clear that the copy of the writ must be delivered to the defendant in such a manner as to make it readily apparent to him, by simply looking at it, what the document is. See for example O’Sullivan v. Murphy (1884), 78 L.T. Jo. 213, where the Exchequer Division of the High Court of Justice of Ireland decided that service allegedly effected by calling to the defendant, who immediately turned and ran away, and then throwing the copy of the writ on the ground, holding up the original, and calling after the fleeing defendant “There is the writ for you”

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was not valid service. Similarly in Banque Russe et Francaise v. Clark, [1894] W.N. 203, the Court of Appeal held that handing the defendant a writ enclosed in an envelope, whether sealed or not, the defendant not being informed of its contents, and having no knowledge that an action had been or was about to be commenced against him, was not good personal service.

On the other hand, thrusting a document of which personal service was required into an inner fold of the unbuttoned topcoat of a defendant who had declined to accept the proffered document was held to constitute good service in a decision which Lord Alverstone, C.J., presiding, referred to as “a very trumpery case”, Rose v. Kempthorne (1910), 103 L.T. 730. In Re Avery, [1952] 2 D.L.R. 413 at p. 415, [1952] O.R. 192, Hogg, J.A. (per curiam), said:

Personal service has been said to be service made by delivering the process into the defendant’s hand or by seeing him and bringing the process to his notice.

The most recent decision I have been able to discover on the point is the helpful judgment of the Senior Master, whose conclusion was upheld on appeal, in Canadian-Dominion Leasing Corp. Ltd. v. Corpex Ltd., [1963] 2 O.R. 497, a case involving somewhat similar problems. Weill, the president of the defendant company, denied that he had been personally served with a copy of the writ; but it was found, at p. 499, that:

.......... he had knowledge that the document was a writ of summons issued by the plaintiff against the defendant and knew the general nature of the plaintiff’s claim.

The learned Senior Master accordingly held that, the process having been brought to Weill’s attention, and the writ having come to the defendant’s knowledge, proper personal service had been effected.

I conclude, therefore, that counsel for the defendant here is correct in his submission that mere delivery of process is not sufficient, of itself, to constitute valid personal service. I cannot, however, agree with him in his suggestion that the additional requirement expressed in the affidavit of service as “leaving a true copy of the same with the defendant” is only met by the defendant ending his encounter with the process server with a copy of the process in his possession. The essential ingredient, as I see it on the authorities, is that the process delivered to the defendant must be so delivered under circumstances which enable the Court to conclude that he knew, or reasonably should have known, what it was, or, to adopt the language of Hogg, J.A., in Re Avery, supra, to the facts of this case, that he knew the document was a writ, issued against him by the plaintiff, and knew in addition the general nature of the claim therein advanced.

There is, in my view, no escape here from the conclusion, on the defendant’s own admissions, that by this test the service here effected was valid. He was advised, and knew of, the plaintiff’s claim against him. He read the document handed to him, saw his name and that of the plaintiff, and saw that the document referred to the accident.

What happened thereafter could not, in my opinion, undo what had then been done. The solicitor’s subsequent actions in taking back the writ when it was handed to him, and failing to promptly notify counsel for the defendant in this action of what had transpired, though difficult to understand, could not have the effect of vitiating the notice and understanding which the previous events had communicated to the defendant.

I conclude, therefore, that valid personal service was effected in this case. The motion is accordingly dismissed, with costs to the plaintiff in the cause.

Motion dismissed.

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Luu v. Wang

2011 BCSC 1240

Burnyeat J.

[1] Pursuant to Rules 4-4, 14-1 and 21-8(3)(b) of the Supreme Court Civil Rules, the Defendant applies to set aside the July 14, 2011 order (“Order”) which allowed a copy of the Notice of Civil Claim to be served substitutionally. The basis of the application is the submission that there was no evidence before the Learned Master that it was impracticable to serve the documents by personal service, that the Defendant could not be found after a diligent search, or that the Defendant was evading service of the documents.

[2] In opposition to the application, the Plaintiff submits that all the preconditions of Rule 4-4(1) were met so that the Order should not be set aside. The Plaintiff also relies on Rule 1-3 of the Supreme Court Civil Rules which states:

(1) The object of these Supreme Court Civil Rules is to secure the just, speedy and inexpensive determination of every proceeding on its merits.

(2) Securing the just, speedy and inexpensive determination of a proceeding on its merits includes, so far as is practicable, conducting the proceeding in ways that are proportionate to

(a) the amount involved in the proceeding,

(b) the importance of the issues in dispute, and

(c) the complexity of the proceeding.

[3] Pursuant to Rule 4-3, documents must be served by person service “Unless the Court otherwise orders”. Rule 4-4(1) of the Supreme Court Civil Rules states:

(1) If it is impracticable to serve a document by personal service or if the person to be served by personal service

(a) cannot be found after a diligent search, or

(b) is evading service of the documents,

the court may, on application without notice, make an order for substituted service granting permission to use an alternative method of service.

BACKGROUND

[4] The Learned Master had an affidavit of “attempted personal service” from a process server who swore on information and belief that another process server went to an address on Angus Drive in Vancouver owned jointly by the Defendant and his wife or former wife on June 17, 2011 and ... spoke with an ADULT FEMALE who identified herself as XIANPING WANG’s wife. She informed him that XIANPING WANG was not there and would be back on June 29. She further informed him that XIANPING WANG would only be there for a few days and to return on June 29.

[5] In his Affidavit, the process server stated that he then went to the Angus Drive address on June 28, 2011 and “... and spoke with an ADULT MALE who kept the chain for the door locked and would not fully open the door. He informed me that he did not speak English very well and would not confirm whether or not he was XIANPING WANG.”

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[6] The process server also stated that he went to the Angus Drive address on June 29, 2011 and received no answer at the door. The process server also stated that he had received a photograph on June 29, 2011 and that the photograph was a: “... true likeness of the Defendant, XIANPING WANG, who I spoke with on Tuesday, June 28, 2011 ...”.

[7] Also before the Learned Master was an affidavit from a paralegal from the firm representing the Plaintiff stating that the Angus Drive address was owned by the Defendant and Bin Zou as joint tenants and setting out certain matters regarding a separate trial where Xianping Wang was also a defendant. It was stated by the paralegal that, in that separate action, the Defendant gave evidence that he was a resident of China, that his wife lived at the Angus Drive address with their two children, that he had a visitor’s visa so that he could visit his wife and children, and that Gordon Weatherill, Q.C. was his counsel.

[8] On June 30, 2011, counsel for the Plaintiff asked Mr. Weatherill whether he was prepared to accept service on behalf of the Defendant in this Action. In a July 5, 2011 letter, Mr. Weatherill advised that he did not have instructions to accept service.

[9] The paralegal further stated in her Affidavit:

I am informed by Ms. Wellburn, and verily believe it to be true that at the conclusion of the trial of Action No. S072661 in June 2010, counsel were advised that the court hoped to have reasons ready in mid September 2010. Ms. Wellburn anticipated that Xianping Wang would attend in Vancouver to hear the reasons for judgment on Action No. S072661 and at such time he could be served.

Judgment has not yet been delivered in respect of the Action No. S072661.

I am informed by Ms. Wellburn and verily believe it to be true that as the expiration date for service of the Notice of Civil Claim drew closer, she began making attempts to serve Xianping Wang in June 2011.

I am informed by Ms. Wellburn and verily believe it to be true that she has experience attempting to effect service in China in connection with another defendant in Action No. S072661. Use of a particular government agency is required, and service took many months.

CASE AUTHORITIES AND DISCUSSION

[10] From the information subsequently available, it is clear that the Defendant was not in Vancouver on July 28, 2011 and that the man that the process server spoke to was not the Defendant but was the father-in-law or former father-in-law of the Defendant. From the photographs available, I am satisfied that it would have been very difficult for a process server to mistake the father in law (or former father in law) of the Defendant for the Defendant.

[11] As at July 1, 2010, the Rules governing civil procedure in British Columbia changed. Since then, there appears to have been no consideration of whether the preconditions for an order for substituted service under the former Rule 12(1) have changed as a result of the adoption of Rule 4-4.

[12] Under the former Rules of Court, Rule 12(1) stated:

Where for any reason it is impracticable to serve a document as set out in Rule 11, the court may order substituted service, whether or not there is evidence that the document will probably reach the person to be served or will probably come to the person’s attention or that the person is evading service.

[13] In interpreting that Rule, McTaggart Co. Ct. J., as he then was, in Malkin & Pinton Industrial Supplies v. Anglehart and Anglehart Furniture (1977), 5 B.C.L.R. 285 (C.C.N.W.) made the following statements:

The purpose of such rule is not to save the plaintiff “trouble and expense of effecting personal service, if personal service can be made”. The mere fact that it may be a matter of some difficulty to reach him (unless, for example, he is evading service) does not of itself relieve the plaintiff of the obligation of

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serving him personally: De Camps v. Sainsbury (1921), 49 O.L.R. 131, 64 D.L.R. 53, per Orde J.; see also Morrow v. Morgan (1920), 47 O.L.R. 97.

In considering the present rule the first question to answer is what is meant by the word “impractical”.

The Shorter Oxford English Dictionary, 3rd ed. (1975), vol. 1, pp. 1034-35, gives the following:

Impractical, ... 1. Impracticable.

Impracticable, ... 1. Not practicable; that cannot be carried out or done; practically impossible 1677. 2. That cannot be put to use or practically dealt with; unmanageable, intractable, unserviceable 1653. 3. An impracticable person 1829.

“In matters of business a thing is commonly treated as impossible when it is impracticable, and as impracticable when it cannot be done without laying out more money than the thing is worth”: Rosetto v. Gurney, 11 C.B. 186, cited in Devitt v. Providence Washington Ins. Co. (1902), 61 App. D. 390, 70 N.Y.S. 654, affirmed 173 N.Y 17, 65 N.E. 777 (at paras. 5-8).

[14] Of similar effect are the statements of van der Hoop L.J.S.C., as he then was, in Credit Foncier Franco-Canadien v. McGuire (1979), 14 B.C.L.R. 281 (S.C.):

Before a Judge can grant an order for substituted service, then, he must be supplied with facts establishing that personal service cannot be usefully effected or will involve too great a cost. The applicant must show that reasonable steps have been taken to locate the party to be served and, if he has been located, that reasonable efforts had been made to effect personal service. What is reasonable must depend on the circumstances of each case including, for example, the type of relief claimed, the amount involved, the avenues explored to locate the person and the steps taken to effect personal service. Many applications are, as this one is, woefully deficient in supporting material setting out the facts which are essential to enable a Judge to exercise the judicial discretion required for the granting of the order sought. (at para. 7)

What must not be lost sight of is the fact that R. 12 provides an exception to the requirement for personal service, not an automatic right to an order for substituted service whenever there is some delay or difficulty in locating a party or in effecting personal service. The exception applies only when the facts set out in the material filed in support of an application justify it. (at para. 9)

[15] In Osburn v. Khoo, [1996] B.C.J. No. 2702 (S.C.), Hall J., as he then was, dealt with an order that had been made allowing the posting of copies of a writ on the door of premises as well as serving copies of the documents on the nephew of the defendant. Hall J. concluded as follows:

As I analyze matters, if a defendant is to be called upon to attorn to the jurisdiction of the forum courts, it is desirable that if possible there should be personal service of process upon a defendant. I believe that the scheme of our Rules of Court recognizes this general principle. Having regard to the nature of modern communications, I do not consider that it could be argued with much force that service personally on this defendant, who is now apparently resident in Hong Kong, could be said to be impractical within the meaning of that terminology as used in the Rule and discussed in the authorities. It might be more convenient and less expensive to effect substituted service in British Columbia but a modest degree of inconvenience and expense does not in my view justify a departure from the ordinary rule of personal service. If the task is very onerous or the expense appeared likely to be very high, then different considerations may fall to be assessed. (at para. 11)

[16] The former Rule only required the applicant to show that it was “impracticable to serve”. The current Rule establishes two distinct types of precondition before an order for substituted service is made – either that it is “impracticable” to serve by personal service or if the person served cannot be found after a “diligent search” or is “evading service”. Accordingly, it was not necessary to show that the Defendant could not be found after a diligent

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search or that he was evading service. The plaintiff only had to show that it was “impracticable” to serve the Defendant.

[17] The Learned Master granted the Order after reading the materials but it is not clear whether he was of the view that personal service was “impracticable” or whether he was of the view that the Defendant could not be found after a diligent search or was evading service.

[18] I have concluded that it would not have been possible for a determination to be made that personal service was impracticable. First, it could not be shown that it was practically impossible to serve the Defendant. Second, there was no information before the Learned Master about the cost of personal service in China, so that it could not be said that service could not be done without laying out more money “then the thing was worth”. While I am now advised that the claim is for an excess of one million dollars, that information was not before the Learned Master. As well, the actual cost of serving someone in China was not before the Learned Master. Third, it could not be shown that personal service could not be easily effected. In fact, the evidence before the Learned Master was that personal service was effected in China on the defendant named in the other action. Fourth, reasonable steps had been taken to locate the Defendant. The Plaintiff knew exactly where the Defendant could be found but there was no evidence that reasonable steps had been taken to serve the Defendant. There was no evidence that the Plaintiff had attempted to serve the Defendant in China. In fact, the Plaintiff gave various reasons why no attempt was made to serve the Defendant in China.

[19] Accordingly, the question which then arises is whether the Plaintiff had produced materials before the Learned Master which would allow the Learned Master to conclude that the Defendant could not be found after a diligent search or that the Defendant was evading service of the Notice of Civil Claim. The Plaintiff knew exactly where the Defendant could be found, so the only question that could arise was whether it was shown that the Defendant was evading service.

[20] While there was evidence before the Learned Master that the Defendant might be evading service, that evidence was based on the incorrect assumption by the process server that the Defendant was present at the Angus Drive address on June 28, 2011.

[21] An order for substituted service may be set aside where the order was erroneously made because circumstances come to light that, if they had been known, would have meant that the situation was not one which would have qualified for substituted service. The ex parte application for an order for substituted service is no different than any other order made on an ex parte basis.

[22] While I am prepared to conclude that the identification of the Defendant by the process server was an inadvertent error, it is clear that the process server could not have identified the Defendant as the man that he saw on June 28, 2011. If the Learned Master had been advised that the person seen on that date was not the Defendant, I am satisfied that the Order would not have been made on the basis that the Defendant was evading service. As the Order appears to have been made on the basis that the Defendant was evading service, the Order must be set aside. If the fact that it was not Defendant had been known to the Learned Master, I am of the view that the Order would not have been made.

[23] While the object of the Supreme Court Civil Rules is to secure a “speedy and in expensive determination”, that object does not detract from the requirements that are set out under Rule 4-4 (1). The preconditions to making an Order under Rule 4-4 so that personal service is not required continue to be as set out in the Malkin, Credit Foncier, and Osbourn decisions, all supra. The Defendant will be called upon to attorn the jurisdiction of the Supreme Court of British Columbia. In those circumstances, personal service may be more appropriate. Any inconvenience and expense in this case do not justify departure from the ordinary rule of personal service.

[24] Accordingly, the order made July 14, 2011 is set aside. Costs of this application will be costs in the cause.

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Austin v. Rescon Construction (1984) Ltd. and Wightman Enterprises Ltd.

Supreme Court of British Columbia Judgment: February 14, 1986

BOYD L.J.S.C.: The defendants make application under Rule 17(11) to set aside a default judgment obtained by the plaintiff.

On October 16th, 1985, the writ of summons was issued in which the plaintiff alleged that the defendants deliberately trespassed upon the plaintiff's land by inserting certain anchor bolts under the surface of the plaintiff's land. The plaintiff claims general and special damages, for trespass, exemplary damages, and in the alternative, damages for unjust enrichment.

On October 18th, 1985, the writ of summons and statement of claim were delivered to Mr. Randy Taylor, counsel for the defendants. On November 12th, 1985, Mr. Taylor served a demand for particulars, together with a letter requesting that he be provided with a period of fourteen days following the delivery of the particulars, within which to file a statement of defence. The particulars requested were provided to Mr. Taylor by letter dated December 2nd, 1985. In that same letter, the plaintiff's solicitor advised Mr. Taylor that unless a statement of defence was filed by December 9th, 1985 he intended to file for judgment.

On December 10th, 1985, Mr. Taylor telephoned Mr. Earle MacLeod, the plaintiff's solicitor. Unfortunately, each individual's recollection of the telephone conversation is somewhat different. According to Mr. MacLeod, Mr. Taylor confirmed that he had just received the particulars and that he would file a statement of defence within one week, to which suggestion Mr. MacLeod agreed. By contrast, Mr. Taylor says he told Mr. MacLeod that he required more time within which to prepare and file a statement of defence. According to him, Mr. MacLeod waived the December 9th, 1985 deadline and no new date for filing was set. Based on his conversation with Mr. MacLeod, he assumed that he would have a reasonable time within which to file the statement of defence.

Following the fateful telephone call, Mr. MacLeod says that he telephoned Mr. Taylor's office on December 20th and December 30th, 1985. He apparently left messages for Mr. Taylor to return his calls, which telephone calls were not returned by Mr. Taylor. He left no message with Mr. Taylor's office inquiring as to why the statement of defence was not yet filed nor advising that he intended to take default judgment.

In his affidavit, Mr. Taylor confirms that Mr. MacLeod telephoned his offices on December 20th and 30th, 1985. His staff has advised him that during both telephone calls, Mr. MacLeod did not demand any statement of defence nor did he advise that default judgment would be entered in the event that a statement of defence was not received immediately.

The default judgment was entered on January 8th, 1986 and served upon the defendants on January 9th, 1986. On January 17th, 1986, the defendants made application to set aside the default judgment, which application was returnable on January 22nd, 1986 and then adjourned for hearing to February 12th, 1986.

It is well established that in order to succeed on an application to set aside a default judgment, the applicant must show first that he did not wilfully or deliberately fail to enter an appearance or file a defence to the plaintiff's claim; secondly, that he made his application to set aside the default judgment as soon as reasonably possible after obtaining knowledge of the default judgment or explain any delay in bringing the application; and third, that he has a meritorious defence or at least a defence worthy of investigation. (Miracle Feeds v. D. & H. Ent. Ltd. (1979), 10 B.C.L.R. 58; Bank of Montreal v. Erickson and Erickson, 57 B.C.L.R. 72 (B.C.C.A.))

In this case, it is unfortunate that the respective parties' counsel have sworn affidavits describing differing versions of the telephone call which occurred on December 10th, 1985. In any event, I am satisfied that there was an

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unfortunate misunderstanding between counsel, and that there was no wilful or deliberate failure on the part of the defendants' counsel to take steps to file a statement of defence.

On reviewing the affidavit of Mr. Taylor sworn January 17th, 1986, and the further affidavit of Mr. Taylor sworn January 21st, 1986, to which is appended the proposed statement of defence, I am also satisfied that there are sufficient facts to support the defendants' contention that they have a meritorious defence to advance. I am also satisfied that the defendants moved in a reasonably prompt fashion and that there was no delay in bringing on this application.

Upon the defendants paying, within thirty days of the date of this judgment, to the plaintiff's solicitor, the costs thrown away as a result of the judgment by default being entered, and the costs of this application, the judgment by default entered against the defendants shall be set aside and the defendants shall forthwith file a statement of defence.

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Leung v. 568263 BC Ltd.

2000 BCSC 577

C.L. SMITH J. [1] The defendants 477738 BC Ltd. and James Yin Gim Leung applied for an order that the Company Act part of this proceeding be set aside. The other defendant numbered company, 568263 BC Ltd., is unrepresented and made no application.

[2] Written submissions were received on January 24, 2000.

BACKGROUND

[3] The action is based upon a claim that the plaintiffs (a married couple) loaned the defendants 477738 BC Ltd. and James Yin Gim Leung the sum of $140,000 and have not been repaid. Further, the plaintiffs seek relief under sections 200 and 227 of the Company Act, R.S.B.C. 1996, c. 62. They allege that the corporate defendant, 568263 BC Ltd., of which the plaintiff, Wing Lee Leung and the defendant, James Yin Gim Leung, were the shareholders and directors, should compensate the plaintiff, Wing Lee Leung, because its affairs have been conducted in a manner oppressive to that plaintiff. Thus, the plaintiffs have joined in one action claims for: damages, breach of trust, repayment of monies had and received, an accounting, a tracing order or a charging order, and an order pursuant to sections 200(1) and 227 of the Company Act.

[4] The writ was issued June 16, 1999. On July 9, 1999 the defendants 477748 B.C. Ltd. and James Yin Gim Leung brought an application to strike the endorsement as disclosing no reasonable cause of action, and alternatively to set aside that part of the proceeding based on the Company Act. They also sought to set aside the Certificate of Pending Litigation.

[5] The plaintiffs allege in their Statement of Claim dated November 17, 1999 the following:

(1) The plaintiffs agreed with the defendants to invest money and to devote time and energy to running a restaurant business. The plaintiff Wing Lee Leung was to be the chef and run the kitchen and the defendant James Leung would manage the restaurant generally. (2) The defendant James Leung is the sole shareholder and director of the defendant 477738 BC Ltd. and is one of two shareholders and directors of the defendant 568263 BC Ltd., the plaintiff Wing Lee Leung, being the other. (3) The defendant 477738 BC Ltd. owns land and premises which it leased to 568263 BC Ltd. (4) The plaintiffs borrowed $140,000 against their house in Vancouver; this money was loaned to 568263 BC Ltd. and was spent on renovations to the premises. (5) The parties had a falling-out and the defendant James Leung caused the company 568263 BC Ltd. to pass resolutions prejudicial to the plaintiffs’ interests and to make improper payments which were not legitimate expenses of the restaurant or which were for his own personal use. He thereby used his position and status in 568263 BC Ltd. to oppress the plaintiff Wing Lee Leung as a shareholder and director of that company.

[6] When the application came on before me I dismissed the defendants’ application to strike the writ as disclosing no cause of action and allowed the plaintiffs’ application for an amendment. It appears that there has been an agreement that the order will provide that no Certificate of Pending Litigation will be registered against the plaintiffs’ property without further court order.

[7] The only remaining disputes are about whether the plaintiffs can combine their claims for damages and other relief against the individual and corporate defendants with their claim under the Company Act, and costs.

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ISSUES

[8] The issues I must determine are:

(1) Do the defendants 477738 BC Ltd. and James Leung have standing to bring on the application to strike the claim under the Company Act which is not against them but relates only to the other numbered company, unrepresented in these proceedings?

(2) Given the provisions of Rule 1(13), which require that an application to “the court” authorized by an enactment be made by originating application, is there discretion nevertheless to permit the Company Act claim to be brought as part of the plaintiffs’ action?

(3) If there is discretion, should it be exercised in this case?

(4) Should there be an order for costs?

ANALYSIS

(1) Do the defendants 477738 BC Ltd. and James Leung have standing to bring on the application to strike the claim under the Company Act which is not against them but relates only to the other numbered company, unrepresented in these proceedings?

[9] This objection was raised by counsel for the plaintiffs but not vigorously pursued. I dismiss this objection because the represented defendants have a sufficient interest in the constitution of the action to object to its coupling with another matter that may lengthen the proceedings unnecessarily. They have standing to bring on this application.

(2) Given the provisions of Rule 1(13) which require that an application to the court authorized by an enactment be made by originating application, is there discretion nevertheless to permit the Company Act claim to be brought as part of the plaintiffs’ action?

[10] Rule 1(13) reads:

1(13) Petitions and applications – Where an enactment authorizes an application to the court or to a judge of the court, and, whether or not the enactment provides for the mode of application, the application shall be

(a) by originating application under Rule 10, or

(b) if the application is interlocutory, by interlocutory application under Rule 44.

[11] Rule 10(1) provides:

10(1) Originating application – An application, other than an interlocutory application or an application in the nature of an appeal, may be made by originating application where

(a) an application is authorized to be made to the court, ..........

The defendants’ position is that although the language of Rule 10(1) is permissive, that of Rule 1(13) is mandatory and therefore where an enactment authorizes an application to be brought to the court it must be done by an originating application under Rule 10.

[12] The plaintiffs refer to Rule 1(5), which provides:

1(5) The object of these rules is to secure the just, speedy and inexpensive determination of every proceeding on its merits.

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[13] Counsel for the plaintiffs brought to my attention Gittings v. Caneco Audio-Publishers Inc., (1988), 26 B.C.L.R. (2d) 349 (B.C.C.A.) in which the Court allowed an appeal from the order of a Chambers judge striking out a claim in a writ of summons for relief under s. 224 of the Company Act. The Court of Appeal held that Rule 2(3) prevented the Chambers judge from making the order. Rule 2(3) reads:

2(3) The court shall not wholly set aside a proceeding on the ground that it was required to be commenced by an originating process other than the one employed.

[14] The court stated at 351-52:

That rule was first introduced in the revised rules of 1976. The purpose of introducing that rule was to remove the possibility of the results, which sometimes took place under the old rules, whereby a proceeding which was not commenced on the right piece of paper or did not contain quite the right words had to be struck out as a nullity, sometimes after the limitation period had expired. Some of those results were no credit to the law.

The submission of the respondent before us today is that Rule 2(3) does not apply in this case because of the mandatory language of s. 227 of the Company Act.

That might be an arguable point if that section required the proceeding to be begun by petition, but one only arrives at the conclusion that the correct procedure is by petition by a route which leads to the rules.

In all the circumstances, I can see no reason why Rule 2(3) does not apply to preclude an order being made, as was done in this case, wholly setting aside a portion of the proceeding on the ground that it was required to be commenced by a different originating process.

I think it follows that the relief given could only have been in the nature of a stay. Such relief would be appropriate if there was a basis for concluding that there would be a practical advantage in requiring the plaintiffs to proceed by petition, or prejudice to the defendants by allowing it not to do so. I see nothing of the kind here. I note that the chambers judge recited the various steps which would have to be taken to get back to the position where this aspect of the dispute between the parties would be part of the action.

Petition procedures often have their disadvantages, and I have no doubt that in this case it would not be a practical possibility to deal with the complex issues which appear to be raised here without essentially converting the proceeding into an action. That being so, it is my view that the order, insofar as it strikes out the claim under s. 224, was made in error and should be set aside.

[15] The Gittings case is directly on point. Two other cases following it were cited by counsel for the plaintiffs: Royal Bank of Canada v. Martens (1988), 55 B.C.L.R. (3d) 73 (S.C.) and Voyage Industries v. Craster, [1998] B.C.J. No. 1884, (11 August 1998), Vancouver Registry, C976871 (S.C.). In the former case, the court refused to grant a stay where claims (normally brought by writ of summons) regarding promissory notes and a deposit agreement were made part of foreclosure proceedings by petition. The court refused the stay because there was no practical advantage in requiring the plaintiff to commence a new action by writ of summons. In Voyage Industries v. Craster, the court held (in the alternative to its main ruling on a point of jurisdiction) that an oppression claim was not sufficiently related to the matters in the main action and that there was a practical advantage in requiring separate proceedings to be commenced.

[16] Counsel for the defendants submits, however, that Gittings is not binding in this case because it was decided prior to the enactment of Rule 1(13), an amendment intended to remedy the confusion that had evolved about the bringing of applications authorized by statute.

[17] When Gittings was decided the comparable provision was s. 61(1) of the Supreme Court Act, R.S.B.C. 1979, c. 397 which stated:

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61(1) Where an enactment authorizes a petition or application to the court or to a judge by a particular mode, the petition or application shall be by originating application or notice of motion as provided in the rules.

[18] Does Rule 1(13), enacted subsequently, eliminate the discretion the Court of Appeal in Gittings found to permit proceedings to continue despite their having been improperly commenced?

[19] Counsel for the plaintiffs did not attempt to provide any extrinsic evidence in support of her claim that Rule 1(13) was enacted to eliminate such discretion. However, the learned authors of McLachlin and Taylor, British Columbia Practice, vol. 1, 2d ed., looseleaf (Markham, Ont.: Butterworths, 1979), do suggest that it has eliminated any discretion. They state at 10-14:

.......... [w]here the originating application is authorized by an enactment, then despite the use of the permissive ‘may’ in R. 10(1)(a), the proceeding must be brought by originating application by virtue of R. 1(13)(a).

[20] The language used in s. 61(1) and Rule 1(13) does not differ in its mandatory force: in both provisions the word “shall” is used. The Interpretation Act, R.S.B.C. 1996, c. 238, s. 29 provides that both “shall” and “must” are to be construed as imperative. Nevertheless, the Court of Appeal in Gittings found that there was discretion flowing from the provision of Rule 2(3), which continues to state, as it did when that case was decided, that the court is not to wholly set aside proceedings on the basis that they have been commenced in the wrong form.

[21] I do not conclude that the enactment of Rule 1(13) has the effect of over-ruling Gittings. There is still room for discretion to permit proceedings to continue even though they have been improperly commenced.

(3) If there is discretion, should it be exercised in this case?

[22] The reasoning in Gittings turned in part on questions of practicality: is there any practical objective to be served by requiring the plaintiffs to issue a petition with supporting material?

[23] Counsel for the plaintiffs referred me to Buckley v. British Columbia Teachers’ Federation (1992), 70 B.C.L.R. (2d) 210 (S.C.) and to Merritt v. Imasco Enterprises Inc. (1992), 2 C.P.C. (3d) 275 (B.C.S.C.). Buckley illustrates that it is not a foregone conclusion that proceedings by way of petition will be converted to proceedings by way of action; s. 200 contemplates that even where there are some disputed facts, they may have to be resolved in a summary way. Merritt concerned an application by the defendants to join two actions under Rule 5(8). Master Kirkpatrick (as she then was) held that the pleadings determine whether common claims, disputes and relationships exist between the parties but that the question of whether they are “so interwoven as to make separate trials at different times before different judges undesirable and fraught with problems and economic expense” requires reference to matters such as the potential for a party to be seriously inconvenienced, whether there will be a real saving in pre-trial procedures, experts” time, and the like.

[24] From the Statement of Claim and the material filed, it appears that the defendant James Leung was interacting with the plaintiffs personally and through two corporate vehicles, one company wholly owned by himself and the second jointly with the plaintiff Wing Lee Leung. The plaintiffs allege that what went wrong in the business relationship manifested itself both for the plaintiffs personally and in the corporate vehicle they had created jointly with the personal defendant. I can only conclude that the factual nexus between the claims is so strong that it would be an exercise of needless formalism to require the plaintiffs to issue a petition with supporting material in an originating application, then bring an application to have the petition heard with the action. Bearing in mind the provisions of Rule 1(5), I decline to make the order sought by the defendants.

(4) Should I make an order as to costs?

[25] Although the defendants have not succeeded in this application, it was brought on because the plaintiffs disregarded the Rules when they joined their claim under the Company Act with their claims for other relief in the action. In the circumstances I will make no order as to costs.

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East Kootenay Realty Ltd. v. Gestas Inc.

1986 BCJ No. 1569 (SC)

BOUCK J.

1 At this point it might be helpful to sketch the practice of commencing proceedings by way of a petition.

2. In most instances a litigant pursues his claim for relief by way of a writ and a statement of claim. This procedure contemplates the delivery of a defence, oral and written discovery of both parties and a trial where witnesses are called to be examined and cross examined. From beginning to end the action can now take up to 18 months to resolve. But in certain circumstances the Rules of Court allow an aggrieved party to bring his claim in a summary way through the use of a petition. When that occurs a final order can be obtained in a few weeks. This is because there are no discovery procedures, except perhaps for cross examination on affidavits, and no witnesses are called to be examined and cross examined since the evidence is all in type written form in documents called affidavits. Because of the summary nature of a petition hearing only a few types of claims can be resolved by this means.

3. A trial at common law always presumed the introduction of evidence through the calling of witnesses. It was only in the courts of equity that facts were proved by way of affidavit. If there was a dispute over any fact during the hearing of a complaint in a court of equity, then the issue was sent to the courts of common law for determination of the fact by means of a jury. The common law court would then report back the verdict of the jury to the equity court and the proceedings would continue in equity. Upon the merger of the two systems of law into one court by the Judicature Acts, all disputed facts in equity were resolved by a judge alone where the complaint was equitable in nature, or by a jury where the action was at common law.

4. Gradually the use of civil juries fell away in common law cases and now most findings of fact in common law trials are made by a judge sitting without a jury. Equitable claims are no longer exclusively resolved by way of a petition and affidavit evidence. Instead, a claim in equity is usually brought through the issuance of a writ and a statement of claim, just as if it were a proceeding in a court of common law.

5. But there are still a number of situations where a common law or equitable claim need not go through the lengthy steps demanded for the trial of contested facts. As a consequence, the rule makers borrowed the procedural device of a petition from the proceedings in equity. It is referred to in the Supreme Court Rules under Rule 10 as an "Originating Application". An Originating Application is brought by way of a petition: Supreme Court Rules, Rule 10(3).

6. There are relatively few categories set out in Rule 10(1)(a) to (h) of the Supreme Court Rules which give a person the right to obtain a summary remedy through the device of a petition....

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Bea v. The Owners, Strata Plan LMS 2138

2015 BCCA 31

Summary:

The appellants appeal from an order of the Supreme Court of British Columbia, ordering the seizure and sale of the appellants’ strata property as a remedy to put a stop to the appellants’ continuing contempt of court. The appellants launched numerous frivolous actions against the respondents. The appellants were subsequently found to be vexatious litigants and ordered to stop filing claims in respect of this matter. The appellants repeatedly disobeyed that order and were subsequently found in contempt of court. The respondents had obtained numerous orders for special costs against the appellants and had registered numerous judgments against the title to the strata property. The chambers judge determined that the only curative remedy available was the immediate seizure and sale of the strata property, with conduct of the sale to be carried out by the respondents. The appellants allege that there was no jurisdiction to make the order, and in the alternative that it was not an appropriate order in the circumstances.

Held: Appeal dismissed. The majority (per Garson and MacKenzie J.A.) held that the chambers judge had jurisdiction to make an order for seizure and sale of property, as such an order is analogous to the historical power to use sequestration as a remedy for contempt. This power is constitutionally protected as a core aspect of a superior court’s inherent jurisdiction to punish for contempt, and therefore the language of the Supreme Court Civil Rules pertaining to available powers in contempt must be read as non-exhaustive. The chambers judge’s discretionary decision to grant the order deserves deference in the circumstances, and it cannot be shown to be inappropriate in this case.

Goepel J.A. dissented. In his opinion the court’s inherent jurisdiction to sentence for contempt was limited by the provisions of the Supreme Court Civil Rules and the chambers judge did not have the jurisdiction to order the sale of the appellant’s property.

Reasons for Judgment of the Honourable Madam Justice Garson:

… [23] I turn first to a consideration of the nature and origins of the court’s inherent jurisdiction in order to determine if a Rule can limit the inherent power of the court to punish for contempt.

[24] The Beas argue that Rule 22-8(1) exhaustively codifies the court’s power to punish for contempt and therefore removes any historical inherent jurisdiction to fashion and apply alternative remedies for contempt.

[25] This issue was considered by the Supreme Court of Canada in MacMillan Bloedel Ltd. v. Simpson, [1995] 4 S.C.R. 725. In MacMillan, the Court concluded that the portions of the Constitution Act, 1867 enshrining a legal system similar in principle to that of the United Kingdom, including ss. 96–101 and the preamble, prevents the Legislature from limiting the core of a superior court’s inherent jurisdiction, including the power to punish for contempt. MacMillan was most recently cited by the Supreme Court of Canada in Trial Lawyers Association of British Columbia v. British Columbia, 2014 SCC 59 (CanLII), where McLachlin C.J.C. stated, “neither level of government can enact legislation that abolishes the superior courts or removes part of their core or inherent jurisdiction”: at para. 30 [emphasis added].

[26] In MacMillan the Court had before it the question of whether it was within the jurisdiction of Parliament to grant exclusive jurisdiction to youth courts (as opposed to superior trial courts) over contempt proceedings involving a young person. Chief Justice Lamer for the majority stated that “the power [of a court] to control its process and enforce its orders, through, in part, punishing for contempt, is within [the protected inherent] jurisdiction”: at para. 33 [emphasis added]. He concluded that “no aspect of the contempt power may be removed from a superior court without infringing all those sections of our Constitution which refer to our existing judicial system as inherited

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from the British, including ss. 96 to 101, s. 129, and the principle of the rule of law recognized both in the preamble and in all our conventions of governance”: at para. 41. In determining what constituted the scope of a superior court’s inherent jurisdiction to punish for contempt, he endorsed I.H. Jacob’s “The Inherent Jurisdiction of the Court” (1970), 23 Current Legal Problems 23, as a “starting point for many discussions of the subject”: at para. 29.

[27] Chief Justice Lamer explained the reasoning for such constitutional protection of a court’s inherent jurisdiction to punish for contempt as follows:

The seminal article on the core or inherent jurisdiction of superior courts is I. H. Jacob’s “The Inherent Jurisdiction of the Court” (1970), 23 Current Legal Problems 23. Jacob’s work is a starting point for many discussions of the subject, figures prominently in analyses of contempt of court, and was cited with approval by Dickson C.J. in B.C.G.E.U. v. British Columbia (Attorney General), [1988] 2 S.C.R. 214. While the particular focus of Jacob’s work is the High Court of Justice in England, he notes that “[t]he English doctrine of the inherent jurisdiction of the court is reflected in most, if not all, other common law jurisdictions, though not so extensively in the United States” (p. 23, fn. 1). Moreover, the English judicial system is the historic basis of our system and is explicitly imported into the Canadian context by the preamble of the Constitution Act, 1867. The superior courts of general jurisdiction are as much the cornerstone of our judicial system as they are of the system which is Jacob’s specific referent.

Discussing the history of inherent jurisdiction, Jacob says (at p. 25):

. . . the superior courts of common law have exercised the power which has come to be called “inherent jurisdiction” from the earliest times, and . . . the exercise of such power developed along two paths, namely, by way of punishment for contempt of court and of its process, and by way of regulating the practice of the court and preventing the abuse of its process.

Regarding the basis of inherent jurisdiction, Jacob states (at p. 27):

. . . the jurisdiction to exercise these powers was derived, not from any statute or rule of law, but from the very nature of the court as a superior court of law, and for this reason such jurisdiction has been called “inherent.” This description has been criticised as being “metaphysical” [cite omitted], but I think nevertheless that it is apt to describe the quality of this jurisdiction. For the essential character of a superior court of law necessarily involves that it should be invested with a power to maintain its authority and to prevent its process being obstructed and abused. Such a power is intrinsic in a superior court; it is its very life-blood, its very essence, its immanent attribute. Without such a power, the court would have form but would lack substance. The jurisdiction which is inherent in a superior court of law is that which enables it to fulfil itself as a court of law.

While inherent jurisdiction may be difficult to define, it is of paramount importance to the existence of a superior court. The full range of powers which comprise the inherent jurisdiction of a superior court are, together, its “essential character” or “immanent attribute”. To remove any part of this core emasculates the court, making it something other than a superior court.

. . .

The core jurisdiction of the provincial superior courts comprises those powers which are essential to the administration of justice and the maintenance of the rule of law. It is unnecessary in this case to enumerate the precise powers which compose inherent jurisdiction, as the power to punish for contempt ex facie is obviously within that jurisdiction. The power to punish for all forms of contempt is one of the defining features of superior courts. . . . .

. . .

. . . . The full panoply of contempt powers is so vital to the superior court that even removing the jurisdiction in question here and transferring it to another court with judges appointed pursuant to s. 96 would offend our Constitution.

[MacMillan at paras. 29, 30, 38, and 41. Emphasis added.]

WEEKS 3 & 4: Bea

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[28] As noted by Lamer C.J.C. in MacMillan at para. 29, the English judicial system was explicitly imported into the Canadian legal system. The Constitution Act, 1867 provides for such, in part, in the following language taken from the preamble:

Whereas the Provinces of Canada, Nova Scotia, and New Brunswick have expressed their Desire to be federally united into One Dominion under the Crown of the United Kingdom of Great Britain and Ireland, with a Constitution similar in Principle to that of the United Kingdom.

[Emphasis added.]

[29] MacMillan determined that the Constitution Act, 1867 protects the entirety of the “core” of a superior court’s inherent jurisdiction from legislative interference. To limit a court’s powers to punish for contempt takes away the court’s jurisdiction to control its own process in circumstances in which those powers would provide the only workable remedy. This is equivalent to the legislative removal of jurisdiction to punish for contempt in certain circumstances that was at issue in MacMillan. The Supreme Court of Canada applied MacMillan in this way most recently in Trial Lawyers, where the Court determined that the Legislature’s mandatory imposition of “hearing fees” interfered with a superior court’s “core” inherent jurisdiction to provide access to the superior courts to persons who could not afford said hearing fees. This was not a wholesale legislated removal of any part of the court’s inherent jurisdiction, but was rather unconstitutional legislation because it imposedmandatory procedural requirements that interfered with what would otherwise be part of a court’s “core” inherent jurisdiction to grant exemptions: Trial Lawyers at paras. 46–48. This is analogous to the case at bar, where the regulations at issue allegedly impose mandatoryprocedural requirements that interfere with what would otherwise be part of the court’s “core” inherent jurisdiction to punish for contempt in these circumstances.

[30] Jacob provides a useful analysis of the inherent jurisdiction of the court. He emphasizes that a court’s inherent jurisdiction is part of procedural law not substantive law: at 24. Inherent jurisdiction must also be distinguished from judicial discretion. These concepts—that is, judicial discretion and inherent jurisdiction—may overlap but are vitally distinct: at 25. He notes that the powers conferred by the Rules of Court are in addition to and not in substitution for the powers arising from the inherent jurisdiction of the court: at 25.

[31] Historically, inherent jurisdiction can trace its roots to a way of punishing an individual for contempt of court and “by way of regulating the practice of the court and preventing the abuse of its process”: at 25. Jacob notes further that “the essential character of a superior court of law necessarily involves that it should be invested with a power to maintain its authority and to prevent its process being obstructed and abused”: at 27. This power to maintain its authority includes that power to “prevent a litigant from taking multiple or successive proceedings which are frivolous or vexatious or oppressive” as is the case here: at 43. As part of its inherent jurisdiction, a court may compel observance of its own process. Jacob notes that these coercive powers include either fining or imprisoning the offender and, importantly for the purposes of this appeal, seizing his or her property: at 45.

[32] Jacob writes that “The powers of the court under its inherent jurisdiction are complementary to its powers under the Rules of Court; one set of powers supplements and reinforces the other”: at 50. He emphasizes that the inherent powers may fill any gaps left by the rules: at 50. Jacob’s summary provides a useful background for understanding the core of inherent jurisdiction the Supreme Court of British Columbia inherited from the English tradition.

. . .

WEEKS 3 & 4: Limitation Act

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Limitation Act , SBC 2012, c.13

LIMITATION ACT

. . .

PART 2 — BASIC LIMITATION PERIOD

Division 1 — Establishment of Basic Limitation Period

Basic limitation period

6 (1) Subject to this Act, a court proceeding in respect of a claim must not be commenced more than 2 years after the day on which the claim is discovered.

(2) The 2 year limitation period established under subsection (1) of this section does not apply to a court proceeding referred to in section 7.

Basic limitation period for court proceeding to enforce or sue on judgment

7 Subject to this Act, a court proceeding must not be commenced to enforce or sue on a judgment for the payment of money or the return of personal property,

(a) if the judgment is a local judgment, more than 10 years after the day on which the judgment becomes enforceable, or

(b) if the judgment is an extraprovincial judgment, after the earlier of the following:

(i) the expiry of the time for enforcement in the jurisdiction where the extraprovincial judgment was made;

(ii) the date that is 10 years after the judgment became enforceable in the jurisdiction where the extraprovincial judgment was made.

Division 2 — Discovery of Claim

General discovery rules

8 Except for those special situations referred to in sections 9 to 11, a claim is discovered by a person on the first day on which the person knew or reasonably ought to have known all of the following:

(a) that injury, loss or damage had occurred;

(b) that the injury, loss or damage was caused by or contributed to by an act or omission;

(c) that the act or omission was that of the person against whom the claim is or may be made;

(d) that, having regard to the nature of the injury, loss or damage, a court proceeding would be an appropriate means to seek to remedy the injury, loss or damage.


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Special situations for persons of full capacity

9 For a claim set out in section 12, 13, 14, 15, 16 or 17 of an adult person of full capacity, the discovery rules set out in that section apply.

Special situations for minors

10 For a claim of a minor, the discovery rules set out in section 18 apply.

Special situations for persons under disability

11 For a claim of a person under a disability, the discovery rules set out in section 19 apply.

Division 3 — Special Discovery Rules

Discovery rule for claims based on fraud or recovery of trust property

12 (1) In this section, "fraud or trust claim" means

(a) a claim based on fraud, or fraudulent breach of trust, to which a trustee was a party or privy,

(b) a claim to recover from a trustee trust property, or the proceeds from the trust property, if

(i) that property is or those proceeds are in the possession of the trustee, or

(ii) that property was or those proceeds were previously received by the trustee and converted to the trustee's own use, or

(c) any other claim arising out of the fiduciary relationship between a trustee and a beneficiary if the trustee

(i) wilfully conceals from the beneficiary the fact that

(A) injury, loss or damage has occurred,

(B) the injury, loss or damage was caused by or contributed to by an act or omission, or

(C) the act or omission was that of the person against whom the claim is or may be made, or

(ii) wilfully misleads the beneficiary as to the appropriateness of a court proceeding as a means of remedying the injury, loss or damage.

(2) A fraud or trust claim is discovered when the beneficiary becomes fully aware

(a) that injury, loss or damage had occurred,

(b) that the injury, loss or damage was caused by or contributed to by the

(i) fraud,

(ii) fraudulent breach of trust,

(iii) conversion, or


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(iv) other act or omission

on which the claim is based,

(c) that the fraud, fraudulent breach of trust, conversion or other act or omission was that of the person against whom the claim is or may be made, and

(d) that, having regard to the nature of the injury, loss or damage, a court proceeding would be an appropriate means to seek to remedy the injury, loss or damage.

(3) For the purposes of subsection (2), the burden of proving that a fraud or trust claim has been discovered rests on the trustee.

. . .

Discovery rule for minors

18 A claim of a minor is discovered,

(a) unless a notice to proceed is delivered under paragraph (b) before the minor attains the age of 19 years, on the later of the following:

(i) the day on which the minor attains the age of 19 years;

(ii) the day on which the claim is discovered under section 8, 12, 13, 14, 15, 16 or 17, as the case may be, or

(b) on the day on which a notice to proceed that complies with the requirements of section 20 (2) and any requirements prescribed under section 20 (5) is delivered in accordance with section 20 (1) and with any requirements prescribed under section 20 (5).

Discovery rule for persons under disability

19 A claim of a person under a disability is discovered,

(a) unless a notice to proceed is delivered under paragraph (b) before the person ceases to be a person under a disability, on the later of the following:

(i) the day on which the person ceases to be a person under a disability;

(ii) the day on which the claim is discovered under section 8, 12, 13, 14, 15, 16 or 17, as the case may be, or

(b) on the day on which a notice to proceed that complies with the requirements of section 20 (2) and any requirements prescribed under section 20 (5) is delivered in accordance with section 20 (1) and with any requirements prescribed under section 20 (5).

. . .

PART 3 — ULTIMATE LIMITATION PERIOD

Ultimate limitation period

21 (1) Subject to Parts 4 and 5, even if the limitation period established by any other section of this Act in respect of a claim has not expired, a court proceeding must not be commenced with respect


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to the claim more than 15 years after the day on which the act or omission on which the claim is based took place.

(2) For the purposes of this section and subject to section 24 and subsection (3) of this section, for any of the following claims, the day an act or omission on which the claim is based takes place is as follows:

(a) in the case of a claim arising out of a conversion, the day on which the property was first converted by any person;

(b) in the case of a claim referred to in section 12, 13, 14 or 15, the day on which the claim is discovered in accordance with that section;

(c) in the case of a claim for contribution or indemnity, the day on which the claimant for contribution or indemnity is served with a pleading in respect of a claim on which the claim for contribution or indemnity is based;

(d) in the case of a claim of a minor, on the earlier of the following:

(i) the day on which the minor attains the age of 19 years;

(ii) the day on which the claim is discovered under section 18 (b);

(e) in the case of a claim of a person who is under a disability at the time at which the act or omission on which the claim is based takes place, on the earlier of the following:

(i) the day on which the person ceases to be a person under a disability;

(ii) the day on which the claim is discovered under section 19 (b).

(3) If a person against whom a claim is or may be made

(a) wilfully conceals from the claimant the fact that

(i) injury, loss or damage has occurred,

(ii) the injury, loss or damage was caused by or contributed to by an act or omission, or

(iii) the act or omission was that of the person against whom the claim is or may be made, or

(b) wilfully misleads the claimant as to the appropriateness of a court proceeding as a means of remedying the injury, loss or damage,

the act or omission on which the claim is based is deemed to have taken place on the day on which the claim is discovered under Part 2.

PART 4 — FACTORS AFFECTING LIMITATION PERIODS

Counterclaim or other claim or proceeding

22 (1) If a court proceeding has been commenced in relation to a claim within the basic limitation period and ultimate limitation period applicable to the claim and there is another claim (the "related claim") relating to or connected with the first mentioned claim, the following may, in the court


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proceeding, be done with respect to the related claim even though a limitation period applicable to either or both of the claims has expired:

(a) proceedings by counterclaim may be brought, including the addition of a new party as a defendant by counterclaim;

(b) third party proceedings may be brought;

(c) claims by way of set off may be advanced;

(d) new parties may be added or substituted as plaintiffs or defendants.

(2) Nothing in subsection (1) gives a person a right to commence a court proceeding under subsection (1) (a) or (b) in relation to a claim for contribution or indemnity after the expiry of a limitation period applicable to that claim.

(3) Subsection (1) does not enable a person to make a claim against another person if a claim by the other person

(a) against the first mentioned person, and

(b) relating to or connected with the subject matter of the proceeding,

is or will be defeated by the first mentioned person pleading a provision of this Act as a defence.

(4) Subsection (1) does not interfere with any judicial discretion to refuse relief on grounds unrelated to the expiry of a limitation period.

(5) In any court proceeding, the court may, on terms as to costs or otherwise that the court considers just, allow the amendment of a pleading to raise a new claim even though, at the time of the amendment, a court proceeding could not, under section 6, 7 or 21, be commenced with respect to that claim.

. . .

Limitation periods extended if liability acknowledged

24 (1) If, before the expiry of either of the limitation periods that, under this Act, apply to a claim, a person acknowledges liability in respect of the claim,

(a) the claim must not be considered to have been discovered on any day earlier than the day on which the acknowledgement is made, and

(b) the act or omission on which the claim is based is deemed to have taken place on the day on which the acknowledgment is made.

(2) An acknowledgment of liability in respect of a claim for interest is also an acknowledgment of liability in respect of a claim for

(a) the outstanding principal, if any, and

(b) interest falling due after the acknowledgment is made.

(3) An acknowledgment of liability in respect of a claim to realize on or redeem collateral under a security agreement or to recover money in respect of the collateral, if made by a person in


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possession of the collateral, is an acknowledgment of liability in respect of the claim by any other person who later comes into possession of the collateral.

(4) An acknowledgment by a trustee of liability in respect of a claim is an acknowledgment of liability in respect of the claim by any other person who is or who later becomes a trustee of the same trust.

(5) An acknowledgment of liability in respect of a claim to recover or enforce an equitable interest in personal property, if made by a person in possession of the personal property, is an acknowledgment of liability in respect of the claim by any other person who later comes into possession of the personal property.

(6) Subsection (1) does not apply to an acknowledgment, other than an acknowledgement referred to in subsection (7), (8) or (9), unless the acknowledgment is

(a) in writing,

(b) signed, by hand or by electronic signature within the meaning of the Electronic Transactions Act,

(c) made by the person making the acknowledgment or the person's agent, and

(d) made to the person with the claim, the person's agent or an official receiver or trustee acting under the Bankruptcy and Insolvency Act (Canada).

(7) In the case of a claim for payment of a liquidated sum, part payment of the sum by the person against whom the claim is or may be made or by the person's agent is an acknowledgment by the person against whom the claim is or may be made of liability in respect of the claim.

(8) A debtor's performance of an obligation under or in respect of a security agreement is an acknowledgment by the debtor of liability in respect of a claim by the creditor for realization on the collateral under the security agreement.

(9) A creditor's acceptance of a debtor's payment or performance of an obligation under or in respect of a security agreement is an acknowledgment by the creditor of liability in respect of a claim by the debtor for redemption of the collateral under the security agreement.

(10) This section applies to an acknowledgment of liability in respect of a claim for payment of a liquidated sum even though the person making the acknowledgment refuses or does not promise to pay the sum or the balance of the sum still owing.

PART 5 — SUSPENSION OF LIMITATION PERIODS

Limitation periods suspended if claimant becomes person under disability

25 (1) Subject to section 26, if a person with a claim becomes a person under a disability, the basic limitation period and ultimate limitation period applicable to the claim do not run while the person continues to be a person under a disability.

(2) If the running of the basic limitation period applicable to a claim has been suspended by subsection (1), the basic limitation period resumes running when the person with the claim ceases to be a person under a disability, and that basic limitation period is the longer of the following:

(a) the length of time that, when the person with the claim became a person under a disability, remained in the basic limitation period applicable to the claim;


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(b) one year from the time that the person with the claim ceased to be a person under a disability.

(3) If the running of the ultimate limitation period applicable to a claim has been suspended by subsection (1), the ultimate limitation period resumes running when the person with the claim ceases to be a person under a disability, and that ultimate limitation period is the longer of the following:

(a) the length of time that, when the person with the claim became a person under a disability, remained in the ultimate limitation period applicable to the claim;

(b) one year from the time that the person with the claim ceased to be a person under a disability.

Notice to proceed if limitation periods suspended under section 25

26 (1) If, under section 25, the running of the basic limitation period applicable to a claim and the running of the ultimate limitation period applicable to the claim are suspended in relation to a person under a disability and that person has a caregiver, a person against whom the claim is or may be made may deliver a notice to proceed to

(a) the caregiver, and

(b) the Public Guardian and Trustee.

(2) A notice to proceed delivered under this section must meet all of the following requirements:

(a) it must be in writing;

(b) it must be addressed to the caregiver and to the Public Guardian and Trustee;

(c) it must specify the name of the person under a disability;

(d) it must specify the circumstances out of which the claim arises or may be alleged to arise, with as much particularity as is necessary to enable the caregiver to investigate whether the person under a disability has the claim;

(e) it must give warning that the following apply to limit the period within which a court proceeding may be commenced in relation to the claim:

(i) section 21;

(ii) because of the delivery of the notice, section 25 (2) and (3);

(f) it must specify the name of the person on whose behalf the notice is delivered;

(g) it must be signed by

(i) the person on whose behalf the notice is delivered, or

(ii) the person's solicitor.

(3) If a notice to proceed

(a) complies with the requirements of subsection (2) of this section and any requirements prescribed under subsection (6) of this section, and


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(b) is delivered in relation to a claim in accordance with subsection (1) of this section and with any requirements prescribed under subsection (6) of this section,

section 25 (2) and (3) applies to the limitation periods applicable to the claim as if the person with the claim ceased, on the date of the delivery of the notice, to be a person under a disability.

(4) Subsection (3) of this section operates to benefit only the person on whose behalf the notice referred to in that subsection is delivered and only with respect to a claim arising out of the circumstances specified in the notice.

(5) A notice to proceed delivered under this section is not an acknowledgement for the purposes of section 24 and is not an admission for any purpose.

(6) The Minister may make regulations prescribing the form, content and mode of delivery of a notice to proceed under this section.

PART 6 — GENERAL

Non-judicial remedies

27 (1) In this section, "non-judicial remedy" means a remedy that a person is entitled, by law or by contract, to exercise in respect of a claim without court proceedings.

(2) If a claimant is prevented from commencing a court proceeding in relation to a claim as a result of the expiry of a limitation period under this Act, the claimant is not entitled to exercise against the person against whom the claim is or may be made, or against any other person, any non-judicial remedy that the claimant would, but for this section, be entitled to exercise in relation to the claim.

. . .

WEEKS 3 & 4: Court Jurisdiction and Proceedings Transfer Act

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Court Jurisdiction and Proceedings Transfer Act , SBC 2003, c.28

Part 1 -- Interpretation

Definitions

1 In this Act:

“person” includes a state;

“plaintiff” means a person who commences a proceeding, and includes a plaintiff by way of counterclaim or third party claim;

“proceeding” means an action, suit, cause, matter or originating application and includes a procedure and a preliminary motion;

“procedure” means a procedural step in a proceeding;

“state” means

(a) Canada or a province or territory of Canada, and

(b) a foreign country or a subdivision of a foreign country;

“subject matter competence” means the aspects of a court’s jurisdiction that depend on factors other than those pertaining to the court’s territorial competence;

“territorial competence” means the aspects of a court’s jurisdiction that depend on a connection between

(a) the territory or legal system of the state in which the court is established, and

(b) a party to a proceeding in the court or the facts on which the proceeding is based.

Part 2 -- Territorial Competence of Courts of British Columbia

Application of this Part

2(1) In this Part, “court” means a court of British Columbia.

(2) The territorial competence of a court is to be determined solely by reference to this Part.

Proceedings in a person

3 A court has territorial competence in a proceeding that is brought against a person only if

(a) that person is the plaintiff in another proceeding in the court to which the proceeding in question is a counterclaim,

(b) during the course of the proceeding that person submits to the court’s jurisdiction,

(c) there is an agreement between the plaintiff and that person to the effect that the court has jurisdiction in the proceeding,


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(d) that person is ordinarily resident in British Columbia at the time of the commencement of the proceeding, or

(e) there is a real and substantial connection between British Columbia and the facts on which the proceeding against that person is based.

Proceedings with no named defendant

4 A court has territorial competence in a proceeding that is not brought against a person or a vessel if there is a real and substantial connection between British Columbia and the facts upon which the proceeding is based.

Proceedings against a vessel

5 A court has territorial competence in a proceeding that is brought against a vessel if the vessel is served or arrested in British Columbia.

Residual discretion

6 A court that under section 3 lacks territorial competence in a proceeding may hear the proceeding despite that section if it considers that

(a) there is no court outside British Columbia in which the plaintiff can commence the proceeding, or

(b) the commencement of the proceeding in a court outside British Columbia cannot reasonably be required.

…

Real and substantial connection

10 Without limiting the right of the plaintiff to prove other circumstances that constitute a real and substantial connection between British Columbia and the facts on which a proceeding is based, a real and substantial connection between British Columbia and those facts is presumed to exist if the proceeding

(a) is brought to enforce, assert, declare or determine proprietary or possessory rights or a security interest in property in British Columbia that is immovable or movable property,

(b) concerns the administration of the estate of a deceased person in relation to

(i) immovable property in British Columbia of the deceased person, or

(ii) movable property anywhere of the deceased person if at the time of death he or she was ordinarily resident in British Columbia,

(c) is brought to interpret, rectify, set aside or enforce any deed, will, contract or other instrument in relation to

(i) property in British Columbia that is immovable or movable property, or

(ii) movable property anywhere of a deceased person who at the time of death was ordinarily resident in British Columbia,


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(d) is brought against a trustee in relation to the carrying out of a trust in any of the following circumstances:

(i) the trust assets include property in British Columbia that is immovable or movable property and the relief claimed is only as to that property;

(ii) that trustee is ordinarily resident in British Columbia;

(iii) the administration of the trust is principally carried on in British Columbia;

(iv) by the express terms of a trust document, the trust is governed by the law of British Columbia,

(e) concerns contractual obligations, and

(i) the contractual obligations, to a substantial extent, were to be performed in British Columbia,

(ii) by its express terms, the contract is governed by the law of British Columbia, or

(iii) the contract

(A) is for the purchase of property, services or both, for use other than in the course of the purchaser’s trade or profession, and

(B) resulted from a solicitation of business in British Columbia by or on behalf of the seller,

(f) concerns restitutionary obligations that, to a substantial extent, arose in British Columbia,

(g) concerns a tort committed in British Columbia,

(h) concerns a business carried on in British Columbia,

(i) is a claim for an injunction ordering a party to do or refrain from doing anything

(i) in British Columbia, or

(ii) in relation to property in British Columbia that is immovable or movable property,

(j) is for a determination of the personal status or capacity of a person who is ordinarily resident in British Columbia,

(k) is for enforcement of a judgment of a court made in or outside British Columbia or an arbitral award made in or outside British Columbia, or

(l) is for the recovery of taxes or other indebtedness and is brought by the government of British Columbia or by a local authority in British Columbia.

Discretion as to the exercise of territorial competence

11 (1) After considering the interests of the parties to a proceeding and the ends of justice, a court may decline to exercise its territorial competence in the proceeding on the ground that a court of another state is a more appropriate forum in which to hear the proceeding.


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(2) A court, in deciding the question of whether it or a court outside British Columbia is the more appropriate forum in which to hear a proceeding, must consider the circumstances relevant to the proceeding, including

(a) the comparative convenience and expense for the parties to the proceeding and for their witnesses, in litigating in the court or in any alternative forum,

(b) the law to be applied to issues in the proceeding,

(c) the desirability of avoiding multiplicity of legal proceedings,

(d) the desirability of avoiding conflicting decisions in different courts,

(e) the enforcement of an eventual judgment, and

(f) the fair and efficient working of the Canadian legal system as a whole.

Conflicts or inconsistencies with other Acts

12 If there is a conflict or inconsistency between this Part and another Act of British Columbia or of Canada that expressly

(a) confers jurisdiction or territorial competence on a court, or

(b) denies jurisdiction or territorial competence to a court,

that other Act prevails.

WEEKS 3 & 4: Professional Conduct Guides

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(former) Professional Conduct Handbook

CHAPTER 11

RESPONSIBILITY TO OTHER LAWYERS

Proceeding in default 12. A lawyer who knows that another lawyer has been consulted in a matter shall not proceed by default in the

matter without inquiry and warning, unless expressly instructed by the client to the contrary, in which case such instructions should be communicated at the outset of the matter.

WEEKS 3 & 4: Code of Professional Conduct

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(January 2013) Code of Professional Conduct

6.02 RESPONSIBILITY TO LAWYERS AND OTHERS

6.02(2) A lawyer must avoid sharp practice and must not take advantage of or act without fair warning upon slips, irregularities or mistakes on the part of other lawyers not going to the merits or involving the sacrifice of a client’s rights.

WEEKS 3 & 4: Bank of Montreal

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Bank of Montreal v. Erickson

Oral judgment: March 16, 1984.

SEATON J.A. (orally):— This is an appeal from an Order of a Supreme Court Judge setting aside a default judgment.

In January of 1982 the Bank claimed against the respondents on a guarantee in support of a promissory note. They were unable to pay, and in January 1983 the Bank instituted proceedings. An appearance was filed, but no defence was filed. In February 1983 a default judgment was entered. Nothing then seems to have happened until the summer of 1983 when execution steps were taken, and then in the beginning of September when a motion was made to set aside the default judgment. That application was granted and this appeal results.

The material filed in support of the application was an affidavit by the two respondents, paragraph 2 of which deals with:

“We owe the Court an apology for not taking steps within the allotted time frame to have the judgment set aside, and our first reason is that we have reached the limit of our endurance of legal harassment. The second reason is that we felt that if we went along with the Bank of Montreal, that they might recognize our desire to maintain a good relationship with them, and that they might help us preserve our equity. The third reason is that we saw no need to waste time or money on a bankrupt situation if there was no way to maintain a grip on our equities.”

And then in paragraph 3 the applicants deal with the merits of their case, starting off thus:

“In view of what has transpired between the Bank of Montreal and ourselves, it is our belief that the plaintiff has no moral right to disrupt our personal life and our future, and we seek a Court decision to order them to cease and desist in their efforts to do so.”

Details are then given of the steps that had been taken that are described as harassment and failure to loan further money, the foreclosing on the company and on the respondents, and the paragraph ended up:

“We feel that, in view of their lack of concern for our equity, as a company and as individuals, the very equity they used for lending us funds, in the first place, that they now should be barred completely from any personal gain we might make in the future, as a security for our retirement and the rest of our lives.”

There are no reasons for judgment. We are told two things; that the Chambers Judge refused to hear counsel for the appellant, and that Mr. Erickson was told by the Chambers Judge that he had no grounds. In this Court Mr. Erickson’s point is that he simply cannot pay the judgment. He does not deny that he owes the money. He simply says that he cannot pay and he will have to go into bankruptcy.

We have been referred to a decision of Hinds C.C.J, as he then was, in Miracle Feeds v. D. and H. Ent. Ltd., 1979 10 British Columbia Law Reports page 58, where he sets out what in his view ought to be shown in order to succeed on an application to set aside a default judgment. He concluded that the applicant must show first that he did not wilfully or deliberately fail to enter an appearance or file a defence to the plaintiff’s claim; secondly, that he made his application to set aside the default judgment as soon as reasonably possible after obtaining knowledge of the default judgment or explain any delay in bringing the application; and third, that he has a meritorious defence, or at least a defence worthy of investigation. None of those three things has been shown here. In my view the Bank was entitled to a judgment.

The application to set aside the default judgment ought to be refused. I would allow the appeal.

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Schmid v. Lacey

British Columbia Court of Appeal Judgment: November 18, 1991

McEACHERN, C.J.B.C.: The action is for damages for trespass, particularly cutting down trees, or logging the plaintiffs’ property.

After logging, there was some discussion between the defendants and an agent of the plaintiffs but nothing happened whereupon the plaintiffs brought action. The Writ was served but the defendant chose not to respond to it and ultimately judgment was taken in default of appearance with damages to be assessed.

The defendant applied promptly to have the default judgment set aside but the learned chambers judge declined to do so and dismissed the application.

The defendant raises two principal arguments that he says should have persuaded the learned chambers judge to allow the action to proceed to trial.

Firstly, he says that he did not respond to the Writ because he was under the impression that a settlement had been reached. This is set out in the barest possible terms in an affidavit filed originally by the defendant’s solicitor but then that affidavit was confirmed by an affidavit sworn by the defendant. The affidavit is very deficient in particulars. The allegation in the affidavit is that the defendant had been negotiating a resolution of this matter with an agent of the plaintiffs and he was under the impression that they had reached a settlement. That is all he says and there are no particulars of the settlement. In my view, that is not a sufficient allegation that should have persuaded the chambers judge to order the action to proceed.

Secondly, the defendant says that he had “hired another person to log trees on his property” and he goes on in his very sparse affidavit to say that this other person had logged the plaintiffs’ without his knowledge, consent, or authority. There are two problems with that allegation.

Firstly, there is an unanswered affidavit from the plaintiff that she brought this problem to the attention of the defendant at the beginning of these operations and the defendant refused to discontinue, alleging that he had measured the country and that he was logging on his own side of the line which is now conceded to be wrong.

Secondly, and I think more importantly, the defendant furnishes no particulars whatsoever as to the terms of the hiring of this other person. Without further information, this allegation has not been raised to the level of a ground that would persuade a chambers judge to order the action to proceed to trial.

For these reasons and for the reasons given by the learned chambers judge I would dismiss this appeal. I should add that I would have thought at this stage in the legal history of this province, counsel who are advising clients on how to set aside a default judgment would know that a high degree of care is required in the preparation of affidavits. That degree of care has not been shown and in fact the affidavits fall far below the standard required in this province.

LOCKE, J.A.: I agree. I would like to add just this. The leading case in setting aside a default judgment is that of Bank of Montreal v. Erickson (1984), 57 B.C.L.R. 72, a case in this Court. The phrase was used in there as to the third ground that the applicant “has a meritorious defence, or at least a defence worthy of investigation.” In my opinion, the phrase “worthy of investigation” does not mean that one is merely entitled to make the allegation. One must, I think, descend to details such as to enable the judge to correctly exercise his mind upon whether there is indeed such a defence. With that addition I agree with the judgment that has just been delivered.

CUMMING, J.A.: I agree with the disposition proposed by my brother the Chief Justice and with the additional comments expressed by Mr. Justice Locke.

McEACHERN, C.J.B.C.: I agree also with what Mr. Justice Locke has said. The appeal is dismissed..

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472900 B.C. Ltd. v. Thrifty Canada, Ltd.

British Columbia Court of Appeal Judgment: filed December 18, 1998.

1. ESSON J.A.: - The defendant appeals by leave from an order refusing its application under Rule 14(6)(c) for an order that the court decline to accept jurisdiction over this matter. When the appeal first came on for hearing before the usual three judge panel, it became apparent that the appellant’s submission could succeed only by overruling earlier decisions of this court. The matter was therefore put over to be heard by five judges.

2. Throughout these reasons, I will refer to the defendant as Thrifty and to the three plaintiffs as 472, 331 and Leisure. Thrifty is an Ontario corporation having its head office in Mississauga. It holds from its American parent the Canadian rights to license others to carry on the Thrifty Rent-a-Car business. The issues between 472 and Thrifty arise out of an area license agreement which authorizes 472 to license others in British Columbia to carry on business as Thrifty Rent-a-Car. Leisure, also an Ontario corporation, is the parent of the other two plaintiffs and is a guarantor of their obligations to Thrifty. 331 at one time was a licensee for the area of Richmond, where the Vancouver International Airport is located, and certain other areas in the province. That agreement was terminated prior to the commencement of this action. 331 now alleges breach by Thrifty of an agreement to repurchase automobiles, and breach of an agreement whereby Thrifty is alleged to have agreed to take over premises leased by 331. Whatever the merits of that claim, it is admittedly severable from any issues between 472 and Thrifty. No facts have been pleaded to support a cause of action on the part of Leisure against Thrifty which originally sought to stay the action by all three plaintiffs but now confines its application to a stay of the action by 472. I will therefore make no further reference to 331 and Leisure.

3. Disputes arose between 472 and Thrifty in June of 1996 at which time Thrifty claimed that over $200,000.00 was owing to it. On 17 October 1996, Thrifty commenced action against 472 in the Ontario Court (General Division) claiming the sum of $447,000.00 which was alleged then to be due and owing under the terms of the Area License Agreement. That step was taken at a point when the parties had been seriously negotiating and while a settlement offer made by Thrifty on 16 October was still open for acceptance. The deadline in the offer was 18 October.

4. On 22 October, Thrifty gave notice purporting to terminate the Area License Agreement on the ground that 472 owed about $332,000.00. On the same day, this action was commenced seeking rescission or damages on the basis that Thrifty had made false representations which induced 472 to enter into the contract. Damages were also sought for breach of s. 45 of the Competition Act, R.S.C. 1985, c. 34 for Thrifty’s negligence as a franchisor and for breach of its duty of good faith. On the same day, 472 applied ex parte for an injunction restraining Thrifty from terminating the license or interfering with the business of 472. An order was made in those terms on 22 October which was later set aside on the ground of material misrepresentation.

5. 472 applied on 26 November 1996 in the Ontario action for an order that the Ontario Court decline jurisdiction on these grounds:

(a) Ontario is not a convenient forum;

(b) An action is pending in British Columbia in respect of the same subject matter;

(c) The balance of convenience favours British Columbia as the appropriate forum; and

(d) British Columbia law applied to the contract at issue.

…….

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THE RULE

10. Rule 14(6)(c) reads as follows:

(6) Where a person served with an originating process has not entered an appearance and alleges that

* * *

(c) the court has no jurisdiction over him in the proceeding or should decline jurisdiction.

the person may apply to the court for a declaration to that effect

In this case, of course, the issue is whether the court should decline jurisdiction. Clearly, the courts of both Ontario and British Columbia have jurisdiction.

THE ENGLISH LAW

11. The Rule provides no guidance as to the principles to be applied on such an application. Guidance must be found in the cases. On this issue, the significant decisions continue to be those of the English courts. We are no longer bound by English authority but have continued to follow and apply them to this issue, but, where the “competing” jurisdictions are provinces of Canada, with due regard to the significance of that factor.

12. In saying that Canadian courts have continued to follow and apply the English authorities, I rely on the decisions of the Supreme Court of Canada. In this area, they have been few and far between. The English authorities have, on the other hand, been quite numerous, but if I may say so without disrespect, have been somewhat confusing. Significant developments took place in the decade or so starting in 1973 during which the House of Lords, in a series of decisions, gradually laid to rest the principles unique to England which had been followed for a century or more, and adopted in their place the principle of forum non conveniens. The decisions which brought about the change, a radical one, were enunciated in a series of judgments:

- Atlantic Star, [1974] A.C. 436 - MacShannon v. Rockware Glass Ltd., [1978] A.C. 795 - Amin Rasheed Shipping Corporation v. Kuwait Insurance Co., [1984] A.C. 50 - The Abidin Daver, [1984] A.C. 398, 1 All E.R. 470 - Spiliada Maritime Corp. v. Cansulex Ltd.; Spiliada (The), [1987] A.C. 460, 3 All E.R. 843

13. The old English rule, which I will call the “St. Pierre rule”, is set out in St. Pierre v. South American Stores (Gath & Chaves) Ltd., [1936] 1 K.B. 382. The most often cited statement of it was that by Scott L.J. at p.398:

The true rule about a stay under s. 41, so far as relevant to this case, may I think be stated thus: (I.) A mere balance of convenience is not a sufficient ground for depriving a plaintiff of the advantages of prosecuting his action in an English Court if it is otherwise properly brought. The right of access to the King’s Court must not be lightly refused. (2.) In order to justify a stay two conditions must be satisfied, one positive and the other negative: (a) the defendant must satisfy the Court that the continuance of the action would work an injustice because it would be oppressive or vexatious to him or would be an abuse of the process of the Court in some other way; and (b) the stay must not cause an injustice to the plaintiff. On both the burden of proof is on the defendant

…

14. The practical result of the St. Pierre rule was that applications to stay actions in England almost never succeeded. The facts of St. Pierre illustrate why that was so. The defendants, companies registered in England but carrying on business exclusively in South America, were tenant and guarantor of the tenant’s obligations under a lease from the plaintiff, a Chilean subject, of store property in Santiago. The lease was Spanish, was drawn up

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according to Chilean law and included a provision that the parties had “elected domicile” in Chile. By virtue of a provision of the Chilean Civil Code, any question as to its effect or interpretation was required to be submitted to the Tribunal of Chile to the exclusion of any other court. The English companies, before the English action was begun, had brought action in Chile seeking a declaration that payment of the disputed amount was illegal or impossible by reason of Chilean law.

…

16. The first rather tentative step towards altering that situation was taken by the House of Lords in The Atlantic Star, supra. That case arose out of a collision which took place in Belgian waters between two Dutch vessels and a Belgian vessel. The owners of the Belgian vessel sued in the Commercial Court at Antwerp. Four other proceedings were begun in Antwerp by different interests such as owners of cargo, owners of other vessels, and dependents of crew members killed in the collision. The action in England was brought by the owners of one of the Dutch vessels against the other Dutch vessel.

17. The action in England had no connection with that country except that the defendant ship had been arrested there in order to found jurisdiction. Brandon J. at first instance, refused to grant a stay because he said it would deprive the plaintiff of an advantage which the plaintiff sincerely believed was a real advantage. He also held at p. 453 that he had no doubt that “.......... so far as convenience is concerned, the Commercial Court of Antwerp is by far the more appropriate forum.” He gave detailed reasons for that conclusion. The Court of Appeal upheld his decision. In the House of Lords, Lord Reid, after recounting the findings of Brandon J., went on to say at p.453:

It is said that the right of access to the Queen’s court must not be lightly refused. In the present case Lord Denning M.R. said [1973] Q.B. 364, 381G, 382c:

No one who comes to these courts asking for justice should come in vain .......... This right to come here is not confined to Englishmen. It extends to any friendly foreigner. He can seek the aid of our courts if he desires to do so. You may call this ‘forum shopping’ if you please, but if the forum is England, it is a good place to shop in, both for the quality of the goods and the speed of service.

My Lords, with all respect, that seems to me to recall the good old days, the passing of which many may regret, when inhabitants of this island felt an innate superiority over those unfortunate enough to belong to other races.

It is a function of this House to try, so far as possible, to keep the development of the common law in line with the policy of Parliament and the movement of public opinion. So I think that the time is ripe for a re-examination of the rather insular doctrine to which I have referred

18. At p.454, having expressed the opinion that any change should be sought within the existing framework of English law rather than adopting the principle of forum non conveniens, Lord Reid said:

The existing basis is that the plaintiff must not be acting vexatiously, oppressively or in abuse of the process of the court. Those are flexible words and I think that in future they should be interpreted more liberally.

19. In the end, the House of Lords by a majority allowed the appeal but declined the invitation of counsel to adopt the rule of forum non conveniens. Lord Wilberforce, who was also in the majority, noted at p.464 that the doctrine was one of general application in Scotland and had been validated in the House of Lords. He noted that a similar doctrine had gained acceptance in the United States of America with the authority of the Supreme Court. But on the question whether it should be adopted in England, he said at p.464:

My Lords, I am of opinion that this is a course which we cannot take. It is clear, from decisions to which I shall refer, that for some 100 years the law of England has taken a divergent path with its own rules, defined and adjusted in numerous cases, some of high authority. This

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same path has been followed in other Commonwealth jurisdictions - Australia, Canada, India, New Zealand. The arguments in favour of “forum non conveniens” as a general rule are not so overwhelming that we should now make a radical change of direction: indeed there is much to be said for the English rule, provided that it is not too rigidly applied. I would not therefore favour accepting the radical solution.

…

Thus, the St. Pierre rule was modified by calling for a more flexible and liberal interpretation of the words of the old rule. In practice, that change appears to have had little effect on the outcome of applications to stay actions in England.

21. Four years later, the House of Lords decided MacShannon v. Rockware Glass Ltd., supra, which involved four actions with similar facts. Each of the four plaintiffs lived and worked in Scotland and had been injured in industrial accidents there. All of the defendants were English companies having their registered offices in England. That was the sole foundation for jurisdiction in the English court. The Court of Appeal (Lord Denning M.R. dissenting) had upheld the decision that no stay should be granted although, as Stephenson L.J. for the majority, said at p.809:

Anyone with nothing but common sense to guide him would say that they ought to be tried in Scotland

The majority view was that, notwithstanding the decision in The Atlantic Star to relax the formula stated by Scott L.J., they were required by The Atlantic Star to refuse a stay because of the retention of the words “oppressive or vexatious” as part of the test, albeit in a modified or flexible form. In MacShannon, the Law Lords again declined to take the radical step of adopting the rule of forum non conveniens but further altered the St. Pierre rule by holding that a stay could be granted without finding the continuance of the action “oppressive” or “vexatious”. They went on to hold that the rule stated by Scott L.J. in St. Pierre should be modified by restating the second part of it to read, in the words of Lord Diplock at p.812:

(2) In order to justify a stay two conditions must be satisfied, one positive and the other negative; (a) the defendant must satisfy the court that there is another forum to whose jurisdiction he is amenable in which justice can be done between the parties at substantially less inconvenience or expense, and (b) the stay must not deprive the plaintiff of a legitimate personal or juridical advantage which would be available to him if he invoked the jurisdiction of the English court.

….

22. The distinction proved not to be so fine as Lord Diplock had hoped. What the MacShannon formula left untouched was the first part of the St. Pierre rule founded on the principle that the right of access to the King’s court must not be lightly refused. The extent to which that part of the rule continued to govern its application was illustrated by Amin Rasheed Shipping Corporation v. Kuwait Insurance Co., supra, where the question was whether the English court should have authorized service ex juris in an action brought by a Liberian shipowner against a Kuwaiti insurance company. The specific issue was whether the proper law of the contract was Kuwaiti or English. In upholding the decision of the Court of Appeal holding that the proper law was Kuwaiti, the Law Lords were sharply critical of certain observations of the lower court which treated the innate superiority of English courts as a factor to be taken into account. Those criticisms are summarized in the headnote:

Per Lord Diplock, Lord Roskill, Lord Brandon of Oakbrook and Lord Brightman. ..........

(ii) it would be wholly wrong for the English courts to embark upon the task of making a comparison of the relative efficiency of the civil law and common law procedures for the determination of disputed facts.

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…

23. A few months later, the Law Lords did away with the surviving elements of Scott L.J.’s formulation and declared forum non conveniens to be the governing principle in England, although without adopting that term. The case is The Abidin Daver, supra. It arose out of a collision in the Bosphorus, an international waterway, between a Cuban ship and a Turkish ship. The owners of the Turkish ship brought action in Turkey and arrested the Cuban ship there. The Cuban owners then brought action in Rem in the Admiralty Court in England and arrested a “sister ship” of the Turkish ship. The Turkish owners applied for and obtained an order by which the English court declined jurisdiction but that was reversed by the Court of Appeal. The House of Lords restored the order of the chambers judge. After reviewing the step-by-step approach of the House of Lords which had begun with The Atlantic Star, and after emphasizing the importance of the existence of a lis alibi pendens which, as Lord Diplock noted at p.408, “had been brushed aside by Scott L.J. and is not referred to in his statement of the rule”, Lord Diplock went on to say at p.411-412:

My Lords, the essential change in the attitude of the English courts to pending or prospective litigation in foreign jurisdictions that has been achieved step-by-step during the last 10 years as a result of the successive decisions of this House in The Atlantic Star [1974] A.C. 436; MacShannon [1978] A.C. 795 and Amin Rasheed [1984] A.C. 50, is that judicial chauvinism has been replaced by judicial comity to an extent which I think the time is now ripe to acknowledge frankly is, in the field of law with which this appeal is concerned, indistinguishable from the Scottish legal doctrine of forum non conveniens. [emphasis added]

24. In the next paragraph, Lord Diplock stated the rule which henceforth was to apply to cases such as this in which there is already an action on foot in the other jurisdiction dealing with the same subject matter:

Where a suit about a particular subject matter between a plaintiff and a defendant is already pending in a foreign court which is a natural and appropriate forum for the resolution of the dispute between them, and the defendant in the foreign suit seeks to institute as plaintiff an action in England about the same matter to which the person who is plaintiff in the foreign suit is made defendant, then the additional inconvenience and expense which must result from allowing two sets of legal proceedings to be pursued concurrently in two different countries where the same facts will be in issue and the testimony of the same witnesses required, can only be justified if the would-be plaintiff can establish objectively by cogent evidence that there is some personal or judicial advantage that would be available to him only in the English action that is of such importance that it would cause injustice to him to deprive him of it

25. In the next paragraph, Lord Diplock expressed the view that the danger of conflicting decisions if two actions were to proceed concurrently in two jurisdictions is a significant one and that:

Comity demands that such a situation should not be permitted to occur as between courts of two civilised and friendly states. It is a recipe for confusion and injustice.

26. The most significant development was the adoption of comity as the governing principle in place of the old rule that access to the English court is not to be lightly refused.

27. The last English authority to which I will refer is The Spiliada, supra, which has particular significance because finally the House of Lords accepted that the law of England as defined in The Abidin Daver, supra, was not only indistinguishable from, but actually is, the rule of forum non conveniens. The point in issue was whether an order for service ex juris was properly made. That issue is, of course, closely related to the issue whether an action brought in this jurisdiction should be stayed. In Spiliada, it was held that essentially the same principles should apply to both issues.

28. The action was brought in England by shipowners who alleged that their vessel was damaged, while on a voyage from Vancouver to Indian ports, by cargo which was wet when loaded and thus caused severe corrosion. Staughton J. granted leave to serve ex juris. The Court of Appeal reversed his decision but the House of

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Lords restored it. The assumption of jurisdiction by the English court was based essentially on the unusual circumstance that Staughton J., at the time the application was made to him, was in the course of hearing a long trial in a similar action against the same shippers in respect of another ship, The Cambridgeshire. So it was not a case, as under the old rule, of the court retaining jurisdiction because of the inherent superiority of English courts. It was a matter of a particular set of circumstances which established the English court as the appropriate forum for that case.

29. The principal speech is that of Lord Goff. His views as to the meaning of forum non conveniens are significant. At p.474, he said that the principal now applicable in both England and Scotland was that of forum non conveniens, the classic statement of which he said was that of Lord Kinnear in Sim v. Robinow (1892), 19 R. 665 at 668.

[T]he plea can never be sustained unless the court is satisfied that there is some other tribunal, having competent jurisdiction, in which the case may be tried more suitably for the interests of all the parties and for the ends of justice

30. After referring to other similar statements of the principle, he went on to say:

I feel bound to say that I doubt whether the Latin tag forum non conveniens is apt to describe this principle. For the question is not one of convenience, but of the suitability or appropriateness of the relevant jurisdiction. However the Latin tag (sometimes expressed as forum non conveniens and sometimes as forum conveniens) is so widely used to describe the principle, not only in England and Scotland, but in other Commonwealth jurisdictions and in the United States, that it is probably sensible to retain it. But it is most important not to allow it to mislead us into thinking that the question at issue is one of “mere practical convenience.” Such a suggestion was emphatically rejected by Lord Kinnear in Sim v. Robinow, 19 R. 665, 668, and by Lord Dunedin, Lord Shaw of Dumferline and Lord Sumner in Société du Gaz case 1926 S.C. (H.L.) 13, 18, 19, and 22 respectively. Lord Dunedin, with reference to the expressions forum non competens and forum non conveniens, said, at p.18:

“In my view, ‘competent’ is just as bad a translation for ‘competens’ as ‘convenient’ is for ‘conveniens.’ The proper translation for these Latin words, so far as this plea is concerned, is ‘appropriate.’”

Lord Sumner referred to a phrase used by Lord Cowan in Clements v. Macaulay (1866) 4 Macph. 583, 594, viz. “more convenient and preferable for securing the ends of justice,” and said, at p.22:

“.......... one cannot think of convenience apart from the convenience of the pursuer or the defender or the court, and the convenience of all these three, as the cases show, is of little, if any, importance. If you read it as ‘more convenient, that is to say, preferable, for securing the ends of justice,’ I think the true meaning of the doctrine is arrived at. The object, under the words ‘forum non conveniens’ is to find that forum which is the more suitable for the ends of justice, and is preferable because pursuit of the litigation in that forum is more likely to secure those ends.’

In the light of these authoritative statements of the Scottish doctrine, I cannot help thinking that it is wiser to avoid use of the word “convenience” and to refer rather, as Lord Dunedin did, to the appropriate forum.

31. I agree that the Latin tag, however inapt to describe the principle, is so widely used that it is sensible to retain it. But it is important to keep in mind that it refers, not to the more convenient forum, but to the appropriate forum. At the risk of creating further confusion but in the hope of reducing it, I observe that the Latin tag, in its present role of describing the doctrine or general principle, means something different from its former use under the old English rule which was to describe a factor which could be considered with others in deciding whether the action was vexatious or oppressive. In that context, “forum conveniens” was used in the sense of “mere practical convenience”.

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32. The Abidin Daver and The Spiliada laid to rest the insular English rule in both its original and modified forms and mandated the radically different approach of determining which is the more appropriate jurisdiction. Comity, which played no part in the old rule, is now a major consideration. Parallel actions dealing with the same subject matter must now be avoided unless the party resisting the application to stay can demonstrate possible loss of a juridical advantage. The right of the plaintiff to sue in the court of his choice is not now a significant factor. A primary purpose of the present rule is to avoid having two actions proceeding in different jurisdictions with the attendant risk of conflicting decisions. There is now no burden on the applicant to establish that the action would be vexatious, oppressive and/or an abuse of the process of the court. Such matters can, of course, still be relied on in aid of the application to stay because, if they can be established, the jurisdiction in which that would occur can hardly be the appropriate one. But the absence of such factors is no longer a basis for refusing the application to stay.

OUR LAW IS ENGLISH LAW

33. The fact that forum non conveniens was held by the House of Lords in 1984 to be the law of England did not, of course, automatically lead to its becoming the law to be applied in this province or elsewhere in Canada. I turn to the decisions of the Supreme Court of Canada which, in my view, make it clear that the principles laid down in The Abidin Daver are now the law in this jurisdiction.

…

37. That forum non conveniens is the Canadian rule was affirmed in Amchem Products Inc. v. British Columbia (Workers Compensation Board), [1993] 1 S.C.R, 897. The Workers Compensation Board of this province had, in the exercise of its subrogated rights to claims of workers who had been harmed by exposure to asbestos, caused a large number of actions to be brought in the State of Texas to recover damages from asbestos manufacturers. The defendants applied to restrain the plaintiffs from proceeding with those actions and were successful at first instance and in this court. The Supreme Court of Canada reversed those decisions.

…

45. Before explaining why, in my view, the reasoning in Avenue Properties was wrong in a number of important respects, I will deal with a third decision of the Supreme Court of Canada which bears on these issues. In De Savoye v. Morguard Investments Ltd., [1990] 3 S.C.R. 1077, 46 C.P.C. (2d) 1, the Supreme Court of Canada upheld the decision of the courts of this province holding that British Columbia should recognize an Alberta judgment if the Alberta court took jurisdiction in circumstances in which, if the facts were transposed to British Columbia, our court would have taken jurisdiction. In relation to this case, the significance of Morguard is that it decides that a higher level of comity should be shown to the courts of sister provinces than need be shown to decisions of “foreign” courts.

46. I return now to Avenue Properties to explain the basis for my view that much of the reasoning in that case is inconsistent with the present state of the law and that it therefore should not be followed.

…

55. In major respects, the decision of this court in Avenue Properties reflected the considerations upon which the insular St. Pierre rule had been based; and failed to have regard to certain of the major considerations on which the new rule of forum non conveniens is based.

56. In Rogers v. Bank of Montreal, supra, the facts and the decision are summarized thus in the headnote:

The plaintiffs, shareholders and employees of A., brought actions in British Columbia, where two of them resided, claiming losses which arose out of the defendants putting A. into receivership in Alberta. Although the court had jurisdiction to hear the matter, the defendants were granted an order staying the proceedings on the basis that the doctrine of forum conveniens governed, and

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that in all the circumstances justice would be better served if the action were tried in Alberta. The plaintiffs appealed.

57. Although the majority decision is said to be based on the modified English rule set down in MacShannon, supra, the major considerations were those derived from the earlier cases. The final conclusion in the reasons of Craig J.A. for the majority at p.622, was:

Because the judge applied the forum conveniens test, he failed, I think, to place sufficient emphasis on the right of the plaintiff to bring this action in British Columbia and on the issue of whether the action in British Columbia would cause a severe injustice to the defendants.

58. Again, no attention was paid to the question of comity. In my respectful view, the law as it stood at that time was correctly stated in the dissenting reasons of Carrothers J.A., who said at p.607:

In the case under appeal, the two potential competing jurisdictions are adjacent common law provinces of Canada, with fundamentally the same laws, similar courts and procedures and with judges appointed in the name of the same Queen. I am of the opinion that criteria founded on undesirability of trespassing on the jurisdiction of a foreign state or the cost of assembling foreign witnesses, or the difficulties of proving foreign and unfamiliar laws are of no assistance in the circumstances facing us. Similarly I would discard from this case the admonition to be found in many of the cases to the effect that the foreign litigant shall not be lightly refused access to the King’s Court, for that would make for invidious comparisons in the case at Bar and would put in the balance the relative superiority of the Courts of the two provinces concerned reminiscent of:

[T]he good old days, the passing of which many may regret, when inhabitants of this island felt an innate superiority over those unfortunate enough to belong to other races.

Thus said Lord Reid in The Atlantic Star, supra, p. 181 All E.R., p. 453 A.C., in response to Lord Denning’s open invitation extended to foreigners to avail themselves of the English Courts. Clearly the foregoing are inappropriate considerations on this particular appeal. Davey J.A. (as he then was) recognized in Tompkins, supra, that litigation in one common law province has no inherent advantage over litigation in another common law province.

…

THE DECISION APPEALED FROM

63. The decision of the learned chambers judge is quoted supra, at para. 9, and I need not repeat it here. The chambers judge gave substantial weight to the principle that a plaintiff’s choice of forum should not be lightly denied, and to the St. Pierre principle that it is not objectionable to have two actions in different jurisdictions dealing with the same subject matter. He gave no weight to the important circumstance that the parties had expressly agreed that:

This Agreement shall be interpreted in accordance with the laws of the Province of Ontario and the parties hereby attorn to the non-exclusive jurisdiction of the Courts of the Province of Ontario.

For the reasons I have given, those are errors in principle. In this case there is the added circumstance, one which has not to my knowledge arisen in any other case, that before the stay application was made here, the court of a sister province had denied a stay. Having regard to the great significance which must now be given to the matter of comity between provinces, I consider that to be a conclusive factor in favour of the appellant.

64. I would allow the appeal and grant an order staying the action of 472900 B.C. Ltd.

WEEKS 3 & 4: Pan-Afric

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Pan-Afric Holdings Ltd. v. Ernst & Young LLP

British Columbia Supreme Court Judgment: filed May 15, 2007

FRANKEL, J.:

INTRODUCTION

[1] The plaintiff, Pan-Afric Holdings Ltd. (“Pan-Afric”), has commenced an action in this Court seeking damages from the defendant, Ernst & Young LLP (“E. & Y.”), arising out of the latter’s alleged breach of contract and negligence in evaluating certain software technology.

[2] E. & Y. now seeks an order, under s. 11 of the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c. 28 (“C.J.P.T.A.”), that these proceedings be stayed on the basis that a court in the State of Maryland, United States of America, is a more appropriate forum in which to have this dispute resolved. It concedes that the Supreme Court of British Columbia has “territorial competence”, as defined in the C.J.P.T.A., i.e., what was formerly referred to as “jurisdiction simpliciter”.

[3] For the reasons that follow this application is allowed in part.

BACKGROUND

[4] Pan-Afric is incorporated under the laws of British Columbia, with its registered office in Vancouver.

[5] E. & Y. is a limited liability partnership established under the laws of the State of Delaware, United State of America, with an office in Baltimore, Maryland. It does not carry on any business in British Columbia.

[6] Diginet Communications Inc. (“Diginet”) is a Delaware corporation, with offices in Gaithersburg, Maryland. It operates a communications network within the United States for the purpose of providing data transmission services. In this connection it developed certain proprietary software.

[7] On November 22, 1993 Pan-Afric and Diginet entered into an agreement wherein Pan-Afric agreed to purchase an undivided one-half interest in Diginet’s software. The agreement contained a clause stating that it was governed by the laws of Maryland.

[8] The agreement provided for an appraisal (i.e., a Valuation Analysis) of the software by an appraiser acceptable to Pan-Afric. The costs were to be borne equally by Pan-Afric and Diginet. If this appraisal did not establish a value of at least $9 million (U.S.), then Pan-Afric had the right to rescind the agreement.

[9] E. & Y. was contacted by Diginet, and was later engaged to perform the appraisal. Specifically, it was asked to value the software in the hands of a Canadian purchaser as of November 30, 1993, without regard for any income taxes that may be attributable to any purchaser. It is not clear whether E. & Y. entered into a written contract. None is in the material before me.

[10] What is clear is that E. & Y. was retained in Maryland, and all the work it did was performed there.

[11] Mr. Sam Beritela, who was employed by E. & Y. in 1993, deposes that his firm was engaged at a meeting he and a colleague, Mr. Lawrence Signorelli, had with Diginet representatives at Diginet’s offices in Gaithersburg. He does not recall anyone from Pan-Afric being present. He states that afterwards, he had limited telephone contact with Pan-Afric representatives, but did attend a “courtesy dinner” with them in Baltimore.

[12] Mr. Noordin Sayani, the president of Pan-Afric, deposes that, to satisfy himself that E. & Y. could perform the required work, he met with representatives of Diginet, Mr. Beritela, and possibly Mr. Signorelli, at E. & Y.’s Baltimore office.

[13] The Valuation Analysis was completed by E. & Y. in December, 1993, and sent to both Pan-Afric and Diginet. It placed the fair market value of the software at between $12.6 million (U.S.) and $15 million (U.S.).


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After receiving the report, Pan-Afric completed the transaction for the agreed upon purchase price of $5 million (U.S.).

[14] Mr. Beritela was responsible for preparing the Valuation Analysis. As indicated in the Statement of Qualifications section of this report, at the time he was a Certified Public Accountant, and a member of the Maryland Association of Certified Public Accountants, the American Institute of Certified Public Accountants, the Institute of Management Accountants, and the American Society of Appraisers. Mr. Signorelli assisted in the preparation of the report. He was also a Certified Public Accountant, and a member of the Maryland Association of Certified Public Accountants, and the American Institute of Certified Public Accountants. In addition, at the time he was a candidate for the Senior Appraiser designation with the American Society of Appraisers. Neither held any professional licences in Canada, nor were they members of any Canadian professional organizations.

[15] The Certificate of Appraiser signed by Mr. Beritela states:

The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the American Society of Appraisers and the Uniform Standards of Professional Appraisal Practice.

[16] Pan-Afric alleges that it was not until 2005 that it became aware that the fair market value of the software had been significantly overvalued. Its Statement of Claim filed on July 12, 2006, contains the following:

15. During or about August, 2005, during the course of an appeal of a reassessment of the Plaintiff for income tax purposes by the Canada Revenue Agency (the “CRA”), the CRA advised the Plaintiff and the Plaintiff for the first time became aware of the fact that the Defendant made a computational error in the Valuation and in the Valuation Analysis which resulted in an overstatement of the range of the fair market value of the Software as of November 30, 1993 of between US$10,000,000 and US$11,900,000. The range of the fair market value of the Software as of November 30, 1993 was in fact between US$2,600,000 and US$3,100,000.

[17] In his affidavit Mr. Beritela stands by his report, and denies any computational error. He states he resides in Maryland, and has not been employed by E. & Y. since 1997. He indicates Mr. Signorelli also resides in Maryland.

[18] In support of its position that the Valuation Analysis is flawed, Pan-Afric filed the affidavit of Gregory A. Gilbert, of Portland, Oregon. Mr. Gilbert is a Chartered Financial Analyst, a Fellow of the American Society of Appraisers, and a member of a number of other American professional organizations. He opines that the report “contains a number of errors that have resulted in an overstatement of the fair market value of the application software technology”, and provides his views on how these errors were made.

RELEVANT LEGISLATION

[19] Section 11 of the C.J.P.T.A. reads:

11(1) After considering the interests of the parties to a proceeding and the ends of justice, a court may decline to exercise its territorial competence in the proceeding on the ground that a court of another state is a more appropriate forum in which to hear the proceeding.








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ANALYSIS

[20] The C.J.P.T.A. is of recent vintage. Although enacted in 2003 it was not proclaimed in force until May 4, 2006: B.C. Reg. 117/06. As Newbury J.A. noted in Lloyd’s Underwriters v. Cominco Ltd., [2007] B.C.J. No. 841 (QL), 2007 BCCA 249, affirming (2006), 60 B.C.L.R. (4th) 261, 2006 BCSC 1276 (per Davies J.), the C.J.P.T.A. is a product of the Uniform Law Conference of Canada, and came about out of a desire to standardize the rules relating to forum non conveniens, and to bring them in line with principles laid down by the Supreme Court of Canada: para. 54.

[21] Prior to the passage of the C.J.P.T.A. a forum non conveniens analysis was based on the non-exhaustive list of un-weighted factors set out by Low J., as he then was, in Stern v. Dove Audio Inc., [1994] B.C.J. No. 863 (QL) (S.C.) at para. 62:

(1) Where each party resides.

(2) Where each party carries on business.

(3) Where the cause of action arose.

(4) Where the loss or damage occurred.

(5) Any juridical advantage to the plaintiff in this jurisdiction.

(6) Any juridical disadvantage to the defendant in this jurisdiction.

(7) Convenience or inconvenience to potential witness.

(8) Cost of conducting the litigation in this jurisdiction.

(9) Applicable substantive law.

(10) Difficulty and cost of proving foreign law, if necessary.

(11) Whether there are parallel proceedings in any other jurisdiction. (“Forum shopping” is to be discouraged.)

[22] That these factors remain relevant was confirmed by Newbury J.A. in Lloyd’s Underwriters:

[55] It is apparent, then, that the CJPTA is not intended simply as a restatement or codification of existing law but does effect some substantive (albeit not dramatic) changes in the previous law. . . . With respect to forum conveniens, on the other hand, the Act seems intended to codify, rather than effect substantive changes to, the previous law. The court is still required to consider “the circumstances relevant to the proceeding” and the list of six factors in s. 11(2) is obviously not exhaustive. The factors are broadly phrased and, as the Chambers judge has shown in this instance, can be generally equated to various factors considered at common law, as described in Stern, supra.

[23] Noting that the residence of the parties is not listed in s. 11 of the C.J.P.T.A., Mr. Cowper, Q.C. suggested, particularly in reply, that it may no longer be a factor to be considered. I do not agree. Where the parties reside remains a consideration under s. 11(2)(a) – “the comparative convenience and expense for the parties . . .” Residence was considered in both Lloyd’s Underwriters (B.C.S.C.) at para. 110, and Coulson Aircrane Ltd. v. Pacific Helicopter Tours Inc. (2006), 57 B.C.L.R. (4th) 226, 2006 BCSC 961 at para. 53 (per Ross J.).

[24] I now turn to the application of s. 11 of the C.J.P.T.A. I will deal only with those considerations/factors relied on by counsel in advancing their respective positions.

Comparative Convenience and Expense for the Parties and Their Witnesses

[25] Pan-Afric resides and carries on business in British Columbia, while E. & Y. resides and carries on business in Maryland. E. & Y. has no connection to British Columbia.


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[26] Although Mr. Sayani may testify, the critical witnesses will be those who prepared the Valuation Analysis, and any experts called with respect to whether the correct methodology was used. Both Mr. Beritela and Mr. Signorelli, who are central to E. & Y.’s case, reside in Maryland. It appears that Mr. Gilbert, who resides in Oregon, is central to Pan-Afric’s case. In addition, it is likely that representatives of Diginet who reside in the United States will be required.

[27] Accepting that the major witnesses reside outside of this jurisdiction, Mr. Drove submits that any expense and inconvenience related to securing their evidence will be substantially lessened by the fact that both liability and damages can be determined on the basis of affidavits under the summary trial procedure provided for under Rule 18A of the Rules of Court.

[28] I am unable to accept this submission. The correctness of the Valuation Analysis is the subject of disagreement between persons who appear to have considerable expertise in appraising software. To decide who is right, and who is wrong, it likely will be necessary for a court to make credibility assessments. This is something that cannot be done under Rule 18A. In addition, the determination of any economic loss suffered by Pan-Afric would not be a straightforward matter, capable of being decided on affidavits.

[29] In support of his argument regarding Rule 18A, Mr. Drove referred to Pacific International Securities Inc. v. Drake Capital Securities Inc. (2000), 82 B.C.L.R. (3d) 329, 2000 BCCA 632. However, as Mackenzie J.A. noted, that action did not appear to involve issues of credibility: para. 25.

[30] Mr. Drove also referred to the judgment of Bennett J. in Seine River Resources Inc. v. Pensa Inc. (1998), 25 C.P.C. (4th) 360 (B.C.S.C.), in submitting that travel costs are a neutral factor, as witnesses can testify by means of video conferencing: paras. 83(5), 85.

[31] While I am prepared to accept that witnesses in Maryland, and Oregon for that matter, can testify before this Court by means of such technology, I agree with Mr. Cowper, that this is not a realistic option for E. & Y. Unlike Seine River Resources the present action involves an allegation of professional negligence. Competence having been put in issue, it is highly unlikely that E. & Y. would be prepared to have this question decided without its most important witnesses attending in person before the trier of fact.

[32] For these reasons I am satisfied that convenience and expense for the parties and witnesses favours litigation in Maryland.

Law to be Applied to the Issues in the Proceedings

[33] Pan-Afric seeks to recover general, aggravated, punitive, and special damages for breach of contract, and the tort of negligence. Although by reason of the fact that Pan-Afric is a British Columbia company any loss suffered would have occurred here, its claim rests on a contract entered into in Maryland, for work done there.

[34] Mr. Cowper submits that it should be inferred that the parties intended their contract to be governed by Maryland law. He points to the fact that the appraisal was provided for in the software purchase agreement entered into by Pan-Afric and Diginet, which contains a clause indicating it is governed by the laws of Maryland. He also points to the covering letter to the Valuation Analysis which states that the report was prepared in accordance with terms of the purchase agreement. In the alternative, he submits that the law to which the contract has the most real and substantial connection is that of Maryland.

[35] On the material provided I cannot infer that Pan-Afric and E. & Y. intended the contract between them to be governed by the laws of Maryland. I do, however, find that Maryland law applies on the basis that it is the system of law with the closest and most real connection to the transaction: see Snap-On-Tools of Canada Ltd. v. Korosec, [2002] B.C.J. No. 3125 (QL), 2002 BCSC 1844 at paras. 11, 21 (per Sigurdson J.); Castel and Walker, Canadian Conflict of Laws, 6th ed., Markham: LexisNexis Butterworths, 2005 (loose-leaf), Vol. 2, § 31.2d. This is because the contract was entered into in Maryland for work to be done there in relation to the purchase of an interest in an asset there. Its only connection to British Columbia is that one of the parties resides here.

[36] With respect to the negligence claim, I similarly hold that it is governed by the laws of Maryland. What is in issue here is the conduct of Maryland professionals whose competence should be judged according to the laws and professional standards applicable in that jurisdiction. If the alleged tort was committed, then it was committed there, not here: see Coast Spas Inc. v. California Acrylic Industries Inc., [1997] B.C.J. No. 1718 (QL) (S.C.) at para. 25 (per Lowry J., as he then was); Castel and Walker, Canadian Conflict of Laws, Vol. 2, § 35.5.


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[37] Although it is open to this Court to apply the contract law, tort law, and professional standards of Maryland, the fact that these are the ones under which this action should be determined weighs in favour of litigating there.

Enforcement of an Eventual Judgment

[38] Mr. Cowper argues, although not strenuously, that the fact that Maryland is not a reciprocating state under the Court Order Enforcement Act, R.S.B.C. 1996, c. 78, weighs in favour of having the action tried here. However, as Mr. Drove points out, this only means that a judgment from this court in Pan-Afric’s favour would require further action there.

[39] I view this as a neutral factor.

Juridical Advantage/Disadvantage

Limitation Periods

[40] Both parties made extensive submissions on this point. Their arguments focused on the respective limitation periods in British Columbia and Maryland. Indeed, Mr. Drove described this as the “lynchpin issue”, and said that the loss of the limitation period applicable here could potentially be fatal to his client’s case.

[41] Although this lawsuit was commenced approximately 12 1/2 years after the Valuation Analysis was prepared, Pan Afric’s position is that the normal two-year limitation period for tort and contract actions set out in s. 3(2)(a) of the Limitation Act, R.S.B.C. 1996, c. 266, does not apply, because it did not became aware of the alleged computation error until so advised by the Canada Revenue Agency. Relying on ss. 6(3) and (4) of the Limitation Act, it says time did not begin to run until sometime after August, 2005. Those provisions read:

(3) The running of time with respect to the limitation periods set by this Act for any of the following actions is postponed as provided in subsection (4):

(c) for professional negligence;

(4) Time does not begin to run against a plaintiff with respect to an action referred to in subsection (3) until the identity of the defendant is known to the plaintiff and those facts within the plaintiff’s means of knowledge are such that a reasonable person, knowing those facts and having taken the appropriate advice a reasonable person would seek on those facts, would regard those facts as showing that

(a) an action on the cause of action would, apart from the effect of the expiration of a limitation period, have a reasonable prospect of success, and

(b) the person whose means of knowledge is in question ought, in the person's own interests and taking the person's circumstances into account, to be able to bring an action.

[42] With respect to the situation in Maryland, E. & Y. filed the affidavit of Andrew Marc Dansicker, a lawyer licensed to practice in that jurisdiction. He deposes that by reason of § 5-101 of the Maryland Courts and Judicial Procedure Code, there is a three-year limitation period for actions for breach of contract and professional negligence. That provision reads:

A civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.

[43] Mr. Dansicker goes on to state that § 5-101 has been judicially interpreted as being subject to a “discovery rule”, the operation of which he describes as follows:

Pursuant to the discovery rule, the statute of limitations will only begin to run when the plaintiff has knowledge of the alleged wrong or should have knowledge of the circumstances which would cause a reasonable person in the position of the plaintiff to undertake an investigation which, if pursued with reasonable diligence, would have led to knowledge of the alleged wrong.


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He was careful to add that he was not asked to express an opinion on how the law of Maryland would be applied to the facts of this matter.

[44] Mr. Drove submits that to try this matter elsewhere than in British Columbia would result in his client losing the postponement provisions of the Limitation Act. Mr. Cowper’s response is that given the “discovery rule” in Maryland, Pan-Afric would be in the same position there with respect to the limitation period, as it is here. He notes that if the facts as to when Pan-Afric first learned of the error in the report are as set out in its Statement of Claim, then the limitation period has not expired in either jurisdiction.

[45] Additionally, Mr. Drove submits that if the action proceeds in British Columbia, then E. & Y. may still be able to rely on the Maryland limitation period by reason of s. 13(1) of the Limitation Act, which provides:

If it is determined in an action that the law of a jurisdiction other than British Columbia is applicable and the limitation law of that jurisdiction is, for the purposes of private international law, classified as procedural, the court may apply British Columbia limitation law or may apply the limitation law of the other jurisdiction if a more just result is produced.

[46] I am not persuaded that there is any limitation period advantage to be gained or lost depending on whether this matter is tried in British Columbia, or Maryland. On the facts pleaded by Pan-Afric the limitation periods in both jurisdictions did not start to run until August of 2005. It will not expire in Maryland until August of 2008.

[47] After the hearing of this matter a question arose in my mind as to whether the Limitation Act postponed the period for Pan-Afric’s claim for breach of contract, as well as for negligence. This is because although “professional negligence” is mentioned in s. 6(3), breach of contract is not. Neither counsel drew any distinction between these causes of action in their respective submissions.

[48] Upon looking into this issue I found that it had been dealt with in Cammack & Co. Notaries Public v. Kavanagh, [2006] B.C.J. No. 1964 (QL), 2006 BCSC 1298, which involved an action against a notary for negligence in drafting an agreement concerning the purchase of a piece of property. In dismissing an appeal from a trial in the Provincial Court, Silverman J. held that it does make a difference whether a case is advanced in contract or in tort because “s. 6(3) of the Limitation Act does not permit an extension of time where the cause of action is one of contract”: para. 31.

[49] In light of this decision, I requested written argument from counsel regarding the effect of s. 6 of the Limitation Act on the breach of contract claim. I have now had the benefit of those submissions.

[50] Mr. Drove submits that Cammack & Co. Notaries Public is wrongly decided, and should not be followed. In his detailed argument he refers to a number of authorities and statutory provisions which do not appear to have been considered in that case.

[51] Mr. Cowper, on the other hand, argues that I should follow this decision. He places particular reliance on the principles set out by Wilson J., as he then was, in Re Hansard Spruce Mills Ltd., [1954] 4 D.L.R. 590 (B.C.S.C.).

[52] Although Mr. Drove raises a number of points that appear to be worthy of fuller consideration, I have decided not to engage in an analysis of whether s. 6 of the Limitation Act extends the time for bringing a breach of contract claim founded on an allegation of professional negligence. For present purposes I will proceed on the basis that the actions in both contract and tort were brought in time. This is the view most favourable to Pan-Afric.

[53] Assuming Pan-Afric is correct my conclusion with respect to limitation periods expressed in paragraph 46 remains the same. It is a neutral factor.

Summary Trial Procedure

[54] As discussed in paragraphs 27 to 29 above, I am of the view that the issues raised in this action are not suitable for disposition by way of a summary trial. Accordingly, I do not accept Pan-Afric’s argument that it will lose the advantage of Rule 18A if this Court declines jurisdiction.

[55] In any event, it appears from Westec Aerospace Inc. v. Raytheon Aircraft Co. (1999), 67 B.C.L.R. (3d) 278, 1999 BCCA 243, affirmed without reasons, [2001] 1 S.C.R. iv, 2001 SCC 26, that merely because a matter is


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amenable to resolution under Rule 18A does not constitute a juridical advantage. In that case Rowles J.A., in allowing an appeal and staying an action commenced in British Columbia, stated:

[53] The other juridical advantage identified by the chambers judge was the availability in this Province of summary trial proceedings. If this factor alone were considered cogent evidence of an important juridical advantage, a litigant would be free to commence parallel proceedings in this Province whenever it had been sued in a jurisdiction which lacks the equivalent summary trial procedure available under Rule 18A of the Rules of Court. Such a ruling could have sweeping consequences and offends the principle of comity by refusing to acknowledge the efficacy of proceedings brought in jurisdictions which do not mirror exactly the procedural rules of this Province.

[54] Westec has led no evidence as to why its dispute is particularly suited to resolution by summary trial procedure or, for that matter, whether a summary trial procedure is generally available in Kansas.

Conclusion With Respect to Forum Non Conveniens

[56] The Maryland courts are the more appropriate forum in which to have the issues raised in this lawsuit determined. What is in dispute is whether professional services engaged there were properly performed there. This determination is to be made on the basis of the law and professional standards of Maryland. As well, the comparative convenience and expense to the parties and their witnesses favours proceeding there.

[57] In short, as put by Mr. Cowper, the center of gravity of this litigation exists in Maryland.

Nature of the Stay

[58] E. & Y. has established that a stay is appropriate. However, I am not prepared to grant one on an unconditional basis. This is because it cannot be said with certainty how § 5 -101 of the Maryland Courts and Judicial Procedure Code will be applied should E. & Y. plead a limitation defence. In this regard I note again that Mr. Dansicker did not express an opinion on this point. I also note E. & Y. has not said that it will forgo raising such a defence should it be successful on this application.

[59] Under s. 11(1) of the C.J.P.T.A. I have the power to “decline to exercise [this Court’s] territorial competence . . . on the ground that a court in another state is a more appropriate forum in which to hear the proceedings”. This is a codification of this Court’s jurisdiction at common law.

[60] This being so, I have the power to grant not only a stay but also, where it is necessary to ensure that justice is done between the parties, a conditional stay. Although I am not aware of such a stay having been granted in British Columbia, it has been done elsewhere: see United Oilseed Products Ltd. v. Royal Bank of Canada, [1988] 5 W.W.R. 181 (Alta. C.A.) at 192 (per Stevenson J.A., as he then was), Pre Print Inc. v. Maritime Telegraph & Telephone Co. (1999), 254 A.R. 336, 1999 ABQB 890 at para. 33 (per Sanderman J.), Nissho Iwai Co. v. Shanghai Ocean Shipping Co. (2000), 185 F.T.R. 314 at paras. 19, 22 (per Gibson J.).

[61] Pan-Afric chose to litigate in British Columbia, in part because it wishes to rely on the postponement provisions of the Limitation Act. In all the circumstances it would be unfair for this Court to unconditionally decline to exercise its admitted territorial competence, only to have the action dismissed in Maryland solely on the basis that it was not brought within time there.

[62] Whether a dismissal in Maryland on the basis of an expired limitation period would operate as a bar to prosecuting this matter here is something I need not decide. There is some authority to the effect that it would not: see Lange, The Doctrine of Res Judicata in Canada, 2nd ed., Toronto: LexisNexis Butterworths, 2004, at 358.

[63] I direct that this action be stayed conditionally. This stay will become final if, and only if, any action instituted by Pan-Afric against E & Y. in Maryland with respect to its Valuation Analysis of the Diginet software is decided on the merits. If such an action is dismissed solely on the basis that the limitation period in Maryland has expired, then Pan-Afric will be at liberty to apply to have the stay vacated.

Costs


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[64] Both parties seek costs on this application. As well, E. & Y. seeks costs with respect to the main action.

[65] Notwithstanding E. & Y. has been successful, at least to the point of obtaining a conditional stay, I am not prepared to award costs at this time. Rather, as Powers J. did in Harrison v. Fedderly Transportation Ltd. (2006), 60 B.C.L.R. (4th) 367, 2006 BCSC 1685 (at para. 30), I am going to exercise my discretion, and order that costs in this action to date, including this application, be contingent on certain events.

[66] If the merits are determined in Maryland, then those costs (determined on the British Columbia tariff) will follow any order for costs made there. However, if the merits are not determined in Maryland, then those costs will be costs in the cause here.

WEEKS 3 & 4: New Civil Rules and the CJPTA

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Addressing Jurisdictional Complexity: The New Civil Rules and the CJPTA

Robert J.C. Deane∗ Borden Ladner Gervais LLP

I. INTRODUCTION

Complex litigation typically involves relationships and transactions spanning different provinces or countries. A threshold consideration in any litigation matter is therefore whether the Supreme Court of British Columbia has jurisdiction at all and, if it does, whether it makes strategic sense to attempt to have the Court decline to exercise that jurisdiction in favour of some other court that also has jurisdiction.

This is an area that has seen significant changes in the past several years, first with the coming into force in May 2006 of the Court Jurisdiction and Proceedings Transfer Act, R.S.B.C. 2003, c. 28 (the “CJPTA”), and more recently, with the coming into force in July 2010 of the new Supreme Court Civil Rules, B.C. Reg. 168/2009. This paper will provide an overview of the current procedure and legal framework for addressing these threshold jurisdictional issues.

II. SUPREME COURT CIVIL RULES

Under the new Supreme Court Civil Rules, jurisdictional disputes are dealt with under Rule 21-8. Rule 21-8 amends and replaces Rules 14(6), 14(6.1), 14(6.2), 14(6.3) and 14(6.4) of the previous Rules of Court.

Rule 21-8 allows parties a number of options if they believe that the Court does not have jurisdiction to hear a matter. Rule 21-8(1) allows a party to apply to strike out, dismiss or stay the proceedings on the ground that the court does not have jurisdiction over that party in respect of the claim made against that party in the proceeding. (The party may also choose to simply allege in a pleading that the Court does not have jurisdiction over the party in respect of the claim made against the party).

Alternatively, Rule 21-8(2) allows a party to apply for a stay of the proceeding on the basis that the court ought to decline to exercise jurisdiction over that party in respect of the claim made against that party in the proceeding.

The major change from the previous Rules of Court with respect to jurisdictional disputes is the addition of a “jurisdictional response” in Form 108. Under the former Rules of Court, a party who had been served and wished to challenge the jurisdiction of the Court had to file an Appearance and could then apply to dismiss or stay the proceedings. Under the new Civil Rules, a party must file a jurisdictional response in Form 108 before applying to dismiss or stay the proceedings. Form 108 simply requires the defendant to select one or both of two options: that the defendant “disputes that this court has jurisdiction over this defendant” or that the defendant “submits that this court ought not to exercise its jurisdiction over this defendant”.

Rule 21-8(5) protects the party that has timely filed a jurisdictional response, as well as a notice of application or a pleading denying jurisdiction from being found to have attorned to the Court's jurisdiction. It provides:

∗ Important Notices: The views expressed in this paper are solely those of the authors and should not be attributed to

Borden Ladner Gervais LLP or any of its clients. No person should act or refrain from acting in reliance on any information in this paper without first obtaining appropriate professional advice. This paper is presented for informational purposes only, does not constitute legal or other professional advice, and does not create a solicitor-client relationship between the reader and the author or Borden Ladner Gervais LLP. Copyright © 2010 Robert J.C. Deane. All rights reserved.

** The author gratefully acknowledges the assistance of David Claassen, Articled Student, in the preparation of this paper.


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Party does not submit to jurisdiction

(5) If, within 30 days after filing a jurisdictional response in a proceeding, the filing party serves a notice of application under subrule (1) (a) or (b) or (3) on the parties of record or files a pleading or a response to petition referred to in subrule (1) (c),

(a) the party does not submit to the jurisdiction of the court in relation to the proceeding merely by filing or serving any or all of the following:

(i) the jurisdictional response; (ii) a pleading or a response to petition under subrule (1) (c); (iii) a notice of application and supporting affidavits under subrule (1) (a) or (b), and

(b) until the court has decided the application or the issue raised by the pleading, petition or response to petition, the party may, without submitting to the jurisdiction of the court,

(i) apply for, enforce or obey an order of the court, and (ii) defend the proceeding on its merits.

The predecessor to Rule 21-8(5) was considered by the Court of Appeal in Purple Echo Productions Inc. v. KCTS Television, 2008 BCCA 85.

III. DETERMINING TERRITORIAL COMPETENCE

A. General Approach

Whether the Supreme Court of British Columbia has jurisdiction over an issue is determined by the CJPTA. The CJPTA is based on the Uniform Law Conference of Canada’s Uniform Court Jurisdiction and Proceedings Transfer Act. One of its purposes is to codify Canadian jurisdictional principles in accordance with the law as stated in Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, and Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897. See generally, Elizabeth Edinger, “New British Columbia Legislation: The Court Jurisdiction and Proceedings Transfer Act; The Enforcement of Canadian Judgments and Decrees Act” (2006), 39 U.B.C. L. Rev. 407.

Section 1 of the CJPTA defines “territorial competence” (formerly jurisdiction simpliciter) as the aspects of the Court’s jurisdiction which depend on a connection between (1) the territory or legal system of the state in which the court is established, and (2) a party to a proceeding in the Court or the facts on which the proceeding is based.

Section 2 of the CJPTA states that the territorial competence of a court in British Columbia is to be determined solely by reference to ss. 2-12 of the CJPTA.

The two most relevant sections of the CJPTA for determining whether a court has territorial competence are ss. 3, 7 and 10.1 Section 3 describes the only situations in which a court has territorial competence in a proceeding against a person:

(a) that person is the plaintiff in another proceeding in the Court to which the proceeding in question is a counterclaim,

1 Part 3 (ss. 13-23) of the CJPTA provides the jurisdiction for the Court to transfer a proceeding to a court outside British

Columbia, if it is satisfied that the receiving court has territorial and subject matter competence in the proceeding. This power is likely to be used sparingly and, indeed, it has been relied upon in very few cases to date. Generally, the parties will be left to their own devices to choose a more appropriate forum if the Court exercises its discretion to decline to exercise its jurisdiction. See Conor Pacific Group Inc. v. Canada (Attorney General), 2010 BCSC 751 and Iskander and Sons Inc. v. Haghighat, 2007 BCCA 416; and, contra, O'Connor v. Chapman, 2007 BCSC 657; England v. Research Capital Corporation, 2008 BCSC 580; and Broman v. Machida Mack Shewchuk Meagher LLP, 2010 BCSC 760. It will not be addressed further in this paper.


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(b) during the course of the proceeding that person submits to the Court's jurisdiction,

(c) there is an agreement between the plaintiff and that person to the effect that the Court has jurisdiction in the proceeding,

(d) that person is ordinarily resident in British Columbia at the time of the commencement of the proceeding, or

(e) there is a real and substantial connection between British Columbia and the facts on which the proceeding against that person is based.

In Stanway v. Wyeth Pharmaceuticals Inc., 2009 BCCA 592, K. Smith J.A. cited the Uniform Law Conference of Canada, and held that (at para. 22):

The presumption of a real and substantial connection in s. 10 is a mandatory presumption with basic facts. The basic facts are those set out in s. 10(a) through (l), which are taken to be proven if they are pleaded. While the presumption is rebuttable, it is likely to be determinative in almost all cases.

In Broman v. Machida Mack Shewchuk Meagher LLP, 2010 BCSC 760, Kloegman J. also quoted the observations of the Uniform Law Conference of Canada as follows:

Paragraph (e) replaces the existing rules, in the common law provinces, relating to service ex juris. Territorial competence will depend, not on whether a defendant can be served ex juris under rules of court, but on whether there is, substantively, a real and substantial connection between the enacting jurisdiction and the facts on which the proceeding in question is based. This provision would bring the law on jurisdiction into line with the concept of “properly restrained jurisdiction” that the Supreme Court of Canada, in Morguard Investments Ltd. v. De Savoye (1990), held was a precondition for the recognition and enforcement of a default judgment throughout Canada. The “real and substantial connection” criterion is therefore an essential complement to the uniform Enforcement of Canadian Judgments Act, which requires all Canadian judgments to be enforced without recourse to any jurisdictional test. The present Act, if adopted, will ensure that all judgments will satisfy the Supreme Court’s criterion of “properly restrained” jurisdiction, which the court laid down as the indispensable requirement for a judgment to be entitled to recognition at common law throughout Canada.

Section 7 of the CJPTA defines the circumstances which constitute ordinary residence for a corporation for the purposes of establishing territorial competence under s. 3(d), including that a corporation is ordinarily resident in British Columbia if it has a registered office in the province: Williams v. TST Porter dba 6422217 Canada Inc., 2008 BCSC 1315.

The situations described in subsections (a) to (d) are primarily factual and will most likely not be the subject of much argument, as the Court of Appeal alluded in Stanway. The majority of jurisdictional argument is derived from subsection (e), which asks whether there is a real and substantial connection between British Columbia and the facts on which the proceeding against that person is based.

Whether a real and substantial connection between British Columbia and the facts on which a proceeding is based exists is determined with reference to s. 10 of the CJPTA. Section 10 provides that a plaintiff can prove any circumstances that constitute a real and substantial connection, but also lists a number of situations in which a real and substantial connection is presumed to exist:

10. Without limiting the right of the plaintiff to prove other circumstances that constitute a real and substantial connection between British Columbia and the facts on which a proceeding is based, a real and substantial connection between British Columbia and those facts is presumed to exist if the proceeding


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(a) is brought to enforce, assert, declare or determine proprietary or possessory rights or a security interest in property in British Columbia that is immovable or movable property,

(b) concerns the administration of the estate of a deceased person in relation to

(i) immovable property in British Columbia of the deceased person, or (ii) movable property anywhere of the deceased person if at the time of

death he or she was ordinarily resident in British Columbia,

(c) is brought to interpret, rectify, set aside or enforce any deed, will, contract or other instrument in relation to

(i) property in British Columbia that is immovable or movable property, or

(ii) movable property anywhere of a deceased person who at the time of death was ordinarily resident in British Columbia,

(d) is brought against a trustee in relation to the carrying out of a trust in any of the following circumstances:

(i) the trust assets include property in British Columbia that is immovable or movable property and the relief claimed is only as to that property;

(ii) that trustee is ordinarily resident in British Columbia; (iii) the administration of the trust is principally carried on in British

Columbia; (iv) by the express terms of a trust document, the trust is governed by the

law of British Columbia,

(e) concerns contractual obligations, and

(i) the contractual obligations, to a substantial extent, were to be performed in British Columbia,

(ii) by its express terms, the contract is governed by the law of British Columbia, or

(iii) the contract

(A) is for the purchase of property, services or both, for use other than in the course of the purchaser’s trade or profession, and

(B) resulted from a solicitation of business in British Columbia by or on behalf of the seller,

(f) concerns restitutionary obligations that, to a substantial extent, arose in British Columbia,

(g) concerns a tort committed in British Columbia,

(h) concerns a business carried on in British Columbia,

(i) is a claim for an injunction ordering a party to do or refrain from doing anything

(i) in British Columbia, or (ii) in relation to property in British Columbia that is immovable or

movable property,

(j) is for a determination of the personal status or capacity of a person who is ordinarily resident in British Columbia,


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(k) is for enforcement of a judgment of a court made in or outside British Columbia or an arbitral award made in or outside British Columbia, or

(l) is for the recovery of taxes or other indebtedness and is brought by the government of British Columbia or by a local authority in British Columbia.

The evidentiary burden to establish territorial competence rests on the party that seeks to establish the existence of matters supporting a finding of territorial competence: Williams v. TST Porter dba 6422217 Canada Inc., 2008 BCSC 1315; VMAC Racing Ltd. v. B.R. Motorsports Inc., 2008 BCSC 685. Facts sufficient to establish jurisdiction must be pleaded or adduced in Affidavit form: Purple Echo Productions Inc. v. KCTS Television, 2008 BCCA 85.

The mere fact that the plaintiff is resident in British Columbia is not, in itself, sufficient to establish territorial competence: England v. Research Capital Corp. 2008 BCSC 580; Marren et al. v. Echo Bay Mines Ltd. 2003 BCCA 298; Cameron v. Equineox Technologies Ltd. 2009 BCSC 221; Sooparayachetty v. Fox, 2010 BCSC 185. Nor is it sufficient if the plaintiff has only suffered damages in British Columbia: Roed v. Scheffler et al., 2009 BCSC 731. Rather, the requirements of s. 10 of the CJPTA must be considered in every case.

In the early discussion of s. 10, there was often reference made to the common law considerations that led to a finding of a real and substantial connection. These factors were generally derived from an Ontario Court of Appeal decision, Muscutt v. Courcelles (2002), 60 O.R. (3d) 20 (C.A.). However, in Stanway v. Wyeth Pharmaceuticals Inc., 2009 BCCA 592, K.J. Smith J.A. held (at para. 73), that “any reliance on the Muscutt factors as a guide to determining the question of jurisdiction came to an end in British Columbia with the coming in force of the CJPTA.” As a result, a proper consideration of a real and substantial connection will be made only with reference to s. 10 of the CJPTA, not by reference to the Muscutt factors – which, on one view, overlap with the factors considered when determining whether there is a more appropriate forum.

Section 10 of the CJPTA has been considered in a significant number of cases involving a variety of fact scenarios. For example, in Roed v. Scheffler, 2009 BCSC 731, Bruce J. held that the Court did not have jurisdiction over an action in which the plaintiff, a resident of British Columbia, was injured by a Washington State resident in a car accident that took place in Washington State. The plaintiff argued that while the initial tort took place outside of British Columbia, she continued to suffer damages in British Columbia because her injuries caused her pain for which she sought medical treatment in British Columbia. Bruce J. held that the residence of the plaintiff, standing alone, cannot establish territorial competence, and concluded as follows (at para. 43):

I find the plaintiff has failed to satisfy the test for territorial competence articulated in s. 3 of the Act. I find the fact that the plaintiff continues to suffer damages in British Columbia insufficient to establish a real and substantial connection on its own. These damages are suffered in British Columbia purely as a result of the plaintiff’s residence here. To find a real and substantial connection based on these facts would be to effectively base jurisdiction entirely on the plaintiff's residence. As set out above, it is well established that a plaintiff’s residence is not sufficient grounds for a territorial competence.

Another example of a context-specific s. 10 analysis can be found in Blackedge Strategic Capital and Consulting Ltd. v. Spelliscy, 2008 BCSC 1217. In Blackedge, the plaintiff brought an action seeking specific performance of a contract to purchase certain mineral claims in Saskatchewan. The plaintiff alleged in the pleadings that the shares were to be delivered to the defendants by the plaintiff’s solicitor in British Columbia. However, there was no evidence to support this allegation and the defendants provided Affidavit evidence that the shares were to be delivered in Saskatchewan. The plaintiff also alleged that the defendant made representations that were either fraudulently or negligently made in British Columbia, but the defendant’s Affidavit material contradicted those assertions as well. As a result, and by reference to s. 10 of the CJPTA, Savage J. was unable to find, on the evidence, that the plaintiff had made out a real and substantial connection between British Columbia and the facts of the case and declined jurisdiction.


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These fact-based cases are generally consistent with the most recent guidance from the Court of Appeal in North America Steamships Ltd. v. HBC Hamburg Bulk Carriers GmbH & Co. KG., 2010 BCCA 501, in which Newbury J.A. held that, when considering the “real and substantial connection test”, “. . . a court should not involve itself in parsing all the different facts of different cases but should instead concern itself with whether on the whole, the plaintiff has shown a real and substantial connection between British Columbia and the facts on which the proceedings are based” (at para. 17).

B. Residual Discretion to Assume Jurisdiction Despite Lack of Territorial Competence

Section 6 of the CJPTA identifies two situations in which a court that lacks territorial competence under s. 3 may hear a proceeding: (1) where there is no court outside British Columbia in which the plaintiff can commence the proceeding; or (2) the commencement of the proceeding in a court outside of British Columbia cannot reasonably be required.

Section 6 of the CJPTA has only been considered in a few cases. In Lailey v. International Student Volunteers, Inc., 2008 BCSC 1344, two plaintiffs were residents of British Columbia and the third plaintiff was a resident of Ontario. The defendant was a non-profit corporation with its principal office in California that offered travel programs to students. The plaintiffs signed up for a program in Ecuador through the defendant. While in the homestay that was organized by the defendant, the plaintiffs alleged that the homeowner engaged in sexually inappropriate conduct. The plaintiffs claimed against the defendant in British Columbia for breach of contract in, among other things, failing to provide them with safe and secure accommodation, attempting to prevent them bringing charges in Ecuador, failing to assist them in their legal claim and in terminating them from the program. The defendant sought to have the claim dismissed on the basis of a lack of jurisdiction.

The Court found that the two plaintiffs from British Columbia clearly fell under s. 10(e)(iii) of the CJPTA, as the plaintiffs had been solicited on campus in British Columbia. However, that section did not apply to the plaintiff from Ontario, and at para. 34, Grauer J. noted that her claim “cannot simply be bootstrapped onto the claims of the other two plaintiffs over which the Court does have jurisdiction”. Grauer J. then went on to consider whether s. 6 gave him the discretion to allow the Ontario plaintiff to commence an action in British Columbia. He noted that whether the Supreme Court of British Columbia would hear the action would still depend on the determination of whether the Court should decline jurisdiction under s. 11 of the CJPTA, an issue that was yet to be argued in that case. Because other jurisdictions possibly existed that may be more appropriate for hearing the matter, he could not find that the Ontario plaintiff could not “reasonably be required” to commence proceedings elsewhere. He concluded at para. 46:

I am of the view that s. 6 of the CJPTA was not intended to be applied as the plaintiffs suggest. Where there is a group of plaintiffs, all of whom could commence an action in a foreign jurisdiction (such as, in this case, California), the fact that some of them are able to establish territorial competence in British Columbia cannot, it seems to me, render it an unreasonable requirement that other plaintiffs who have no connection whatsoever to British Columbia should commence their action in a jurisdiction where there is territorial competence. If it makes less economic sense for the claims to be divided between two different jurisdictions instead of litigated together in one, then I should think that those with the British Columbia connection might well consider joining those without it in the jurisdiction that has territorial competence over all of the claims. This would make more sense than the claims being tried together in a jurisdiction that does not have territorial competence over all of them.

One recent case in which s. 6 of the CJPTA has been used to found jurisdiction is Josephson (Litigation guardian of) v. Balfour Recreation Commission, 2010 BCSC 603. In Josephson, the plaintiff and defendant were residents of Idaho; the plaintiff was thrown from a golf cart driven by the defendant in British Columbia. The defendant alleged that the plaintiff received medical treatment in Idaho which caused the plaintiff’s injuries in whole or in part and filed a third party notice against the Idaho doctors. The third party doctors applied to have the third party proceedings brought against them by the defendant dismissed on the basis that the Court lacked jurisdiction over them.


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The defendant was unable to establish a real and substantial connection between British Columbia and the alleged negligence of the doctors in Idaho because, as discussed at para. 42, “a cursory view of the facts underlying the third party claim suggests that it concerns a tort committed in Idaho.” Loo J. then moved to consider s. 6 of the CJPTA and whether it gave her the discretion to hear the third party claims. Madam Justice Loo found that it could not reasonably be required for the defendant to commence his proceedings in Idaho due to Idahoan law preventing any chance of success (at para. 96):

There is no dispute that [the defendant] cannot bring an action in Idaho against the applicants for contribution and indemnity because he was not a patient and therefore his claim is not one recognized under Idaho law. To argue that s. 6 does not apply because [the defendant] can commence his action and not be successful, does not reflect a fair, large, and liberal construction of the CJPTA or an interpretation that best ensures the attainment of its objects.

As a result, the third party proceedings were allowed to be heard in British Columbia, despite the fact that they alleged negligence against Idaho doctors working on an Idaho resident in Idaho. Leave to appeal was granted by the Court of Appeal for British Columbia and the third party proceedings stayed pending the outcome of that appeal in reasons indexed at 2010 BCCA 339.

IV. DETERMINING SUBJECT MATTER COMPETENCE

Apart from territorial competence, any court hearing a matter must also have subject matter competence.

In s. 1 of the CJPTA, “subject matter competence” is defined to mean “the aspects of the Court’s jurisdiction that depend on factors other than those pertaining to the Court’s territorial competence”. This phrase, though, appears only in Part 3 of the CJPTA, dealing with the transfers of proceedings to or from other jurisdictions. This appears to be because, in order to have any adjudicative capacity at all, the Court must have subject matter competence existing wholly apart from the terms of the CJPTA.

In Scott v. Hale, 2009 BCSC 228, N. Brown J. was required to consider the differences between territorial competence and subject matter competence. Relying upon the 1994 report of the Uniform Law Conference of Canada, he held that “subject matter competence”, as referred to in the CJPTA, means the restrictions, if any, imposed on the Court’s power relating to the nature of the dispute, the amount in issue, or other factors that are unrelated to the territorial competence of the Court. Such limitations are typically imposed by the Legislative Assembly, as it has done by assigning exclusive jurisdiction over most workplace claims to the Workers Compensation Board in s. 96(1) of the Workers Compensation Act, R.S.B.C. 1996, c. 492. As the Court noted, the Court would have territorial competence in respect of most such claims, but its subject matter competence has been legislatively restricted.

Another example of a rule governing the Court’s subject matter competence is the requirement that the party seeking relief have standing to do so: Courcelles v. Rogers et al., 2006 BCSC 882.

V. DISCRETION TO DECLINE TO EXERCISE JURISDICTION

Whether the Supreme Court of British Columbia has territorial competence over the issue in question is not always the end of the inquiry. There are situations in which the Supreme Court may have territorial competence over an issue, but another court in a different jurisdiction does as well. In that case, the Supreme Court must determine whether it will exercise its territorial competence or allow the other court to deal with the matter.

Historically this question was considered under the common law doctrine of forum non conveniens. Section 11 of the CJPTA now deals with the discretion to exercise territorial competence. The burden is on the party seeking to have the Court decline jurisdiction to demonstrate that another forum is clearly more appropriate: Purple Echo Productions Ltd. v. KCTS Television, 2008 BCCA 85.

In Teck Cominco Metals Ltd. v. Lloyd’s Underwriters, 2009 SCC 11 at para. 22, McLachlin C.J. held that s. 11 was “intended to codify the forum non conveniens test, not to supplement it.” Section 11 of the CJPTA reads as follows:


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11. (1) After considering the interests of the parties to a proceeding and the ends of justice, a court may decline to exercise its territorial competence in the proceeding on the ground that a court of another state is a more appropriate forum in which to hear the proceeding.








In Teck, the appellant argued that s. 11 of the CJPTA did not apply where a foreign court had already asserted jurisdiction in a case. McLachlin C.J. rejected this argument and held, at para. 21, that the CJPTA was a comprehensive regime and that each factor under s. 11 must be considered:

The CJPTA creates a comprehensive regime that applies to all cases where a stay of proceedings is sought on the ground that the action should be pursued in a different jurisdiction (forum non conveniens). It requires that in every case, including cases where a foreign judge has asserted jurisdiction in parallel proceedings, all the relevant factors listed in s. 11 be considered in order to determine if a stay of proceedings is warranted. This includes the desirability of avoiding multiplicity of legal proceedings. But the prior assertion of jurisdiction by a foreign court does not oust the s. 11 inquiry.

The issue in Teck was whether the Supreme Court of British Columbia should decline jurisdiction over coverage proceedings relating to environmental damage that occurred in the United States, downstream from Teck’s British Columbia smelter. Proceedings were commenced initially in Washington State, and parallel proceedings in British Columbia commenced later that same day. The United States District Court asserted jurisdiction in the issue; however, the Supreme Court of British Columbia subsequently determined that a consideration of the factors in s. 11 of the CJPTA led to the finding that the central issues in the coverage action weighed in favour of hearing the matter in British Columbia. The Supreme Court of Canada upheld this ruling, agreeing that British Columbia was the forum most closely connected with the issues and that Washington State was not a clearly preferable forum. The Chief Justice acknowledged the practical difficulties of this decision (at para. 38):

While I am sympathetic to the difficulties presented by parallel proceedings, the desire to avoid them cannot overshadow the objective of the forum non conveniens analysis, which is “to ensure, if possible, that the action is tried in the jurisdiction that has the closest connection with the action and the parties”

Another case in which s. 11 was considered is Iskander and Sons, Inc. v. Haghighat, 2007 BCSC 753, where the Court found that it had jurisdiction over the dispute, but declined to exercise it in favour of the courts of Texas. In Iskander, the plaintiff was a Texas corporation operating a commercial mall business in Texas with no business operations or assets in British Columbia. The defendant Haghighat was a former officer of the plaintiff and resided in Texas. Haghighat wired a significant amount of money from the plaintiff’s account to two British Columbia residents, who were also defendants in the action. In declining to exercise jurisdiction, Rice J. noted that there was a pending action in Texas concerning similar actions, Texas laws may apply to the issues, the parties had expended significant expenses in the Texas action that would have to be duplicated, and that those facts, among others, led


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him to the conclusion (at para. 36) that “the state of Texas has the closest connection with the action and the parties. I draw this conclusion with the principles of unity, order and fairness in mind… The Texas court is the more appropriate forum in which to hear the proceeding.”

VI. CONCLUSION

Jurisdictional issues in British Columbia are completely governed by the CJPTA, which is a comprehensive code for the determination of the Court’s territorial competence, and the circumstances in which that jurisdiction may be declined.

The threshold question that must be determined is whether the Supreme Court of British Columbia has territorial competence over an issue. That analysis will generally turn on whether there is a real and substantial connection between British Columbia and the facts on which the proceeding against that person is based as delineated in s. 10 of the CJPTA. Counsel must also consider the strategic advantages or disadvantages of litigating the particular claim in British Columbia when determining whether to bring such an application.

If the Supreme Court of British Columbia has territorial competence, the Court, if asked to do so, must then determine whether to exercise its discretion to hear that matter or to defer to another court. That decision will be made with reference to s. 11 of the CJPTA, which is a complete codification of the common law forum non conveniens test. Again, counsel must consider, in the context of the entire claim, which jurisdiction is the most favourable.

Each step of the analysis is heavily fact-driven. Both in their originating pleadings and in any materials filed on an application for an Order under the CJPTA, in accordance with the procedures set out in the new Supreme Court Civil Rules, it is incumbent upon all parties to provide a detailed factual foundation for the determination sought. The courts have demonstrated a reluctance to be bound by the apparent conclusions in other cases, preferring to assess the substantive realities of the cases before them, always by reference to the factors enumerated in the CJPTA.

WEEK 5: Pleadings

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Pleadings

W. Stanley Martin Fasken Martineau DuMoulin LLP

A. OBJECTIVES

1. Prepare a clear, orderly and succinct statement of the claim or defence:

(a) Audience: Mr. Justice Taylor in his address “The Third Art of Advocacy” reviews the working life of a member of the Supreme Court of British Columbia. He states:

“In an ideal legal system the judge would have an opportunity not only to study at leisure the pleadings in each action he is to hear, and to research the principal questions of law which they disclose, but would also conduct one or two pretrial conferences with counsel in order to gain a clear grasp of the issues and establish the procedural course of the trial before he embarks on the hearing itself.”

He goes on to say that such is not the case in British Columbia and the most that you can hope for is that the judge has received the record the night prior to the trial. The pleadings are the first exposure the court has to the case and it is important to strike a responsive chord by providing a carefully prepared document. If the case is to be heard by a jury it is even more important that the language chosen be simple and clear.

(b) Clarity: Mr. Justice Taylor, in “The Third Art of Advocacy” states:

“Almost everywhere else, linguistic flourishes, the latest buzz words, new fancy talk will sell anything. These devices are useless when it comes to selling the only merchandise with which the courts can deal: ideas. The tribunal has to understand what counsel actually means by his words. That takes hard work on both sides.”

2. Prepare legally adequate pleadings:

(a) Raise issues in sufficient detail to permit the range of examinations for discovery which you require.

(b) Raise issues in sufficient detail to permit you to lead the relevant and necessary evidence at trial.

(c) Disclose a cause of action and a factual basis upon which judgment in your client’s favour could be granted.

B. PREPARATION

1. Limitations. The steps which follow are the ones which should be taken when you have adequate time. The initial determination that you have to make when you are first consulted is what the appropriate limitation period is. If it is about to expire you should file immediately a broad, general document which will cover all bases!

2. Evidence Review.

(a) Documents - review both client’s documents and documents in the possession of other parties who are prepared to cooperate (e.g. in motor vehicle accident the police reports), and documents which

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are in the public domain which are relevant, such as reports on weather conditions, stock market trading figures, regulatory filings, etc.

(b) Investigative Reports. If the case is one where the assistance of experts is required it is useful to have their preliminary opinions at least so that you can make sure you are on reasonably solid ground. You want to be sure that you are shooting at the correct target.

Example:

Peter Ballem once acted on behalf of an individual that suffered an epileptic seizure while driving which caused him to stamp down on the, accelerator and collide with a number of vehicles. The result was extensive property damage to a number of vehicles and physical injury to a few people. The actions were dismissed against Peter’s client and none of the plaintiffs had commenced action against the physician who had advised Peter’s client that he could drive in spite of the fact that he did not meet the guidelines under the Motor Vehicle Act.

(c) Client and other witnesses’ evidence. You should have the chronological account and minutes of evidence prepared so that you can prepare a pleading which is consistent with the evidence available to you.

3. Legal Research. It is necessary to research the law so that you are aware of the grounds which must be met to entitle your client to the relief sought.

4. Review in-house precedents or precedent books.

5. Review drafts with your client prior to filing. Nobody is as familiar with the facts as your client.

C. SPECIFIC POINTS IN PLEADING

1. Crisp, concise and professional, not prolix or argumentative. (See Rule 19(1) - “as brief as the nature of the case will permit”.)

2. Plead the material facts, not the evidence (Rule 19(1)). This means you have to understand the legal theory of the claim or defence.

3. If possible, your pleadings should tell your client’s story. It is impossible to tell from many pleadings what actually happened.

4. Plead the necessary law. The English texts are not a good guide to the British Columbia practice. The strict view is that you can argue any point of law arising from the allegations of fact, with the exception of certain specific matters (e.g. estoppel, res judicata, illegality, limitation period) which have to be pleaded. The general (and reasonable) practice in B.C. is to plead the legal consequences of the material facts.

5. Plead the statute or regulation relied on, and make sure you have pleaded the material facts to trigger the application of the provision.

6. Make sure there is a factual basis for the pleaded allegations (Stewart v Tse (1992), 71 BCLR (2d) 13 (S.C.). Avoid pleading matters which your client has no realistic possibility of establishing.

Example:

One large Vancouver law firm recently filed a defence in an action on a guarantee which alleged that the guarantor had been released from his obligation pursuant to a forbearance agreement entered into previously. That same firm had acted for the defendant in the negotiations concerning the forbearance agreement and prepared a draft forbearance agreement which specifically released the guarantor. That was

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rejected on the grounds that it released the guarantor. They then prepared another form of forbearance agreement which did not release the guarantor and merely deferred payment which was accepted. One wonders when the lawyer from that firm will be forced to take the stand on the issue of the terms of the forbearance agreement and what the chances are of the court finding that there was a release of the guarantor when he was represented throughout by a lawyer who had demonstrated his awareness of how to draft a release of guarantee.

7. Statements of Defence

(a) Plead any matters which would otherwise take the plaintiff by surprise (Rule 19(15)). This may include a conclusion of law.

(b) Admit the obvious and non-controversial.

(c) Choose whether to respond paragraph by paragraph to the statement of claim or whether to use the defence to put forward affirmatively your client’s case.

8. Particulars are sometimes necessary: see Rule 19(11) - misrepresentation, fraud, wilful default, undue influence - plus many other areas - negligence, debt.

9. The court has a further discretion to order particulars: Big Bay Timber Ltd. v Arkinstall Logging Co. Ltd. (1978), 7 BCLR 69. Distinguish particulars necessary for pleading and particulars required after discovery: Cominco v. Westinghouse (1978), 6 BCLR 25.

10. Amendment is common (even after the close of evidence at trial) but it is better to get it right first. Discovery scope may be limited and some amendments may not be allowed (especially fraud). Contrast Cominco v. Westinghouse (1979), 11 BCLR 142 at 148-9, and Rogers v. Hunter (1982), 37 BCLR 321 at 323. Amend the statement of claim before trial to delete claims which have been abandoned.

11. Take extra care over:

• deemed admissions (e.g. Rule 19(10) - status)

• inconsistent allegations (Rule 19(7))

• defamation (Rule 19(12), common law)

• effect of documents (Rule 19(2)).

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APPENDIX 1

Pleadings Check List

The following matters must be pleaded:1

Contents of documents Contract or legal relationship Res ipsa loquitur Private Act of Parliament Specific statues, e.g., Sale of Goods Act Aggravation and mitigation Limitations Act Not guilty by statute Notice Want of jurisdiction Estoppel Contributory negligence Act of third party Want of authority Release, payment or performance Settled account Waiver Bona fide purchaser without notice Tender before action Counterclaim

Malice, fraudulent intent and knowledge Presumptions Judicial notice Foreign law Regulations Statute of Frauds Statutory limit of liability Conditions precedent Illegality Ultra vires Res judicata Accident Non est factum Want of capacity Accord and satisfaction Surrender Equitable defences Defamation Set-off

1 Taken from D. Stockwood, Civil Litigation (1980), at p. 145.

WEEK 5: Jones

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Jones v. Donaghey

2011 BCCA 6

Reasons for Judgment of the Honourable Mr. Justice K. Smith:

[1] After hearing this appeal, we allowed the appeal with reasons to follow. These are my reasons.

[2] Julie Ann Donaghey, a defendant in the underlying action, appeals with leave from an order of the Honourable Mr. Justice Macaulay of the Supreme Court of British Columbia by which, on application of the plaintiff, he ordered her to attend for a psychiatric examination pursuant to Rule 7-6(1) of the Supreme Court Civil Rules, (the successor of Rule 30(1) of the Rules of Court), which provides,

(1) If the physical or mental condition of a person is in issue in an action, the court may order that the person submit to examination by a medical practitioner....

[3] The question is whether the chambers judge erred in concluding that Ms. Donaghey’s mental condition “is an issue in the litigation” and consequently ordering Ms. Donaghey to attend for a psychiatric examination pursuant to Rule 7-6(1) on the basis that evidence of her mental condition is “potentially ... relevant” to an issue or issues in the case. In my view, he did and I would allow the appeal.

[4] The Supreme Court Civil Rules prescribe the rules that regulate practice and procedure in the Supreme Court – they set out the administrative system under which disputes are taken to the court and adjudicated. Clearly, such a system must have an orderly method of determining the precise point or points to be decided in each case. In the Supreme Court’s administrative system, this method is known as “pleading”. The rules governing pleading are set out in Part 3 of the Rules. Thus, the law of pleading is an element of the law of practice and procedure.

[5] Part 7 of the Rules sets out another element of this system. It is entitled “Procedures for Ascertaining Facts”. Rule 7-6(1), pursuant to which the order under appeal was made, regulates part of this component of the administrative system.

[6] It is trite to say that words take their meaning from their context. The “modern principle” of statutory interpretation mandates that “words are to be read in their entire context in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: Elmer A. Driedger, The Construction of Statutes, 2d ed. (Toronto: Butterworths, 1983) at 87. This approach is equally applicable to subordinate legislation, like the Supreme Court Civil Rules, enacted by the provincial legislatures. Thus, the meaning of “issue” in Rule 7-6(1) must be ascertained by considering it in the context of the Rules as a whole in accordance with this “modern principle”.

[7] In the law of pleading, “issue” is a term of art. As was said in Farrell v. Secretary of State for Defence, [1980] 1 All E.R. 166 at 173 (H.L.), the primary purpose of pleadings is “to define the issues and thereby to inform the parties in advance of the case they have to meet and so enable them to take steps to deal with it.” In D.B. Casson, Odgers on High Court Pleading and Practice, 23rd ed. (London: Sweet & Maxwell/Stevens, 1991) at 123-124, “issue” is explained in this way:

The pleadings should always be conducted so as to evolve some clearly defined issues, that is, some definite propositions of law or fact, asserted by one party and denied by the other, but which both agree to be the points which they wish to have decided in the action.

...

The function of pleadings then is to ascertain with precision the matters on which the parties differ and the points on which they agree; and thus to arrive at certain clear issues on which both parties desire a judicial decision.

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[Emphasis in original.]

[8] Thus, an “issue” of fact is a disputed question of fact. However, not every disputed question of fact is an “issue”. In Howell v. Dering, [1915] 1 K.B. 54, Lord Justice Buckley, discussing the meaning of “issue” in a rule of court that provided for costs to follow the event of an issue tried before a jury, said, at 62,

It is impossible to say that every question of fact which is in dispute between a plaintiff and a defendant is an “issue.” The word can be used in more than one sense. It may be said that every disputed question of fact is in issue. It is in a sense, that is to say, it is in dispute. But every question of fact which is “in issue” and which a jury has to determine is not necessarily “an issue” within the meaning of the rule. I should define “issue” for the purposes of this rule in some such words as these: An issue is that which, if decided in favour of the plaintiff, will in itself give a right to relief, or would, but for some other consideration, in itself give a right to relief; and if decided in favour of the defendant will in itself be a defence. [Emphasis added.]

[9] Accordingly, an “issue” is a disputed fact the resolution of which will, without more, have legal consequences as between the parties to the dispute.

[10] Such facts are referred to as “material” facts in Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44 at para. 54, [2001] 2 S.C.R. 460:

[54] A cause of action has traditionally been defined as comprising every fact which it would be necessary for the plaintiff to prove, if disputed, in order to support his or her right to the judgment of the court: Poucher v. Wilkins (1915), 33 O.L.R. 125 (C.A.). Establishing each such fact (sometimes referred to as material facts) constitutes a precondition to success.

[11] Professor James B. Thayer called them “ultimate” facts in A Preliminary Treatise on Evidence at the Common Law, Reprint (South Hackensack, N.J.: Rothman Reprints Inc., 1969) at 194, where he said, “... [R]easoning ... intervenes ... between the primary facts, what may be called the raw material of the case, and the secondary or ultimate facts”, and at 197, where he stated, “When it is said that a fact is for the jury, the fact intended ... is that which is in issue, the ultimate fact, that to which the law directly annexes consequences.”

[12] The Rules of Court, which governed when the underlying action was commenced, adopted the description “material” in Rule 19(1):

(1) A pleading shall be as brief as the nature of the case will permit and must contain a statement in summary form of the material facts on which the party relies ....

[13] The Supreme Court Civil Rules has continued this traditional usage in Rule 3-1(2)(a):

(2) A notice of civil claim must do the following:

(a) set out a concise statement of the material facts giving rise to the claim....

[14] Accordingly, since the purpose of pleadings is to define the “issues” of material or ultimate fact as between the parties, whether a proposition of fact is “in issue” for purposes of Rule 7-6(1) must be determined from an examination of the pleadings: Astels v. Canada Life Assurance Co., 2006 BCCA 110 at para. 4, 23 C.P.C. (6th) 266.

[15] “Relevant”, the term used by the chambers judge, belongs to the law of evidence.

[16] The relationship between relevance and issues of material or ultimate fact was explained in R. v. Watson (1996), 30 O.R. (3d) 161 at 172, 108 C.C.C. (3d) 310 (C.A.):

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Relevance ... requires a determination of whether as a matter of human experience and logic the existence of “Fact A” makes the existence or non-existence of “Fact B” more probable than it would be without the existence of “Fact A”. If it does then “Fact A” is relevant to “Fact B”. As long as “Fact B” is itself a material fact in issue or is relevant to a material fact in issue in the litigation then “Fact A” is relevant and prima facie admissible.

[17] This concept is succinctly illustrated, albeit using different terminology, in R. v. White, [1926] 2 W.W.R. 481 at 485, 45 C.C.C. 328 (B.C.C.A.), where the Court adopted a passage from S. L. Phipson, ed., Best on Evidence, 12th ed. (London: Sweet & Maxwell, 1922) at 6 that included these words:

The fact sought to be proved is termed the “principal fact”; the fact which tends to establish it, “the evidentiary fact”. When the chain consists of more than two parts, the intermediate links are principal facts with respect to those below, and evidentiary facts with respect to those above them.

[18] Thus, a material fact is the ultimate fact, sometimes called “ultimate issue”, to the proof of which evidence is directed. It is the last in a series or progression of facts. It is the fact put “in issue” by the pleadings. Facts that tend to prove the fact in issue, or to prove another fact that tends to prove the fact in issue, are evidentiary or “relevant” facts. And, as Professor Thayer said at 197, “Issues are not taken upon evidential matter.”

[19] In the case at bar, the plaintiff’s litigation guardians are his natural parents. The plaintiff was born on July 9, 2006. In September 2006, he was removed from the custody of his parents by the Director of Child Development pursuant to the provisions of the Child, Family and Community Service Act, R.S.B.C. 1996, c. 46 and, following a presentation hearing in the Provincial Court, he was ordered, over the opposition of his parents, into the interim custody of the Director. In the late fall of 2006, the Director placed him in the foster care of Ms. Donaghey and her partner, Erana King. In December 2006, while he was in their care, the plaintiff claims, he suffered a traumatic brain injury when either Ms. Donaghey or Ms. King shook him.

[20] The plaintiff pleaded “intentional assault” (i.e., battery) and negligence against Ms. Donaghey, as follows:

16. On or about December 20, 2006, while the Infant was in a Director appointed foster home with the Defendants, Donaghey and King, the Defendant Donaghey intentionally assaulted the Infant by:

(a) Violently shaking the infant; or

(b) Such further particulars which are not yet known to the Plaintiffs.

...

27. In addition and/or in the alternative to the allegations set out in paragraph 16 hereof, the Defendant, Donaghey was negligent and breached her duty of care to the Infant, the particulars of which include:

(a) agreeing to act and/or to continue to act as a foster parent when she knew or ought to have known that she and/or King were not adequately trained, supervised or supported by the Director or that she and King were unable to meet the needs of the Infant;

(b) failing to care for and/or adequately meet the needs of the Infant;

(c) failing to adequately supervisor [sic] and/or support King;

(d) interfering with the proper and/or appropriate fostering of the relationship between the Infant and the Parents;

(e) causing harm to the Infant by negligent and/or inappropriate physical handling of the Infant;

(f) failing to adequately discharge her duties as locus parentis to the Infant;

(g) failing to protect the Infant from harm;

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(h) leaving the Infant with King when she knew or ought to have known that King was prone to violence and/or prone to take inappropriate and potentially dangerous behaviours in relation to the Infant;

(i) such further particulars as are not yet know[n] to the Plaintiff.

[21] Ms. Donaghey denied these allegations in her statement of defence.

[22] The plaintiff also pleaded negligence against Ms. King and the Director in these terms:

28. In addition and/or in the alternative to the allegations set out in paragraph 18 hereof, the Defendant, King was negligent and breached her duty of care to the Infant, the particulars of which include:

...

(d) Leaving the Infant with Donaghey when she knew or ought to have known that Donaghey was prone to violence and/or prone to take inappropriate and potentially dangerous behaviours in relation to the Infant;

...

29. The Director and/or its agents were negligent and breached its duty of care to the Infant, the particulars of which include:

...

(n) placing the Infant into the care of Donaghey and/or King when the Director knew or ought to have known that such a placement was and/or continued to be unsafe, inappropriate or unsafe and/or inconsistent with the best interests of the Infant.

[23] Ms. King and the Director denied these allegations in their respective statements of defence.

[24] On his application, the plaintiff relied on evidence that Ms. Donaghey had admitted on examination for discovery to “anger management issues” as a young woman (more than 20 years ago) for which she had received psychological counselling and that she had “yelled” at a co-worker in 2009, and on expert psychiatric opinion evidence that, during a videotaped statement she gave to a police officer investigating the plaintiff’s injury, she displayed “an exaggerated emotional response”; that although such responses can occur in the general population, they are more likely to occur in a person with a personality disorder; that although “anger management problems” may occur in the general population, they are more likely to occur in persons with personality disorders; and that to determine whether Ms. Donaghey has a personality disorder would require a psychiatric examination. Accordingly, he contended, Ms. Donaghey’s mental condition was in issue in the action and he was therefore entitled to an order that she attend for examination by a qualified psychiatrist to investigate whether she suffers from a personality disorder.

[25] The chambers judge agreed. He began his reasons by noting that “the plaintiffs specifically allege that Ms. Donaghey ‘was prone to violence and/or prone to take inappropriate and potentially dangerous behaviours in relation to the infant’” and that

[v]irtually identical allegations are made against the co-defendant, King, who was also a foster parent at the material time. In addition, the plaintiffs claim that Her Majesty the Queen, as represented by the ministries responsible, negligently approved the personal defendants as foster parents when they knew, or ought to have known, that the foster parents were prone to violence as set out above.

[26] After stating that “[t]he plaintiffs expressly raised the question of pre-disposition in their pleadings”, the chambers judge said,

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Whether proof of a personality disorder with associated anger management problems may go more to the question whether the ministry, having known of the past counselling, should have made further inquiries into Donaghey’s background rather than to proving that Donaghey committed the alleged assault, is an open question. Potentially, such evidence is relevant to one or both issues, depending on the actual content.

[27] He concluded,

In my view, the plaintiffs are entitled to the order sought. I am satisfied that Donaghey’s mental condition at the relevant times is an issue in the litigation.

[28] Thus, he concluded that whether Ms. Donaghey has a personality disorder is “relevant to one or both issues” he identified and, as well, that her mental condition “is an issue in the litigation”.

[29] In my view, the chambers judge erred. The test under Rule 7-6(1) is not whether the mental condition of a person is “relevant” to an issue; rather, it is whether the mental condition is itself “in issue”. Moreover, Ms. Donaghey’s mental condition is not put “in issue” by the pleadings.

[30] The issue raised by Ms. Donaghey’s denial of the allegation in paragraph 16 of the statement of claim is whether she intentionally assaulted the plaintiff by violently shaking him. That Ms. Donaghey suffered from a personality disorder is not a material fact in respect of this issue, that is, proof that she suffered from a personality disorder would not in itself have legal consequences as between these parties.

[31] The “issue” raised between the plaintiff and Ms. Donaghey in paragraph 27 is whether Ms. Donaghey breached her duty of care to the plaintiff in any one or more of the specified ways. None of these allegations put Ms. Donaghey’s mental condition in issue.

[32] The issues raised as between the plaintiff and Ms. King and as between the plaintiff and the Director respectively in paragraphs 28(d) and 29(n) of the statement of claim are whether these defendants breached their duty of care to the plaintiff by leaving him with Ms. Donaghey when they “knew or ought to have known” one or more of the particularized facts. Thus, the issue in each case is the state of mind of these defendants. Proof that Ms. Donaghey suffered from a personality disorder would not entitle the plaintiff to success on these issues. Her mental condition is not a “definite proposition of ... fact, asserted by [the plaintiff] and denied by [Ms. King/the Director], ... which both agree to be the point which they wish to have decided”: Odgers, supra, at para. 5.

[33] Ms. Donaghey’s mental condition might be an evidentiary fact relevant to the issues raised in the paragraphs under discussion, as the chambers judge concluded. However, as I have said, relevance of the mental condition of a person to an issue is not the test under Rule 7-6(1). Rather, the person’s mental condition itself must be in issue to warrant an order pursuant to the rule and none of these allegations put Ms. Donaghey’s mental condition in issue.

[34] This situation may be contrasted with the more common situation in which a plaintiff claims damages on the basis that a defendant has negligently caused him or her personal injury. In such a case, the defendant’s denial puts the plaintiff’s condition, whether physical or mental or both, “in issue”. The plaintiff’s injury is a material fact and the failure to prove it will be fatal to the action. Accordingly, the defendant may be entitled to a medical examination pursuant to Rule 7-6(1) to obtain evidence of the plaintiff’s physical or mental condition. However, as I have explained, this is not such a case.

[35] For those reasons, I would allow the appeal, set aside the order that Ms. Donaghey attend for a psychiatric examination, and dismiss the plaintiff’s application.

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Citizens for Foreign Aid Reform Inc. v. Canadian Jewish Congress

British Columbia Supreme Court Victoria, British Columbia Judgment: September 28, 1999

ROMILLY J.: - The plaintiff in this action commenced an action against the defendants for defamation. The defendants brought on this application for the following orders:

1. an Order dismissing paragraphs 9 and 10 of the Statement of Claim for failing to disclose a reasonable claim, and by reason that they are unnecessary, scandalous, frivolous and vexatious, pursuant to Rule 19(24) of the Rules of Court. In the alternative, an Order pursuant to Rule 19(11) and (16) that further particulars of the claims and allegations made in paragraphs 9 and 10 be provided to the defendants within 14 days.

2. an order pursuant to section 205 of the Company Act, R.S.B.C. 1996 , c. 2 and the inherent jurisdiction of the court that the plaintiff post security for costs with respect to its claim against the defendants in the amount of $61,646.45 within 30 days of the Order, failing which the plaintiff’s claim will be dismissed.

3. an Order pursuant to Rule 19(11) and 19(16) for further particulars of the compensatory damages claimed in the statement of claim and an Order pursuant to Rule 26(10) requiring the plaintiff to produce certain documents within 7 days.

The application for an order under Rule 19(11) and 19(16) with respect to the plaintiff’s claim for compensatory damages has been resolved by the plaintiff’s solicitor undertaking to amend his pleadings to remove the claim for compensatory damages and inserting instead “aggravated damages”.

Factual Background

In a statement of claim in this matter filed in the Victoria Registry, the plaintiffs, in an action in defamation, stated at paras 5 and 6:

5. The defendants, and each of them, in the first half of the year 1998 caused a brochure to issue over its name, and with its imprimatur entitled “CANADIAN JEWISH CONGRESS PACIFIC REGION Issues of Concern to the Jewish Community of British Columbia 1995-1998”.

6. As a sub topic in the publication referred to above, a chapter was published under the title HATE GROUPS AND HATE PROPAGANDA. This chapter contained the following paragraph regarding the plaintiff:

“While strongly tied to American hate groups, the White Supremacist movement in Canada has an identity distinct from its southern neighbours. Homosexuals, Jews, South Asians, African Canadians and other groups have been the targets of violence and hate propaganda by groups like the Western Guard, the Northern Hammerskins, the Heritage Front, Canadian League of Rights, Citizens for Foreign Aid Reform (C-Far), the National Party of Canada (NPOC), the Church of the Creator, and the Council on Public Affairs, etc. Canadian hate groups often promote themselves as legitimate and academic movements, usually under the guise of free speech, grassroots advocacy on public policy issues on Holocaust revisionism.”

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The defendants submit that the plaintiff is an Ontario corporation that has no funds and would not be able to pay any costs that could be awarded against them if they this action is dismissed. They drew my attention to letter dated June 1, 1994 by the plaintiff organization soliciting funds to pay rent for some premises. The letter reads in part:

We need help.

#1. First, we have just re-opened our office. At the end of March, after eight yeas in the same location, C-Far had to close its office. The building was undergoing renovation. Other space would have been too expensive. To conserve scarce resources, we have tried to operate in a more decentralized manner. It didn’t work. However, we have found a new location. The facilities are better and they are cheaper. However, money is very tight. Would you be able to make a one-time donation of a month’s rent - $378? If not, would you be able to contribute a tenth of a month’s rent --$37.80? You might wish to use postdated cheques.

The defendants, in support of its application also drew my attention to paragraph 3 of the plaintiff’s statement of claim which states:

The plaintiff employs persons to carry out its objects, and for funds relies on the support of donors relying on its good reputation in pursuit of its objects.

In reply to this submission by the defendants, the plaintiff filed an affidavit of one Paul Fromm, a director of the plaintiff who deposed as follows:

2. CFAR was incorporated on the 20th day June 1979 in the Province of Ontario pursuant to Letters Patent issued on that date. It has existed since that date, and remains on the Company registry in good standing in Ontario.

3. CFAR is not impecunious, and has both an ongoing annual income sufficient to meet any order for costs that may be made against it, and unencumbered assets situated in Ontario which are sufficient to pay any costs that may be ordered by the Court in this action.

Counsel for the defendants counter with the fact that the affidavit of Mr. Fromm is insufficient. They submit his affidavit contains a bald assertion with no details and he has not deposed to the fact that the plaintiff has exigible assets.

Issues Raised on this Application

The issues raised on this application are:

1. Should an order for security for costs be made against the plaintiff?

2. Should paragraphs 9 and 10 of the plaintiff’s statement of claim be struck out pursuant to Rule 19(24) of the Rules of Court?

3. If the impugned pleadings are not struck out, should I make an order for particulars pursuant to Rule 19(11) or (16) of the Rules of Court?

The first issue with which I intend to deal is the issue of security for costs.

The Security for Costs Issue

The plaintiff is an Ontario corporation that is not registered extra-provincially in British Columbia. The defendants bring the application for security of costs pursuant to the Company Act, R.S.B.C. 1996, c. 62, s. 205 as well as the inherent jurisdiction of the court. With respect to the latter, the court has an inherent jurisdiction to order security for costs against a non-resident plaintiff, though the order is a discretionary one that must be exercised judicially and

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in the interests of all parties: Sheill v. Coach House Motel Ltd., [1982] B.C.J. No. 666 (Q.L.) (B.C.C.A.). With respect to the former, the issue of whether the Company Act has application to a company not incorporated or registered extra-provincially in this province was discussed by Spencer J. in Ruko of Canada Ltd. v. Canadian Imperial Bank of Commerce (1991), 49 C.P.C. (2d) 105 (B.C.S.C.). He stated in obiter at p. 107:

That point [application of Company Act to a non-resident corporate plaintiff] was not fully argued before me, and it is not necessary to this application since the Court’s inherent jurisdiction is also invoked, but to the extent it may be thought to be necessary, I express the view that the definition of “corporation” in s. 1 of the Act appears to make s. 229 [now s. 205] refer to any company regardless of its place of incorporation. Jurisdiction to award costs under the section is engaged by the fact that the company has commenced litigation within the Court’s jurisdiction.

In other words, in the opinion of this court, section 205 of the British Columbia Company Act has application to a non-resident corporate plaintiff that is not registered extra-provincially in British Columbia.

Section 205 of the Company Act provides:

205. Court may order security for costs

If a corporation is plaintiff in an action or other legal proceeding and it appears that the corporation will be unable to pay the costs of the defendant if the defendant is successful in the defence, the court may require security to be given by the corporation for those costs, and may stay all proceedings until security is given.

The power to make an order under s. 205 of the Company Act is a discretionary one. In Kropp v. Swaneset Bay Golf Course Ltd. (1997), 29 B.C.L.R. (3d) 252 at 260-1 (B.C.C.A.), Finch J.A. set forth the principles that ought to guide the exercise of that discretion:

The court has a complete discretion whether to order security, and will act in light of all the relevant circumstances; the possibility or probability that the plaintiff company will be deterred from pursuing its claim is not, without more, sufficient reason for not ordering security; the court must attempt to balance injustices arising from use of security as an instrument of oppression to stifle a legitimate claim on the one hand, and use of impecuniosity as a means of putting unfair pressure on a defendant on the other; the court may have regard to the merits of the action, but should avoid going into detail on the merits unless success or failure appears obvious; the court can order any amount of security up to the full amount claimed, as long as the amount is more than nominal; before the court refuses to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled; and the lateness of the application for security is a circumstance which can properly be taken into account.

Based then, on the decision in Kropp, supra as well as the decision of Spencer J. in Ruko, supra, the test to be applied on an application for security for costs is as follows:

1. Does it appear that the plaintiff company will be unable to pay the defendants’ costs if the action fails?

2. If so, has the plaintiff shown that it has exigible assets of sufficient value to satisfy an award of costs?

3. Is the court satisfied that the defendants have an arguable defence to present?

4. Would an order for costs visit undue hardship on the plaintiff such that it would prevent the plaintiff’s case from being heard?

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(1) Plaintiff’s Ability to Pay

In Ruko, supra the Court explained at p. 108 that the burden of proving that the plaintiff is unable or unlikely to be in a position to pay costs, if awarded, lies on the defendant making the application. The defendant must provide a prima facie case that the corporate plaintiff has insufficient assets to pay costs of the action.

In the case at bar, the defendants have established that the corporate plaintiff is non-profit organization. It has no share capital and does not engage in commercial activity per se. It relies on donations for funds, a fact that is evidenced by a letter dated June 1, 1994 by the plaintiff corporation soliciting funds to pay rent. It reads in part: “Money is tight. Would you be able to make a one-time donation of a month’s rent - $378? If not, would you be able to contribute a tenth of a month’s rent -- $37.80?”

Based on this evidence put before the court for the defendants, the court must decide if the defendants have shown a prima facie case that the plaintiff may be unable to pay costs.

(2) Exigible Assets

If a defendant has shown a prima facie case that the plaintiff may be unable to pay costs, the plaintiff may avoid an order for security by showing that it has exigible assets: Ruko, supra at p. 108. In the case at bar, the plaintiff filed an affidavit of its director, Paul Fromm, sworn September 1, 1999. Mr. Fromm deposes that the plaintiff “is not impecunious, and has both an ongoing annual income sufficient to meet any order for costs that may be made against it, and unencumbered assets situated in Ontario which are sufficient to pay costs that may be ordered by the Court in this action.” Apart from this assertion by Mr. Fromm, the plaintiff has not produced evidence of any assets or the value thereof.

(3) Arguable Defence

The plaintiff may also avoid an order for costs if it is evident on the record before the court that the defendant has not an arguable defence: Fat Mel’s Restaurant Ltd. v. Canadian Northern Shield Insurance Co. (1993), 76 B.C.L.R. (2d) 231 (C.A.). In Ruko, supra, the court discussed the merits of the defence and the requirements thereof in a claim for security for costs. The court explained that all that is required is that a judge be satisfied that the defence is bona fide and presents an arguable case, not that it should win in any event. Spencer J. made these comments at p. 109:

With respect to the merits of the defence, both plaintiff and defendants swear that their cases have a good chance of success. All that is required now is that I should be satisfied that the defence is bona fide and has an arguable case to present, not that it should win in any event. The strength or weakness of a defendant’s case is a factor to be considered in ordering security, to be balanced with the factors of financial strength, delay, prejudice to the plaintiff and whether the plaintiff may be prevented by the financial burden of posting security from presenting its case at all.

In the present application, therefore, the defendants need not show that they will ultimately prevail, but merely that they have a reasonable defence to the plaintiff’s claim of defamation. Counsel for the defendant, Kirsten G. Mehl, in her Affidavit sworn August 26, 1999, deposes that while a pro forma defence was filed in this action, the Statement of Defence will be amended to plead justification, fair comment and qualified privilege. The defendants will also plead that the plaintiff has not suffered and is incapable of suffering any loss of reputation. In support of these pleadings, the defendants produced a newspaper article which allegedly reports on some of the activities of the plaintiff’s director, Mr. Fromm and the plaintiff. The defendants submit that this evidence substantiates their claim that the plaintiff is an extremist organization which does engage in acts of hate and violence towards minority groups. In other words, it substantiates their defence to the claim of defamation.

(4) Hindering of a Meritorious Claim

In exercising its discretion to order security for costs, the court must consider the interests of justice between the parties and balance those interests to try to insure that the substance of their dispute ends up properly litigated. As

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such, once a prima facie case is made out by the defendants, the court must consider whether an undue hardship would be visited upon the plaintiff if an award for security for costs was made. In other words, would the ordering of security for costs prevent justice from being done.

To succeed in showing that an order for security would stifle the action, the plaintiff must show that it has insufficient assets and no means of raising money for security: Kropp, supra. In the case at bar, there is dearth evidence as to the financial state of affairs of the plaintiff. There is also a dearth of evidence as to any access the plaintiff may have to resources. Consequently, though it appears that the plaintiff may be unable to pay costs of the action, it does not follow, in the absence of evidence, that such a state of affairs would result in stifling the advancement of the plaintiff’s claim if costs were ordered to be secured.

In sum, on an application for security for costs, once the defendants have established a prima facie case that the plaintiff lacks exigible assets, the plaintiff is required to respond with evidence to establish either that it will be able to pay the defendants’ costs, that the defendants have no arguable case, or that an order for security will stifle the action. These tests serve to balance the possible injustice of stifling the corporate plaintiff’s claim against the possible injustices of exposing the defendants to a law suit where they could not recover their costs if successful.

An additional factor that might guide the exercise of the court’s discretion in ordering security for costs is the status of the plaintiff’s residence as a reciprocating state. In this regard, counsel for the plaintiff brought to the court’s attention the case of Riedel International Inc. v. British Columbia (1991), 53 B.C.L.R. (2d) 110 (B.C.S.C.). In that case, Macdonald J. held that while residence in a reciprocating state is not a bar to an order for security of costs, it is a factor to be considered. In the case at bar, the plaintiff is an Ontario corporation. Ontario is a reciprocating state for the purposes of Part 2 of the Court Order Enforcement Act. The plaintiff maintains that since it is not impecunious and since it resides in a reciprocating state, there is no basis for ordering security of costs on such facts. In other words, the defendants, if successful, have formal steps that they can take to recover their costs.

Needless to say I have instructed myself on the law as enunciated above. In the case at bar, I find that the defendants have established a prima facie case that the plaintiff lacks exigible assets. I also find that the plaintiff has not established that it would be able to pay the defendants costs, that the defendants have no arguable case, or that an order for security for costs will stifle the action. After applying that law to the facts of the case at bar, I am satisfied that this is a case where an order for security for costs is appropriate.

Having found that an order for security for costs is appropriate, it is open to me to order any amount of security up to the full amount claimed: Kropp, supra. However, there is authority for the proposition that there should be some evidentiary foundation for the amount ordered to be secured. In Shiell, supra, the claim for $2,348.00 in conduct money was not allowed because there was no evidence that the plaintiff would have been required to travel from Scotland to attend examination of discovery before trial.

In the case at bar, counsel for the plaintiff complains about that the proposed bill of costs, prepared by the defendants, is extremely high. He challenges the claim for the cost of travel and the cost of photocopying. In this regard I accept the opinion of Mr. Gordon, counsel for the defendants, that this action is really an action between two Ontario Organizations held in Victoria and that it would be very costly to bring the witnesses here for this trial and to pay the conduct money to bring representatives of the plaintiff here for their examination for discovery. I do agree with counsel for the plaintiff, however, that the proposed bill for photocopying seems to be a bit high. Realizing that it is in my discretion to order an amount of security up to the full amount claimed, I order that the amount of security for costs be $40,646.45.

Having held that this is a case where the plaintiff should pay security for costs, I order that the plaintiff shall post security for costs by depositing with its solicitor in trust the following sums by the following dates in respect of the defendants:

October 31st 1999 $10,000.00

January 15th 2000 $10,000.00

March 15th 2000 $20,646.45

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Upon failure of the plaintiff to deposit these sums by the dates ordered to the credit of the defendants, proceedings against the defendants will be stayed. Furthermore, unless the security ordered is deposited within two months of the date ordered for it to be posted, under the inherent jurisdiction of this court as opposed to s. 205 of the Company Act the action will be dismissed against the defendants.

I now turn to the application by the defendants to strike paragraphs 9 and 10 of the statement of claim.

Application to Strike Paragraphs 9 and 10 of the Statement of Claim

The defendants apply to have paragraphs 9 and 10 of the Statement of Claim struck pursuant to Rule 19(24) of the Rules of Court on the grounds that they fail to disclose a reasonable claim, and by reason that they are unnecessary, scandalous, frivolous and vexatious, or otherwise an abuse of process. In the alternative, the defendants apply for further and better particulars of those paragraphs pursuant to Rule 19(11) and (16).

The relevant paragraphs of the Statement of Claim are as follows:

9. The foregoing defamatory statements are malicious and part of an ongoing campaign of vilification and incitement of hatred in which the Canadian Jewish Congress is engaged in competition with other Jewish groups to raise funds to combat alleged anti-Semitism and to create fear and apprehension about free speech or political views they do not like.

10. The foregoing comments are woven together by the Canadian Jewish Congress and Michael Elterman in their conspiratorial world view to create power for themselves in combatting [sic] a mythical enemy.

The relevant Rules read:

Rule 19 - Pleadings Generally

(11) Where particulars necessary - Where the party pleading relies on misrepresentation, fraud, breach of trust, wilful default or undue influence, or where particulars may be necessary, full particulars, with dates and items if applicable, shall be stated in the pleadings. If the particulars of debt, expenses or damages are lengthy, the party may refer to this fact and instead of pleading the particulars shall deliver the particulars in a separate document either before or with the pleadings.

(16) Order for particulars - The court may order a party to deliver further and better particulars of a matter stated in a pleading.

(24) Scandalous, frivolous or vexatious matters - At any stage of a proceeding the court may order to be struck out or amended the whole or any part of an endorsement, pleading, petition or other document on the ground that

(a) it discloses no reasonable claim or defence as the case may be

(b) it is unnecessary, scandalous, frivolous or vexatious,

(c) it may prejudice, embarrass or delay the fair trial or hearing or the proceeding,

or

(d) it is otherwise an abuse of the process of the court,

and the court may grant judgment or order the proceeding to be stayed or dismissed and may order the costs of the application to be paid as special costs.

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Rule 19(24)(a) - No reasonable claim disclosed

To succeed on an application under Rule 19(24)(a) it must be established that it is “plain and obvious” that the pleading discloses no reasonable cause of action: Hunt v. Carey Canada, [1990] 2 S.C.R. 959 (S.C.C.). If there is any doubt it should be resolved in favour of permitting the pleadings to stand: McGauley v. British Columbia (1989), 39 B.C.L.R. (2d) 223 (B.C.C.A.). The court should proceed on the assumption that all the facts pled are true: Helman v. Brown (1966), 57 W.W.R. 608 (B.C.C.A.). The only question then is whether the facts disclose a cause of action: Minnes v. Minnes (1962), 39 W.W.R. 112 (B.C.C.A.); McNaughton v. Baker (1988), 25 B.C.L.R. (2d) 17 (C.A.). In other words, as long as the pleadings disclose a triable issue, either as it exists, or as it may be amended, then the issue should go to trial. The mere fact that the case is weak or not likely to succeed is no ground for striking it out under the provisions of Rule 19(24): Minnes, supra.

In the case at bar, it is admittedly difficult to discern what the allegations of fact in the impugned paragraphs of the Statement of Claim are directed towards. The paragraphs do not set out in a clear manner, the averments of unlawful conduct to which the defendants are expected to answer. Consequently, the defendants contend that paragraphs 9 and 10 should be struck for want of a reasonable cause of action. Notwithstanding the lack of clarity of the impugned paragraphs, the plaintiff, submits that paragraphs 9 and 10 are allegations of malice and conspiracy respectively.

Malice

In assessing a claim under Rule 19(24)(a), the court must determine, if the facts as alleged, if proved, would be sufficient to make out malice. In the law of defamation, malice may be shown if it is proven that the defendant used the occasion at issue for some wrong or improper purpose or indirect motive: Raymond E. Brown, ed., The Law of Defamation in Canada, 2d ed. (Scarborough, Ont.: Carswell, 1994). An improper purpose or indirect motive includes, amongst other things, engaging in a course of action for one’s own benefit or advantage, or for the purpose of harassing or intimidating the plaintiff. The plaintiff contends that it has met the requirements in paragraph 9. The plaintiff submits that the defendants made the alleged defamatory statements for the improper purpose of perpetuating “an ongoing campaign of vilification and incitement of hatred in which the Canadian Jewish Congress is engaged in competition with other Jewish groups to raise funds to combat alleged anti-Semitism and to create fear and apprehension about free speech or political views they do not like.”

Though this alleged improper purpose may be seemingly difficult to prove, an application under Rule 19(24) does not afford an appropriate forum in which to engage in a detailed examination of the strengths and weaknesses of the plaintiff’s case. The sole question is whether, assuming that all the facts the plaintiff alleges are true, the plaintiff can present a question fit to be tried. Accordingly, the court must decide if the “improper purpose” as alleged by the plaintiffs, if proved, could establish malice. The court may only strike a pleading pursuant to Rule 19(24)(a) if it is “plain and obvious” that the pleading does not disclose a reasonable claim of malice. In other words, if the “improper purpose” alleged by the plaintiff is potentially able to serve as the basis for a claim of malice, it should not be struck.

In the case at bar, I find that the “improper purpose” as alleged by the plaintiffs, if proved, could establish malice, consequently, I am not prepared to strike paragraph 9 of the statement of claim.

Conspiracy

The plaintiff submits that paragraph 10 of the Statement of Claim is simply an allegation of conspiracy between the defendants in the commission of the tort of defamation. A reading of the impugned paragraph might suggest otherwise. The references to the defendants’ “conspiratorial world view” and struggles in “combatting [sic] a mythical enemy” are suspiciously anti-Semitic in themselves. It would seem that the plaintiff is alleging, not that the defendants conspired between themselves, but that the defendants view the “mythical enemy” as conspiring against them. Clearly, this is not a proper averment of unlawful conduct by the defendants.

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If paragraph 10 is indeed intended as an allegation of conspiracy between the defendants, it must be properly pleaded and the material facts upon which the averment is founded must be set out. In my view, neither has been done.

To establish the tort of conspiracy the plaintiff must plead: (1) an agreement, in the sense of a joint plan or common intention on the part of the defendants to do the act which is the object of the alleged conspiracy; (2) an overt act or acts consequent upon the agreement; (3) resulting damage to the plaintiff. L.D. Rainaldi, ed. Remedies in Tort (Scarborough, Ont.: Carswell, 1987). Where the acts relied on are in themselves unlawful it is sufficient to show that the defendants’ conduct was directed toward the plaintiff and that the defendants should have known that the injury to the plaintiff would result: Hunt v. Carey, supra. The essence of the tort of conspiracy is the concerted action. Sufficient facts must be set out in the Statement of Claim, so that, if proved, they establish an agreement or combination between the defendants.

In the case at bar, no reference is made in the Statement of Claim to an agreement between the defendants to defame the plaintiff, or that the defendants knew of any such agreement, or that they intended to be party thereto. In paragraph 5 of the Statement of Claim it is simply alleged that:

5. The defendants, and each of them, in the first half of the year 1998 caused a brochure to issue over its name, and with its imprimatur entitled “CANADIAN JEWISH CONGRESS PACIFIC REGION Issues of Concern to the Jewish Community of British Columbia 1995-1998”.

Moreover, the defendant Canadian Jewish Congress (“CJC”) is a body corporate under the laws of Canada. The defendant Michael Elterman (“Elterman”) is the authorized spokesperson of the CJC. As the authorized spokesperson, Elterman is an agent of the CJC. A corporate entity can only act by its officers, employees, or agents. Consequently, if Elterman was acting within the scope of his position as agent, and therefore CJC’s alter ego, the claim of conspiracy must fail because CJC cannot conspire with itself: D.C. Thomson & Co. Ltd. v. Deakin et al., [1952] 2 All E.R. 361 at 370 (C.A.); Kuhn v. American Credit Indemnity Co., [1992] B.C.J. No. 953 (Q.L.) (B.C.S.C.). There is no indication in the Statement of Claim that Elterman was working outside his capacity as agent for CJC when the alleged defamatory statements were made.

I find that the facts as alleged do not establish a common plan between CJC and Elterman, and that Elterman was acting outside of his capacity as agent for the corporate defendant. Consequently, I find that the facts set out in the Statement of Claim do not establish the agreement or combination between the defendants that is required to make out the tort of conspiracy. I therefore order that paragraph 10 be struck or amended. Even if I am wrong, I agree with counsel for the defendants that paragraph 10 is unnecessary, embarrassing and scandalous in that irrelevant imputations against the character of the defendants are raised directly and by innuendo.

Rule 19(24)(b) and (c) - Frivolous and Embarrassing

To succeed on an application under Rule 19(24)(b) or (c) it must be established that it is “plain and obvious” that the pleading offends either or both provisions.

The authorities provide little guidance as to what constitutes pleadings that are “unnecessary”, “scandalous”, “frivolous” or “embarrassing”. However some principles do emerge.

Irrelevancy and embarrassment are both established when pleadings are so confusing that it is difficult to understand what is being pleaded: Gittings v. Caneco Audio-Publishers Inc. (1987), 17 B.C.L.R. (2d) 38 (B.C.S.C.). An “embarrassing” and “scandalous” pleading is one that is so irrelevant that it will involve the parties in useless expense and will prejudice the trial of the action by involving them in a dispute apart from the issues: Keddie v. Dumas Hotels Ltd. (1985), 62 B.C.L.R. 145 at 147 (B.C.C.A.). An allegation which is scandalous will not be struck if it is relevant to the proceedings. It will only be struck if irrelevant as well as scandalous: College of Dental Surgeons of B.C. v. Cleland (1968), 66 W.W.R. 499 (B.C.C.A.). A pleading is “unnecessary” or “vexatious” if it does not go to establishing the plaintiff’s cause of action or does not advance any claim known in law: Strauts v. Harrigan, [1992] B.C.J. No. 86 (Q.L.) (B.C.S.C.). A pleading that is superfluous will not be struck out if it is not

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necessarily unnecessary or otherwise objectionable: Lutz v. Canadian Puget Sound Lumber and Timber Co. (1920), 28 B.C.R 39 (C.A.). A pleading is “frivolous” if it is obviously unsustainable, not in the sense that it lacks an evidentiary basis, but because of the doctrine of estoppel: Chrisgian v. B.C. Rail Ltd. et al., [1992] B.C.J. No. 1567, (6 July 1992), Prince George Registry 20714 (B.C.S.C.).

In the case at bar, the defendants contend that paragraphs 9 and 10 of the Statement of Claim are unnecessary, scandalous and vexatious and that they will prejudice, embarrass and delay the fair trial of this proceeding. There can be no doubt that both paragraphs are “scandalous” in their offensive imputations against the character of the defendants. However, an allegation that is scandalous will not be struck, even if written maliciously or mala fides, if it is relevant to the proceedings. The question before this court then, is do the impugned pleadings constitute allegations of fact relevant to and necessary for the purpose of furthering the plaintiff’s cause of action?

Does Paragraph 9 of the Statement of Claim to Towards Establishing the Plaintiff’s Claim of Malice?

The plaintiff contends that paragraph 9 pleads malice. Such a plea is necessary to defeat a defence of qualified privilege or a defence of fair comment. As mentioned above, malice includes not only the usual definition of that word denoting ill will or spite; it also includes any improper purpose or indirect motive on the part of the defendants. The plaintiff maintains that paragraph 9 is an allegation of an improper purpose or indirect motive. Though not necessarily clear on its face, the plaintiff maintains that paragraph 9 is an allegation that the defendants maliciously committed the tort of defamation for the improper purpose of furthering “an ongoing campaign of vilification and incitement of hatred in which the Canadian Jewish Congress is engaged in competition with other Jewish groups to raise funds to combat alleged anti-Semitism and to create fear and apprehension about free speech or political views they do not like.”

Regardless of how outrageous or unfounded this allegation may appear, if the court finds that it goes to proving the plaintiff’s case, then it should not be struck. That is because, on a motion to strike out a pleading under Rule 19(24), the court proceeds on the assumption that all facts plead are true: Helman v. Brown, supra. The mere fact that the case is weak or not likely to succeed is no ground for striking it out under the provisions of Rule 19(24): Minnes v. Minnes, supra. Therefore, if the perpetuation of a “campaign of vilification and incitement of hatred ..........” goes to establishing the plaintiff’s claim of malice, then it appears that it is not unnecessary. Consequently, no matter how scandalous it is, it should not be struck by the court. The pleading should only be struck if it is “plain and obvious” that it is unnecessary or that it was pled only to distract the parties and involve them in a dispute apart from the issues at hand.

In the case at bar, I am unable to find that it is “plain and obvious” that paragraph 9 is unnecessary or that it was pled only to distract the parties and involve them in a dispute apart from the issues at hand. Consequently, I am unable to strike paragraph 9 of the statement of Claim on this ground. I am satisfied that it goes to proving the plaintiff’s case.

Rule 19(24)(d) abuse of process

The ambit of abuse of process is very broad. Abuse of process may be found where proceedings involve a deception of the court or constitute a mere sham; where process of the court is not being fairly or honestly used, or is employed for some ulterior or improper purpose; proceedings which are without foundation or serve no useful purpose: Babavic v. Babowech, [1993] B.C.J. No. 1802, (3 September 1993) Vancouver Registry C931968 (B.C.S.C.). In the case at bar, I am unable to find that the plaintiff’s pleadings in paragraphs 9 and 10 of the Statement of Claim are vexatious and without merit, brought with the sole motive and intent to harass the defendants and to interfere with their ability to defend the action.

…

Conclusions

To conclude, I order that the amount of security for costs be $40,646.45.

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Having held that this is a case where the plaintiff should pay security for costs, I order that the plaintiff shall post security for costs by depositing with its solicitor in trust the following sums by the following dates in respect of the defendants:

October 31st 1999 $10,000.00

January 15th 2000 $10,000.00

March 15th 2000 $20,646.45

Upon failure of the plaintiff to deposit these sums by the dates ordered to the credit of the defendants, proceedings against the defendants will be stayed. Furthermore, unless the security ordered is deposited within two months of the date ordered for it to be posted, under the inherent jurisdiction of this court, as opposed to s. 205 of the Company Act, this action will be dismissed against the defendants.

There will also be an order that paragraph 10 of the plaintiff’s statement of claim be struck out pursuant to Rule 19(24) of the Rules of Court and that the plaintiff pay to the defendants costs of this application.

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G.W.L. Properties Ltd. v. W.R. Grace & Co. of Canada (1992 BCSC) (Particulars)

Date of Release: May 12, 1993

The plaintiffs and a related company named as a third party apply for particulars of the defences filed by W.R. Grace & Co. of Canada Ltd. and W.R. Grace & Co. -- Conn. (“Grace”). The plaintiffs say, that with discovery now substantially concluded, they require a more complete statement of the facts that are material to the defences raised in order to properly prepare for trial. Grace says the demand for particulars that has been made seeks only evidence and the disclosure of the mode by which the material facts pleaded are to be proven. The application is made in the context of complex commercial litigation. The issue is not uncommon: The General Electric Company Limited v. Simplex-G.E. Limited et al, [1971] R.P.C. 351 at 353 (Ch. Div.):

The issue between the parties is the familiar one of whether these particulars should be regarded as material facts or as evidence, and the line between the two is notoriously difficult to draw.

This is a products liability case. The plaintiffs are the present owners of three office towers. Two were built in the l960’s; the third in the mid-l970’s. The owners allege Grace was negligent in manufacturing or supplying an insulation product that was installed in the buildings when they were constructed. They say Grace knew, or ought to have known, the product was dangerous to human health because it contains asbestos. The owners claim to have suffered damages in the result amounting to many millions of dollars. Grace denies the negligence alleged and raises various defences in the alternative. The action is set to be tried in about four months time.

The Law

The disposition of this application is governed by Rule 19:

(1) A pleading shall be as brief as the nature of the case will permit and must contain a statement in summary form of the material facts on which the party relies, but not the evidence by which the facts are to be proved.

(11) Where .......... particulars may be necessary, full particulars, with dates and items if applicable, shall be stated in the pleading …

(11.1) Particulars need only be pleaded to the extent that they are known at the date of pleading, but further particulars may be delivered after they become known, and shall be delivered within 10 days of a demand being made in writing.

(16) The court may order a party to deliver further and better particulars of a matter stated in a pleading.

An order for the delivery of particulars of facts material to a cause of action, or a defence, in addition to those already pleaded, is primarily one of discretion to be exercised in a judicial manner: Cominco Ltd. v. Westinghouse Can. Ltd. et al. (1978), 6 B.C.L.R. 25 at 29 (S.C.). The guide to the exercise of discretion is found in the words of the Rule, i.e., “where particulars may be necessary” and the power in the court to order delivery of particulars is, accordingly, stated in broad terms: Big Bay Timber v. Arkinstall Logging Co. Ltd. (1978), 7 B.C.L.R. 69 at 70 (C.A.). What particulars are to be stated must depend upon the facts of each case: Philipps v. Philipps (1878), 4 Q.B.D. 127 at 139 quoted in Anglo-Can. Timber Products Ltd. v. B.C. Elec. Co. (1960), 31 W.W.R. 604 at 610 (B.C.C.A.).

The function of particulars is six fold: Cansulex Limited v. Perry (March 18, 1982), Vancouver Registry No. C785837 at pp. 10-11 (C.A.):


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(1) to inform the other side of the nature of the case they have to meet as distinguished from the mode in which that case is to be proved;

(2) to prevent the other side from being taken by surprise at the trial;

(3) to enable the other side to know what evidence they ought to be prepared with and to prepare for trial;

(4) to limit the generality of the pleadings;

(5) to limit and decide the issues to be tried, and as to which discovery is required; and

(6) to tie the hands of the party so that he cannot without leave go into any matters not included.

The scope of particulars that may be demanded lies in the answer to the question whether what is sought is intended to, and does, delineate the issues between the parties, or does no more than disclose the way in which the case will be proven: Cansulex at pp. 8-9.

Discovery is not a substitute for particulars. The contention that what is demanded can be obtained, or that it has been obtained, on discovery is no reason to refuse particulars properly sought. Further, the fact that what is sought in a demand for particulars is best known to the party demanding is no reason to refuse. A party is entitled to know what case is made against it when (whether before or after discovery) the other side is in a position to give particulars of the facts it will prove at trial: Cominco at pp. 28-29.

Counsel referred me to several authorities where particulars were sought in different kinds of cases. In considering the owners’ demand that is the subject of this application, I have found the disposition in Cominco of assistance because it was a products liability case. The contention there was that a cable made by the defendant manufactures had caused a fire in the plaintiffs’ plant. The plaintiffs pleaded a case in both negligence and contract. They alleged, broadly, that the manufacturers were informed of the purpose for which the cable was to be used, that it had been sold to the plaintiffs as a type of cable purporting to have fire retardant qualities, and it had previously failed to act as a fire retardant in similar installations to that of the plaintiffs’ plant. Particulars were ordered to be given to one of the manufacturers who applied, some to be delivered before and some after discovery. The order was comprehensive but by way of example: the plaintiffs were required to give particulars of how the intended use of the cable was made known to the defendant, the persons involved, the dates, and the manner of communication; they were required to particularize in what way the cable purported to have a fire retardant quality, what persons said so, and to whom, on what dates; they had to identify the similar installations where the cable was installed stating what were the similarities with the plaintiff’s installation and in which installations, and on what dates, had there been fires where the cable failed to act as a fire retardant.

In Cominco the plaintiff did not resist giving particulars on the ground that the demand sought only the disclosure of evidence as Grace argues here. The question was one of when the particulars were to be delivered: before or after discovery. But I consider the case illustrative of a practical approach to delineating the issues to be tried in a complex products liability case where the pleadings are broad and the need to avoid surprise requires that the court’s discretion be exercised in favour of the party seeking to tie the hands of its adversary. In Cansulex the Court of Appeal said at p. 11:

The length of trials, and what seems to be the increasing length of trials, must be a matter of concern and anything that can be done to bring the real issues between the parties fairly forward without surprise for careful consideration must be encouraged.

The trial of this action is presently expected to require six months. A similar case that Grace is defending in this court commenced in January 1992 and has not been concluded yet. In my view, the expected length of the trial must be a consideration in the exercise of discretion in the disposition of this application.


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The Owners’ Demand

I turn, then, to consider what particulars are necessary and ought to be given in respect of the facts pleaded by Grace in the context of this case.

During the course of argument, Grace conceded the owners were entitled to some of the particulars sought. The nature of the specific defence pleaded and the particulars sought, that Grace has argued it should not have to give, can be stated in summary form.

Grace pleads that, at times which are material, the owners or their predecessor companies, that designed and constructed the buildings, and the Workers’ Compensation Board that allowed the insulation to be used, knew, or ought to have known, that the product installed contained asbestos, asbestos could be hazardous to human health in certain circumstances, and asbestos-free products were available. It is pleaded they knew, or ought to have known, because:

(1) Advice: They were advised accordingly by salesmen and other employees of companies that are now part of the Grace group of companies and by salesmen and employees of other entities.

The owners seek particulars of the names of the persons who gave and who received the advice, by whom they were employed, when and where the advice was given, and the nature of the advice.

(2) Publications: There was advertising and promotional material circulated by companies that are now part of the Grace group and by others.

The owners seek particulars of the titles of the material, the times and places of publication and circulation, the persons who published and circulated the material, and the subject matter of each publication.

(3) Publicity: There was, at all material times, wide publicity about the possible effects in certain circumstances of asbestos fibre on human health. There was publicity of a controversy with respect to one building constructed in Vancouver in 1971 concerning the possible health effects of using an asbestos-containing product. There was publicity about using asbestos- free products manufactured by Grace in other projects.

The owners seek particulars of the nature of the publicity, the method of dissemination, the possible effects on human health, and the circumstances under which asbestos fibres could have an effect.

They seek particulars of the nature of the controversy in 1971 and of the publicity including any publications about the incident. They have demanded particulars sufficient to identify the projects where asbestos-free products were used and the nature of the associated publicity.

(4) Common Knowledge: Concerns about the possible effects in certain circumstances of asbestos fibres on human health were a matter of common knowledge at all material times.

The owners seek particulars of the nature of the knowledge, the character of the effects, and the circumstances.

(5) Workers’ Compensation Board: The WCB conducted inspections and testing at construction sites where the product containing asbestos was being applied and found the levels of air-borne asbestos to be within the applicable standards. It supervised the application of an asbestos-free product in one instance. It organized conferences, seminars, and courses as well as distributing publications, notices, and other information that related to the possible health effects of asbestos fibres.

The owners seek particulars of the construction sites where the inspection and testing was done, the dates, the persons involved, the nature of the tests and inspections, the results, and the applicable standards. They seek


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particulars of the WCB’s supervision of an asbestos-free product: the Board’s involvement, the persons involved, the dates, the amount of product applied and where it was applied, and the name of the applicator.

The owners also seek particulars of when and where the conferences, seminars, and courses were held and the subject matter of each. They seek particulars of when and where the publications and notices were published, the titles, and the subject matter. They seek as well some identification of the other information distributed by the WCB.

Grace says the material fact is that the owners, their predecessors, or the WCB, had, or ought to have had, knowledge of the nature of the insulation product and the availability of other products. Grace has pleaded the means of knowledge and is not required to plead more: the means need not be particularized. To do so, Grace says, would be to plead evidence or the mode by which the material fact is to be proven. Pleadings are to be a brief summary of material facts; the evidence in support is to be ascertained by discovery.

I do not accept the distinction Grace would drawn. It appears to me that what the owners seek are, in large measure, facts that are material to the defence that Grace raises. The owners seek a statement of the facts that Grace must prove if the defence is to succeed. They do not seek the evidence by which the facts will be proven. For example, the owners are faced with a broad allegation that they knew the nature of the insulation and the existence of alternatives because they, or their predecessor companies, were given advice to that effect some time during the last 30 years or more. They seek the facts Grace must prove: what the advice was and when and by whom the advice was given, and, for that matter, by whom it was received. They do not seek the evidence by which those facts will be proven: the testimony to be given by the persons who gave the advice or the persons who received it or other persons who may have heard the advice being given, i.e., the mode of proof. It may of course be that the mode of proof will, in any given instance, be obvious from the particulars given, but that is not a reason for refusing particulars as long as what is sought are facts that are intended, and will serve, to delineate the issues.

Conclusion

I consider that many of the facts sought are necessary to inform the owners of the case they have to meet and to enable them to properly prepare for trial. They need to tie Grace’s hands: they need a statement of specifically what Grace will prove was the means whereby the alleged knowledge was or ought to have been acquired. Discretion should be exercised in favour of requiring Grace to provide the owners with a statement of facts that makes clear what advice, publications, publicity, and common knowledge it is that are material and that Grace will prove to establish its defence. In this case it is imperative that efforts be made to ensure the issues to be tried are focused and the element of surprise minimized. It is time for Grace to particularize the facts material to establishing the owners’ knowledge of the product and the alternatives available with which the parties and the court will be concerned at the trial. In my view, the need for particulars in this regard will be met by Grace stating the following facts to the extent that such are to be proven at trial:

(a) the specific advice that was given, the dates, the persons involved and in what capacity they were employed;

(b) the titles, the source, and the dates of the published material;

(c) the possible effects on human health and the certain circumstances that were the subject of the publicity and the common knowledge that existed at all material times; and

(d) the projects that were the source of publicity concerning the use of asbestos-free products and the content of the publicity associated with each.

(e) By the same token the owners are also entitled to a statement of the following:

(f) when and where the WCB inspections and testing were undertaken when Grace’s product containing asbestos was being applied; and


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(g) when and where the WCB conferences, seminars, and courses were organized and what and when publications, notices, and other materials were distributed which included discussion of the possible health effects of asbestos fibres.

The owners seek additional particulars to which no argument was addressed. Their demand concerns pleadings about the advice given by Grace to the owners immediately before this action was commenced, the somewhat vague description employed by Grace in their pleadings of companies related to the owners, unnamed Canadian government authorities Grace alleges allowed the installation of their product in the buildings, and unnecessary expenses Grace alleges the owners have incurred in the abatement of the insulation. It appears to me that the disposition I have made may render argument on these aspects of the application unnecessary. If not, the parties will be at liberty to speak to the matter further.

Disposition

There will accordingly be an order that Grace give particulars of their defence as described in (a) through (f) above together with those particulars they conceded should be given. Grace will be required to give the particulars by May 31, 1993.

Costs in the cause.

Lowry, J.

WEEK 5: Sahyoun

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Sahyoun v. Ho

2013 BCSC 1143

Reasons for Judgment: Voith J.

Overview

[1] These reasons arise out of cross-applications brought by the plaintiffs other than Antonios Sahyoun (the “Plaintiffs”) and by many, but not all, of the defendants. The defendants who were involved in the application are identified on the front page of these reasons and fall into four groups: a) 10 different physicians (the “Defendant Physicians”); b) a collection of individuals, health care facilities and authorities, the Vancouver School Board and Gateway Society: Services for Persons with Autism (the “Health and School Defendants”); c) the University of British Columbia; and d) various individuals employed by the Province of British Columbia and the Province of British Columbia.

…

[3] The Defendants seek to compel the plaintiffs to file an amended notice of civil claim which complies with the Supreme Court Civil Rules, B.C. Reg. 168/2009 (the “Rules”). In response to this application, the Plaintiffs seek to file the draft amended notice of civil claim which they have prepared. The Defendants oppose the filing of this pleading on the basis that it continues to suffer from numerous deficiencies and that it does not address the concerns that arise from the Plaintiffs’ earlier pleadings.

Background

…

[11] In response to various communications from the defendants, an amended notice of civil claim was filed on April 2, 2012. Thereafter, counsel for both the Defendant Physicians and for the Health and School Defendants wrote to the Plaintiffs indicating that their amended pleadings did not comport with the requirements of Rule 3-1. The focus of these concerns related to the fact that the amended notice of civil claim failed to: a) establish or identify which of the plaintiffs were said to have a claim against which defendant, b) identify the nature of the duty, or the legal basis for the duty, that the plaintiffs say various of the defendants owed them, c) describe how that duty or any other cause of action was breached and d) describe the damages or the nature of the damages the individual plaintiffs allege they suffered.

[12] The Defendants argue, as I have said, that the Plaintiffs’ proposed amended notice of civil claim (the “Proposed Pleading”) does not address the concerns that they identified earlier and that it is also deficient in multiple other respects.

[13] On February 21, 2013, the Plaintiffs served the Defendants, or some of them, with an unfiled notice of application indicating that they sought an order to file the Proposed Pleading.

[14] This action was commenced more than five years ago. It pertains to conduct that dates as far back as 1990. No trial date has yet been set. The Proposed Pleading names 49 defendants. It is 49 pages and 191 paragraphs long. A number of the Defendants intend, if and when the pleadings are closed, to bring a summary trial application.

Analysis

i) The General Objects and Requirements of a Notice of Civil Claim

[15] Rule 3-1(2) provides, in part:

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(2) A notice of civil claim must do the following:

(a) set out a concise statement of the material facts giving rise to the claim;

(b) set out the relief sought by the plaintiff against each named defendant;

(c) set out a concise summary of the legal basis for the relief sought;

...

(g) otherwise comply with Rule 3-7.

[16] The new Rules alter the structure in which pleadings are to be prepared. The core object of a notice of civil claim, however, remains the same. That object is concisely captured in Frederick M. Irvine, ed., McLachlin and Taylor, British Columbia Practice, 3rd ed., vol. 1 (Markham, Ont.: LexisNexis Canada Inc., 2006) at 3-4 - 3-4.1:

If a statement of claim (or, under the current Rules, a notice of civil claim) is to serve the ultimate function of pleadings, namely, the clear definition of the issues of fact and law to be determined by the court, the material facts of each cause of action relied upon should be stated with certainty and precision, and in their natural order, so as to disclose the three elements essential to every cause of action, namely, the plaintiff’s right or title; the defendant’s wrongful act violating that right or title; and the consequent damage, whether nominal or substantial. The material facts should be stated succinctly and the particulars should follow and should be identified as such...

[17] These requirements serve two foundational purposes: efficiency and fairness. These purposes align with Rule 1-3 which confirms that “the object of [the] Supreme Court Rules is to secure the just, speedy and inexpensive determination of every proceeding on its merits.”

[18] I emphasize efficiency because a proper notice of civil claim enables a defendant to identify the claim he or she must address and meet. The response filed by a defendant, together with the notice of civil claim and further particulars, if any, will confine the ambit of examinations for discovery and of the issues addressed at the trial itself. Proper pleadings limit the prospect of delay or adjournments. They allow parties to focus their resources on those matters that are of import and to ignore those that are not. They facilitate effective case management and the role of the trier of fact.

[19] A proper notice of civil claim also advances the fairness of pre-trial processes and of the trial. Defendants should not be required to divine the claim(s) being made against them. They should not have to guess what it is they are alleged to have done.

[20] In Keene v. British Columbia (Ministry of Children and Family Development), 2003 BCSC 1544, 20 B.C.L.R. (4th) 170, Justice Parrett confirmed that the essential purpose of pleadings is to define the issues, giving the opposing parties notice of the case they have to meet and to provide the “boundaries and the context for effective pre-trial case management, the extent of disclosure required, as well as the parameters or necessity of expert opinions” (para. 27).

[21] In Homalco Indian Band v. British Columbia (1998), 25 C.P.C. (4th) 107 (B.C.S.C.), a case which is often referred to because of the succinctness and clarity with which it describes the object and required structure of an appropriate pleading, Justice K. Smith, as he then was, said:

5 The ultimate function of pleadings is to clearly define the issues of fact and law to be determined by the court. The issues must be defined for each cause of action relied upon by the plaintiff. That process is begun by the plaintiff stating, for each cause, the material facts, that is, those facts necessary for the purpose of formulating a complete cause of action: Troup v. McPherson (1965), 53 W.W.R. 37 (B.C.S.C.) at 39. The defendant, upon seeing the case to be met, must then respond

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to the plaintiff's allegations in such a way that the court will understand from the pleadings what issues of fact and law it will be called upon to decide.

[22] Furthermore, notwithstanding the changes in form that are required by the present Rules and by Form 1, certain essential aspects of the structure of pleadings also remain the same. In Homalco, Justice Smith described that structure and said:

6 A useful description of the proper structure of a plea of a cause of action is set out in J.H. Koffler and A. Reppy, Handbook of Common Law Pleading, (St. Paul, Minn.: West Publishing Co., 1969) at p. 85:

Of course the essential elements of any claim of relief or remedial right will vary from action to action. But, on analysis, the pleader will find that the facts prescribed by the substantive law as necessary to constitute a cause of action in a given case, may be classified under three heads: (1) The plaintiff's right or title; (2) The defendant's wrongful act violating that right or title; (3) The consequent damage, whether nominal or substantial. And, of course, the facts constituting the cause of action should be stated with certainty and precision, and in their natural order, so as to disclose the three elements essential to every cause of action, to wit, the right, the wrongful act and the damage.

If the statement of claim is to serve the ultimate purpose of pleadings, the material facts of each cause of action relied upon should be set out in the above manner. As well, they should be stated succinctly and the particulars should follow and should be identified as such: Gittings v. Caneco Audio-Publishers Inc. (1988), 26 B.C.L.R. (2d) 349 (C.A.) at 353.

ii) The Need to be Clear and Concise

[23] The requirement in Rule 3-1(2), that a notice of civil claim “set out a concise statement of the material facts giving rise to the claim” and “set out a concise summary of the legal basis for the relief sought”, are mandatory and directed to promoting clarity. Indeed, the word “concise” is defined in The Oxford English Dictionary, 11th ed. Revised, as “giving information clearly and in a few words”. Thus, both brevity and lucidity are important.

iii) The Requirement to Identify Material Facts

[24] Though the Rules do not define what constitutes a “material fact”, that concept is well defined in the case law.

[25] A material fact is one that is essential in order to formulate a complete cause of action. If a material fact is omitted, a cause of action is not effectively pled. The foregoing definition of “material fact” was specifically approved by the Court of Appeal in Skybridge Investments Ltd. v. Metro Motors Ltd., 2006 BCCA 500 at para. 9, 61 B.C.L.R. (4th) 241, and in Young v. Borzoni, 2007 BCCA 16 at para. 20, 64 B.C.L.R. (4th) 157. That same definition was also referred to and applied by judges of this court in Budgell v. British Columbia, 2007 BCSC 991 at para. 8, and in Micka v. Oliver & District Community Economic Development Society, 2008 BCSC 1623 at para. 9.

[26] More recently, in Jones v. Donaghey, 2011 BCCA 6, 96 C.P.C. (6th) 10, the court explained that a material fact is one that, when resolved, will have legal consequences as between the parties to the dispute. At para. 18, the court provided that “a material fact is the ultimate fact, sometimes called ‘ultimate issue’, to the proof of which evidence is directed. It is the last in a series or progression of facts. It is the fact put ‘in issue’ by the pleadings. Facts that tend to prove the fact in issue, or to prove another fact that tends to prove the fact in issue, are evidentiary or ‘relevant’ facts”. See also British Columbia Teachers’ Federation v. British Columbia, 2012 BCSC 1722 at paras. 15-17 [BCTF].

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iv) Particulars

[27] At the same time, though the distinction can be difficult to apply, material facts are not particulars. In McLachlin and Taylor at 3-6, the authors state:

There is a distinction between material facts and particulars. A material fact is one that is essential in order to formulate a complete cause of action. If a material fact is omitted, a cause of action is not effectively pleaded. Particulars, on the other hand, are intended to provide the defendant with sufficient detail to inform him or her of the case he or she has to meet. Particulars are provided to disclose what the pleader intends to prove.

[28] Rule 3-7(18), which is also relevant in this case, states:

If the party pleading relies on misrepresentation, fraud, breach of trust, wilful default or undue influence, or if particulars may be necessary, full particulars, with dates and items if applicable, must be stated in the pleading.

v) No Evidence

[29] Rule 3-7(1) confirms that “[a] pleading must not contain the evidence by which the facts alleged in it are to be proved”.

vi) The Relief Sought

[30] Rule 3-1(2)(b), to which I referred earlier, requires a notice of civil claim to “set out the relief sought … against each named defendant”.

[31] To the extent a plaintiff sues multiple defendants and seeks different forms of relief against those various defendants, such differences must be apparent.

vii) The Legal Basis for the Relief Sought

[32] Historically, it was not necessary to identify by name the cause of action that a plaintiff sought to advance: Alford v. Canada (Attorney General) (1997), 31 B.C.L.R. (3d) 228 (S.C.), aff’d [1998] B.C.J. No. 2965 (C.A.). Nor was it necessary for the plaintiff to plead a statute that he or she relied on: Gold v. Toronto Dominion Bank, [1998] B.C.J. No. 3074 (S.C.).

[33] Neither of these propositions appears to remain valid under the current Rules. Thus, the authors of McLachlin and Taylor state at 3-5 and 3-7, respectively:

... under Rule 3-1(2)(c) a notice of civil claim must “set out a concise summary of the legal basis for the relief sought”. It would appear that where the cause of action is breach of contract, that must be stated as the basis for the relief sought. Similarly, where the cause of action is a nominate tort, the tort must be named. Where the cause of action is negligence, it may not be necessary to identify that as the cause of action, but in that case there would have to be a statement that the legal basis of the claim made is the existence of a duty of care, breach of the duty of care, and damages resulting from the breach of a duty of care.

…

The requirement under [Rule 3-1(2)(c)] to set out a concise summary of the legal basis for the relief sought means that earlier case law stating that it was not necessary to plead a statute if the material facts giving rise to the right to relief under the statute were pled is no longer applicable in British Colombia.

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Deficiencies in the Proposed Pleading

[34] The Proposed Pleading is severely deficient. It offends virtually all of the foregoing Rules and requirements of a proper pleading.

[35] The Proposed Pleading is extremely prolix. It was fairly described by one counsel as a “running narrative”. It contains a great deal of evidence. In those instances where it is possible to discern what cause of action is being advanced, the material facts which would be necessary to establish that cause of action are often absent.

[36] Importantly for present purposes, it is not possible to identify which plaintiff asserts what cause of action against which defendant.

[37] Broadly speaking, this is apparent in several ways. In many instances, the Proposed Pleading alleges that some wrong was committed against all of the plaintiffs. After I asked Dr. or Mrs. Sahyoun questions, however, it became apparent that not all the plaintiffs were advancing these causes of action. Conversely, other paragraphs purport to pertain to multiple defendants; on questioning, it became clear that only some of the defendants were alleged to have harmed one or more (but not all) of the plaintiffs. An example which captures both of these difficulties is found at paragraph 120 of the Proposed Pleading:

120. Moreover, the Defendant the Vancouver Board of Education is vicariously and [severally] liable for the actions and omissions … of its employees Dr. Jean Moore, Beverley Underhill, Karen Till, Robert Pearmain, Allan McLeod and Donald Goodridge, who obstructed and hindered Antonios’s, Miriam’s and Bishoy’s education, and caused the unlawful and the forceful removal of the three children from their parents’ care on November 5, 1998, and caused severe injury, harm, loss, and damages to the Plaintiffs which have and will continue to affect all Plaintiffs for the duration of their lifetimes.

[38] Following a series of questions that I posed, it became apparent that Dr. and Mrs. Sahyoun only purport to have a claim against Messrs. McLeod and Goodridge, though this is clearly not apparent from reading paragraph 120.

[39] Throughout the application, I repeatedly asked Dr. and Mrs. Sahyoun to identify with precision what cause of action they and/or Bishoy and Miriam purported to advance against which defendant. The very fact that that exercise was necessary speaks to the extent of the problem. The exercise revealed further difficulties.

[40] Thus, the position of Dr. Sahyoun changed between the first and second day of the hearing. Furthermore, the positions of Dr. Sahyoun and Mrs. Sahyoun were not entirely consistent. Still further, I explained to Dr. Sahyoun on the first day of the application that some of the conduct he complained of (for example against Dr. Ho, one of the Defendant Physicians) did not appear to ground a cause of action that either he or his wife could advance. On the second day of the application, he announced that he had, overnight, obtained new information against Dr. Ho that would cause him to now add new causes of action to the Proposed Pleading.

[41] Portions, but not all, of the Proposed Pleading are structured chronologically. The consequence is that the role of various Defendants and the claims advanced against such defendants are interspersed throughout the pleading.

[42] The foregoing difficulties, individually and collectively, make it virtually impossible for the Defendants to either identify or to understand the claims being advanced against them.

[43] There were further problems with some of the causes of action that the Plaintiffs wished to advance. The following examples are simply illustrative and not exhaustive of these difficulties.

[44] Mrs. Sahyoun repeatedly told me that she had a claim against a particular defendant because that defendant’s conduct had somehow affected one of her children and “what affects my children affects me”. Though this may be true in the broadest sense, it is not a proposition that can ground a cause of action.

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…

[48] Part 2 of the Proposed Pleading, under the heading “Relief Sought”, advances a single, generic prayer for relief by all plaintiffs against all defendants. It includes claims for special as well as punitive, aggravated and general damages. It does not begin to set out the relief that is claimed “against each named defendant”. While I do not suggest that such relief must be repeated in rote form against each of 49 defendants, this portion of the pleading must surely signal to a defendant, as well as to the trier of fact, what relief is being claimed against a particular defendant or a particular group of defendants.

[49] Part 3 of the Proposed Pleading, under the heading “Legal Basis”, lists some 15 legal authorities, 21 statutes, regulations or international conventions, 14 articles from various medical journals and miscellaneous appendices including the 1990 and 1991 Vancouver White Pages. It does not, in any way, tie any of these materials to any particular defendant, though some of the materials, and in particular some statutes, are referred to earlier in Part 1 of the Proposed Pleading.

[50] In BCTF, Justice Griffin, in the context of an application for particulars, dealt with the required content of Part 3 of a notice of civil claim under the new Rules, and said:

[14] Starting out with Part 3 of the notice of civil claim itself, I see nothing wrong with the way in which the plaintiff has set out the legal basis for the relief sought. The “Legal Basis” portion of the notice of civil claim is appropriately concise; it commits the BCTF to a cause of action and it adequately informs the Province of the legal foundation of claim.

[51] Accordingly, a plaintiff must, in its pleadings, commit to a cause of action and adequately inform the defendant of the legal foundation of its claim. Part 3 of the Proposed Pleading does not begin to achieve these objects; see also Fletcher v. British Columbia (Minister of Public Safety and Solicitor General), 2013 BCSC 554 at paras. 25-27.

[52] The current Rules and Form 1 have, as I said earlier, changed the traditional structure of a notice of civil claim. Nevertheless, the need for clarity and coherence persists. In Homalco, Justice Smith addressed these requirements and said:

9 Nevertheless, Mr. Clark submitted, it is enough if the material facts can be found in the statement of claim and a plaintiff cannot be compelled to prepare it in the conventional form. I cannot agree. A statement of claim must plead the causes of action in the traditional way so that the defendant may know the case he has to meet to the end that clear issues of fact and law are presented for the court. The comments of Thesiger L.J. in Davy v. Garrett (1877), 7 Ch. D. 473 (C.A.) at 488 and 489 are apt here:

I am disposed to agree with the contention that the mere stating material facts at too great length would not justify striking out a statement of claim. But when in addition to the lengthy statement of material facts we find long statements of immaterial facts, and of documents which are only material as evidence, a Defendant is seriously embarrassed in finding out what is the case he has to meet.

...

Now, in any properly constituted system of pleading, if alternative cases are alleged, the facts ought not to be mixed up, leaving the Defendant to pick out the facts applicable to each case; but the facts ought to be distinctly stated, so as to shew on what facts each alternative of the relief sought is founded.

[53] At bottom, in a case that involves multiple plaintiffs, multiple defendants and multiple causes of action, it remains necessary for each plaintiff to identify with precision what material facts (not evidence), what causes of action and what relief he or she is advancing against which defendant(s).

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[54] Neither a defendant nor a trier of fact should have to parse through a notice of civil claim and either cobble together or speculate about what cause of action is being advanced against which defendant.

The Test for Amending Pleadings

[55] In Shaw Cablesystems Limited, Justice N. Smith said:

[8] Rule 24(1) allows a party to amend a pleading at any time with leave of the court. Applications for leave to amend should be considered on the same basis as applications to strike existing pleadings. In Victoria Grey Metro Trust Company v. Fort Gary Trust Company [(1982)], 30 B.C.L.R. (2d) 45 at page 47 (S.C.) McLachlin J. (as she then was) said:

…it seems to me obvious that the court will not give its sanction to amendments which violate the rules which govern pleadings. These include the requirements relating to conciseness (R. 19(1)); material facts (R. 19(1)); particulars (R. 19(11)); and the prohibition against pleadings which disclose no reasonable claim or are otherwise scandalous, frivolous or vexatious (R. 19(24)). With respect to the latter, it may be noted that it is only in the clearest cases that a pleading will be struck out as disclosing no reasonable claim; where there is doubt on either the facts or law, the matter should be allowed to proceed for determination at trial… While these cases deal with striking out claims already pleaded, consistency demands that the same considerations apply to the question of amendment to permit new claims.

...

[9] Rule 19(24) reads:

(24) At any stage of a proceeding the court may order to be struck out or amended the whole or any part of an endorsement, pleading, petition or other documentation on the ground that

(a) it discloses no reasonable claim or defence as the case may be,


(c) it may prejudice, embarrass or delay the fair trial or hearing or the proceeding, or


And the court may grant judgment or other the proceeding to be stayed or dismissed and may order the costs of the application to be paid as special costs.

...

[12] In Citizens for Foreign Aid Reform Inc. v. Canadian Jewish Congress, [1999] B.C.J. No. 2160 (B.C.S.C.) at para. 34 Romilly J. said:

… as long as the pleadings disclose a triable issue, either as it exists, or as it may be amended, then the issue should go to trial. The mere fact that the case is weak or not likely to succeed is no ground for striking it out under the provisions of Rule 19(24).

[56] Although Shaw Cablesystems Limited was decided under Rule 19(24) of the old Rules of Court, the present rule, Supreme Court Civil Rule 9-5(1), mirrors its language.

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[57] The decision in Victoria Grey Metro Trust Company, cited in the foregoing quote, is also pertinent in that the court said:

[2] ... These provisions arguably support a generous approach to the question of amendments. However, the court will not allow useless amendments[.]

Ultimately, Victoria Grey Metro Trust Company was overturned as the B.C. Court of Appeal found that the proposed amendments “raise[d] questions which are proper to raise having regard to the origin of the proceeding” ((1982), 30 B.C.L.R. (2d) 50 at para. 4). But the principle articulated - that a useless amendment will not be allowed - still holds.

[58] In this case, having regard to the numerous and varied deficiencies in the Proposed Pleading, I am satisfied that it should not be filed. There was some suggestion by some of the Defendants that I ought not to allow the Plaintiffs to redraft the Proposed Pleading. In The Owners, Strata Plan LMS3259 v. Sze Hang Holdings Inc., 2009 BCSC 473 at paras. 40-43, Justice Sinclair Prowse described both the authorities that addressed the circumstances in which a party will not be permitted to redraft pleadings that were struck by the court as well as the conceptual basis for the exercise of that discretion.

[59] The notices of application that were filed by the Defendants do not seek any such relief nor do I consider that it would be appropriate, for various reasons, to limit the Plaintiffs’ ability to amend and file a proper claim.

[60] The courts will, to the extent reasonably possible and depending on the history of a matter, extend some indulgence to a self-represented litigant who is not conversant with the Rules or the law. Such indulgences do not, however, extend to any diminution or impairment of another party's substantive rights. Allowing the Proposed Pleading to be filed, for example, would impair the ability of the Defendants to respond to and defend the claims being made against them. It would render their defence inefficient. It would impede their intended application to strike all or parts of the claims being made against them. An indulgence granted to a self-represented litigant cannot extend this far.

[61] Providing the Plaintiffs a further opportunity to prepare a proper claim does not engage these concerns. Having said this, other concerns do arise. In Broadfoot 2011 and Broadfoot 2008, Justices Silverman and Williams, respectively, identified various deficiencies in the pleadings advanced by Dr. and Mrs. Sahyoun. Some of those deficiencies are repeated in the Proposed Pleading. Furthermore, in Broadfoot 2008, Justice Williams addressed Dr. and Mrs. Sahyoun’s attacks on various administrative decision-makers and observed:

[80] I reach my conclusion having carefully examined the statement of claim. While it is important to be cautious of allegations that they are really just attacks on the decision dressed up to allege serious bad faith misconduct, the court must bear carefully in mind the test which is to be employed in assessing this application and to which I adverted earlier. It must be assumed that the facts alleged can be proved.

[62] These comments resonate in the present case. The Proposed Pleading contains numerous serious allegations of fraudulent misrepresentation, falsification of materials, perjury and malicious behavior on the part of numerous unrelated defendants. It is open to a plaintiff, on a proper basis, to advance some of these matters either independently or in support of an action if a proper foundation exists for the allegation. It is thoroughly wrong to do so for strategic reasons. I have explained to Dr. and Mrs. Sahyoun that they must reflect carefully on what allegations they advance and should be mindful of the sanctions that potentially exist where a claim of this nature is not made out.

[63] I am ordering the Plaintiffs to provide the Defendants with a further amended notice of civil claim, which complies with Rule 3-1, within 60 days of receipt of these reasons. That timeframe provides the Plaintiffs ample time to reflect on these reasons and to make the amendments that are required. It also recognizes that the Defendants have been seeking to obtain a proper pleading from the Plaintiffs for many months and that they wish to address the claims being made against them.

WEEK 5: Code of Professional Conduct

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Code of Professional Conduct

4.01 THE LAWYER AS ADVOCATE

Advocacy 4.01(1) When acting as an advocate, a lawyer must represent the client resolutely and honourably within the limits

of the law, while treating the tribunal with candour, fairness, courtesy, and respect. 4.01(2) When acting as an advocate, a lawyer must not:

(a) abuse the process of the tribunal by instituting or prosecuting proceedings that, although legal in themselves, are clearly motivated by malice on the part of the client and are brought solely for the purpose of injuring the other party;

(b) knowingly assist or permit a client to do anything that the lawyer considers to be dishonest or dishonourable;

(c) appear before a judicial officer when the lawyer, the lawyer’s associates or the client have business or personal relationships with the officer that give rise to or might reasonably appear to give rise to pressure, influence or inducement affecting the impartiality of the officer, unless all parties consent and it is in the interests of justice;

(d) endeavour or allow anyone else to endeavour, directly or indirectly, to influence the decision or action of a tribunal or any of its officials in any case or matter by any means other than open persuasion as an advocate;

(e) knowingly attempt to deceive a tribunal or influence the course of justice by offering false evidence, misstating facts or law, presenting or relying upon a false or deceptive affidavit, suppressing what ought to be disclosed or otherwise assisting in any fraud, crime or illegal conduct;

(f) knowingly misstate the contents of a document, the testimony of a witness, the substance of an argument or the provisions of a statute or like authority;

(g) knowingly assert as fact that which cannot reasonably be supported by the evidence or taken on judicial notice by the tribunal;

(h) make suggestions to a witness recklessly or knowing them to be false;

(i) deliberately refrain from informing a tribunal of any binding authority that the lawyer considers to be directly on point and that has not been mentioned by another party;

(j) improperly dissuade a witness from giving evidence or advise a witness to be absent;

(k) knowingly permit a witness or party to be presented in a false or misleading way or to impersonate another;

(l) knowingly misrepresent the client’s position in the litigation or the issues to be determined in the litigation;

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(m) abuse, hector or harass a witness;

(n) when representing a complainant or potential complainant, attempt to gain a benefit for the complainant by threatening the laying of a criminal charge or by offering to seek or to procure the withdrawal of a criminal charge;

(o) needlessly inconvenience a witness; or

(p) appear before a tribunal while under the influence of alcohol or a drug.

WEEK 5: Joly

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Joly v. Pelletier

Ontario Superior Court of Justice May 16, 1999

1. EPSTEIN J. (endorsement): - This endorsement relates to a series of motions brought on behalf of a number of the defendants in two related actions commenced in this Court by the plaintiff, Rene Joly. The moving parties seek orders striking out the Statements of Claim and thereby dismissing the actions on the grounds that the pleadings disclose no cause of action (rule 21.01(3)(b)) or are frivolous or vexatious or an abuse of the process of the Court (rule 25.11).

2. Mr. Joly’s claims in these two actions, and in several others not currently before me, all centre on his firm assertion that he is not a human being; rather a martian. As I understand them, the nature of his complaints against the numerous defendants who include a number of doctors, medical facilities and government agencies is that they have conspired with the American government in its attempts to eliminate him and have otherwise taken various steps to interfere with his ability to establish himself and live freely as a martian.

3. As indicated, there are two actions before me. At the beginning of the hearing Mr. Joly advised me that he has recently commenced a third action against, among others, the Central Intelligence Agency, President Clinton and the Honourable Anne McClellan for interfering with his D.N.A. test results that prove that he is, in fact, not human.

4. Given the related issues in the three actions brought in this Court, I ordered that the three proceedings be consolidated. All parties consented to this order. An order will issue to this effect. Unfortunately, I failed to note the action number of the third action affected by this order.

5. As another preliminary matter, I should indicate that given the unusual nature of the plaintiff’s claims, a discussion took place at the beginning of argument as to whether I should order that a hearing be conducted pursuant to the provisions of rule 7 of the Rules of Civil procedure for a determination as to whether the plaintiff was in a position properly to represent his interests on the motions or whether a litigation guardian should be appointed. As a result of this issue having been raised, I arranged for a reporter to record the proceedings and the plaintiff agreed to testify under oath and answer certain questions posed by Mr. Novak, counsel who appeared on behalf of a number of the defendants. At the conclusion of this form of hearing and having considered the submissions made, I determined that there was no reason to delay the argument of the motions. I made the observation that in every respect Mr. Joly properly conducted himself before the Court. He presented himself as polite, articulate, intelligent and appeared to understand completely the issues before the Court and the consequences should I grant the relief sought. There was nothing before me, other than the uniqueness of the pleadings in question, for me, on my own volition, to adjourn, pending a hearing to determine if Mr. Joly is under some form of disability. This observation, the fact that no one was really urging me to adjourn and the costs to all concerned of having these proceedings protracted, factored into my decision to proceed.

6. Finally, I add that at the request of the parties, leave was granted to adduce evidence at the hearing. Both Mr. Novak and Mr. Joly presented evidence to the Court in support of their submissions.

7. The crux of the various arguments advanced orally and in the written material is that Mr. Joly’s claims disclose no cause of action and are otherwise frivolous, vexatious and an abuse of the process of the Court. It was also argued that the tort of conspiracy was not properly pleaded and that no damages have been identified or claimed. It was further pointed out that several of the defendants are not legal entities and are not capable of being sued.

8. Mr. Joly, in a well prepared, thoughtful argument submitted that he had evidence of falsification of records and related wrongdoing. On the pivotal point of Mr. Joly’s being in fact a martian Mr. Joly advised me that the only reason he was not now able to satisfy the Court that he is a martian, not a human, is due to the falsification of his D.N.A. test results by the Americans.

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9. The authorities relied upon by the moving parties are well known. On a motion to strike out a pleading, the Court must accept the facts as alleged in the Statement of Claim as proven unless they are patently ridiculous and incapable of proof and must read the Statement of Claim generously with allowance for inadequacies due to drafting deficiencies. See Nash v. The Queen in Right of Ontario (1995), 27 O.R. (3d) 1 (C.A.). Perhaps the leading case is that of Carey Canada Inc. v. Hunt et al. (1990) 74 D.L.R. (4th) 321 (S.C.C) in which the test in Canada is described as assuming that the facts as stated in the Statement of Claim can be proved, the Court must be satisfied that it is “plain and obvious” that the plaintiff’s statement of claim discloses no reasonable cause of action.

10. Concerning rule 25.11, the Court will dismiss or stay an action as being frivolous, vexatious or abusive only in the clearest cases where it is plain and obvious the case cannot succeed. The decision in Steiner v. Canada [1996] F.C.J. No. 1356 (Fed. T.D.) makes it clear that if a pleading does not present a rational argument, either on the evidence or in law, in support of the claim, and casts unreasonable aspersions is frivolous.

11. In my opinion there are at least two reasons why the two Statements of Claim in question ought to be struck and the actions dismissed.

1. Neither pleading discloses a cause of action. While conspiracy to do harm to someone is the basis of many actions in this Court there is a fundamental flaw in the position of Mr. Joly. Rule 1.03 defines plaintiff as “a person who commences an action”. The New Shorter Oxford English Dictionary defines person as “an individual human being”. Section 29 of the Interpretation Act provides that a person includes a corporation. It follows that if the plaintiff is not a person in that he is neither a human being nor a corporation, he cannot be a plaintiff as contemplated by the Rules of Civil Procedure. The entire basis of Mr. Joly’s actions is that he is a martian, not a human being. There is certainly no suggestion that he is a corporation. I conclude therefore, that Mr. Joly, on his pleading as drafted, has no status before the Court.

2. In respect to the motions brought under rule 25.11 I am of the view that the test has been passed in the circumstances of this case. In other words, I am satisfied that the claims are frivolous and vexatious and constitute an abuse of the process of this Court. In addition to the fact that the tort of conspiracy has not been remotely properly pleaded, no damages have been claimed and many of the defendants are not even legal entities capable of being sued. More importantly, with all respect to Mr. Joly and his perception of reality, these actions are patently ridiculous and should not be allowed to continue as they utilize scarce public resources not to mention the time and money of the numerous defendants who have been forced to defend these actions.

12. In the circumstances I have come to the conclusion that the moving parties are entitled to the relief requested. The Statements of Claim in both actions are struck and the actions are dismissed.

13. The defendants are entitled to their costs of the actions but it would seem to be that the defence has likely incurred little if any costs in defending the actions. The moving parties are certainly entitled to their costs of the motions, if demanded. If the parties require any assistance with respect to the resolution of costs, they may arrange a conference call through the assistance of my secretary.

WEEK 5: Murrell

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Murrell v. Simon Fraser University British Columbia Court of Appeal Vancouver, British Columbia Judgment: filed December 30, 1997

1. SOUTHIN J.A.: - This is an appeal from the judgment dismissing the action of the appellant, the plaintiff below, [1996] B.C.J. No. 935, for damages for what is commonly called wrongful dismissal but is more accurately a claim for damages for breach of the implied term of a contract of employment under which an employee is entitled to reasonable notice of termination.

2. It is common ground first, that the appellant, who was the operations administrator for the Faculty of Business Administration, having an annual salary of approximately $49,000.00 and assorted benefits, was dismissed from her employment in the autumn of 1994; secondly, that there was no express term, written or oral, of her contract of employment setting forth the duties owed by her to the respondent; thirdly, that the burden of proving facts which warranted the respondent in terminating the appellant without notice lies upon the respondent.

3. There are two serious procedural difficulties in this appeal. First, the pleadings are so deplorable that the appellant has been able to put forward, not unreasonably, the proposition that the respondent’s pleadings did not properly disclose the case she had to meet on the question of justification for the dismissal. Secondly, it is not easy to discern from the learned trial judge’s reasons for judgment what are findings of fact and what is merely a narrative deciding nothing. Had the pleadings in this case been properly drawn, the learned judge would have had a sound framework for his reasons.

4. The statement of claim was 42 paragraphs long. By way of comparison, the statement of claim in the 13th edition of Bullen & Leake & Jacob’s Precedents of Pleadings (London: Sweet & Maxwell, 1990) for a claim for damages for wrongful dismissal without notice is a mere six paragraphs. Even allowing for the fact that, in the case at bar, the 42 paragraphs include a claim for defamation and pleas which may be said to go to whether there should be an award of aggravated or punitive damages, the statement of claim is riddled with pleas which are not of material facts. What, for instance, is the materiality of a plea, as in this statement of claim, that, “The plaintiff was born [on such and such a date] and is a single mother with two children.”?

5. The statement of claim, with its deficiencies, in itself would cause difficulties for the draftsman of a statement of defence, but the draftsman then made his or her own difficulties, one of which, strictly speaking, should be fatal to the defence.

6. Bullen, Leake & Jacob’s, supra, at p. 1141, gives what I commend to the profession as a most useful form of defence in an action such as this. It runs to three paragraphs:

1. There were express terms of the said contract of employment that the plaintiff would:

(i) act towards the defendants with all good faith, fidelity and loyalty and/or not to the detriment of or in competition with the defendants’ interests;

(ii) obey the reasonable and lawful directions of the defendants;

(iii) not so act as to damage or destroy the trust and confidence between the plaintiff and defendants;

(iv) act with all due skill, care and competence;

(v) not neglect his duties to the defendants; [or as the case may be.]

2. The plaintiff was in breach of the said terms in that.

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3. In the premises the plaintiff repudiated the said contract which repudiation the defendants were entitled to and did accept by and/or the defendants were entitled to and did dismiss the plaintiff summarily, namely .

7. Unlike the draftsman of the precedent in Bullen & Leake & Jacob’s, the draftsman here never did allege what the terms of the contract of employment were that were breached by the appellant.

8. There is no plea of the implied term of good faith, fidelity and loyalty. There is no plea of a duty, or a term requiring the appellant, to obey the reasonable and lawful directions of the defendants, and so forth.

9. Such a plea or pleas are integral to an employer’s defence and the reason is worth expatiating upon. It has long been implied by law not by an application in any given case of the officious bystander rule that it is a term of every contract of employment that the employee shall serve his employer with good faith and fidelity (see the oft-cited case of Robb v. Green, [1895] 2 Q.B. 315 (C.A.)).

…………………………

17. In my opinion, where, as in the case at bar, the conduct relied upon by way of justification is in the conduct of the employer’s business, the implied term to be pleaded is the obligation of good faith and fidelity; where the acts to be pleaded in justification are outside the employer’s business, such as the hypothetical thieving bank manager, the plea should be of an implied term not to act so as to destroy trust and confidence and a breach of that term.

18. I have already referred to the difficulties with the statement of claim and with the statement of defence.

19. There is a further difficulty. There is no reply and yet it appeared to me that some of the argument before us might be said to raise what is commonly called “condonation”, properly a matter for reply. As Lord Atkinson points out in the Federal Supply case, supra, at p. 8, this is not a word “happily chosen”:

The word “condonation”, though used in some of the authorities cited by most distinguished Judges, is not quite happily chosen. In the cases of Phillips v. Foxhall [(1872), 41 L.J.Q.B. 293; L.R. 7 Q.B. 666] and Boston Deep Sea Fishing and Ice Co. v. Ansell [(1888) 39 Ch. D. 339], so much relied upon by the respondents, the word is used as applicable to a case where a master, with full knowledge of a servant’s misconduct, continues to retain him in his, the master’s, service. It is likened to the case of a man who, knowing he has a legal right to do either of two things, determines or elects to do one of them in preference to the other; and also likened to the case of a man who, knowing that a forfeiture has been worked, and that he has a legal right to take advantage of it, deliberately abandons that right that is, waives the forfeiture. In these cases, however, to which “condonation” is compared, the burden of proving that the election had been made or the forfeiture waived would rest upon him who relied upon the one or the other. And so it is with condonation. The master must be fully aware that the servant has by his misconduct forfeited the right to be continued in his master’s service, which is the correlative of the master’s right to dismiss him before he can be held to have waived that forfeiture.

20. In these cases, it can be a nice question whether there was a breach of the implied term which was “condoned” by the employer or the acts of the employer show that he did not consider the act in issue to be a breach. Suppose, for instance, an employee is in the habit of coming into work half an hour after the normal starting time of the office. If the employer says nothing, should the conclusion be that there was no breach or that the breach was “condoned”?

21. To return to the statement of defence, the respondent pleaded thus:

4. In answer to paragraphs 8 and 28 of the Statement of Claim, the Defendants say that the Plaintiff was dismissed from her employment for just cause.

* * *

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19. In further answer to the whole of the Statement of Claim, the Defendants say that the Plaintiff performed acts and omissions which extinguished the University’s trust in the Plaintiff and which made it impossible for the University to maintain confidence in the Plaintiff that she would carry out her duties in the future in an appropriate, responsible and trustworthy manner.

22. No particulars having been given of either of these allegations, the appellant sought particulars only of para. 19. Because much turns in this case on the reply given to the demand, I now quote it:

In reply to the Plaintiff’s Request for Particulars dated June 13, 1995, the Defendants say that the particulars of the Statement of Defence are as follows:

1. Under paragraph 19, the specific acts and omissions of which the Defendants are presently aware which extinguished the trust of Simon Fraser University (“University”) in the Plaintiff and which made it impossible for the University to maintain confidence in the Plaintiff that she would carry out her duties in the future in an appropriate, responsible and trustworthy manner are:

(a) Acting inappropriately, irresponsibly and in contravention of policy and procedure by borrowing monies for personal use from University funds;

(b) Providing inaccurate information to her co-workers regarding her borrowing of monies for personal use from University funds;

(c) Making inaccurate alterations and adjustments to the documentation maintained by the University relating to her borrowing of monies for personal use from University funds;

(d) Delaying the repayment to the University of monies borrowed by her for personal use from University funds;

(e) Providing inaccurate information regarding her borrowing of monies for personal use from University funds to representatives of the University during the investigation of this and other issues relating to her employment by the University;

(f) Acting inappropriately, irresponsibly and in contravention of policy and procedure by seeking and using University funds to pay the cost of personal travel by her which was of no benefit to the University;

(g) Providing inaccurate information to her co-workers and superiors regarding her use of University funds to pay the cost of personal travel which was of no benefit to the University;

(h) Failing to compensate the University for University funds used by her to pay the cost of personal travel after it became or should have become apparent to her that the travel was of no benefit to the University;

(i) Providing inaccurate information regarding her use of University funds to pay the cost of personal travel which was of no benefit to the University to representatives of the University during the investigation of this and other issues relating to her employment by the University;

(j) Acting inappropriately, irresponsibly and in contravention of policy and procedure by purchasing goods through the University for her personal use;

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(k) Providing inaccurate information to her co-workers regarding her purchase of goods through the University for her personal use;

(l) Delaying the payment to the University of monies owed by her for goods purchased through the University for her personal use;

(m) Providing inaccurate information regarding her purchase of goods through the University for her personal use through the University to representatives of the University during the investigation of this and other issues relating to her employment by the University;

(n) Acting inappropriately, irresponsibly and in contravention of policy and procedure by hiring friends and relatives on behalf of the University to assist with the relocation of the premises of the Faculty of Business Administration in April and May, 1994 (the “Relocation”);

(o) Causing the University to pay inappropriately high wages to friends and relatives for their assistance with the Relocation;

(p) Applying to her own outstanding debt to the University monies ostensibly paid by the University to her relatives as wages for assistance with the Relocation;

(q) Providing inaccurate information regarding her hiring of friends and relatives on behalf of the University to assist with the Relocation to representatives of the University during the investigation of this and other issues relating to her employment by the University;

(r) Acting inappropriately, irresponsibly and in contravention of policy and procedure by causing the University to pay for expenses incurred by her and others at the Diamond University Club at meetings which were of no benefit to the University;

(s) Providing inaccurate information regarding the expenses incurred by her and others at the Diamond University Club at meetings which were of no benefit to the University to representatives of the University during the investigation of this and other issues relating to her employment by the University;

(t) Acting inappropriately, irresponsibly and in contravention of policy and procedure by failing to reimburse the University for personal charges incurred by her on utility and service accounts held by the University;

(u) In the alternative, acting inappropriately, improperly and in contravention of policy and procedure by delaying her reimbursement of the University for personal charges incurred by her on utility and service accounts held by the University;

(v) Providing inaccurate information regarding her reimbursement of the University for personal expenses incurred by her on utility and service accounts held by the University to representatives of the University during the investigation of this and other issues relating to her employment by the University;

(w) Acting inappropriately, irresponsibly and in contravention of policy and procedure in the handling of and accounting for University funds in the course of preparing a deposit by the Faculty of Business Administration to the University Cashier’s Office in or about August 1993;

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(x) Failing to ensure the safe deposit by the Faculty of Business Administration to the University Cashier’s Office of University funds for which the Plaintiff took responsibility in or about August 1993;

(y) Providing inaccurate information to her co-workers regarding her handling of and accounting for University funds in the course of preparing a deposit by the Faculty of Business Administration to the University Cashier’s Office in or about August 1993;

(z) Providing inaccurate information regarding her handling of and accounting for University funds in the course of preparing a deposit by the Faculty of Business Administration to the University Cashier’s Office in or about August 1993 to representatives of the University during the investigation of this and other issues relating to her employment by the University;

(aa) Acting inappropriately, irresponsibly and in contravention of policy and procedure in handling and accounting for monies kept by the Faculty of Business Administration in a locked safe in the Faculty’s office;

(bb) Acting inappropriately, irresponsibly and in contravention of policy and procedure in failing to ensure the safety and security of funds kept by the Faculty of Business Administration in a locked safe in the Faculty’s office;

(cc) Acting inappropriately, irresponsibly and in contravention of policy and procedure in failing to ensure the confidentiality and security of the secret combination of numbers required to open the safe in the Faculty’s office;

(dd) Providing inaccurate information to her co-workers regarding her handling of monies kept by the Faculty of Business Administration in the locked safe in the Faculty office and her failure to ensure the confidentiality and security of the secret combination of numbers required to open the safe;

(ee) Providing inaccurate information regarding her handling of money kept by the Faculty of Business Administration in a locked safe in the Faculty office and her failure to ensure the confidentiality and security of the secret combination of numbers required to open the safe to representatives of the University during the investigation of this and other issues relating to her employment by the University.

23. The Defendants may provide further particulars of this paragraph when additional information is acquired and Examinations for Discovery are conducted. [para 23] There have been no applications by either party, either to the learned judge below or to this Court, for an amendment to the pleadings.

24. On the one hand, counsel for the appellant asserted in this Court that the respondent’s statement of defence, together with the particulars, did not properly disclose the case she had to meet which, as it has now turned out, was an accusation of flagrant dishonesty. There is much to be said for that assertion. The particulars are prolix, obfuscatory and mealy mouthed.

25. On the other hand, counsel for the respondent says the course of trial overcame all the difficulties caused by the respondent’s ill-drafted pleadings, and cites my judgment in Cohen v. Ostry (1994), 89 B.C.L.R. (2d) 231, 111 D.L.R. (4th) 241.

26. In my opinion, this is not a case in which the merits should be decided despite defective pleading. There is a great deal at stake for the appellant in this case and I do not think it right that this Court should have to construct

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the respondent’s case for it. In saying that, I have firmly in mind that the burden of proving that it lawfully terminated the contract of employment is on the respondent.

27. Although the statement of claim does contain, buried in a prolix assertion of facts which are not material facts, the pleas of material facts essential to an action for wrongful dismissal, the statement of defence, not having even a plea of the term of the contract of employment which is said to be breached, does not.

28. Therefore, ex mero motu and so that order may be brought to this case, I would grant leave to the appellant to deliver an amended statement of claim in such form as counsel may advise, depending upon Mr. Roberts to ensure that the statement of claim is a proper statement of claim limited to the material facts only. With a proper statement of claim from the appellant, the respondent will not have to plead to immaterial allegations on the appellant’s part.

29. The respondent may then seek leave from this Court to deliver an amended statement of defence.

30. Arrangements for the necessary hearing of the respondent’s application can be made by counsel through the Registry.

SOUTHIN J.A.: - I agree. BRAIDWOOD J.A.: - I agree. PROUDFOOT J.A.: - I agree.

WEEK 5: National Leasing

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National Leasing Group Inc. v. Top West Ventures Ltd.

2001 BCSC 111

1. MASTER BOLTON: - This is an application by the defendant by counterclaim to dismiss the counterclaim on the ground that it discloses no reasonable claim.

2. The plaintiff’s action against the defendants is for a debt alleged due for a computer system and accessories. It is difficult to describe the nature of the defence or counterclaim.

3. The counterclaim consists of 97 paragraphs, over 26 pages. It was apparently drafted by a friend of the defendant Mr. Shandler who has a somewhat idiosyncratic approach to English grammar. For instance, he has deconstructed the outline of the defendant by counterclaim prepared for this hearing, breaking it down into its constituent parts of speech. According to the helpful code he endorsed on the outline, the three personal names forming the title of the defendant law firm, Douglas Symes & Brissenden, are respectively an adjective, a pronoun and another pronoun.

4. On the face of the document, I had difficulty discerning any cause of action while the matter was being spoken to in chambers, but in view of its length and complexity, I concluded that I should reserve my decision in order to consider it in more detail.

5. The first paragraph reads:

1. For the [DE]FENDANT with the knowledge of the David-Wynn:Miller; Language-Procedures (http://www.dwmlawprocedures.com; http://brucestellar.tsx.org) is with the damage: damage by the utilization of the fictitious-language/scribble as the foundation for the authority for the action/claim against the DE[FENDANT] damage by the criminal-rate of the interest [section: 347: Criminal-Code of the Canada]; damage by the false-statements [section: 397.1(a); Criminal-Code of the Canada]; damage by the completion of a fraud: constructive or actual [section: 380.1 of the Criminal Code of the Canada]; damage by the completion of a mail-fraud [section: 381 of the Criminal-Code of the Canada; damage by the bad-faith; by the PLAINTIFF and DEFENDANT by the COUNTER-CLAIM.

This is not too bad. It does not disclose a cause of action, because the nature of the transaction, the parties, and the date, are not set out. But there is some general indication of an intention to plead fraud, misrepresentation and the levying of a criminal rate of interest. If properly particularized it might form the basis of an arguable defence or cause of action against the plaintiff.

6. But unfortunately the counterclaim does not give anything I can recognize as particulars in any of its remaining 96 paragraphs. A selection of other pleadings, chosen not entirely at random, follows:

5. For the SUPREME-COURT of the BRITISH-COLUMBIA, with the possession of this Counter-claim-vessel is, as the holder in the due-course of this Counter-claim-vessel, with the knowledge/claim with this Counter-claim-vessel.

….

14. For the establishment of the Truth with the noun-subject-matter-language with this Counter-claim in the now-tense is with the now-tense-seizure/salvage of the fiction-jurisdiction, in the use by the PLAINTIFF and DEFENDANT by the COUNTER-CLAIM, by the [DE]FENDANT.

….


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17. For the utilization/operation of the fictitious-language/scribble/scribble-procedures of the English-language by the PLAINTIFF and DEFENDANT by the COUNTER-CLAIM is with the creation of the fictitious-language/scribble by the PLAINTIFF and DEFENDANT by the COUNTER-CLAIM.

…

21. For the use of the word: OF, in the phrase/claim:

STATEMENT OF CLAIM(sic), with the absence of an article in the immediate-next-position, is with the use of the word: OF, as the adverb for the modification of the immediate-next-word: CLAIM, as a verb, by a procedure of the English-language.

…

38. For the use of the pre-fix: De, with the word:

De-fendant, is with the use of the pre-fix for the negation of the root-word, fendant, by the attachment and modification of the pre-fix of the negation: De, by a procedure of the English-language.

…

46. For the use of the word: Plaintiff, as a verb in the phrase/claim is with the lack of the certification/authentication of the subject-matter-noun-Plaintiff with the CLAIM.

…

74. For the lack of the joinder and jurisdiction in the now-tense is with the lack of the now-tense-statement/claim: incorporation, registration, entrance, containment, charge, calculation, expiration, placement, assignment, deliverance, acknowledgment, fault, attempt, retrieval, refusal, suffering, enrichment, entitlement, conversion, estimation and negligence, by the PLAINTIFF and DEFENDANT by the COUNTER-CLAIM, for the now-tense-adjudication of a past-tense-statement/claim by the SUPREME-COURT of the BRITISH-COLUMBIA.

…

89. FOR THE [DE]FENDANT-CLAIMS, THAT THE LEASE, BY THE PLAINTIFF AND DEFENDANT BY THE COUNTER-CLAIM, IS WITH THE LACK OF THE SUBJECT-MATTER, FOR THE FOUNDATION OF A CLAIM AGAINST THE [DE]FENDANT, AND AS A RESULT, WITH THE VOID.

…

94. FOR THE [DE]FENDANT-CLAIMS, THAT THE LEASE IS WITH A PROVISION FOR A CRIMINAL-RATE OF THE INTEREST, [SECTION: 337 OF THE CRIMINAL-CODE OF THE CANADA], AND AS A RESULT, WITH THE REASON FOR THE FORFEITURE OF THE PLAINTIFF’S-DEFENDANT’S BY THE COUNTER-CLAIM-LOCUS-STANDI IN THE SUPREME-COURT OF THE BRITISH COLUMBIA FOR THE SEEKING OF A REMEDY.

95. OR IN THE ALTERNATIVE, FOR THE [DE]FENDANT-CLAIMS, ORDER OF THE COURT FOR AN ACCOUNTING, BY AN INDEPENDENT-ACCOUNTANT, OF THE PLAINTIFF’S-BOOKS FOR A DETERMINATION OF THE AMOUNT-OF-MONEY, WITH THE PLAINTIFF, BY THE WAY OF AN EARNING IN THE FORM-OF-MONEY FROM A CRIMINAL-RATE OF THE INTEREST, FROM ALL LEASE-AGREEMENTS, FOR A


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CALCULATION OF THE EXEMPLARY-DAMAGES, EQUAL WITH THE AMOUNT-FOUND, FOR THE BENEFIT OF THE [DE]FENDANT.

96. :ANIMUS-MININIS EST ANIMA-SCRIPTI

FOR THE INTENTION OF A PARTY IS WITH THE SOUL OF THE INSTRUMENT.

97. :RATIO-LEGIS EST ANIMA-LEGIS

FOR THE REASON OF THE LAW IS WITH THE SOUL OF THE LAW.

The document concludes with this stirring declamation:

By the [DE]FENDANT:

In the City of the Vancouver in the Province/State of the British-Columbia in the Land of the Canada with the Law of the Flag and with the right of the contract.

Date: 2000-Anno-Domini/10/25

In the Good-faith, with the God as the Witness; Autograph of the [DE]FENDANT SEAL

“Aerock:Shandler: 2000-ANNO-DOMINI/10/25” :Aerock: Shandler

The signature of Mr. Shandler is sealed with a single fingerprint.

7. There are a couple of paragraphs where a glimmering of a defence against the plaintiff can be discerned. Paragraphs 78 and 94 raise a question of a criminal rate of interest, but give no particulars amounting to a cause of action. Paragraph 89 is an unparticularized assertion that the lease forming the basis of the plaintiff’s claim is void. Paragraph 95 requests an accounting of the amount due under the lease. These allegations, if fleshed out with particulars, might conceivably amount to a defence against the plaintiff’s claim. But even with any imaginable particulars, they could not possibly form the basis for a claim against the defendant by way of counterclaim.

8. In the result, I am satisfied that the counterclaim does disclose no cause of action and must be dismissed, with costs.

9. If Mr. Shandler genuinely believes he has a defence against the plaintiff’s claim, I would respectfully suggest that, without sacrificing his friendship with Mr. Naudi, he might seek advice from someone whose theories of pleadings and grammar are rather more attuned to traditional usage. It is certainly thought-provoking to consider the “de” in “defendant” as a negation of a root word “fendant”, and “plaintiff” as a verb. (If the OED is watching, Mr. Naudi said it first, not I.) But the judges and masters of the Supreme Court of British Columbia are required to be somewhat conservative, if not downright pedantic, when it comes to pleadings. Our scribble/scribble-procedures are not inflexible, but they do require that counterclaims disclose a comprehensible, arguable cause of action, and I am afraid that this one does not.

WEEK 6: Imperial Parking

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Imperial Parking Corporation v. Anderson

2014 BCSC 989 KENT J.

Introduction

[1] The defendants each apply under Rule 7-1 for an order requiring the plaintiff to comply with their demand for further and better discovery of documents. The plaintiff resists the application on the grounds that either:

1. they have already produced all of the documents they have in respect of some of the categories sought; and

2. the balance of the documents demanded are simply not relevant to the issues in the case.

[2] For the reasons that follow, the applications are dismissed.

Background

[3] The application was argued in the context of pleadings which have been amended with the consent of the other parties, but which have not yet been filed. I proceeded with the application on the basis of counsels’ assurance that these pleadings would be filed and I assume this has already taken place or will very shortly.

[4] The lawsuit is a breach of fiduciary duty claim against a former CEO (Anderson) and management consultant (Menzies/Coastal Pacific) who have set up a business (GoPark Management) in competition with the business of the plaintiff (Imperial Parking). The causes of action alleged against the defendant include breach of fiduciary duty, deceit, fraudulent misrepresentation, conspiracy, and misappropriation of confidential information. The discovery of documents in this type of case usually provides critical evidence, but it is the pleadings which identify the “material facts” or “matters in question” that inform the document discovery process.

[5] The key allegations pleaded in the unfiled Further Amended Notice of Civil Claim are that:

• at all material times, Anderson was a director and the CEO of the plaintiff and was subject to a written employment agreement that contained covenants respecting non-competition, non-solicitation, and confidentiality of corporate information;

• Menzies/Coastal Pacific entered into a written consulting agreement with the plaintiff dated December 31, 2007 which also imposed non-competition, non-solicitation and confidentiality obligations;

• by letter agreement dated June 9, 2010, Anderson and Menzies purported to amend the latter’s consulting agreement by reducing its term from six years to five years and eliminating the non-competition obligation;

• this amendment agreement was executed between Anderson and Menzies to “serve their personal interests in combining together to compete” against the plaintiff in the future and the existence of the letter agreement was “intentionally concealed”;

• on August 11, 2010, Anderson entered into a “termination and settlement agreement” with the plaintiff pursuant to which sums in excess of $1 million were paid to Anderson and ongoing fiduciary obligations were acknowledged, albeit his non-competition obligation was reduced from 24 months to 18 months;


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• in March 2012, Anderson and Menzies formed GoPark Management to engage in direct competition with the plaintiff, having conspired with each other to wrongfully compete with the plaintiff utilizing the latter’s confidential business information.

[6] Interestingly, the plaintiff’s pleading, particularly the most recent amendments to same, has been deliberately crafted to seek narrow relief expressly in order to avoid production of some of the documents and information that the defendants now seek. In particular, as against Anderson, the plaintiff seeks the following remedies:

• damages for breach of fiduciary duty, deceit and fraudulent misrepresentation, comprised of repayment of all compensation paid to Anderson under the Anderson settlement agreement;

• an accounting of all proceeds or payments received in relation to the breach of fiduciary duty and an order for disgorgement;

• rescission of the Anderson settlement agreement and an order that Anderson repay all compensation received under same along with a declaration that the Anderson non-competition obligations in his employment agreement continued until August 11, 2012 (i.e. long after the GoPark Management business was established);

• damages for conspiracy, comprised of compensation paid to Anderson under the Anderson settlement agreement; and

• punitive damages.

…

[9] All parties acknowledge that the heart of the case is the circumstances surrounding the execution of the June 9, 2010 letter agreement which eliminated the Menzies non-competition obligation. The plaintiffs are essentially claiming that this was a secret agreement made in furtherance of a conspiracy to permit competition that would not otherwise have been permissible. The concealment of that transaction is the basis of the deceit allegation underlying the claim for rescission of the Anderson termination and settlement agreement dated August 11, 2010.

…

Discovery of Documents under Supreme Court Civil Rule 7-1

[13] Much of the discussion which follows is derived from Beihl v. Strang, 2010 BCSC 1391, Edwards v. Ganzer, 2012 BCSC 138, and Kent “Discovery of Documents Under Supreme Court Civil Rule 7-1: Technical and Evidentiary Conundrums”, 70 Advocate 703, (2012).

[14] The Supreme Court Civil Rules which came into effect July 1, 2010 impose limits on the discovery process. The “new” rules changed the procedure for discovery and inspection of documents.

[15] Rule 26 of the former Supreme Court Rules required each party upon demand to deliver a “list of documents that are or have been in the party’s possession or control relating to every matter in question in the action”. The old rule was broadly interpreted in accordance with the test described in the famous case, Compagnie Financiere du Pacifique v. Peruvian Guano Co. (1882), 11 Q.B.D. 55 (C.A.) in which the Court of Appeal stated:

… It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may - not which must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words “either directly or indirectly”, because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance


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his own case or to damage the case of his adversary, if it is a document which may fairly lead him to train of inquiry, which may have either of these two consequences ...

[Emphasis in original.]

[16] As applied in B.C., the above principle obliged parties to make discovery of often a very substantial number of documents, many of which were subsequently determined to be largely irrelevant to the issues in dispute. However, according to the introduction to the new rules, “Peruvian Guano is mortally wounded if not already dead”.

[17] Rule 7-1 contemplates the following:

• production within 35 days of the end of the pleading period,

• of a list of documents that are or have been in the party’s possession or control,

• which could, if available, be used by any party of record at trial to prove or disprove a material fact [emphasis added], including

• all other documents to which the party intends to refer at trial,

• mandatory ongoing discovery of additional documents initially omitted through inaccuracy/incompleteness or arising through subsequent possession/control, by way of “prompt amendment” of the list of documents,

• the ability of a party to make demand for discovery of additional documents not set out on the list which “relate to any or all matters in question in the action” (the “old” test) provided justification is supplied, and

• prohibition of the use at trial of any document of which discovery has not been made.

[18] In short, Rule 7-1 contemplates a two-tier document discovery process involving:

1. initial discovery that may be relatively narrow; and

2. further discovery on demand of broader classes of documents.

The First Tier

[19] The first tier of document discovery applies the “probative of material facts” test. It is much more narrow than any Peruvian Guano “direct/indirect, relating to matters in question/train of inquiry possibility” test.

[20] The concept of “material facts” requires a careful analysis and understanding of the causes of action/defence in each case. Each cause of action, whether it is negligence, breach of contract, conspiracy or simple debt, is broken down into constituent elements i.e. the components that must be established on the evidence in order to make out the cause of action/defence. The factual underpinnings of these elements are the “material facts” and to the extent that they can be proved/disproved by way of documents, the latter are the documents that must be initially disclosed under Rule 7-1(1).

[21] Under the new rules, plaintiffs and defendants must plead the “material facts”. Part 1 of the notice of civil claim requires the plaintiff to “set out a concise statement of the material facts giving rise to the plaintiffs claim”. A defendant’s response to civil claim must admit, deny or disclaim knowledge of those facts, must set out the defendant’s own version of the facts including any additional “material facts relevant to the matters raised”.


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[22] Hence, reference to the facts that have been specifically pleaded in the pleadings can assist in determining what are the “material facts” in relation to which document discovery must occur. If the pleadings are poorly drafted or otherwise inadequate, careful analysis of the material elements of the cause of action sought to be pleaded will be required to “inform” the proper document discovery process.

The Second Tier

[23] Subsections 7-1(10) and (11) provide for the second tier of the new document discovery process. They allow a party to demand the listing/production of additional documents or classes of documents beyond what has already been disclosed. But there is a major difference between the two subsections, namely,

• a demand under Rule 7-1(10) is for additional documents that should have been disclosed under subrule (1) i.e. documents that are probative of a material fact or any other document to which the party intends to refer at trial, whereas

• the additional documents that may be demanded under Rule 7-1(11) are for such additional documents within the listing party’s “possession, power or control” and which “relate to any or all matters in question in the action” i.e. the Peruvian Guano discovery under the former rules with the addition of the word “power”.

[24] A demand for broader discovery of documents under Rule 7-1(11) must be accompanied by:

• a written demand identifying additional documents or classes of documents with reasonable specificity, and

• an indication of the reason why such additional documents or classes of documents should be disclosed in the case.

[25] This “two-tiered” process of initial narrow discovery of documents followed by broader discovery of documents upon justifiable demand requires a rigorous assessment of the adequacy of any party’s discovery of documents. Casual, pro-forma approaches should be avoided. Counsel have an ethical and professional duty to be diligent and to act with scrupulous integrity with respect to the pursuit and assessment of what documents must be produced and what documents need not be produced.

[26] Competent and ethical counsel can reasonably disagree in any given case on the materiality of certain facts or the relevance of documents related to such facts. Indeed, Rule 7-1 expressly contemplates such disputes being brought for and resolved by the court. But proper and professional conduct does not permit deliberate non-disclosure of documents which are required to be disclosed, nor knowing disregard of the Rules based on cynical assumptions respecting strategy or cost. The discovery of documents under the new rule demands good judgment and utmost integrity, perhaps even more so than in the past.

Application to the Present Case

[27] The two applications brought by the defendants are similar but not identical. The defendant Anderson seeks an order requiring the plaintiff to deliver a further amended list of documents listing “all of the documents described and listed in Schedule A” to the notice of application. Schedule A then lists 22 categories of documents; the descriptions are often general and lack focus e.g. “all emails and other correspondence between Alan Copping and Michael Menzies from August of 2010 to December of 2011”, or “all documents relating to the City of Coquitlam’s decision to terminate its parking management contract with the plaintiff, including, without limitation, a copy of the parking management contract and termination letter”.

[28] The demand is said to be made “in accordance with Rule 7-1(10) and (11)” without specifically identifying which category is demanded under which subrule. Since the test for additional production under each subsection is different, counsel should assist the court by specifically identifying which subsection applies to each additional


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document being sought. The lack of focus combined with the broad generality of document description is not helpful.

[29] Upon the hearing of the application, the court was advised that the applicant was no longer pursuing production of some 14 of the 22 categories of documents that had been listed. This was also the first time counsel for the plaintiff had been advised of that intention and, with some justification, he protested the time and expense that had thus been wasted.

[30] The remaining categories of documents in respect of which the defendant Anderson continues to seek further and better production by way of a further amended list of documents from the plaintiff include:

5. All communications services and inset or communications and correspondence between Alan Copping and the Plaintiff’s in-house counsel from April 2010 to December 2011 relating to Michael Menzies and the Consulting Agreement.

7. The complete file where the plaintiff kept a copy of the Menzies’ Consulting Agreement.

13. All emails and other correspondence between Alan Copping and Michael Menzies from August of 2010 to December of 2011.

16. All documents evidencing that Bentall Kennedy, Oxford Properties Group, Brookfield Office Properties, Abbotsford General Hospital, RCMP “E” Division site, the City of Harrison and the City of Kelowna were the Plaintiff’s customers or potential customers from August of 2010 to August of 2012.

17. All documents evidencing any and all profits and/or revenues generated by the Plaintiff as a result of work and services that it performed for Bentall Kennedy, Oxford Properties Group, Brookfield Office Properties, Abbotsford General Hospital, RCMP “E” Division site, the City of Harrison and the City of Kelowna.

18. Copies of all bids and proposals that the Plaintiff submitted to … Abbotsford Regional Hospital, RCMP “E” Division site, the City of Harrison and the City of Kelowna from August of 2010 to August of 2012 [additional names deleted at application].

19. Copies of any rejection and termination letter that the Plaintiff received from … Abbotsford Regional Hospital, RCMP “E” Division site, the City of Harrison and the City of Kelowna from August of 2010 to August of 2012 [additional names deleted at the application].

20. All communications and correspondence between the Plaintiff and the following companies and entities from August of 2010 to August of 2012: Bentall Kennedy, Oxford Properties Group, Brookfield Office Properties, Abbotsford Regional Hospital, RCMP “E” Division site, the City of Harrison and the City of Kelowna.

21. All documents relating to the City of Coquitlam’s decision to terminate its parking management contract with the Plaintiff, including, without limitation, a copy of the parking management contract and termination letter.

[31] For their part, the other defendants seek an order requiring the plaintiff to amend its list of documents to list three categories of additional material namely:

(a) Documents that evidence the allocation of responsibility for parking management activities (including, without limitation, violation issuance and enforcement, payment collection, upkeep and maintenance, staffing, security, and installation of meters) as between Impark and its affiliates and subsidiaries;


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(b) Documents that evidence Impark’s loss or damage, or lack thereof, associated with the defendants’ alleged competition including, without limitation, the following documents or categories of documents:

(i) Contracts or customers Impark had and that Impark alleges GoPark has acquired; and,

(ii) Records evidencing the financial performance of contracts or customers that Impark had and that Impark alleges GoPark has acquired including, without limitation:

(A) Financial statements for the period 2010 to present;

(B) Profit and loss statements for the period 2010 to present;

(C) General ledger excerpts for the period 2010 to present;

(D) Internal analyses and reports;

(E) Internal memoranda and correspondence; and,

(F) Correspondence with customers or former customers.

(c) Documents relating to Impark’s interest, or lack thereof, in any contracts or customers at issue in this litigation including, without limitation, strategic and marketing plans, business and financial projections, and proposals.

[32] The Notice of Application does not identify which subsection of Rule 7-1 the defendants are invoking. It merely refers to “Rule 7-1” without more. At the hearing, counsel advised that the application was being brought under Rule 7-1(10) but also stated that Rule 7-1(11) could also be invoked because it had issued to the plaintiff detailed correspondence outlining the rationale for the further production that was being demanded.

[33] The Anderson Notice of Application was filed August 30, 2013. The Notice of Application of the other defendants was filed May 7, 2014. The application record included six affidavits filed by four different legal assistants each attaching the numerous letters between counsel constituting the six-month bombardment of demands and replies respecting perceived inadequacies in document production. It is almost impossible to figure out from this material the current status of particular documents and particular demands, all of which has been muddied even further by the fact that examinations for discovery have been held since the first application was filed and which have resulted in yet further requests for additional material.

[34] Rule 7-1(11) requires that any written demand for additional documents or classes of documents must identify same “with reasonable specificity”. Where the demand is overly broad and vague, the “lack of specificity which characterizes [the] application is fatal to its success”: Lit v. Hare, 2012 BCSC 1918 at para. 68. In that case, the court noted at para. 68:

It is difficult for the court to adjudicate on a document production application where what is sought are “all documents not yet produced” in broadly defined categories.

[35] That observation applies with equal force to the applications in this case.

[36] The plaintiff has performed extensive document searches which are described in detail by counsel’s letter of September 18, 2013. The search for email material alone yielded approximately 3,800 documents and more than 9,000 documents if one included attachments to emails. All of this material was delivered to counsel and reviewed for materiality.


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[37] The letter goes on to state:

If, despite these extensive efforts, you still take the position that further document production is required from [the plaintiff], we are open to considering reasonable requests for specific searches for properly defined categories of material documents….

[38] Plaintiff’s counsel advises that Impark has repeatedly offered to conduct further document searches if the defendants provide a reasonable list of search terms and dates, yet this has simply not occurred.

[39] The plaintiff argues:

In spite of Impark’s substantial document search efforts, production of numerous documents that fall within these demands, and offers to conduct additional reasonable searches for properly particularized documents, Mr. Anderson claims Impark’s document production is somehow deficient. He provides no argument or evidence to support this point and has not pointed to a single document he believes exists but that has not been produced.

[Emphasis added.]

[40] I am inclined to agree that the lack of specificity in most of the demands is fatal to the application. However, there are two other points to be made.

[41] First, counsel advises that, except for the categories of documents relating to damages discussed below, there has been a diligent search for documents of the sort demanded by the defendants, that the documents in question have been reviewed and all appropriate production has been made under the rule. Earlier in these reasons I emphasized the professional conduct and ethical obligations of counsel in respect of the document disclosure process. I accept counsel’s assertion in this case that a diligent document search has been undertaken and that all available material has been produced. In such circumstances, particularly given the lack of specificity in the residual demands, there is no proper basis on which a further order should be made, whether pursuant to Rule 7-1(10) or (11).

[42] The application by Menzies/Coastal Pacific/GoPark is somewhat more specific. It identifies three categories of documents which are being sought namely:

1. documents relating to the allocation of parking management activities;

2. documents relating to Impark’s losses; and

3. documents relating to Impark’s interests in contracts or customers.

[43] With respect to the first category, the defendants argue the documents are material to the interpretation and enforceability of the non-competition clause in the Menzies’ consulting agreement that is central to the lawsuit. In particular they note the agreement prohibits involvement in “any undertaking competitive with the Business”, and that the term “Business” is defined to mean “activities carried on by [the plaintiff]”. Unlike other provisions in the agreement, there is no phrase including Impark’s subsidiaries or affiliates.

[44] The plaintiff responds that there is no allocation of parking management activities and types of customers as between Impark and its affiliates because the businesses simply do not operate that way. In other words, there are no documents to produce.

[45] Secondly, the plaintiff points to the totality of the language in the restrictive covenant (“notwithstanding the foregoing”, “including without limitation” etc.) and the generality of the prohibited activities means the defendants’ interpretation of the agreement lacks merit. I agree on both counts and find no basis for ordering for the production of this category of documents.


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[46] The second category of documents demanded by the defendants relates to Impark’s damages or losses sustained (or not sustained) as a result of the defendants’ conduct. It is claimed these “damages documents” may be relevant to the trial judge’s assessment of the appropriateness of an order for accounting and disgorgement as well as the claim for punitive damages. They say the plaintiff cannot by its surgical pleading “constrain the defendants, or the court for that matter, from inquiring into the appropriateness of any particular remedy”.

[47] The plaintiff replies that it is not seeking compensatory damages for its own actual losses but only disgorgement. The plaintiff has deliberately narrowed its pleadings to expressly remove claims for compensatory damages in tort based on the plaintiff’s own loss thereby rendering the latter subject irrelevant. It argues “a litigant is dominus litus and free to withdraw any particular relief sought” thereby eliminating the necessity for document discovery related to the relief in question, citing Fortunato v. The Toronto Sun (2001), 55 O.R. (3d) 371 (S.C.J.).

[48] In any event, the plaintiff says a breach of fiduciary duty claim does not require proof of actual loss or damage. The case law has consistently reaffirmed the principle that faithless fiduciaries must account for ill-gotten profits regardless of any loss to their principal: Canadian Aero Service Ltd. v. O'Malley, [1974] S.C.R. 592 at 622; Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574 at 618 and 657; Beyer-Brown& Associates Ltd. v. S & R Interiors Ltd., 2007 BCSC 327 at para. 52; and Strother v. 3464920 Canada Inc., 2007 SCC 24, [2007] 2 S.C.R. 177 at paras. 75-77.

[49] The plaintiff is frank in acknowledging it has expressly amended its pleadings to avoid production of its new confidential information. It says, in effect, “these defendants have already stolen our old/former confidential information, and we are simply not prepared to produce any new confidential information developed since their departure even though it means forgoing any remedy for compensatory damages”.

[50] Again, I find myself in agreement with the plaintiff’s argument. Because the relief sought is limited to disgorgement of monies received and not compensatory damages in tort, the extent of loss or damage actually sustained by the plaintiff as a result of the defendants’ allegedly illegal conduct has become irrelevant. To the extent it might affect any award of punitive damages, it is still open to the defendants to argue the plaintiff’s failure to adduce evidence in that regard means any such award should be negated or made in only a modest amount.

[51] The last category of documents in respect of which production is sought are those relate relating to the plaintiff’s interest, or lack thereof, in the contracts or clients secured by GoPark Management. The defendants say the Menzies consulting agreement actually permitted Menzies to pursue new business in competition to the plaintiff subject to the plaintiff’s prescribed rights of first refusal.

[52] Again, this argument must fail. The clause in question, paragraph 1.8 of the consulting agreement, makes it clear that the exception only applies “during the term” of the agreement, whereas the non-competition covenant applies for a period of two years following that term. The claim against the defendants, except for the allegedly “secret” June 2010 letter agreement eliminating the non-competition covenant, relates to the defendants’ conduct after the termination of their contractual relations with the plaintiff. The restrictive covenant carves out an exception for “deals” which were actually refused by the plaintiff in accordance with section 1.8 of the agreement while it was in force, but there was no evidence presented on this application as to the existence of any such “refused deals” and hence the whole issue is moot.

[53] For all of these reasons, the defendants’ applications for an order requiring the plaintiff to further amend its list of documents is dismissed. Given the plaintiff’s pleading machinations in response to the application when it was first filed, costs are not awarded to the plaintiff in any event of the cause but rather shall be in the cause.

WEEK 6: IBEW Local 213

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International Brotherhood of Electrical Workers, Local 213 v. Hochstein

Court of Appeal for British Columbia Date of Judgment: August 13, 2009

Reasons for Judgment of the Honourable Madam Justice Newbury

[1] By writ and statement of claim filed in November 2002, the plaintiff, Local 213 of the International Brotherhood of Electrical Workers (the “Union”) sued four defendants, including the appellants Mr. Hochstein and the Independent Contractors and Business Association of British Columbia, for defamation. The Union objected to certain articles published in the local newspaper concerning its so-called “job targeting” or “market recovery” program, an attempt by the Union to compete more effectively by subsidizing some labour costs of unionized contractors, using funds received as “union dues”. The Union asserted that the publication falsely implied the program was an illegal tax evasion scheme that defrauded the federal and provincial governments of tax revenue.

[2] Prior to trial, various court orders were made regarding the production of documents by the Union regarding the market recovery program. One of those orders was appealed: see 2004 BCSC 310 and 2005 BCCA 44. Later, in response to further submissions made on behalf of the Union regarding the confidentiality of the documents it was required to disclose, the Court of Appeal reminded counsel by memo that “there is a strict rule enunciated in a case from this Court, Hunt v. T & N plc (1995), 34 C.P.C. (3d) 133, concerning the duty imposed on counsel and parties to litigation to preserve confidentiality of material produced in the litigation process. We would expect this law to be sedulously followed.” When providing documents to the defendants thereafter, the Union reminded counsel for the defendants that it “insisted upon strict compliance” with the undertaking of confidentiality and that it would “pursue all available remedies” if there was any breach of the undertaking. A written agreement between counsel concerning documents made no mention of the undertaking.

[3] The trial began in December 2006 and ended in March 2007. As part of its case, the Union introduced into evidence the following documents, as described by the chambers judge at para. 7 of his reasons:

(a) Spreadsheets (Numbers 10 and 11 from Exhibit 3) which identify contractors who applied for and received funding from the plaintiff’s market recovery program, the amount of funding the contractors were to receive from the market recovery fund, the total hours funded and the rate at which those hours were to be funded. The information contained in the spreadsheets was obtained from confidential letters of commitment prepared by the plaintiff’s officers and employees, and delivered to the contractors in respect of the electrical portion of work to be performed on particular construction projects. All communications between the plaintiff and the union contractors relating to the market recovery program were made on a confidential basis.

(b) The plaintiff’s annual financial statements from 1992 to 2002, which contained the amounts held in the market recovery fund and the annual expenditures made from the market recovery fund.

(c) Excerpts from the plaintiff’s newsletters to its members.

The chambers judge noted that no mention was made of the implied undertaking of confidentiality by counsel at trial. Nor did the defendants apply to be released from their undertaking, or suggest that upon the documents being marked as exhibits at trial, the undertaking would somehow expire or cease to have effect.

[4] Mr. Justice Groberman rendered judgment in the action on October 11, 2007. His Lordship held that the statements complained of by the plaintiff were not capable of supporting the defamatory meanings alleged by the Union and he dismissed the action. At the close of his reasons, he commented that it was unfortunate that the case had reached the Court and that:


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... Discussion of issues of public policy ought to be encouraged. The impugned statements in this case were primarily about taxation policy rather than about the plaintiff union. It is unseemly for the plaintiff to attempt to squelch such discussion through resort to a defamation action, even if the defendants have been careless in their statement of facts. Debates as to the correctness or falsity of the defendants’ assertions were properly a matter for public discourse. [At para. 37.]

No appeal was taken from the dismissal of the action.

[5] A few weeks later, the defendants advised counsel for the Union of their wish to “publicize” information contained in exhibits that had been filed at trial. Mr. Grant on behalf of the defendants invited Mr. McGrady to advise if he believed there was any basis in law for objecting to the proposed use of the material, so that the defendants could apply to the Court for directions. The Union did object, and in due course, the defendants applied in this action for a declaration that the exhibits described above (referred to as the “Documents”) had not been sealed and that public use of the Documents had not been restricted, and for an order releasing the defendants from any undertakings restricting disclosure of the Documents.

[6] The motion was not heard until May 20, 2008 – by which time the Supreme Court registry had notified the Union that the exhibits filed at trial would be destroyed at the end of the one-year statutory retention period if they were not claimed. Counsel for the Union picked up the Documents promptly upon receiving this notice.

The Implied Undertaking

[7] The implied, or court-imposed, undertaking of confidentiality precludes a party who has obtained documents on discovery, from using them otherwise than for purposes of the litigation in which they were obtained. The undertaking has been a settled aspect of the law of this province since this court’s decision in Hunt v. T & N plc (1995) 4 B.C.L.R. (3d) 110. Hunt has been followed in other provinces, including Ontario (see Goodman v. Rossi (1995) 125 D.L.R. (4th) 613 (Ont. C.A.)), Saskatchewan (see Laxton Holdings Ltd. v. Madill, [1987] 3 W.W.R. 570 (Sask. C.A.)), and New Brunswick (see Rocca Enterprises Ltd. v. University Press of New Brunswick Ltd., (1989) 103 N.B.R. (2d) 224 (Q.B.)), and was recently cited with approval in Juman v. Doucette 2008 SCC 8, [2008] 1 S.C.R. 157, at para. 27. In the latter case, Binnie J. for the Court noted two primary rationales for the implied undertaking. First, he said, a proper trial discovery is “essential to prevent surprise or ‘litigation by ambush’, to encourage settlement once the facts are known, and to narrow issues even where settlement proves unachievable.” Thus the rules of court of most jurisdictions compel litigants to answer all relevant questions posed on discovery, opening the gate to investigate what may be confidential documents in pursuit of allegations that may ultimately be found to have no merit at all. (Para. 24.) Second, Binnie J. noted:

A litigant who has some assurance that the documents and answers will not be used for a purpose collateral or ulterior to the proceedings in which they are demanded will be encouraged to provide a more complete and candid discovery. This is of particular interest in an era where documentary production is of a magnitude (“litigation by avalanche”) as often to preclude careful pre-screening by the individuals or corporations making production. See Kyuquot Logging Ltd. v. British Columbia Forest Products Ltd. (1986), 5 B.C.L.R. (2d) 1 (C.A.), per Esson J.A. dissenting, at pp. 10-11. [At para. 26.]

Both rationales, then, are aimed at ensuring full disclosure of all relevant documents is made prior to trial. Again in the words of Binnie J. in Doucette, disclosure of all relevant documents is required because the public interest in “getting at the truth” in a civil action outweighs the examinee’s privacy interest; but since discovery is compelled, the undertaking ensures that the invasion of privacy is generally limited to that purpose alone. (Para. 25.)

[8] Even so, the law also recognizes that there may be exceptional circumstances in which the public interest in full disclosure may be outweighed by some more compelling public interest, as discussed in Doucette at paras. 30-8. At para. 34, Binnie J. suggested that the following rule of court in force in Manitoba, Ontario and Prince Edward Island reflects the common law more generally:


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If satisfied that the interest of justice outweighs any prejudice that would result to a party who disclosed evidence, the court may order that [the implied or “deemed” undertaking] does not apply to the evidence or to information obtained from it, and may impose such terms and give such directions as are just. [At para. 34.]

[9] The law as to whether and when the implied undertaking comes to an end has been less discussed and has therefore been less clear – at least until recently. Since counsel on this appeal focussed on the state of the law on this point as at the commencement of the trial (December 2006), a brief review of the cases to which they referred us may be in order. Although the law on this point goes back much further (see the review of English and Canadian cases beginning at para. 18 of Goodman v. Rossi, supra), counsel took as their starting-point the decision of the House of Lords in Home Office v. Harman [1982] 1 All E.R. 532 (H.L.). It clearly and dramatically framed the debate concerning the use, for “extraneous” purposes, of confidential documents disclosed in pre-trial proceedings and introduced into evidence at trial. The plaintiff in the underlying action was a prisoner who was suing the Home Office in connection with his treatment in prison. The Home Office produced several documents prior to trial and warned the plaintiff’s solicitor, Ms. Harman, that it did not wish them to be used for general purposes of the prisoners’ rights organization to which she belonged. She replied that she was very well aware of the obligation not to use them for purposes other than the matter at hand. Over the first several days of trial, counsel for the plaintiff read out the material parts of 800 pages of the documents in court. The solicitor then proceeded to show the “bundles” of documents to a reporter, who published a newspaper article highly critical of the prison authorities. The Home Office sought relief, other than committal to prison, for contempt of court against the solicitor. The Court of Appeal upheld her conviction and certified the issue for the House of Lords as follows:

... whether a litigant’s obligation or undertaking implied by law in respect of the use which may be made of his opponent’s documents disclosed on discovery in the action is correctly defined as terminating if and when and to the extent that any such document is read out in open court in the course of proceedings in that action or is otherwise affected by such reading out. [At 310-11.]

[10] The majority of the House of Lords dismissed the solicitor’s appeal, with Lords Simon and Scarman dissenting. All three members of the majority gave separate speeches. Lord Diplock stated that the case was “not about freedom of speech, freedom of the press, openness of justice or documents coming into the public domain”, but was rather about “an aspect of the law of discovery of documents in civil actions in the High Court.” (At 299.) He noted, however, that the reason for the principle that civil actions must be heard in open court had been expressed by Lord Shaw of Dunfermline in Scott v. Scott [1913] A.C. 417 as a “spur to exertion” that “keeps the judge himself, while trying, under trial.” One “side-effect” of this principle, Lord Diplock noted, was that any document read out orally in court could be taken down in shorthand by anyone, even though it might later be ruled inadmissible. (At 303.) Lord Diplock observed – with some regret, it appears – the advent of “mechanical recording equipment” switched on as soon as a trial begins, although Ms. Harman, he said, had not sought to obtain a transcript of counsel’s five-day opening speech in the underlying case. Allowing counsel to read 800 documents out to the court was in his Lordship’s view indicative of “judicial turpitude”. He emphasized the failure of the trial judge to conduct the trial efficiently as the basis for concluding that the reading of a document in open court should not affect the implied undertaking. In his words:

… the judge who has control of the trial of the action and whose duty, as a member of the judiciary, is owed not only to the litigants in that particular action but also to litigants in other actions that are waiting to come on has a duty to see that time is not wasted. He ought to be chary of allowing written documents which he (or a witness) can read for himself much more quickly silently to be read aloud by counsel in their entirety instead of confining counsel to oral references to the most material parts of them. The reason for the rule in Scott v. Scott [1913] A.C. 417 is not to encourage such judicial turpitude; as Bentham put it one of the reasons for the rule is just the contrary. I would myself add this as a reason (additional to those based on the desirability of encouraging full and unreserved discovery of documents before trial that were given in the courts below) why public policy requires that the implied undertaking given by a solicitor to the court, on obtaining production of discovery of documents belonging to his own client’s adversary, that he will not take advantage of his possession of copies of those documents to sue them or to enable others to use them for some collateral purpose, does not terminate as respects each individual document at the very moment that that document, whether admissible or not, is actually read out in court. [At 306; emphasis added.]


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[11] Lord Keith discussed wider reasons of public policy in his concurring reasons. The implied obligation not to make “improper use” of discovered documents, he said, is directed not to the enforcement of the law relating to confidentiality but to the maintenance of the proper administration of justice. In his analysis:

There is good reason to apprehend that, if the argument for the appellant were accepted, there would be substantially increased temptation to a litigant to destroy or conceal the existence of relevant documents which would fall properly within the ambit of discovery. There is also reason to apprehend the introduction into proceedings of tactical manoeuvrings on either side designed to secure that discovered documents are or are not read out in full. Both these developments would be undesirable from the point of view of the proper administration of justice. [At 309.]

Lord Roskill, also concurring, noted that the principle of open courts admitted of no doubt, but that it was amply safeguarded by hearing in open court, “without the subsequent making available of any documents read in open court for a purpose which had no immediate connection with the litigation in question.” In his analysis, the notion that the undertaking terminates once a document is so read, militated against full and frank discovery. (At 326.)

[12] Lord Scarman on the other hand, speaking for himself and Lord Simon, questioned whether it could be good law “that the litigant and his solicitor are alone excluded from the right to make that use of the documents which everyone else may now make, namely to treat them as matters of public knowledge? In our view, this is not the law. We do not think that a system of law which recognizes the right of freedom of communication in respect of matters of public knowledge can decently or rationally permit any such exception.” (At 312.) In the minority’s view, the “general requirement of public justice and the right to freedom of communication” were overriding factors, and the anomaly of focussing on whether the documents had been read out in open court could be obviated by a rule under which documents would lose their confidentiality once they were exhibited as part of the public record at trial. (At 319.)

[13] I note that following the House of Lords’ decision, Ms. Harman applied to the European Commission of Human Rights to have the law in England changed. The government ultimately agreed to seek to amend the law to accord with the minority’s view, and in 1987, the English rules on disclosure and inspection of documents were revised to provide that the undertaking as to confidentiality ceases to apply to a document “after it has been read to or by the Court, or referred to, in open court, unless the Court for special reasons has otherwise ordered ...”. (See Bibby Bulk Carriers Ltd. v. Cansulex Ltd. et al. [1988] 2 All E.R. 820 (Q.B.) at 823-25.)

[14] Turning to British Columbia, this court in Hunt v. T & N plc, supra, did not refer specifically to whether or when the undertaking of confidentiality terminates. In 1997, in Discovery Enterprises Inc. v. Ebco Industries Ltd. [1998] 5 W.W.R. 435, 42 B.C.L.R. (3d) 192 (B.C.S.C.), Chief Justice Williams raised the question of whether in a chambers application the filing of a document or disclosure in court should be a “rationale for ending an implied undertaking which came about to protect the disclosing party from these documents being used for extraneous purposes.” He suggested that these and related questions should be fully considered by appropriate committees of the bench and bar rather than determined by a judge. In the absence of a rule of court, he said he would follow Harman. (At para. 31.)

…

[17] In May 2006, a few months before the trial began in the case at bar, the question arose in Doucette (Litigation Guardian of) v. Wee Watch Day Care Systems Inc. 2006 BCCA 262, 55 B.C.L.R. (4th) 66 whether the implied undertaking of confidentiality in a civil action could or should be varied to allow disclosure of discovery transcripts to the police, who were investigating a possible criminal offence. The civil action was being brought on behalf of a child who had allegedly suffered injury as a result of negligence on the part of a childcare worker. The childcare worker was to be examined for discovery. She sought an order restricting disclosure of the transcript and invoked the protection of the Canada Evidence Act, the British Columbia Evidence Act and the Charter at her discovery. A judge in chambers granted the Attorney General’s motion to vary the implied undertaking of confidentiality to allow her discovery evidence to be shown to the police. This court on appeal ruled that the chambers judge’s various rulings on the motions were premature and that if and when the childcare worker was charged with a criminal offence, it would be for the criminal court to decide whether “evidence obtained from the


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civil process can be admitted at her criminal trial.” In the course of her reasons, however, Kirkpatrick J.A. for the Court noted, also in obiter, that “the confidentiality of the discovery process in British Columbia evaporates once the evidence is tendered in court. The principle of open court, including … open court files, renders the confidentiality rule limited to the pre-trial process.” (Para. 80.)

[18] In Litton v. Braithwaite 2006 BCSC 1481, 61 B.C.L.R. (4th) 146, decided in October 2006, Halfyard J. expressed the view that this court’s statement of the law at para. 80 of Doucette had changed the law as held in Discovery and that accordingly, the implied undertaking of confidentiality did not apply to documents introduced at trial. (At para. 34.)

[19] Finally in this review of the law leading up to December 2006, in Xu v. Foo 2006 BCCA 525, 62 B.C.L.R. (4th) 132, Huddart J.A. expressed uncertainty on the point in obiter at para. 58 of her reasons dated November 23, 2006.

[20] Subsequent to the commencement of trial in the case at bar, any uncertainty as to whether the undertaking of confidentiality disappears once documents are adduced into evidence was largely dissipated by the Supreme Court of Canada’s judgment on the appeal in Doucette, reported as Juman v. Doucette, supra. The Supreme Court allowed the childcare worker’s appeal from this court’s order, concluding that it would be wrong for the police to be able to take advantage of statutorily-compelled testimony in civil litigation, thus undermining her right to silence and the protection against self-incrimination. Although the Court said that a non-party engaged in other litigation would have standing to seek to obtain a modification of the implied undertaking, the Attorney General’s application was rejected. The Court characterized his application as intended to “sidestep the appellant’s silence in the face of police investigation of her conduct. The authorities should not be able to obtain indirectly a transcript which they are unable to obtain directly through a search warrant in the ordinary way because they lack the grounds to justify it.” (Para. 58.)

[21] More importantly for purposes of this case, the Court in its discussion of the implied undertaking stated at para. 25 that the “general idea, metaphorically speaking” is that “whatever is disclosed in the discovery room stays in the discovery room unless eventually revealed in the courtroom or disclosed by judicial order.” Further, the Court wrote at para. 51 that “When an adverse party incorporates the answers or documents obtained on discovery as part of the court record at trial, the undertaking is spent ...” (my emphasis), citing Lac d’Amiante, supra, and Shaw Estate v. Oldroyd 2007 BCSC 866 at paras. 20-2. The Court continued:

It follows that decisions to the contrary, such as the decision of the House of Lords in Home Office v. Harman ... should not be followed in this country. The effect of the Harman decision has been reversed by a rule of change in its country of origin. [At para. 51.]

In Doucette itself, since the civil action had settled in 2006, the undertaking was said to continue to bind the respondent, thus preserving the appellant’s privacy interest indefinitely.

…

ON APPEAL

[25] On appeal, the defendants submit that the chambers judge erred in holding that the law with respect to the implied undertaking was uncertain at the time of trial; in holding that the Court retained jurisdiction to impose a “new” undertaking on the defendants after the undertaking had come to an end; and in imposing an undertaking in the circumstances of this case. The defendants say that at the time of commencement of trial in this case, the law was not uncertain, having been clearly stated in Lac d’Amiante, Re Down, Doucette and Litton. Those cases relied upon by the Union to illustrate uncertainty are, counsel says, distinguishable. In Discovery, the proceedings were interlocutory; in Xu v. Foo, the documents in question had never been tendered at trial, and in both cases the Court’s comments regarding the termination of the obligation of confidentiality were entirely obiter.

[26] Mr. McGrady for the defendants naturally relied on Discovery and the cases cited therein by Williams C.J.S.C. – Wirth Ltd. v. Acadia Pipe and Supply Corp., (1991) 79 Alta. L.R. (2d) 345 (Q.B.), where it was said that


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whether or not the undertaking ends when the information is read out in open court “has not been determined”; Lubrizol Corp. v. Imperial Oil Ltd., (1990) 39 F.T.R. 43 (Prothonotary), which relied heavily on Harman, supra; and Sezerman v. Youle (1996) 135 D.L.R. (4th) 226 (N.S.C.A.), where the Court was not prepared to “follow the rule-makers in England” who had overruled Harman. As well, Mr. McGrady notes that I denied leave to appeal Chief Justice Williams’ decision in Discovery: see [1998] B.C.J. No. 183, 103 B.C.A.C. 261.

[27] All of these cases, of course, pre-dated Lac d’Amiante, Re Down and Doucette (C.A.). Had they been examined, they would have suggested that the weight of authority ‒ albeit mostly obiter dicta ‒ by late 2006 supported the proposition that the deemed undertaking “evaporated” once the documents or transcripts were adduced into evidence at trial. Although an argument might have been made to the effect that Lac d’Amiante was restricted to the province of Quebec and that this court in Doucette did not refer to Lac d’Amiante in any event, the better view would have been that this court correctly stated the law in Doucette, and was followed in Litton. At the very least, the law was such that a party relying on the continuation of the implied undertaking after trial would have been alerted to the advisability of seeking a sealing order when the documents were tendered into evidence. All of this, of course, is in addition to the usual rule, referred to earlier, that courts do not change the law but declare it. The conclusion therefore seems inescapable that at all material times in this proceeding, the deemed undertaking was one that would likely terminate upon the entry of the Documents as exhibits in the trial record.

[28] But there is more a fundamental reason why the deemed undertaking cannot in my view now be relied on by the Union – the fact that it was not the ‘adverse party’, but the Union itself, who introduced the Documents into evidence as part of its own case at trial. None of the authorities to which we were referred supports the continuation of the undertaking, binding on the party against whom the documents were used (here, the defendants), in such circumstances. The policy rationales that found the obligation – the prevention of surprise at trial, the encouragement of settlements, the desirability of narrowing issues prior to trial and generally the public interest in “complete and candid” disclosure – become irrelevant once the party asserting confidentiality elects to enter the Documents as exhibits in an open courtroom, even if he or she did also disclose them in discovery. Using the facts in Harman as an illustration, suppose that no discovery of documents had taken place but the Home Office had itself put the records into evidence. There would be no issue of continued confidentiality – the Documents would have become public by the act of the party who previously asserted a privacy interest in them. Similarly here, the Union elected to make the Documents public and cannot be said to be prejudiced if the defendants, like any other member of the public, use them for other purposes. The fact the Union disclosed the Documents prior to trial does not, in my respectful view, alter this fact. What happened in the discovery room is superseded by what the Union did in the courtroom.

[29] In the result, I consider that the chambers judge exercised his discretion on the basis of a misapprehension of principle – that the defendants in this case continued to be bound by the deemed undertaking in respect of Documents adduced into evidence by the Union itself the party claiming a privacy interest. Furthermore, even if the defendants had entered the Documents into evidence, the obligation would have terminated at that time in accordance with the law reviewed above.

[30] In the result, I would allow the appeal and grant a declaration in the terms sought by the defendants in the notice of motion dated December 14, 2007.

“The Honourable Madam Justice Newbury”

I Agree:

“The Honourable Mr. Justice Low”

I Agree:

“The Honourable Mr. Justice K. Smith”

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Hodgkinson v. Simms British Columbia Court of Appeal Judgment: December 13, 1988

The judgment of the Court was delivered by McEachern C.J.B.C., allowing the appeal; concurred in by Taggart J.A. Dissenting reasons for judgment delivered by Craig J.A.

MCEACHERN C.J.B.C.: - This appeal is concerned with an important practice question relating to the privilege of a solicitor’s brief, particularly whether photocopies of documents collected by the Plaintiff’s solicitor from third parties and now included in his brief are privileged even though the original documents were not created for the purpose of litigation.

The Plaintiff alleges that he invested substantial funds in MURB projects on the advice of the Defendant accountants. The investments not having turned out as expected, the Plaintiff alleges various breaches of duty including the acceptance by the Defendants of secret commissions from the MURB developers, and negligence in the advice upon which the Plaintiff says he relied. These investments were made in 1980 and 1981.

The Defendants have moved their offices four times since these investments were made and there have been mergers with other firms and departures of accountants within this firm, as a consequence of which the Defendants say they do not have complete files on some or all of these transactions.

The Plaintiff’s solicitor, however, has conducted investigations in the course of which he has obtained photocopies of numerous documents said to be relevant to the issues in the action for which he claims privilege. The Plaintiff says the Defendants could find these documents for themselves but the Defendants, without making very serious investigations, say they are entitled to see the documents the Plaintiff’s solicitor has “ingathered” into his brief as they are not privileged.

These documents have been mentioned in the Plaintiff’s Supplementary List of Documents in the following terms:

“ Documents obtained by the Solicitor for the Plaintiff after this litigation arose for the dominant purpose of preparing for this litigation and forming a part of the Plaintiff Solicitor’s brief ..........”

Following the above are 31 separate items which may be illustrated by quoting just a few:

“1. 80 06 12 to 84 01 15 64 photocopied documents

2 Undated 2 photocopied documents

3. Undated 4 handwritten documents (photocopies)

..........

80 09 02 to 85 12 03 15 photocopied documents

..........

26. Various 7 photocopied documents”

It is apparent that a serious question of practice arises. The Defendants say there is no privilege for copies of unprivileged documents and for that reason, and for the further reason that there is said to be a general trend toward full disclosure and the avoidance of ambush, the Plaintiff must disclose these documents.

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The Plaintiff says such copies are privileged and that great mischief will result if, in an adversarial system, counsel of one party is entitled to “dip” into the solicitor’s brief of opposing counsel.

The learned Chambers judge, in a careful judgment, applied the dominant purpose theory. He concluded (at Appeal Book pp. 57-9):

“ For a ‘communication’ from a third party to attract the privilege, he who has caused it to come into being (its genesis) must have done so with the dominant purpose of its being used by the solicitor in the matter of his forming an opinion with respect to an issue or issues arising in litigation already underway or of litigation of which there is a reasonable prospect of becoming underway. Shaughnessy Golf & Country Club v. Uniguard Services Ltd. (1986), 1 B.C.L.R. (2d) 309 (C.A.) and Lust v. Lewis, [1987] B.C.J. No. 2480 (Vancouver Registry CA008155, November 27, 1987). ..........

It is manifest that whoever was the author of the original documents whose existence Mr. Walsh has uncovered, and of which he holds copies, that author did not create them with the dominant purpose of their being used in this litigation. Mr. Walsh ingathered them with that dominant purpose, but he was not their creator. Accordingly, they do not satisfy the dominant purpose test and were it not for certain authorities to which I am about to refer, I would not hesitate to hold that these copies held by Mr. Walsh are not entitled to the protection of the privilege.”

The Chambers judge went on to discuss a number of authorities, particularly Lyell v. Kennedy (1884), 27 Ch.D. 1 (C.A.); Re Hoyle Industries Ltd. et al., [1980] C.T.C. 501, 80 D.T.C. 6363, (F.C.T.D.); Crown Zellerbach v. Deputy Attorney General of Canada, [1982] C.T.C. 121, 82 D.T.C. 6116 (B.C.S.C.), which appear to support the claim to privilege but nevertheless concluded there is a material distinction between collections of documents which were in issue in those cases and the copies of documents in dispute in this case. At p. 61 he said:

“It seems to me that there is a material distinction between the ‘documents’ collected in these tax cases and the copies of the ‘documents’ (other than the ‘Communications’ referring to these ‘documents’) in gathered by Mr. Walsh. The former were ‘Communications’, properly speaking, as described by Esson, J. in Crown Zellerbach, supra, at p. 123, whereas the latter never were.”

I do not find it helpful to approach this question of privilege just from the perspective of “communications.” Privilege attaches in proper cases to conventional communications where information is transferred from a client to his solicitor and vice versa by letter or conversation, but other documents such as cheques, invoices, legal bills and many other commercial or non-commercial documents may also be privileged even though they convey information or ideas indirectly. For example, a cheque may be evidence of a secret commission, or it may be completely innocent, but it is not a conventional communication. For that reason, I would not support the distinction which apparently found favour with the Chambers judge.

Similarly, I do not find it helpful to attempt a distinction between solicitor privilege and the “lawyer’s work product” that was recognized by the United States Supreme Court in the leading case of Hickman v. Taylor (1946), 329 U.S. 495, and which distinction some commentators attempt to extract from some of the cases: “Civil Litigation Trial Preparation in Canada,” Neil J. Williams, 1980, 58 C.B.R. 1 at p.50. “Lawyer’s work product” is a convenient term to describe the kinds of material that, subject to controlling authorities such as Voth, infra, are protected by privilege, but I see no need to recognize a separate category of immunity against production.

The learned Chambers judge also perceived a policy, said to be approved by this Court, of moving “.......... from privilege to complete disclosure.” This is said to arise from two unreported decisions of this Court which are mentioned in Wipfli et al. v. Britten et al., which is also unreported, C781186, Vancouver Registry, May 15, 1979 (B.C.S.C.).

The first of these decisions, Gergely et al. v. Ellington, CA1978/747, September 11, 1978, was a case where the defendant driver, who had vision difficulties, was ordered to submit to a medical examination and to submit his eyeglasses for inspection and analysis.

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The second case was Blackstock v. Patterson et al., CA780814, November 3, 1978, where there was a question about who was driving a vehicle, and certain portions of a damaged motor vehicle, which carried signs of human blood and hair, were ordered produced for inspection and analysis.

The Wipfli case related to an application to have the plaintiff, a birth-damaged child, examined by a physician appointed by the defendants.

In each of these three decisions there are pronouncements about the advantages of full disclosure. In Gergely the Court stated that the modern philosophy is that trials by ambush should be avoided and there should be full disclosure. It is said that both sides should be fully informed of the other’s case for two purposes: (1) to prevent ambush if a trial does take place; and (2) to facilitate settlement before proceeding to trial on known facts.

I pause to say that I have difficulty with the word “ambush” in connection with this case. Documents to be relevant would have to relate to the transactions in question and the Defendants are just as able as the Plaintiff to make the enquiries necessary to discover these documents. One who seeks to ambush another does not disclose that fact in advance.

While I have no hesitation associating myself with the fullest possible disclosure, it seems to me with respect that the cases cited are not authority for the proposition that privilege must give way to disclosure. In fact, the cases cited do not deal with solicitor’s privilege at all. There are strong and valid reasons for privilege which should not lightly be diluted, and conflicting policies, even where they collide head-on, often co-exist, with one subject to the other. While I favour full disclosure in proper circumstances it will be rare, if ever, that the need for disclosure will displace privilege.

In my view it is highly desirable to maintain the sanctity of the solicitor’s brief which has historically been inviolate. The cases are replete with explanations for such a privilege. In Susan Hosiery v. M.N.R., [1969] 2 Ex. C.R. 27 (F.C.T.D.) at pp. 33-34, Jackett, P., in a much quoted passage, said:

“Turning to the ‘lawyer’s brief’ rule, the reason for the rule is, obviously, that, under our adversary system of litigation, a lawyer’s preparation of his client’s case must not be inhibited by the possibility that the materials that he prepares can be taken out of his file and presented to the court in a manner other than that contemplated when they were prepared. What would aid in determining the truth when presented in the manner contemplated by the solicitor who directed its preparation might well be used to create a distortion of the truth to the prejudice of the client when presented by someone adverse in interest who did not understand what gave rise to its preparation. If lawyers were entitled to dip into each other’s briefs by means of the discovery process, the straightforward preparation of cases for trial would develop into a most unsatisfactory travesty of our present system.”

With respect, I do not think the learned President has fully explained the reason for a solicitor’s privilege and I would place possible misunderstandings of context at the lower end of the scale of importance. More to the point, in my view, is the statement of Cotton, L.J. in Lyell v. Kennedy (1881), 27 Ch.D. 1 at pp. 18-19 where he said:

“Now the only privilege which can be claimed, and such as here the Defendant desires to claim, is what is called ‘professional privilege,’ that is to say, that if a man does not employ a solicitor he cannot protect that which, if he had employed a solicitor, would be protected; the reason for this privilege being, as has frequently been stated, that the English law being technical, the greatest facilities ought to be afforded to every one who is involved in litigation to consult a solicitor and to receive from his solicitor communications which shall be privileged, and to enable the legal adviser of the party employing him to make a sufficient investigation, and so obtain the fullest means of ascertaining what advice he shall give as to the course to be adopted, without affording the opportunity to an opponent of prying into those communications, those searches, those responses, which are according to English law all of a confidential character …”

To the same effect are the judgments in Anderson v. Bank of B.C. (1875) 2 Ch.D. 644 (C.A.) as follows:

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“Again, the solicitor’s acts must be protected for the use of the client. The solicitor requires further information, and says, I will obtain it from a third person. That is confidential. It is obtained by him as solicitor for the purpose of the litigation, and it must be protected upon the same ground, otherwise it would be dangerous, if not impossible, to employ a solicitor. You cannot ask him what the information he obtained was. it may be information simply for the purpose of knowing whether he ought to defend or prosecute the action, but it may be also obtained in the shape of collecting evidence for the purpose of such prosecution or defence. All that, therefore, is privileged.” (per Jessel, M.R. at p.p. 649-650)

“Looking at the dicta and the judgments cited, they might require to be fully considered, but I think they may possibly all be based upon this, which is an intelligible principle, that as you have no right to see your adversary’s brief, you have no right to see that which comes into existence merely as the materials for the brief.” (per James, L.J. at p. 656)

In my view the purpose of the privilege is to ensure that a solicitor may, for the purpose of preparing himself to advise or conduct proceedings, proceed with complete confidence that the protected information or material he gathers from his client and others for this purpose, and what advice he gives, will not be disclosed to anyone except with the consent of his client.

…

It is obvious, however, that everything a client says to a solicitor and everything a solicitor does or collects cannot be privileged and it is important to define, with as much precision as possible, what falls within and what falls outside the privilege.

There are really two overlapping questions here. The first problem relates to the dominant purpose rule and the second is whether solicitor’s privilege extends to the kind of documents in question on this application.

1. THE DOMINANT PURPOSE RULE

In Voth Bros. Construction (1974) Ltd. v. North Vancouver School District (1981) 29 B.C.L.R. 114 and Shaughnessy Golf & Country Club v. Uniguard Services Ltd. et al. (1986), 1 B.C.L.R. (2d) 309, this Court adopted the dominant purpose rule described in Waugh v. British Railways Board, [1980] A.C. 521 (H.L.) . That rule is stated in the following terms:

“..........a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection.”

It is conceded by Plaintiff’s counsel that the original documents he discovered in his investigation, being documents which were created before litigation was anticipated, and not for the purpose of litigation, are not privileged and he asserts no claim in that behalf.

It is also apparent in my view that the photocopies of these unprivileged documents, resting in Mr. Walsh’s brief, were produced or brought into existence with the dominant purpose of being used in the conduct of litigation.

Mr. Urquhart argues that a copy of a pre-existing unprivileged document cannot become privileged by being added to counsel’s brief. Mr. Walsh disagrees. It is necessary to turn to the second question.

2. DOES SOLICITOR’S PRIVILEGE EXTEND TO THESE COPY DOCUMENTS?

The starting point in any discussion of solicitor’s privilege is Lyell v. Kennedy (No. 1), supra, the facts of which are significantly close to the facts of this case. It was a pedigree action where the solicitor for a party procured

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copies and extracts from certain entries in public registers and also photographs of certain tombstones and houses, for all of which privilege was claimed.

This claim to privilege was challenged but the Court of Appeal upheld the privilege. Cotton, L.J. at pp. 25-26 said:

“What ought we to do here? Here is a litigation about pedigree and the heirship to a lady who died many years ago; and it is sworn by the Defendant that for the purpose of defending himself against various claimants he has made inquiries, and that he has obtained every one of those documents for the purpose of protecting himself, and that he has got them, not himself personally, but that his solicitors have got them, for the purpose of his defence, for the purpose of instructing his counsel, and for the purpose of conducting this litigation on his behalf. Now no case has been quoted where documents obtained under such circumstances have been ordered to be produced. In my opinion it is contrary to the principle on which the Court acts with regard to protection on the ground of professional privilege that we should make an order for their production; they were obtained for the purpose of his defence, and it would be to deprive a solicitor of the means afforded for enabling him to fully investigate a case for the purpose of instructing counsel if we required documents, although perhaps juris in themselves, to be produced because the very fact of the solicitor having got copies of certain burial certificates and other records, and having made copies of the inscriptions on certain tombstones, and obtained photographs of certain houses, might show what his view was as to the case of his client as regards the claim made against him.”

Mr. Walsh argues that there is no proper distinction between a photograph of an unprivileged tombstone and a photocopy of an unprivileged document, provided of course that they are both obtained for the purposes of litigation.

In the same case, Bowen, L.J. at p. 31 said:

“Then comes the point as to documents, and as to the documents, I agree with everything that has been said by the Lord Justice. We are not dealing now with documents which the party has procured himself; we are dealing with documents which have been procured at the instigation of a solicitor; and, bearing in mind, the rule of privilege which the law gives in respect of information obtained by a solicitor, it seems to me we cannot make the order asked for by Mr. MacClymont without doing very serious injustice in this case. A collection of records may be the result of professional knowledge, research, and skill, just as a collection of curiosities is the result of the skill and knowledge of the antiquarian or virtuoso, and even if the solicitor has employed others to obtain them, it is his knowledge and judgment which have probably indicated the source from which they could be obtained. It is his mind, if that be so, which has selected the materials, and those materials, when chosen, seem to me to represent the result of his professional care and skill, and you cannot have disclosure of them without asking for the key to the labour which the solicitor has bestowed in obtaining them. I entirely agree, therefore, with what has been said, and without saying what ought to be done in another case, I am satisfied that in this case we could not make the order asked for without infringing the principle on which the Court acts, nor is it necessary to say what would be done as to any particular document if a right to inspection were made out.”

…

It is my conclusion that the law has always been, and in my view should continue to be, that in circumstances such as these, where a lawyer exercising legal knowledge, skill, judgment and industry has assembled a collection of relevant copy documents for his brief for the purpose of advising on or conducting anticipated or pending litigation he is entitled, indeed required, unless the client consents, to claim privilege for such collection and to refuse production.

I reach this conclusion because of the authorities cited which state the law accurately and authoritatively and because this does no violence to the dominant purpose rule established by Waugh and Voth, both supra. This

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conclusion merely extends the application of that rule to copies made for the dominant purpose of litigation. It follows that the copies are privileged if the dominant purpose of their creation as copies satisfies the same test (Voth) as would be applied to the original documents of which they are copies. In some cases the copies may be privileged even though the originals are not.

I would not wish it thought that the foregoing applies only to collections of copies. It could apply also to a single copy-document, or to a number of unrelated copies if they meet the test of Voth as I have described it.

Mr. Walsh adds a further argument with which I respectfully agree. He says that what the Defendants seek is not just to look at these copy-documents but also to look into counsel’s mind to learn what he knows, and what he does not know, and the direction in which he is proceeding in the preparation of his client’s case. That, in my view, would be a mischief that should be avoided.

I turn to another question which was argued before us. There is no doubt the onus of establishing privilege rests with the party claiming or alleging that a document is privileged: Steeves v. Rapanos [1982] 6 W.W.R. 244 (B.C.C.A.).

In this case the claim to privilege was made in the language quoted supra which was taken from Lord Atkin’s Court Forms and Precedents in Civil Proceedings, 1941, vol. 8, p. 49.

In my view the claim is adequately made in the Plaintiff’s Supplementary List. But the authorities are clear that the documents for which privilege is claimed must be sufficiently identified so that the Court may make an effective order for production in a proper case. I do not think the Plaintiff has sufficiently described the documents in its Supplementary List. The Plaintiff has a difficult problem in this connection because it does not wish to even hint at the nature or source of the documents. Presumably there is some order in the organization of the documents on the Supplementary List and I think it would be sufficient if the Plaintiff followed the practice with respect to each item in its list suggested in Lord Atkin’s 1983 edition, Vol. 15, p. 115 as follows:

“Letters .......... and copies .......... tied up in a bundle marked ‘A.B. 1’, numbered consecutively Nos. 1 - 26, the same being initialled by me.”

I do not suggest the documents must be described such as “letters”; “documents” would be sufficient. If this is done the parties will know that documents being produced by an order for production or at trial, if any, have been disclosed on the list.

But in the particular circumstances of this case I would not deprive the Plaintiff of its right of privilege because of an insufficient identification of the documents. The Plaintiff must, however, forthwith deliver an amended Supplementary List.

I would allow the appeal and dismiss the Defendants’ application for production with costs to the Plaintiff throughout.

MCEACHERN C.J.B.C.

TAGGART J.A.: - I agree.

CRAIG J.A. (dissenting): - The plaintiff appeals from the judgment of a judge in chambers ruling that copies of certain documents in his possession were not privileged.

The Chief Justice has set out the facts and circumstances in his reasons for judgment, and I will not repeat them except to the extent that I feel it necessary to illustrate why I have reached a different conclusion from my colleagues. I would dismiss this appeal. I would rigidly circumscribe the ambit of the lawyer brief privilege.

Rule 26(1) requires a party to an action to deliver, on demand, a list of documents which are or have been in his possession or control relating to any matter in question in the action and produce these documents. The courts

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have universally adopted the judgment of Lord Esher in Compagnie Financiere v. Peruvian Guano C2., (1882), 11 Q.B.D. 55 at 63 as determining when a document relates to a matter in question. Rule 26(2) provides that where a claim is made that a document is “privileged from production”, counsel must claim privilege for a specified document an .......... a statement of the grounds of the privilege”.

Counsel for the plaintiff relies on the case of Susan Hosiery Limited v. The Minister of National Revenue, [1969] 2 Ex. C.R. 27. At p. 33, Jackett P. stated that there were two principles involved in legal professional privilege. I will refer to them, briefly, as (1) solicitor-client privilege and (2) lawyer brief privilege (sometimes referred to as litigation privilege). According to Jackett P. the privilege under (2) relates to “all papers and materials created or obtained specially for the lawyer’s ‘brief’ for the litigation, whether existing or contemplated . ..........”

Although counsel for the plaintiff concedes that the original of the documents obtained from third parties are not privileged, he submits that the photocopies are privileged because they were obtained in the course of preparing the lawyer’s brief. I think that it is appropriate to recall what Wigmore said about solicitor and client privilege (adopted by the Supreme Court in Baker et al., [1976] 1 S.C.R. 254). In Vol. VII, (McNaughton Revision) s. 2285 p. 527, Wigmore states:

Looking .......... upon the principle of privilege, as an exception to the general liability of every person to give testimony upon all facts inquired of in a court of justice, and keeping in view that preponderance of extrinsic policy which alone can justify the recognition of any such exception .........., four fundamental conditions are recognized as necessary to the establishment of a privilege against the disclosure of communications:

(1) The communications must originate in a confidence that they will not be disclosed.

(2) This element of confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties.

(3) The relation must be one which in the opinion of the community ought to be sedulously fostered.

(4) The injury that would inure to the relation by the disclosure of the communications must be greater than the benefit thereby gained for the correct disposal of litigation.

Only if these four conditions are present should a privilege be recognized.

(author’s emphasis)

As the lawyer brief privilege is simply an aspect of solicitor-client privilege, I would circumscribe the ambit of the lawyer brief privilege by a reference to these four rules.

McCormick on Evidence (3rd ed) observes at p. 171 that the vast majority of the rules of evidence “.......... have as their common purpose the elucidation of the truth, ..........” He continues at p. 171:

By contrast the rules of privilege, .......... are not designed or intended to facilitate the fact finding process or to safeguard its integrity. Their effect instead is clearly inhibitive; rather than facilitating the illumination of truth, they shut out the fight.

In Waugh v. British Railways Board, [1979] 2 All E.R. 1169, Lord Edmund-Davies observed at p. 1182:

Justice is better served by candour than by suppression. For, as it was put in the Grant v. Downs majority judgment, “privilege .......... detracts from the fairness of the trial by denying a party access to relevant documents or at least subjecting him to surprise”

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(my emphasis)

Rule 1(5) states that “the object of these rules is to secure the just, speedy and inexpensive determination of every proceeding on its merits”.

In my view, we may attain this object only if we promote full disclosure and rigidly circumscribe the concept of privilege, including the lawyer brief privilege. I think that this has been the trend of the decisions of this court in recent years; Gergely et al. v. Ellingson (September 11, 1978, No. CA780747); Dufault v. Stevens et al. (1978), 86 D.L.R. (3d) 671; Bates v. Stubbs (1979), 101 D.L.R. (3d) 623; Blackstock v. Patterson et al. (1978), 95 D.L.R. (3d) 362; Voth Bros. Construction (1974) Ltd. v. North Vancouver S. Dist. No. 44 Board of School Trustees et al. (1981), 29 B.C.L.R. 114; Shaughnessy Golf & Country Club v. Uniguard Services Ltd. et al. (1986), 1 B.C.L.R. (2d) 309.

In Gergely, Chief Justice Farris gave the judgment of the majority. He said at p. 4 of his judgment:

I take the position that this Rule is remedial [Rule 30(1)(4)] and it is intended to give litigants the right to know each other’s case in advance. It is part of the modern philosophy that there should not be trials by ambush but that there should be full disclosure between the two parties in order (a) that the matter may be settled, without going to court, or (b) that, if it goes to court, there will be a trial with both sides being fully informed as to the other side’s case. Therefore, I think this Rule should not receive a restricted interpretation.

Members of this Court have referred to this passage with approval from time to time in the course of dealing with the object of the rules: see Bates v. Stubbs at pp. 629-30.

In the Voth Bros. Construction case, this Court adopted the approach of the House of Lords in the Waugh case, namely, that the test for privilege should be the dominant purpose test. In adopting the dominant purpose test for privilege, the House of Lords preferred the view of Barwick, C.J., who dissented, in the Australian case of Grant v. Downs (1976), 135 C.L.R. 674. The majority of the court in Grant v. Downs decided that privilege should only be granted to documents which were brought into being for the sole purpose of litigation. The House of Lords decided that the dominant purpose test enunciated by Barwick, C.J. was the more appropriate. The headnote in the report of Waugh to which I have referred above, accurately sets out what I think is the ratio of the case:

The court was faced with two competing principles, namely that all relevant evidence should be made available for the court and that communications between lawyer and client should be allowed to remain confidential and privileged. In reconciling those two principles the public interest was, on balance, best served by rigidly confining within narrow limits the privilege of lawfully withholding material or evidence relevant to litigation. Accordingly, a document was only to be accorded privilege from production on the ground of legal professional privilege if the dominant purpose for which it was prepared was that of submitting it to a legal advisor advice and use in litigation. Since the purpose of preparing the internal enquiry report for advice and use in anticipated litigation was merely one of the purposes and not the dominant purpose for which it was prepared, the board’s claim of privilege failed and the report would have to be disclosed.

(my emphasis)

At p. 1172, Lord Wilberforce made certain observations which I consider to be apt in this case:

. . before I consider the authorities, I think it desirable to attempt to discern the reason why what is (inaccurately) cared legal professional privilege exists. It is sometimes ascribed to the exigencies of the adversary system of litigation under which a litigant is entitled within limits to refuse to disclose the nature of his case until the trial. Thus one side may not ask to see the proofs of the other side’s witnesses or the opponent’s brief or even know what witnesses will be called: he must wait until the card is played and cannot try to see it in the hand.

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The fact that a party may be required to disclose the memorandum or statement of a prospective witness does not necessarily mean that person will be called as a witness. It does provide, however, an opportunity for counsel for the opposite party to investigate circumstances and to be prepared for the eventuality in case that person does testify.

Counsel for the defendant concedes that in this case he is not entitled to see the brief of counsel for the plaintiff but he submits that if the documents are not privileged, initially, they should be produced for discovery if they relate to a matter in question, otherwise the defendant will be taken by surprise at the trial. I agree with this submission. I reiterate that the object of the rules is set out in Rule 1(5) and that we can attain this object only by rigidly circumscribing the concept of lawyer brief privilege. I think that this principle is the essence of the decisions in the cases of Waugh, Voth Bros. Construction, and Shaughnessy Golf & Country Club.

There is no case which requires this Court to adopt the lawyer brief rule, to the extent proposed by counsel for the plaintiff, including the cases of Anderson v. Bank of British Columbia (1876), 2 Ch.D. 644 and Lyell v. Kennedy (1884), 27 Ch.D.1. The courts decided these cases over one hundred years ago, and they certainly do not manifest the so-called “modern” approach. I appreciate that in Watson v. Cammell Laird & Co., [1959] 1 W.L.R. 702 the Court of Appeal followed Lyell v. Kennedy, but I think that these decisions are not in accord with the avowed purpose of our rules as set out in Rule 1(5) and, certainly, are contrary to the decisions in Voth Bros. Construction and Shaughnessy Golf & Country Club.

I fail to comprehend how original documents which are not privileged (because they are not prepared with the dominant purpose of actual or anticipated litigation) can become privileged simply because counsel makes photostatic copies of the documents and puts them in his ‘brief”. This is contrary to the intent of the rules and to the modern approach to this problem. If a document relates to a matter in question, it should be produced for inspection.

I think that the chambers judge was right in considering that since the documents were not brought into being for the dominant purpose of getting advice from a lawyer, or for use in litigation (actual or anticipated) they were not privileged and that the copies should not be privileged even though they were used in the lawyer’s brief. Unless the party advancing a claim for privilege is able to depose that the documents owe their origin to the dominant purpose of obtaining legal advice or to conduct or aid in the conduct of litigation which at the time of its origin was in reasonable prospect, the court should refuse a claim for privilege: Shaughnessy Golf & Country Club I am not prepared to accept the proposition that documents which originally were not privileged should become privileged simply because they have become part of the lawyer’s brief in his preparation for trial.

The defendants submit, also, that the plaintiff has not sufficiently identified the documents for which he claims privilege in the list of documents. I agree with this submission.

Accordingly, I would dismiss the appeal.

CRAIG J.A.

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Keefer Laundry Ltd. v. Pellerin Milnor Corp. et al.

British Columbia Supreme Court Vancouver Registry Judgment: August 2, 2006 GRAY, J.:

I. INTRODUCTION

[1] Both the plaintiff and the defendant Pellerin Milnor Corp., which I refer to as Milnor, brought applications for production of documents. The applications raised practice issues regarding the appropriate evidence to be filed by a party resisting production of documents on the basis of privilege. The application also raised the issue of when the court should exercise its discretion under Rule 26(12) to examine a document to decide the validity of the claim of privilege.

[2] The plaintiff, which I sometimes refer to as Keefer, operates a commercial laundryfacility. Milnor manufactured commercial laundry equipment that was installed in Keefer’s premises. Keefer alleges that the equipment was unfit. It alleges that the equipment sometimes caused laundry to become torn, rusted, and oil-stained, and that the equipment failed to segregate the laundry between various batches and customers. Keefer sued Milnor for alleged breach of contract, including various guarantees and warranties, and breach of the warranties under the Sale of Goods Act, R.S.B.C. 1996, c. 410. Keefer also alleges that Milnor was negligent and made negligent representations about the equipment’s abilities.…

(b) Particular Claims of Lawyer-Client Privilege

[55] Lawyer-client privilege, also termed solicitor-client privilege, is the “highest privilege” recognized by the courts because communications between lawyers and their clients are essential to the effective operation of the adversarial justice system. Clients seeking legal advice must be able to communicate with lawyers without fear that their communications may be disclosed to anyone else. Otherwise they are likely to censor themselves, and their lawyers will be unable to accurately discern the legal issues involved or provide adequate representation before and during trial. (Smith v. Jones, [1999] 1 S.C.R. 455, 62 B.C.L.R. (3d) 209 at paras. 44-47).

[56] Lawyer-client privilege is a rule of evidence, a fundamental civil and legal right, and a principle of fundamental justice in Canadian law…

[57] The courts have continually affirmed that the protection of confidentiality provided by lawyer-client privilege must be as close as possible to absolute to ensure public confidence. As a class privilege, it does not involve a balancing of interests on a case-by-case basis. Disclosure of information subject to lawyer-client privilege must be ordered only when it is absolutely necessary to achieve the ends of justice. …

[58] A party asserting that a document is privileged bears the onus of establishing the privilege. (Hamalainen v. Sippola, (1991), 62 B.C.L.R. (2d) 254, [1992] 2 W.W.R. 132 (C.A.).)

[59] The applicable legal test is different for each of the three distinct kinds of lawyer-client privilege: Legal Advice Privilege, Litigation Privilege, and Lawyer’s Brief Privilege. Some of the confusion in this area of law arises from confusion between the different kinds of lawyer-client privileges.

(i) Milnor's claim of Legal Advice Privilege over documents #5, 20, 34, 37, 41-43, 47, 49-52, 54, 58, 82, 86, 94, and 95.


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[60] Not every item of correspondence passing between a lawyer and client is privileged. Privilege can only be claimed document by document, and each document must meet the following criteria: (i) a communication between lawyer and client; (ii) that entails the seeking or giving of legal advice; and (iii) that is intended to be confidential by the parties. (Solosky v. Canada, supra.) Legal advice is not limited to explanations of law; it includes advice as to what a client should do in a particular legal context.

[61] A lawyer is not a safety-deposit box. Merely sending documents that were created outside the solicitor-client relationship and not for the purpose of obtaining legal advice to a lawyer will not make those documents privileged. Nor will privilege extend to physical objects or “neutral” facts that exist independently of clients’ communications. (R. v. Murray, (2000), 48 O.R. (3d) 544, 186 D.L.R. (4th) 125.)

[62] Some facts that at first appear to be neutral may be held to be privileged. For example, lawyer’s fees may remain privileged because the fee charged may disclose information about the nature and extent of the lawyer-client relationship. (Maranda v. Richer, [2003] 3 S.C.R. 193, 2003 SCC 67.)

[63] Lawyer-client privilege only protects communications arising from the lawyer-client relationship. Casual discussions or conversations with someone who happens to be a lawyer are not privileged, nor is information shared with in-house counsel who is acting in the capacity of a business or policy advisor rather than as legal counsel… The lawyer must be acting in a professional capacity at the time the information is relayed, although no formal retainer is required before privilege will attach. …

[64] To determine whether the lawyer is acting in a professional legal capacity at the relevant time, the court will consider general evidence of the nature of the relationship, the subject matter of the advice, and the circumstances in which it was sought or rendered. (R. v. Campbell, supra.) However, lawyers asserting privilege must be careful to avoid providing so much information that it will constitute a waiver of the very privilege that is claimed. …

(ii) Milnor's claim of Litigation Privilege over documents #53, 60, 88, and 93.

[91] Litigation Privilege protects documents and communications made for the “dominant purpose” of preparing for ongoing or reasonably anticipated litigation, even if those documents are generated by third parties. …

[92] This Litigation Privilege operates in tandem with the Lawyer’s Brief Privilege to create a zone of privacy to facilitate adversarial preparation. Litigation Privilege has a narrower, more limited rationale than the privilege afforded to Legal Advice Privilege over confidential communications between lawyers and their clients. Although Litigation Privilege does protect the confidentiality of the lawyer-client relationship to some extent, the thrust of Litigation Privilege is the proper functioning of the adversarial system. The B.C. Court of Appeal has suggested that this means that even non-confidential information may be protected by Litigation Privilege if the relevant document was created for the dominant purpose of litigation. (College of Physicians of British Columbia, supra.)

[93] Because communications between lawyers and their clients are covered by Legal Advice Privilege, and communications and documents collected by lawyers from third parties for the purpose of formulating and giving legal advice to clients are covered by Lawyer’s Brief Privilege, Litigation Privilege is properly limited to communications between clients and third parties, and to documents created by clients or third parties, for the dominant purpose of pursuing litigation. However, communications between lawyers and third parties in the context of litigation are sometimes considered to be covered by Litigation Privilege, rather than Lawyer’s Brief Privilege, because they in fact are covered by both subsets of lawyer-client privilege.

[94] Reports from third parties are privileged if they are produced for the dominant purpose of furthering contemplated litigation. The courts will examine the true nature of the relationship of the third party to the litigation and the services rendered before recognizing privilege in third party communications. (College of Physicians of British Columbia, supra; Foster Wheeler Power, supra.)


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[95] Rule 40A of the Rules of Court requires disclosure of expert reports sixty days before the report will be tendered in evidence. The report remains privileged until it is disclosed, even if the party has consented to provide the report.

[96] Litigation Privilege must be established document by document. To invoke the privilege, counsel must establish two facts for each document over which the privilege is claimed:

1. that litigation was ongoing or was reasonably contemplated at the time the document was created; and

2. that the dominant purpose of creating the document was to prepare for that litigation.

(Dos Santos (Committee of) v. Sun Life Assurance Co. of Canada (2005), 40 B.C.L.R. (4th) 245, 2005 BCCA 4 at paras. 43-44.)

[97] The first requirement will not usually be difficult to meet. Litigation can be said to be reasonably contemplated when a reasonable person, with the same knowledge of the situation as one or both of the parties, would find it unlikely that the dispute will be resolved without it. (Hamalainen v. Sippola, supra.)

[98] To establish “dominant purpose”, the party asserting the privilege will have to present evidence of the circumstances surrounding the creation of the communication or document in question, including evidence with respect to when it was created, who created it, who authorized it, and what use was or could be made of it. Care must be taken to limit the extent of the information that is revealed in the process of establishing “dominant purpose” to avoid accidental or implied waiver of the privilege that is being claimed.

[99] The focus of the enquiry is on the time and purpose for which the document was created. Whether or not a document is actually used in ensuing litigation is a matter of strategy and does not affect the document’s privileged status. A document created for the dominant purpose of litigation remains privileged throughout that litigation even if it is never used in evidence. …

(iii) Milnor's claim of Lawyer’s Brief Privilege, Documents #3, 55, 57, 59, and 96-114.

[103] Lawyer’s Brief Privilege protects the lawyer’s work product, including any notes and information or reports collected to prepare for litigation or to give legal advice. If a group of unprivileged documents is collected, the collection itself becomes privileged. …

[104] This privilege is based on the theory that no one should be permitted to “look into the mind” of the lawyer as he or she is preparing a case. The purpose of Lawyer’s Brief Privilege is to ensure that the lawyer can make all necessary inquiries so that he or she is able to give the client complete advice and to properly prepare for litigation. (Hodgkinson v. Simms, supra.)

[105] In order for Lawyer’s Brief Privilege to attach, there must be an exercise of the lawyer's skill and judgment in assembling the allegedly privileged information.

…

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Dykeman v. Porohowski

2010 BCCA 36 The Honourable Madam Justice Newbury

[1] The plaintiff/appellant, Ms. Dykeman, was injured in two motor vehicle accidents, the first on September 5, 2000 (the accident involving the defendants Porohowski and Hothi), and the second on August 28, 2001 (involving the defendant Rogers). The plaintiff’s damage claims were tried by a jury over several days in late 2007 after the question of liability for the second accident had been settled in her favour. The jury awarded Ms. Dykeman total damages of $44,400, consisting of $15,000 for non-pecuniary damages, $4,400 for past income loss, $5,000 for special damages, $20,000 for costs of future care and nil for loss of income-earning capacity. Since the defendant Porohowski was found to be entirely at fault in respect of the first accident, he was ordered to pay one-half of the damages plus court order interest and one-half of the plaintiff’s assessable costs and disbursements.

[2] The plaintiff appeals the jury’s award on four discrete bases – namely that the jury’s verdict was “inconsistent” and should therefore be set aside; that the trial judge erroneously permitted the jury in effect to draw an inference adverse to the plaintiff due to her failure to call certain evidence; that the trial judge erred in refusing to put to the jury the plaintiff’s “in-trust” claim; and last, that he erred in allowing the defence to cross-examine her on various Internet postings which the plaintiff says had not been disclosed to her counsel prior to trial in accordance with R. 26 of the Supreme Court Rules. For the reasons that follow, I am of the view that the appeal must be allowed on the third and fourth grounds and that a new trial must be ordered.

Factual Background

[3] At the time of the first accident, Ms. Dykeman, then approximately 23 years old, was a passenger in the front seat of a vehicle being driven by Mr. Porohowski (whom she married three months later). He was attempting to leave a parking lot by making a left turn onto Highway No. 10 to proceed westbound. In the course of making the turn, he collided with a vehicle driven by the defendant Hothi, who was also travelling westbound on Highway No. 10. Ms. Dykeman, who had been wearing her seatbelt, struck her right temple on the passenger window and struck her right knee and ankle. She also suffered a vitreous detachment of her right eye and a neck injury.

[4] At the time of the second accident, Ms. Dykeman had been driving an extended cab truck heading north on 184th Street in Surrey. She had stopped at the four-way stop sign at 32nd Avenue and when it appeared safe to do so, proceeded through – at which point the vehicle driven by the defendant Rogers entered the intersection without stopping. The two vehicles collided.

[5] Immediately following the first accident, Ms. Dykeman felt some initial soreness and disorientation. She testified that the following day, she noticed blood on her pillow and went to a walk-in clinic, where the doctor suggested she go to the emergency room at Surrey Memorial Hospital. She was discharged without the necessity of a CT scan, as hospital personnel felt she did not have a serious enough concussion. She said she began to experience shooting pain down her neck, problems with depth perception and balance, “floaters” in the vision of her right eye, sensitivity to light, headaches and difficulty focussing. Although her knee, ankle and back problems cleared up, she continued to suffer headaches and pain in her neck and indeed alleged that most of her other symptoms were continuing even up to the time of trial seven years later. The low back and hip injuries she suffered in the second accident, on the other hand, were quite distinct from those suffered in the first and had largely cleared up by the time of trial.

[6] The plaintiff had been working at a restaurant in September 2000, but her passion was horseback riding and she had ambitions to become a “Grand Prix” show jumper. In late 2000, she and Mr. Porohowski had formed a partnership to carry on the business of providing agrarian and equestrian services. That partnership was dissolved in May 2001, but shortly thereafter, Ms. Dykeman and her parents formed another partnership under the name “Freedom Fields Farm”. It carried on the business of farming and equestrian activities (including horse-boarding) and required a great deal of time and labour. Ms. Dykeman claimed that due to the accidents, and particularly their

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effects on her balance and depth perception, she was limited in the duties she could perform on the farm and in her ability to ride and jump horses. How her injuries had affected her capacity to earn income was the subject of various reports and testimony from experts, including Dr. Shukett, a rheumatologist; Dr. O’Breasail, a psychiatrist; Dr. Van Rijn, a physiatrist; Dr. Hohmann, a vocational expert; Dr. Anderson, an ophthalmologist; Dr. Longridge, an otolaryngolist; Ms. Sharma, a vocational expert; Ms. Dobbin, an occupational therapist; Mr. Maynard, an expert on equestrian competition in Canada; Dr. Jones and Dr. Keyes, both neurologists; and Mr. Benning, an economist who provided calculations of estimated wage losses.

[7] The plaintiff claimed out-of-pocket expenses in the amount of $94,788.21 (much of which was attributable to wages paid to replacement workers in the equestrian operation) and future care costs of $476,817 as calculated by Mr. Benning. He also quantified the plaintiff’s “past and future wage loss” at $325,300 if she had 50% residual capacity and $451,448 if she had 25% residual capacity as a self-employed horse trainer/farm operations foreman. Subsequently, based on Mr. Maynard’s report concerning wages in the horse industry, Mr. Benning provided a further calculation that estimated Ms. Dykeman’s “past and future wage loss” as ranging between $1,205,192 and $3,796,811.

[8] The plaintiff also asserted an “in-trust claim”, which was duly pleaded, in respect of the “losses and labour” of her parents in providing assistance in the operation of the Freedom Fields Farm business. (As well, her parents were themselves plaintiffs in the action and claimed damages for having expended additional money and efforts in the business and otherwise as a result of Ms. Dykeman’s injuries and “inability to work after the accident”.) There was evidence that her mother, a psychologist, helped in the Freedom Fields business by giving tours of the farm, doing filing, answering the phone, and by babysitting once Ms. Dykeman had children. This entailed her delaying her planned return to the practise of her profession. Ms. Dykeman’s father was employed full-time during the week but did “whatever was needed” in the evenings and on weekends, to the extent of one to two hours per day. He estimated that he used up about $40,000 in vacation leave to support the farm enterprise.

[9] The plaintiff’s treating doctors, whose reports and diagnoses were based in large part on her subjective reports, were cross-examined extensively at trial. The defence position was that the appellant was suffering from soft tissue injuries that had never totally disabled her and which had little or no objective basis in terms of medical diagnosis; and that her claims that ‘but for’ the accident, she would have achieved considerable success and earned substantial income in the show jumping business were contradicted by other evidence and were exaggerated. Thus Ms. Dykeman’s credibility was clearly in issue, and the Internet postings on which she was cross-examined provided some basis for the defendants’ position that her injuries were less severe and less persistent than she had claimed, and that her earnings prospects prior to the accident had been much less promising than Mr. Benning’s reports had assumed.

…

Disclosure of “Internet Documents”

[32] The plaintiff’s fourth and final ground of appeal relates to the disclosure and use at trial of certain Internet postings by counsel for the defendant Mr. Porohowski. Mr. Gibb, counsel for the defendant Hothi, had purported to “list” these in Part III of his Form 93 as follows:

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Doc # Source Description Dates of Records

77 ICBC Diskette containing an index to the Plaintiff’s web postings

Various

78 Themanestreet.com Copy of bundle of printouts of articles regarding the Plaintiff’s horse business

Various

79 Various Copy of various pictures printed out from the internet regarding horse riding

Undated

80 Internet Copy of bundle of printouts of articles regarding advertising of the Freedom Fields Farm

Various

Plaintiff’s counsel had, he said, received this list only a few days before trial and had not sought production pursuant to Rule 26(8).

[33] The issue of disclosure arose in the context of Mr. Harris’ cross-examination of Ms. Dykeman. Mr. Harris began by soliciting her confirmation that she had posted various “writings” on a website known as “thewomensplace.ca” and on another entitled “themanestreet.ca” and had corresponded with various other members of those websites concerning her interest in and activities with horses. Mr. Harris then informed the trial judge that:

... I’d like to refer in the next part of my cross-examination to some of the website writings of the plaintiff. And the reason for doing so will appear. There are approximately 8000 such writings. ... I now propose to release privilege on those blogs for the purpose of the following questions and answers with the plaintiff. [Emphasis added.]

[34] Mr. Mussio on behalf of Ms. Dykeman objected that his client was being subjected to “trial by ambush” in that the documents in question had not been produced “within seven days of the trial” and he had not seen any of them or discussed them with his client. (Later he clarified that he had received Mr. Gibb’s list a few days before trial, when he had been out of town.) The jury was excused to permit counsel and the trial judge to discuss the matter further. Mr. Mussio submitted that the “real issue” was that because the documents had (he said) been “produced” (i.e., brought into existence) by Ms. Dykeman, they could not properly be the subject of solicitor’s brief privilege. As well, since the postings had not been properly disclosed, he was taken by surprise by Mr. Harris’ application to use them, or some of them, to cross-examine the plaintiff.

[35] For his part, Mr. Harris referred to Blake v. Gill (1996), 4 C.P.C. (4th) 158 (S.C.) and Williams v. Vancouver (City), 2006 BCCA 556, 60 B.C.L.R. (4th) 89, in support of his position that plaintiff’s counsel had been put on a “train of inquiry” by the index listed at item 77 of the Form 93. In any event, he contended, the plaintiff could hardly be taken by surprise by “writings” she herself had written.

[36] The trial judge issued his ruling after an adjournment. He began by recounting the factual background of the application. He rejected Mr. Mussio’s position that the defence had not produced a ‘list’ that properly disclosed the Internet items. In the trial judge’s analysis, “... discovery is met by the listing. As a separate step, there is production, and if a copy was required, that would have been obtained by request.” (My emphasis.) He declined to read R. 26(14) in conjunction with R. 40(13), presumably on the basis that an Internet posting did not qualify as a “plan, photograph or object”. (It is Rule 40(13) that contains a reference to a time-period ending seven days prior to trial.) After reviewing Blake v. Gill, supra; Robitaille v. Vancouver Hockey Club Ltd. (1981) 30 B.C.L.R. 286 (C.A.); Daruwalla v. Shigeoka (1992) 72 B.C.L.R. (2d) 344 (S.C.); Carol v. Gabrielle (1997) 14 C.P.C. (4th) 376

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(S.C.); Ball v. GAP (Canada) Inc. 2001 BCSC 824; and Jones, Gable & Co. v. Price (1977) 5 B.C.L.R. 103 (S.C.), the Court concluded:

As I noted when I came into the courtroom and Mr. Harris kindly provided me his blue folder of documents, I have now had the opportunity of looking through the plaintiff’s documents, or at least the web postings of various documents. I do not know how far counsel will go with them, but some of them plainly are very personal statements of a young lady that may or may not be used by counsel. Some are plainly relevant to the issues before the jury in terms of the nature of the injuries sustained by the plaintiff, how the injuries said to be sustained by the plaintiff affect her ability to ride horses or how well she rides a horse, and how much it may have affected her plans as she hoped them play out.

In Jones, Gable & Co. v. Price (1977), 5 B.C.L.R. 103 (SC) Anderson J. met one of the early cases where this situation arose, and there he directed that there be a brief adjournment. As he put it:

I believe that the ends of justice will be served by permitting counsel for the defendants to consult with Mr. Price in respect of the documents delivered ...

Anderson J. said this is not to be used as a precedent, but there is a very delicate balance in this case in terms of the plaintiff as a witness and the fact that it is a jury trial, and at least on my brief view of the documents, the ends of justice are best met by allowing the plaintiff and her counsel to view the documents.

It is now two o’clock. The plaintiff will only have until the end of the half hour to go over the documents, but that should be sufficient, and then we will resume the trial and I will permit Mr. Harris to use the documents, but plainly to keep focused on the issues at trial, the evidence she has given and where the documents are on point. There are plainly, on my very quick look at it, some very personal statements that have been made by the plaintiff, and there could be real prejudice, and I know I am in the hands of senior counsel here who I am sure will direct himself along that path.

So what I will allow, Mr. Mussio, is that you and Ms. Dykeman will have until 2:35 p.m. to review the document book so that she is aware of them. If there is an objection as to the authenticity of any of the documents, I want that to be brought to me forthwith, But other than that, then Mr. Harris will be permitted to cross examine on the documents. [At paras. 26-31; emphasis added.]

[37] Mr. Harris was permitted to introduce a book of Internet postings which was marked Exhibit D for identification only and which, we are now told, consisted of 124 pages of the “approximately 8000 writings” encompassed by the “list”. (Counsel are unable to agree whether the 124 pages contained 63 or 35 “articles” plus one photo.) Mr. Harris cross-examined Ms. Dykeman on 30 of the postings and made fairly extensive submissions to the jury on them and her testimony relating thereto.

[38] In this court, the plaintiff submits that the trial judge erred in allowing Mr. Harris to cross-examine her on the Internet postings and to use them in closing summations. Again it is said that the postings were not properly listed on any list of documents before trial and that accordingly, R. 26 was not complied with.

[39] The salient sub-rules of R. 26 provide as follows:

(1) A party to an action may deliver to any other party a demand in Form 92 for discovery of the documents which are or have been in the party's possession or control relating to any matter in question in the action, and the other party shall comply with the demand within 21 days by delivering a list, in Form 93, of the documents that are or have been in the party's possession or control relating to every matter in question in the action.

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...

(1.3) Documents to which there is no objection to production must be enumerated in a convenient order and include a short description of each.

...

(2) Where it is claimed that a document is privileged from production, the claim must be made in the list of documents with a statement of the grounds of the privilege.

(2.1) The nature of any document for which privilege from production is claimed must be described in a manner that, without revealing information that is privileged, will enable other parties to assess the validity of the claim of privilege.

...

(8) At any time a party may deliver a notice to any other party, in whose pleadings or affidavits reference is made to a document, requiring the other party to produce that document and, within 2 days, the other party shall deliver a notice stating a place where the document may be inspected and copied during normal business hours or stating that he or she objects to producing the document and the grounds of the objection.

…

(13) Where, after a list of documents has been delivered under this rule,

(a) it comes to the attention of the party delivering it that the list was inaccurate or incomplete, or

(b) a document relating to a matter in question in the action comes into the party's possession or control,

the party shall deliver forthwith a supplementary list specifying the inaccuracy or document.

(14) Unless the court otherwise orders, where a party fails to make discovery of or produce for inspection or copying a document as required by this rule, the party may not put the document in evidence in the proceeding or use it for the purpose of examination or cross-examination.

[40] Rule 26(2) and (2.1) were recently considered at length by this court in Stone v. Ellerman 2009 BCCA 294, 92 B.C.L.R. (4th) 203 in connection with a “pain journal” of the plaintiff over which privilege had been asserted. The journal was not specifically mentioned in the Form 93 but the plaintiff submitted it came within the phrase “notes and documents, correspondence, minutes of evidence, memoranda being the work product of plaintiff’s legal advisors” in respect of which privilege was claimed in Part III of the form. The Court found that the description was inadequate, since nothing in it would enable other parties to assess the validity of the claim of privilege or to anticipate that anything like a pain journal existed among the “notes and documents”, even in the most general terms. (Para. 22.) Chief Justice Finch for the majority elaborated:

The information that must be included in the description of a document over which privilege is claimed will vary depending upon the document, but it must be sufficiently described so that if the claim is challenged it can be considered by a judge in chambers: Babcock v. Canada (Attorney General), 2004 BCSC 1311, 246 D.L.R. (4th) 549, citing Visa International Service Assn. v. Block Bros. Realty Ltd. (1983), 64 B.C.L.R. (2d) 390 (C.A.).

In Saric v. Toronto-Dominion Bank, 1999 BCCA 459, Mr. Justice Hall, in chambers, cited Shaughnessy Golf and Country Club v. Uniguard Services Ltd. and Chahal (1986), 1 B.C.L.R.

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(2d) 309 (C.A.), for the proposition that the grounds for privilege have to be established in respect of each document which is said to be privileged. He added (at para. 12) “a litigant, (and presumably the court), has to have some proper basis upon which to determine issues of privilege as they relate to documents”.

It has been held that since Rule 26(2.1) came into force in mid-1998 the “bundling” of documents under a broad description is no longer sufficient and that each document must be listed separately. In Leung v. Hanna (1999), 68 B.C.L.R. (3d) 360 (S.C.), solicitor-client privilege was claimed over documents that were described as “documents marked P3 [through P10], the same having been initialled by the handling solicitor”. Mr. Justice Burnyeat found that each document had been listed separately as the new sub-rule required. He found that the descriptions themselves otherwise satisfied the requirements articulated in Hodgkinson v. Simms (1988), 33 B.C.L.R. (2d) 129, under the old rule, which permitted quite generic descriptions in favour of protecting privileged information. Burnyeat J. held that such descriptions – now of individual documents – remained sufficient under the new rule.

In Bajic v. Friesen, 2006 BCSC 1290, a master in chambers explained the decision in Leung this way:

It is clear from the decision of Mr. Justice Burnyeat that the sanctity, if you will, of solicitor/client privilege in his mind trumps any attempt to describe documents in part 3 such that they provide any conceivable understanding to the other party as to the nature of the document. It would appear it then forces a party concerned with the description or lack of same in part 3 to bring an application to the court which then leaves the judge or master hearing the matter to review the document and then conclude whether or not it is appropriately within part 3. [At paras. 23-6; emphasis added.]

[41] Applying these observations to the case at bar, can it be said that the descriptions reproduced above were such as to enable the plaintiff and her counsel, or a judge in chambers, to assess the validity of the claim of privilege? In my opinion, none of the items was sufficiently described for this purpose. Item 77, an index to the plaintiff’s “web postings”, could contain any number of “writings” posted on any number of websites, relevant or irrelevant to the case. With respect to item 78, one does not know who wrote the “articles” regarding the plaintiff’s equestrian business or the date of such articles; with respect to item 79, there is no description of the “pictures printed out from the Internet regarding horse riding”, where they are from or what connection, if any, the plaintiff had with them; and with respect to item 80, there is again no description of the “articles”, who wrote them or when. Counsel told the court below that the postings had all been written by the plaintiff, but even that was not apparent from the disclosure document. Thus I disagree with the trial judge’s ruling that the postings had been adequately “listed” for purposes of R. 26. (For a discussion of ‘e-discovery’ generally, see The Sedona Conference Working Group 7, The Sedona Canada Principle: Addressing Electronic Discovery (2008).) If the defence had been more forthcoming, counsel for Ms. Dykeman might well have challenged the claim of privilege asserted by Mr. Harris – via the Form 93 filed by Mr. Gibb.

[42] Assuming, then, that the defence failed to make proper discovery of the Internet documents, the next question is whether it can be said the trial judge nevertheless properly exercised his discretion under the opening words of R. 26(14) to permit Ms. Dykeman to be cross-examined on some of those documents. In Stone v. Ellerman, the majority stated that the factors relevant to the exercise of such discretion include the question of prejudice to the party being cross-examined, whether there was a reasonable explanation for the other party’s failure to disclose, whether excluding the document would prevent the determination of the issue on its merits, and whether in the circumstances of the case, the ends of justice require that the document be admitted. In this case, counsel did not provide any “explanation” for the non-descriptiveness of Mr. Gibb’s list and argued only that disclosure had been sufficient. The trial judge therefore had no explanation to consider, even if he had been of the view that the listing was deficient.

[43] It is difficult to square the trial judge’s ruling on this second question with his prior ruling that the documents had been properly disclosed or ‘listed’. If the latter was correct, there was no need to ‘balance’ the

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interests of justice in avoiding trial by ambush against the interests of justice in assessing Ms. Dykeman’s credibility by cross-examining her on the Internet postings. Given that her lawyer had only half an hour to discuss the 124 pages with her, it cannot be said with any certainty that she was not prejudiced by what transpired. At the end of the day, I am not confident that the apparent exercise of the trial judge’s discretion was fair to the plaintiff or rested on a correct understanding of the Rule. I would therefore allow the appeal on this basis as well.

…

[45] I would allow the appeal and order a new trial.

“The Honourable Madam Justice Newbury” I agree: “The Honourable Madam Justice Prowse” I agree: “The Honourable Mr. Justice Lowry”

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Kaladjian v. Jose

2012 BCSC 357

The Honourable Mr. Justice Davies

INTRODUCTION

[1] This judgment concerns an appeal from a decision of Master Baker dismissing the defendant’s application for the delivery of the plaintiff’s Medical Service Plan (“MSP”) Claim History Report by the Ministry of Health.

[2] The defendant submits that in refusing to order the production of the MSP report, Master Baker erred in his interpretation of Rule 7-1(18) of the present Rules of Court (the “present Rules”).

…

BACKGROUND

[4] The plaintiff seeks damages for injuries suffered in a motor vehicle accident in December 2008, for which the defendant has admitted liability.

[5] The plaintiff’s claims include claims for general damages for pain and suffering and loss of enjoyment of life, as well as past and future earnings losses, loss of homemaking capacity and cost of future care and management fees.

[6] Significantly for the purposes of this appeal, the plaintiff also claims to have suffered damages arising from the “exacerbation of injuries suffered in a 2002 motor vehicle accident.”

[7] Also important is the fact that the defendant included in his defence what I understand to be a standard pro forma plea alleging pre-existing injury in motor vehicle cases, stating:

Any alleged injury, loss, damage or expense was not caused by the collision, but is attributable to previous and/or subsequent accidents, injuries or conditions involving or affecting the plaintiff or congenital defects and/or pre-existing injuries or conditions and the defendant says further that the alleged collision did not aggravate any pre-existing injury or condition.

[8] Six months before filing the application for the plaintiff’s MSP records, a paralegal with the defendant’s solicitors wrote to counsel for the plaintiff concerning production of documentation related to the plaintiff’s claims.

[9] Included was a request for the plaintiff’s MSP records from January 1, 2003, to the present date as well as a “Pharmanet” printout from January 1, 2002, to the present date.

[10] Plaintiff’s counsel produced the clinical records of the plaintiff’s treating physician from November 28, 2002 to February 18, 2011, but refused to produce the MSP report “because it cannot be used by any party of record to prove or disprove a material fact”.

[11] The defendant then brought an application under Rule 7-1(18) for the production of the plaintiff’s MSP records. He did so before examining the plaintiff for discovery.

…

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ANALYSIS AND DISCUSSION

[34] I accept that, as drafted, former Rule 26(11) and present Rule 7-1(18) contain virtually the same wording in authorizing the court to order production by third parties to the parties to the litigation of relevant documents in the third party’s possession and control.

[35] “Documents” also has the same definition under the former Rules and present Rules.

[36] There is, however, a significant difference between the document production regimes established under former Rule 26 and present Rule 7-1.

[37] Under former Rule 26(1), a party was required to list:

… documents which are or have been in the party’s possession or control relating to any matter in question in the action, …

[38] Under Rule 7-1(1)(a), a party is now (at least initially) obligated to list only:

(i) all documents that are or have been in the party’s possession or control and that could, if available, be used by any party of record at trial to prove or disprove a material fact, and

(ii) all other documents to which the party intends to refer at trial, …

[39] That change has altered the test in British Columbia for determining whether any document or class of documents must now (at least at first instance) be disclosed.

[40] As stated by Edwards J. in Creed, the former broad test of relevance for disclosure purposes, emanated from the decision in Cie Financière du Pacifique v. Peruvian Guano Ltd (1882), 11 Q.B.D. 55 (Eng. Q.B.) [Peruvian Guano], which required disclosure of documents that “may fairly lead to a line of inquiry which may “either directly or indirectly enable the party...to advance his own case or damage the case of his adversary”

[41] Rule 7-1(1) changed that test for documentary relevance at first instance by requiring listing only of documents that could be used at trial to prove or disprove a material fact and documents the disclosing party intends to rely upon at trial.

[42] I say that the test of documentary relevance is changed “at first instance” because Rule 7-1 also provides processes by which broader disclosure can be demanded of a party under Rules 7-1(11) through (14) under which the court can decide whether, and if so, to what extent, broader disclosure should be made.

[43] In Crowe, Master Bouck discussed those processes in the context of the stated objectives of the present Rules. At para. 23 she stated:

[23] All of these Rules are to be interpreted in accordance with the objective of the SCCR:

1-3(1) The object of these Supreme Court Civil Rules is to secure the just, speedy and inexpensive determination of every proceeding on its merits.

(2) Securing the just, speedy and inexpensive determination of a proceeding on its merits includes, so far as is practicable, conducting the proceeding in ways that are proportionate to

(a) the amount involved in the proceeding,

(b) the importance of the issues in dispute, and

(c) the complexity of the proceeding.

[44] In specific reference to Rules 7-1(11) and (12), Master Bouck then went on to say at paras. 27 to 29:

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[27] … Those Rules contemplate a broader scope of document disclosure than what is required under Rule 7-1(1)(a). Indeed, the two tier process of disclosure (if that label is apt), reflects the SSCR’s objective of proportionality. In order to meet that objective, the party at the first instance must put some thought into what documents falls within the definition of Rule 7-1(1)(a)(i) but is not obliged to make an exhaustive list of documents which in turn assists in the “train of inquiry” promoted in Compagnie Financiere du Pacifique v. Peruvian Guano Co. (1882), 11 Q.B.D. 55 at pp. 62-63(Q.A.).

[28] Only after a demand is made under Rule 7-1(11) for documents that relate to any or all matters in question in the action and the demand for productions is resisted can a court order production under Rule 7-1(14). It should be noted that in this case, the demand (and indeed order sought) is for production of additional documents, not simply a listing of such documents: see Rules 7-1(1) (d), (e) and (f).

[29] The court retains the discretion under Rule 7-1(14) to order that the party not produce the requested list or documents. Again, the court must look to the objectives of the SCCR in exercising this discretion.

[45] I agree with those observations which are, in my view, equally applicable to the interpretation and application of Rule 7-1(18).

[46] The introduction of the concept of proportionality into the present Rules together with the need for a party to satisfy the court that additional document discovery beyond a party’s initial obligations under Rule 7-1(1) must inform the interpretation of Rule 7-1(18). It also satisfies me that cases decided under the former Rule 26(11) are of limited assistance in interpreting and applying Rule 7-1(18) in motor vehicle cases.

[47] It would, in my view, be arbitrary and inconsistent with the objects of the present Rules if the production of the records of a party to litigation in the possession of third parties were to be subject to a pleadings-only Peruvian Guano based test of relevance when more narrow tests govern the production of a party’s own documents.

…

[61] After considering the authorities and submissions of counsel, I have concluded that the pleadings continue to govern the determination of issues of relevance in relation to the scope of examination for discovery under the present Rules and will usually also govern issues concerning the initial disclosure obligations of a party under Rule 7-1(1), if challenged by a party under Rule 7-1(10).

[62] I have also concluded that the narrowing of the discovery obligations of parties and most particularly the removal of the Peruvian Guano “train of inquiry” test of relevance will generally require a defendant to provide some evidence to support an application for additional documents, whether demand is made under Rule 7-1(11) or Rule 7-1(18).

[63] A requirement for evidentiary support recognizes the difference between the scope of examination for discovery and the scope of document discovery under the present Rules and will allow considerations of proportionality to be addressed in specific cases.

[64] A requirement for evidentiary support in requests for additional documents and third party records also prevents against unwarranted “fishing expeditions” based solely upon pro forma pleadings.

[65] Decisions to the contrary under the former Rule 26(11) based upon a Peruvian Guano analysis and test of relevance may offer some assistance in the assessment of relevance for disclosure purposes under Rule 7-1(18), but they must now be read in accordance with all of the provisions of Rule 7-1, including Rule 7-1(14) and the objective of proportionality.

2) Lack of available evidence without MSP records

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[66] The defendant’s submission that in many cases evidence of pre-existing injuries will not be available to a defendant so that production of a plaintiff’s MSP records is necessary to enable a defendant to “evaluate a plaintiff’s claims and prepare for examination for discovery” also fails to recognize that the “train of inquiry” test of relevance from Peruvian Guano no longer applies to document discovery under Rule 7-1(1).

[67] Further, defendants have at their disposal other means by which to obtain information about the state of a plaintiff’s health prior to discovery.

[68] Foremost amongst those tools is the obligation of plaintiffs to produce documents that could be used by either party to prove or disprove a material fact. If indeed there is a relevant pre-existing condition as pleaded, a plaintiff’s relevant medical records will likely have been produced on the plaintiff’s initial list of documents under Rule 7-1(1).

[69] The extent to which there has been compliance with that obligation can be pursued at examination for discovery, and if evidence is obtained that can support an application for production of MSP records, such an application can then be made.

[70] The all too common pro forma pleading of a pre-existing condition by defendants is not sufficient without more to require disclosure of MSP records which may prove to be wholly irrelevant to the injuries allegedly suffered by the plaintiff.

3) Efficiency and minimal invasion of privacy

[71] The defendant has also submitted that due to the nature of plaintiffs’ MSP records, production of them will be an efficient and cost effective means of assessing the plaintiff’s pre-accident condition and that any intrusion into plaintiffs’ privacy interests in their MSP records will be minimal because only the names of medical care providers will be disclosed.

[72] While I appreciate that the production of the MSP records of a plaintiff would be an efficient and cost effective means by which defendants could assess a plaintiff’s pre-accident condition, I do not accept that either efficiency or cost effectiveness are bases upon which to override not only protected privacy interests but also the disclosure regime established by the present Rules.

[73] The contents of a plaintiff’s MSP records remain private unless it is established to the satisfaction of the court that an invasion of that privacy is necessary.

[74] In my view, the defendant’s submissions advocating the invasion of privacy interests by defendants “as of right” by reason only of a defence plea of a pre-existing condition, fails a proportionality analysis. Even when the information sought is as limited as that contained in MSP records, privacy rights should not be abridged without cogent reasons to do so.

[75] Every individual’s health and the medical treatment of it is a personal and private matter that should not be lightly interfered with. In today’s world of medical specialization, disclosure of even the name of a medical professional consulted by an individual for reasons wholly unrelated to a defence plea of a prior existing condition is an unwarranted and unnecessary invasion of privacy. Privacy interests do not take second place to notions of expediency.

[76] Further, the defendant’s expediency submission again conflates the scope of document production under the present Rules with the scope of examination for discovery.

[77] It is, in first instance, up to counsel for a plaintiff to determine whether the medical records of their client must be disclosed under Rule 7-1(1).

[78] Involvement in an automobile accident does not amount to an implied waiver of privacy rights.

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4) Dishonesty or non-compliance by plaintiffs in disclosing relevant documents

[79] The defendant has submitted that if a plaintiff is dishonest or does not comply with his or her disclosure obligations under Rule 7-1(1), a defendant will be unable to obtain necessary evidence with which to seek production of the plaintiff’s MSP records. The defendant thus submits that MSP records should always be available to assess credibility and compliance with disclosure obligations.

[80] Like the defendant’s submissions on efficiency and minimal invasion of privacy, this submission does not recognize the differences between the scope of document discovery and that of examination for discovery under the present Rules.

[81] These “dishonesty and non-compliance” submissions are also disturbing in that they assert that as a class, plaintiffs, their counsel or both, will not comply with their disclosure obligations.

[82] There is neither legal nor evidentiary support for that assumption or for the suggestion that the present Rules should be interpreted to counter anticipated non-compliance.

[83] If there is a pleading by the defendant of a pre-existing condition as in this case, that pleading triggers the need for counsel for a plaintiff to consider whether that plaintiff must disclose some or all of their medical records under Rule 7-1(1).

[84] Medical records that meet the test of being able to be used by a party to prove or disprove the material fact of the existence of a pre-existing condition relevant to the injuries suffered by the plaintiff will be subject to the plaintiff’s initial disclosure obligation under Rule 7-1(1). Medical records that cannot be so used to prove or disprove such a material fact will not.

[85] Counsel for plaintiffs, acting responsibly as officers of the court, will be in the best position to assess those questions of material relevance at first instance.

[86] The question of whether medical records material to an alleged pre-existing condition are in the possession or control of a plaintiff can also appropriately be pursued by defendants on examination for discovery.

DISPOSITION OF THIS APPEAL

[87] I have addressed many of the issues raised on this appeal by reference to those circumstances in which allegations of pre-existing conditions are pleaded only by a defendant. I have done so because the defendant argued this appeal not only on the basis that Master Baker incorrectly interpreted Rule 7-1(18) in this case, but also on this basis that Kauhane and Crowe were wrongly decided.

[88] In relation to those submissions I have, for all of the foregoing reasons, concluded that if only the defendant has pleaded a pre-existing condition, Master Baker’s and Master Bouck’s decisions in Kauhane and Crowe requiring evidence to support a defendant’s application for the production of MSP records were not wrongly decided.

[89] I am, however, also mindful that in this case, by their respective pleadings, not only the defendant but also the plaintiff have put the plaintiff’s pre-existing condition in issue.

[90] That removes the possibility that the defendant is engaged in a “fishing expedition” in seeking the plaintiff’s MSP records.

[91] Not only the fact of a pre-existing condition but also the date and circumstances of its origin are no longer speculative, and the plaintiff is obligated to provide materially relevant medical records in her possession and control concerning that pre-existing condition from and after the date of that collision in November 2002.

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[92] What remains in issue, however, is whether the defendant established entitlement to the production of the plaintiff’s MSP records for the purposes alleged in the affidavit filed in support of his application.

[93] Those purposes were to enable defendant’s counsel “to properly evaluate and defend the plaintiff’s claims in this action and to prepare for examination for discovery of the plaintiff.”

[94] For reasons which I have discussed at length, those are not purposes that now entitle the defendant to the production of the plaintiff’s MSP records in this case. They are based upon the Peruvian Guano “train of inquiry” test that no longer applies to a plaintiff’s document discovery obligations under Rule 7-1(1), and the evidence before Master Baker established to his satisfaction that the plaintiff had produced the clinical records of her only treating doctor for the relevant period.

[95] Further, as I have previously noted, the plaintiff’s MSP records were in the possession and control of plaintiff’s counsel, so that bringing the application for their production under Rule 7-1(18) was, at best, misguided.

[96] If what was challenged by the defendant was whether the plaintiff’s MSP records “could be used to prove or dispute a material fact” under Rule 7-1(1), the application for production ought to have been brought under Rules 7-1(10) and 7-1(14). I make no comment on whether that application could succeed.

[97] If what was challenged by the defendant was whether the plaintiff’s MSP records were “additional documents” that should be disclosed, the demand for production ought to have been made under Rule 7-1(11), and the application for production should have been made under Rule 7-1(14) where questions of whether the court should alter the test of relevance for document disclosure purposes and if so to what extent, could be addressed. That inquiry would include principles of proportionality.

[98] In all of those circumstances I am satisfied that Master Baker was not wrong in the exercise of his discretion to refuse to order production of the plaintiff’s MSP records under Rule 7-1(18) in this case.

[99] The appeal is accordingly dismissed.

COSTS

[100] The plaintiff will have her costs of this application on Scale B in any event of the cause.

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Tai v. Lam

2010 BCSC 1819

Master Baker

[1] THE COURT: This is an application arising from a motor vehicle accident which occurred on the 25th of December, 2006, and apparently there was a subsequent accident as well. The trial is set for about two weeks hence, a little less perhaps, the 13th of September.

[2] The defence is seeking production of two categories of documents. Firstly, bank statements from February 25th, 2006, to today’s date. It is about four and a half years’ worth of bank statements. Secondly, business records as detailed in para. 2 of the application, specifically those documents which may corroborate deductions made for income tax purposes by the plaintiff as either a self-employed or contracting camera repairman.

[3] If I have it right, the defence wants this information to defend against Mr. Tai’s claim for loss of capacity, among other things, I guess, to defend against his claim that he is unable to undertake a different trade or activity than that which he has traditionally done, i.e., camera repair.

[4] At the application, late, in reply in fact, the first aspect of the application was modified, and Mr. Leoni has offered to take the bank statements on a Halliday basis essentially and that they be delivered to plaintiff’s counsel, redaction occur, and they be sent the redacted copies.

[5] I am not going to make the order sought. I agree entirely with Mr. Bolda’s view of this, which is that it is essentially one production too far, that the information and details sought goes beyond what is reasonable, even on a redacted basis. To ask that all the bank statements be produced is a broad, broad sweep.

[6] Sitting here listening, it struck me, it is as if a party who commences proceedings and says, “look, I have been injured and I have suffered financial losses” is inviting some kind of a Full Monty disclosure, that they are expected to produce all financial information they might ever have out there. Even if it is suggested or offered today that that be done on a redacted basis, it is still, in my respectful view, a requirement for production that is excessive.

[7] It certainly raises big issues about privacy and if one says, “well, redaction would fix that”, what does it take for counsel to sit down and patiently, carefully redact their client’s bank records for four and a half years? If that is not a question of confidentiality and privacy, it is a question of proportionality, which is just as concerning to me today as the other issues.

[8] The banking records. I am also persuaded by Mr. Bolda’s argument, and a common position taken today, that the judgment will be one of assessment, not calculation, that the trial judge will have multiple facets to consider and amongst them the gross income. And while it is for the defence to present and structure its case as it wishes, it seems to me that if it successfully attacks any of these claims for expenses it can only increase Mr. Tai’s income, and I cannot see the value in that perspective.

[9] I know that until recently the standard in this province was Peruvian Guano and locally Dufault v. Stevens, but that standard has changed. There has to be a greater nexus and justification for the production of the documents in a case, and I am satisfied that that standard has not been met here today, so that the application is dismissed.

[10] Anything else?

[11] MR. BOLDA: I will be content that costs remain in the cause in this one, My Lord.

[12] MR. LEONI: That’s fine, Your Honour.

[13] THE COURT: Yes, that is fine. Costs in the cause.

WEEK 6: Pro-Sys Consultants

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Pro-Sys Consultants Ltd. v. Infineon

2011 BCSC 1128

The Honourable Mr. Justice D.M. Masuhara

Introduction

[1] This is a class action in which the defendants are alleged to have engaged in an international price-fixing conspiracy.

[2] The rulings herein arise from issues raised in recent Case Planning Conferences over which I presided as Case Management judge. There are two related matters which require direction.

…

[5] The second matter relates to the plaintiff’s demand for a list of documents and production. The plaintiff has set out many difficulties and deficiencies that it has found with the disclosure of the defendants. In prior proceedings, I was advised by plaintiff’s counsel that difficulties had been encountered in obtaining a proper list of documents and in searching for and reading documents provided in electronic form. The parties were directed to address the technical issues related to production at an earlier Case Planning Conference. The materials indicate that meetings between counsel for the plaintiff and defendants occurred and that the technical specialists have had ongoing discussions on solving problems encountered with the data transferred in the disclosure.

…

Issue 2: Document Production

[17] The plaintiff submits that the defendants have not properly provided their list of documents and that to the extent documents have been provided, they are not properly searchable. The relevant rule is 7-1(1) which states:

List of documents

(1) Unless all parties of record consent or the court otherwise orders, each party of record to an action must, within 35 days after the end of the pleading period,

(a) prepare a list of documents in Form 22 that lists

(i) all documents that are or have been in the party's possession or control and that could, if available, be used by any party of record at trial to prove or disprove a material fact, and

(ii) all other documents to which the party intends to refer at trial, and

(b) serve the list on all parties of record.

[18] It was clear from the outset that the volume of documentation in the disclosure would be huge. There has been no agreement between the parties under the Practice Direction Re: Electronic Evidence for the exchange of documents electronically, except that the parties have provided documents on a hard drive provided by the plaintiff and have done so using Summation Litigation Software as requested by the plaintiff. The defendants produced their lists of documents from September 30 to October 20, 2010.

[19] Infineon has listed and provided approximately 177,215 documents. It has produced its documents in three sets in electronic form. The first set relates to documents produced in the U.S. proceedings and lists 126,170


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documents. The second set also appears to be documents produced in the U.S. proceedings and lists 119,265 documents. The third set lists 4,186 documents and appears to contain documents additional to the first two sets.

[20] Micron has listed and provided approximately 231,277 documents comprising approximately 900,000 pages.

[21] Samsung has listed and provided approximately 85,275 documents.

[22] Hynix has listed and provided approximately 128,732 documents comprising approximately 678,070 pages.

[23] The plaintiff says that the defendants have simply provided a “data dump”. The plaintiff says that the defendants have in some cases over-disclosed and in others under- disclosed; that many documents are duplicative, un-described, incomplete or without attachments, unreadable, unordered, irrelevant, and without metadata where there should be such information. In the case of the Infineon defendants, the plaintiff says that Infineon Technologies AG’s list appears to have sufficient indentifying information for most documents but that no descriptive information has been provided in the list for the Infineon Technologies North America Corp.’s list and its Canadian Litigation list - only begin and end document numbers. In respect to Micron’s disclosure, while plaintiff’s counsel deposes that most documents appear to have some information beyond begin and end dates, the plaintiff’s Summation litigation support consultant deposes that over her 13 years of working with very large litigation, and over 150 different database collections, Micron’s is “by far the worst case of a complete mess of a production” she has seen and lists many of the deficiencies that she has been able to uncover. Micron’s response materials did not contest the consultant’s characterization and proposes several further actions to improve its production. Except for Hynix, the plaintiff says that counsel for the defendants have not put their minds to producing their lists of documents; rather, the lists provided are only computer generated lists from a data base. The plaintiff says that defence counsel have not fulfilled their duties in ensuring the documents provided are consistent with this court’s disclosure rule. The plaintiff says that the defendants have in essence “downloaded” costs to the plaintiff.

[24] Plaintiff’s counsel submits on the strength of G.W.L. Properties Ltd. v. W.R. Grace & Co. of Canada Ltd., 14 C.P.C. (3d) 74, [1992] B.C.J. No. 2387 (S.C.) [Grace], that counsel having conduct of the case before this Court must lay eyes upon each document that is in the hands of their respective defendants to ensure that what is produced is consistent with the Rules.

…

[44] There also remains the issue as to the role of counsel conducting the case in this jurisdiction in the disclosure process. This issue arises because the defendants have sought to rely, on the assistance from counsel in other jurisdictions as dispensing with their duty of disclosure.

[45] On the one hand, underlying the new rules is the principle of proportionality, which seeks the just, speedy and inexpensive determination of a proceeding on the merits (subrule 1-3(2)). The objective of “proportionality” is reflected in the rules regarding the scope of documentary disclosure. The principle of proportionality does not reduce the level of professional responsibility and diligence required of counsel in meeting the disclosure requirements of this Court. Though assistance from others such as paralegals and counsel in other jurisdictions in related cases can be utilized and is not unusual, the ultimate responsibility remains with present counsel. It is the decision of counsel having conduct of this case as to what is to be disclosed or not. It is the responsibility of counsel to ensure that (a) the client has been properly advised as to the disclosure that is required and (b) disclosure has been provided consistent with those instructions and with the rules. The new rules may indeed require even greater effort, given that documents produced in litigation have to, at least at the first instance, meet a higher level of relevance than before; i.e. “to prove or disprove a material fact” or be a document “to which the party intends to refer at trial”.

[46] I do not agree with the plaintiff’s position that Grace stands for the proposition that counsel is required to lay hands upon and review each document to be disclosed. Even in that case, the order to provide a further list of documents promptly was predicated on the court’s understanding that the defendant and its U.S. attorney (with the


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assistance of paralegals) had been involved for nine years continuously in the production of documents in related litigation in the U.S. such that there would be no undue hardship in providing a further and more complete list.

[47] It seems that to require a party’s counsel to duplicate the properly conducted work of other counsel would not be efficient. In this case, the work of other counsel has been described, however it is not clear to what extent counsel having conduct of this case have exercised their oversight to the production made. As a result, defence counsel are directed to provide a detailed description of their own assurance measures taken, such as instructions given to those relied upon, oversight employed, reviews of relied upon counsel’s methods, and verification methods used, to ensure that the rules of this Court have been properly communicated and applied in the disclosure relied upon.

…

WEEK 7: B.C. Lightweight Aggregate Ltd.

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B.C. Lightweight Aggregate Ltd. v. Canada Cement LaFarge Ltd. et al.

British Columbia Court of Appeal May 3, 1978

CRAIG, J.A.:—At the conclusion of the hearing of the appeal, the Court allowed the appeal, stating that reasons would be delivered later, and directed that the plaintiff be at liberty to examine Olivier LeCerf for discovery at such place as counsel might agree and, failing such agreement, that he be examined either in Vancouver or in Paris, France, at the option of the respondent.

In 1975, the plaintiff commenced an action against 33 corporations claiming damages for conspiracy to injure the plaintiff in its trade and business. With the exception of one defendant, the defendant companies are in two groups, referred to in this proceeding as the “LaFarge Group” and the “Ocean Group”. In January of this year, counsel for the plaintiff applied for several orders, including an order that “Olivier LeCerf do attend to be examined for discovery on behalf of the defendant, Canada Cement LaFarge Ltd. at such place and in such manner as the Court deems just and convenient pursuant to Rule 27(26)”.

LeCerf resides in Paris, France. At one time, he was general manager of the respondent Canada Cement LaFarge Ltd. and is, apparently, a member of the board of directors of the company.

Prior to making this application, counsel for the plaintiff had already commenced to examine James Sinclair for discovery in his capacity as an executive of one of the defendant LaFarge companies. In addition, all the LaFarge companies which were defendants in the action had designated Mr. Sinclair as a person to be examined for discovery on the matters in question on behalf of each of these companies -- presumably, on the basis that they had the right to do so under the Supreme Court Rules, Rule 27(6).

After hearing some argument, the Chambers Judge adjourned this particular application. Subsequently, he directed counsel’s attention to the decision of Meredith, J., in Hartland Holdings Inc. v. Wall & Redekop Corp. (No. C773785, Vancouver Registry), pronounced December 12, 1977, in which Meredith, J., held that the intent of Rule 27(6) -- which came into force in February of 1977 -- was to alter the practice relating to the examination of a representative of a corporate party for discovery by permitting the corporation to select the representative who would be examined, not the party seeking the examination. After receiving written submissions from counsel, the Chambers Judge applied the reasoning of Meredith, J., in Hartland Holdings Inc. v. Wall & Redekop Corp., and dismissed the plaintiff’s application stating that the plaintiff should “be restricted, in the first instance, to the examination of Mr. Sinclair”.

With deference, I think that Rule 27(6) was not meant to have this effect.

The pertinent parts of Rule 27 are as follows:

27(3) A party to an action may examine for discovery any party adverse in interest. (MR 370c.)

(4) A person who is or has been a director, officer, employee, agent, or external auditor of a party may be examined for discovery. (MR 370cc.)

(5) No party, after having examined a person referred to in subrule (4), may examine any other person referred to in that subrule without leave of the Court. (MR 370ccc.)

(6) Where a corporation is a party it shall disclose the name of a person to be examined who is knowledgeable concerning the matters in question in the action. (New.)

. . . . . (26) So far as is practical, this rule applies to a person residing out of British Columbia, and the Court, on application on notice to the person, may order the examination for discovery of the


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person at such place and in such manner as it thinks just and convenient. Unless the Court otherwise orders, delivery of the order and the notice may be made on, and payment of the proper fee may be made to, the solicitor for the person. (MR 370t, 370u.)

Meredith, J., considered the former Rules relating to an examination of a representative of a corporate party, particularly O. 31a, M.R. 370 cc., r. 2, and noted that there was nothing in the former Rules corresponding to the present Rule 27(6). He said as follows:

There are several changes, I think, significant in the construction of the new Rules. Under M.R. 370 ccc. “any person who is or has been an officer or servant of a corporation” was subject to oral examination. Marginal Rule 370ccc. made it clear, however, that only one person was subject to examination save by an order of the Court. Thus it seems that the adverse party had his choice in selecting the appropriate person to be examined. The word “any” in M.R. 370 cc. permitted the adverse party to select. There is no authority that I know of to the contrary.

In Rule 27(4), the expression now is “a person”, not “any person” as before. Then, Rule 27(6), which seems simply to impose a duty on the corporation to disclose, implies at least that the person disclosed as the “person to examined” is the person referred to in Rule 27(4).

Is the interpretation which would confer upon the company the right to nominate its director, officer or employee, in the first instance, reasonable? I think it is to be preferred to the unrestricted right of the adverse party. A corporation should surely have some voice in the selection of its spokesman, and particularly the spokesman who is called upon to make admissions on its behalf. And especially where the choice, as matters stand, is amorphous.

The Rules in force prior to February, 1977, have always been interpreted as permitting a party to select a representative of a corporate party adverse in interest whom he would examine for discovery. After examining this corporate representative, the adverse party could not examine another corporate representative without leave of the Court. The former Rules did not require a corporate party to disclose the name of a representative who would be the appropriate person to examine for discovery, so the adverse party did not have a means of forcing the corporate party to disclose the name of an appropriate examinee if the adverse party was unsure of who was the appropriate examinee.

Rule 27(6) now requires a corporate party to “disclose the name of a person .......... who is knowledgeable concerning the matters in question in the action”. It does not take away the right of an adverse party to select a representative of the corporate party who is to be examined for discovery.

Several decisions in Ontario have held that a party taking out an appointment to examine a representative of a corporate party has the right to select the representative who is to be examined: Barry v. Toronto & Niagara Power Co. (1906), 7 O.W.R. 700; Trinity College v. Levinter, [1924] 2 D.L.R. 584, 54 O.L.R. 290; Tyack v. Western Freight Lines, Ltd., [1942] O.W.N. 143.

In the case of Barry v. Toronto & Niagara Power Co., the Master who made the order said that “serious injustice might be done if the right of examination for discovery was in any way to be regulated by the adverse party”.

In the case of College Housing Co-Operative Ltd. et al. v. Baxter Student Housing Ltd. et al. (1974), 50 D.L.R. (3d) 318, [1975] 3 W.W.R. 379, Hamilton, J., of the Court of Queen’s Bench in Manitoba, followed these decisions.

In 1960, Rule 326(3) was incorporated into the “Rules of Practice and Procedure of the Supreme Court of Ontario”. It provides that “a corporation may apply to the Court to have examined an officer or servant in lieu of the officer or servant selected to be examined”. This Rule clearly suggests that the opposite party still has a right to select the officer or servant to be examined.

If the drawers of our new Rules had intended to alter the existing practice relating to the examination of a representative of a corporate party adverse in interest they surely would have expressed this intention in unequivocal language. Such an alteration cannot even be inferred from the language of Rule 27(6).

Counsel for the respondent submitted that an order under Rule 27(26) is discretionary and that even if the Chambers Judge had disagreed with the decision of Meredith, J., in Hartland Holdings Inc. v. Wall & Redekop Corp. (No.


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C773785, Vancouver Registry) the Chambers Judge still had the right under Rule 27(26) to refuse to grant the application, or, alternatively, he had grounds for refusing to grant the application of the appellant, notwithstanding the reasoning in Hartland Holdings Inc. v. Wall & Redekop Corp.

A Judge does have a discretion under Rule 27(26), but it seems that the Chambers Judge in this case exercised his discretion against the applicant solely on the basis of the reasoning of Meredith, J., in Hartland Holdings Inc. v. Wall & Redekop Corp. As this Court disagreed with that reasoning, it directed that the appeal should be allowed.

The appellants will have the costs of this appeal.

Appeal allowed.

WEEK 7: Fraser River Pile & Dredge Ltd.

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Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd.

British Columbia Supreme Court Vancouver, British Columbia Judgment: filed October 14, 1992

WONG J.:— This motion raises an issue of a practice direction as to whether there are limitations on the right of attending Counsel in a civil oral discovery to discuss with his witness, during an adjournment of the ongoing discovery, the evidence already given or to be given without consent of the examining Counsel.

This civil action involves the sinking and loss of the Plaintiff’s barge “Sceptre Squamish” on November 16, 1990 in the Strait of Georgia while under rental to the Defendant. A major issue in this action is whether the Plaintiff or the Defendant was responsible for decisions concerning the towing of the barge to safety in the event of storms. A Mr. Barry Johnson was produced for examination on behalf of the Defendant on August 17th and 18th, 1992. During the course of his examination, Mr. Johnson admitted that he was to make the final decision concerning the towing of the barge to safety. Because of this admission, Counsel for the Defendant requested an immediate adjournment to discuss with Mr. Johnson the evidence he had given. Over the objections of Counsel for the Plaintiff, Counsel for the Defendant discussed with Mr. Johnson the evidence given by him during the adjournment.

The Plaintiff now seeks an Order, pursuant to Supreme Court Rule 27(21) and the inherent jurisdiction of this Court, directing Counsel for the Defendant not to communicate with witnesses produced for examination for discovery on behalf of the Defendant, concerning their evidence, until the conclusion of their examination. There are no decided authorities on this point in British Columbia.

In Nova Scotia, there is a recent ruling by the Law Society expressly providing that “it is unethical for a lawyer to communicate with a witness concerning the evidence of that witness during any adjournment of the oral discovery of that witness, unless all Counsel consent and then only for an expressly agreed purpose” (Ruling 1992-11). However, there is no similar Law Society Ruling in British Columbia.

The only case dealing with the issue of communication with a client-witness during discovery, that has been drawn to my attention, is McLeod v. Cdn. Newspapers Co. (1987), 15 C.P.C. (2d) 151 (Ont. S.C.). In that case, Counsel for the witness handed to the witness notes and whispered with her privately during the actual examination. The examining party adjourned the examination for discovery and brought a motion for directions with respect to the propriety of the communications that had taken place. Master Sandler held that the private communication were improper. He directed that Counsel for the witness not to communicate privately with her witness, either by passing notes or by consultation, on resumption of the examination for discovery. McLeod, supra, is distinguishable from the case at Bar which does not involve deliberate interference with the actual examination or improper advice as to the evidence to be given.

Counsel for the Defendant in this case claimed the right to seek an adjournment and to confer privately with his witness in order to ascertain if there was a change in what he originally understood the witness’s evidence to be. Counsel for the Defendant took the position that it was more expedient to clarify the seeming inconsistency immediately rather than later on re-examination. ………………………

The lack of authority in British Columbia on this subject of conduct during discoveries indicates to me that heretofore the professional ethics and responsibility of individual Counsel have been the governing factor.

I was urged by Counsel for the Plaintiff to extend the application of cases which prohibit discussion between Counsel and his witness during cross-examination at trial to examinations for discovery.


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In 413528 Ontario Ltd. v Wilson Avenue Inc., (1989), 42 C.P.C. (2d) 70, a case dealing with cross-examination on an affidavit, Master Sandler held that Counsel was not to communicate with his witness about the witness’ evidence, or on any other issue in the proceeding, during the course of cross-examination of that witness. He also stated that the prohibition was to be applied reasonably so as not to prevent legitimate communications between Counsel and witness, especially a witness-party to the proceedings, such as answering outstanding questions concerning the conduct of the proposed trial or discussing settlement, but operated to prevent Counsel from interfering with the evidence being given by the witness during cross-examination or from aiding the witness in any way. It was also designed to prevent the appearance of any improper conduct. It was Master Sandler’s view that if the cross-examination was merely in recess, such as, for example, during a coffee break, then Counsel should refrain from communicating with the witness completely. However, if the cross-examination was adjourned for a period of time and to be recommenced at a future date, then again, the witness’ Counsel should not communicate with the witness respecting the witness’s evidence given or to be given. But Master Sandler ruled that such prohibition on communication would not extend to communication between Counsel and his witness about matters that had nothing to do with the witness’s evidence already given, or about to be given, or with other evidence to be presented by other witnesses on the pending motion or application.

……………………………..

The main purpose behind the above rulings prohibiting communications between Counsel and his witness during cross-examination is to prevent Counsel from telling his witness what he or she should say. This concern is equally applicable in a discovery process. Not only must there be no interference by Counsel with the witness’s evidence, there must also be an appearance that there is no such improper conduct. However, at the same time, one must also keep in mind that in a complex case, a discovery of an examinee may take place over an extended period of time with lengthy adjournments. It would be impractical in such a situation to prohibit Counsel from having any discussions with his or her witness or to limit the discussion to issues not related to the evidence given or to be given. It would be unrealistic to assume that there can be a discussion on the issue of settlement, for example, without a discussion also of all the evidence that has been given thus far. Therefore a complete ban on discussion of the evidence during adjournment of ongoing discoveries is, in my view, both impractical and unrealistic. ”Wood shedding” or advising the witness as to the answers to be given on resumption of the examination for discovery is, of course, improper and unethical.

Balancing the need to maintain the integrity of the discovery process and the demand for practicality, I would make the following suggestions for future guidance of Counsel:

1) Where a discovery is to last no longer than a day, Counsel for the witness should refrain from having any discussion with the witness during this time. In order to maintain the appearance of proper conduct, Counsel and the witness should not even be seen to converse during any recess.

2) Where a discovery is scheduled for longer than one day, Counsel is permitted to discuss with his or her witness all issues relating to the case, including evidence that is given or to be given, at the conclusion of the discovery each day. However, prior to any such discussion taking place, Counsel should advise the other side of his or her intention to do so.

3) Counsel for the witness should not seek an adjournment during the examination to specifically discuss the evidence that was given by the witness. Such discussion should either wait until the end of the day adjournment or until just before re-examination at the conclusion of the cross-examination.

I have been told by Counsel that re-examination of Mr. Johnson has now been concluded and thus any need for direction concerning his evidence is moot. However I trust the suggestions made above will be sufficient guidance for Counsel as to how the other examinees’ discoveries should be conducted.

The Plaintiff’s application is dismissed. Costs will follow the final result of the cause.


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WEEK 7: Sinclair

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Sinclair v. March

2001 BCSC 102

1 DILLON J.:— The plaintiff has applied pursuant to Rule 28(2) for the pre-trial examination of Dr. Ralph Christensen ("the physician"), the physician who cared for the plaintiff in 1994 and 1995 after the bariatric gastric bypass surgery ("the surgery") performed by the defendant, Dr. March, in 1993. The plaintiff seeks not only to examine Dr. Christensen as to complications dealt with by the physician allegedly arising from the 1993 surgery, but also to obtain the physician's opinion about the surgery that was performed in the first place. The physician opposes the application because it seeks the opinion of the physician who does not wish to become an expert witness in this matter. The physician also opposes the application as an attempt to obtain evidence for trial and further states that the physician has not refused to provide a responsive statement as first required under Rule 28(3)(c). Neither defendant takes a position on this application.

2 The physician performed five repair operations on the plaintiff in 1994 and 1995. He was personally involved in her recovery and is the only person with detailed information about it. The plaintiff has waived any privilege over this information. Plaintiff's counsel initially interviewed the physician in August 1997. At that time, the physician expressed the opinion that the surgery was negligently performed and offered to review the post-operative care. The physician also indicated that he would be willing to give evidence at the trial of this matter.

3 Lawyers for the defendant, Dr. March, requested to meet with Dr. Christensen who had retained counsel to represent him in 1998. A meeting was arranged with counsel both for Dr. March and the plaintiff present in October 1998. The purpose of the meeting was for the physician to answer questions relating to his knowledge of matters. However, plaintiff's counsel did not ask questions, assuming the role of a watching brief. Plaintiff's counsel says that it was his understanding that this was the interview of Dr. March but the physician maintains that the plaintiff had opportunity to ask questions at this meeting. In any event, the meeting deteriorated quickly over issues of privilege. The physician's clinical records were produced to the plaintiff after this meeting.

4 On June 15, 2000, plaintiff's counsel contacted the physician directly by letter. He requested that the physician provide a medical legal report which included answers to the following questions:

1)

Considering that Dr. Ray March was the only person in the province of British Columbia still performing these gastric bypass operations at the time of the last operation and further considering that Royal Columbian Hospital did no fewer than two major reviews questioning the efficiency of such operations prior to the operation performed on our client are you of the view that such operations have an inherent risk and danger that supersede the benefit that would flow from them?

2)

How many of such operations have you done and how many have been successful and are you aware of how many such operations are generally successful?

3)

What does the literature say about those operations and their success rates and further what does the literature say about the risk of danger including the number of fatalities?

4) Was Ms. Sinclair a suitable candidate for such an operation?

5) What is the definition of morbidly obese?

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6)

We enclose herewith a promotion pamphlet produced by the Defendant March setting out information. Ought this pamphlet contain a warning as to the nature of the risks that may arise in the performance of this operation and its success rate.

7)

You have seen the full medical chart of the Plaintiff and we are also enclosing further documentation to make your record for review complete. Having reviewed this material was the procedure performed by Dr. March carried out in a negligent manner and if so what are the aspects of negligence?

In addition we ask that you address the following:

1. what is the criteria for the need of gastric bypass surgery;

2. what were the risks of having the procedure at the time it was conducted;

3. what were the risks post-operatively;

4. what is the standard of care post-operatively in this kind of case; and

5. what was the actual follow up post-operative care.

5 The physician responded through his counsel that he would not provide a medical legal report but he would respond to questions as long as he was "not cast in the role of an expert witness". This was the first time that the plaintiff knew that the physician would not be an expert witness and came at a time when the plaintiff had been unable to locate an expert in her case. The plaintiff then advised that she wanted to examine the physician under Rule 28.

6 The physician does not oppose answering the last question because it does not ask for opinion but also says that the affidavit in support of this application does not suggest that the plaintiff does not already have this information. It is suggested that this information was obtained at the two interviews of the physician. The physician is opposed to giving opinion evidence in any form. The physician has not provided a substantive response to any specific question posed in the June 2000 letter.

7 It is not contested that Dr. Christensen is not an expert retained by any of the parties to this litigation. This means that the application is not actually under Rule 28(2) but under Rule 28(1). This did not cause confusion at the hearing of this application because all parties were prepared to argue the application within Rule 28(1).

8 Exercise of the discretion in Rule 28(1) depends first upon fulfilment of the requirements of Rule 28(3) (Johnston v. Royal Jubilee Hospital (1980), 25 B.C.L.R. 398 (B.C.C.A.) at 399). It has been established that the physician has material evidence to give. It has also been established that none of the parties has retained the physician as an expert so that Rule 28(3)(b) does not apply. Did the physician provide a responsive statement? An offer by the witness' solicitor to respond to any questions was sufficient to deny refusal to provide a statement (Johnston ibid). In this case, the plaintiff has interviewed the physician twice, although the second interview was restricted. In the first interview, the physician said that he would review the post-operative care. This suggests that he did not provide definite information about this care. The second interview was conducted by the defendant's counsel and broke down rather quickly. While the physician stated that answers were given to questions asked, the content of the information is vague. A statement that he answered questions relating to his knowledge of matters in question is insufficient when it is not clear whether the answers were given in response to questions by the applicant and when these answers were given prior to the plaintiff having a copy of the clinical records of the physician. I do not find either of these opportunities sufficient to constitute a responsive statement as to this physician's knowledge about matters at hand and, in particular, in response to the questions raised in the June 2000 letter. The physician's solicitor offered generally to respond to questions provided that they did not require the expression of opinion and said that a written response would come in the coming weeks. A response has not come and it was not clear until this application as to what questions the doctor would respond to. Certainly, the physician has refused to respond to

WEEK 7: Sinclair

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all but one of the questions. It is not the open offer of response that was seen in Johnston. Further, there is clear refusal to provide responsive opinionated information. This refusal is sufficient to open the door to the exercise of discretion under Rule 28(1) and to consider whether opinions may be elicited upon pre-trial examination under Rule 28(1).

¶ 9 Rule 28 was introduced in 1977 as a new discovery technique to allow for pre-trial examination of witnesses who have material evidence relating to a matter in question. Rule 28(1) says:

Where a person, not a party to an action, may have material evidence relating to a matter in question in the action, the court may order that the person be examined on oath on the matters in question in the action and may, either before or after the examination, order that the examining party pay reasonable solicitor's costs of the person relating to the application and the examination.

¶ 10 The purpose of the rule was to provide " ..........'a new investigative technique' to facilitate full disclosure of the facts before trial, thus avoiding a party being taken by surprise at trial and ensuring that all relevant evidence is brought before the court .........." (McLachlin and Taylor, British Columbia Practice, 2nd ed. (Vancouver: Butterworths, 2000) at 28-2). Because there is no property in a witness and because each side should know as much as possible about the facts prior to going to trial, Rule 28 provided a significant advance in investigation of fact prior to trial (Aintree Investments Ltd. v. West Vancouver (District) (1977), 5 B.C.L.R. 216 at 222 (B.C.S.C.)). The proposition that there is not property in a witness applies as to the facts that he has observed and his own independent opinion on them (Harmony Shipping Co. SA v. Davis, [1979] 3 All E.R. 177 at 182 (C.A.). Fraser and Horn, The Conduct of Civil Litigation in British Columbia, vol. 1 (Vancouver: Butterworths, 2000) at 379 describe that the policy of the Rule was to permit examination of the uncooperative witness. The Rule facilitates presentation and clarification of issues for trial while guarding against the danger that a party will unfairly use another's expert to prepare his own case (Rule 28(2)).

¶ 11 Rule 28 was unique to British Columbia and Nova Scotia when drafted and was similar to United States Federal Rules 30 and 31 which provide for taking depositions from persons whether parties or not (see McLachlin and Taylor, supra at 281 and Fraser and Horn, supra at 379). Although there are differences between the rules, it is worthwhile to note that American jurisprudence has recognized that their rule does not apply to facts or opinions not acquired in anticipation of litigation (see Grinnell Corporation v. Hackett (1976), 70 F.R.D. 326; Barkwell v. Sturm Ruger Co. Inc. (1978), 79 F.R.D. 444; Norfin Inc. v. International Business Machines Corp. (1977), 74 F.R.D. 529; Depositions and Discovery 23 Am Jur 2d s. 69, 73). In other words, an expert not retained in anticipation of litigation can be examined for discovery as of right under American federal rules. The American federal rule is essentially the rule recognized in our Rule 28(2) and (3)(b) which puts barriers up for examination of an expert which another party has had to pay. The investment of another in the witness means that this witness will be treated differently: it does nor mean that the witness is excluded as a matter of principle. The British Columbia Rule 28(1) is, of course, not one of right but requires the exercise of discretion.

¶ 12 The discovery nature of the rule is enlightened by application of Rule 27(22) to the Rule as provided in Rule 28(8). Rule 27(22) states:

Unless the court otherwise orders, a person being examined for discovery shall answer any question within his or her knowledge or means of knowledge regarding any matter, not privileged, relating to a matter in question in the action, and is compellable to give the names and addresses of all persons who reasonably might be expected to have knowledge relating to any matter in question in the action.

¶ 13 Rule 27 and 28 are, however, fundamentally different. The purpose of Rule 28 is to provide information, not to record evidence or provide admissions. The use of discovery obtained under this rule is limited at trial to cross-examination of a witness as to a previous contradictory statement made under oath (Kelly v. Calcutt (1991), 63 B.C.L.R. (2d) 43 at 49 (B.C.S.C.); Aintree Investments Ltd., supra at 220; Re Claassen and McNiece (1983), 146 D.L.R. (3d) 376 at 380 (B.C.S.C.)). The scope of inquiry is broader under Rule 28 because it is not limited to matters at issue between parties as defined in the pleadings but includes all that is generally relevant between all

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parties (Yemen Salt Mining Corp v. Rhodes-Vaughn Steel Ltd. (1977), 3 B.C.L.R. 98 at 100 (B.C.S.C.); aff'd June 23, 1977, Vancouver No. CA770549, (B.C.C.A.)). Rule 27 discovery does not examine all of the facts whereas Rule 28 allows factual information to come from anyone who was "..........on the spot.........." or knew "..........exactly what happened.........." (ibid).

¶ 14 In Yemen, the broader nature of Rule 28 was apparent in the ability to examine an employee who might not be liable for examination under Rule 27. This case also suggests that the Rule is to be given liberal interpretation, thus supporting the general attitude expressed in Rule 1(5) that material relevant to litigation should not be withheld (see Voth Bros. Construction (1974) Ltd. v. North Vancouver School District No. 44 Board of School Trustees et al. (1981), 29 B.C.L.R. 114 (B.C.C.A.)). Liberal interpretation of discovery rules applies to non-parties so to eliminate the element of surprise at trial.

¶ 15 It was also determined in Yemen that opinion evidence could be elicited from a witness upon examination under Rule 28. Ruttan, J. said at 100:

.......... the scope of inquiry is wider under R. 28. It is not, in essence, confined to "discover" the defendant's case as set out in his pleadings and is not limited to matters in issue with the party in question, but includes all that is relevant, generally, to all parties in the action, including other defendants or third parties. The same employee may be excluded as a witness on discovery when examination is directed to opinion or expert evidence: see Coady J. in Ball v. B.C. Electric Ry. Co. (1951), 4 W.W.R. (N.S.) 478 (B.C.). Such evidence would be clearly admissible under Rule 28. ..........

Farris, C.J.B.C. adopted these reasons on appeal.

¶ 16 Other cases have also recognized that witnesses under Rule 28 may be examined as to both fact and opinion (Kelly v. Calcutt supra at 50; United Services Funds (Trustee of) v. Richardson Greenshields of Canada Ltd. (1988), 24 B.C.L.R. (2d) 41 (B.C.S.C.) at 44-45. In Eckersley v. Terwiel, (1991) 59 B.C.L.R. (2d) 94 (B.C.S.C.) the court came to a different conclusion on facts very similar to here. The learned judge did not, however, have the benefit of the cases cited above and was under the impression that there were no cases on point. He based his decision on Trustee of Property of Blue Band Navigation Company Limited (a Bankrupt) v. Price Waterhouse & Company, [1933] 3 W.W.R. 49 (B.C.C.A.), a case under Rule 27. It is important to notice that a rationale for the conclusion in Blue Band was that it would be unfair for the plaintiff to be bound by admissions made at the discovery. Eckersley was an appeal from a master, [1991] B.C.J. No. 2645, and it is interesting that the master had based his decision on incorporation of Rule 27(22) into Rule 28. Rule 27(22) has been interpreted to exclude questions of expert opinion except where the sole issues is the valuation of property or where a professional man is sued for his own negligence (Teachers' Investment & Housing Co-operative (Trustee of) v. Jennings (1992), 61 B.C.L.R. (2d) 98 (B.C.C.A.)). The second exception allows examination about judgment and opinions about standard of care because it goes directly to issues raised in the pleadings and the scope and nature of the duties in question.

¶ 17 Rule 28 is drafted so that once an expert is retained in the litigation, his opinion cannot be solicited under this Rule unless the opinion cannot be obtained through other means (Rule 28(2) and (3)(b)). This implies that the expert could be examined if he was not retained or if the applicant was unable to obtain the opinion through other means (see International Minerals & Chemical Corp. (Canada) v. Commonwealth Insurance Co. (1990), 89 Sask. R. 81 (Sask.Q.B.)). Absent the retainer, an expert is just another witness if he has material evidence relating to a matter in question and no questions of privilege arise. The specific inclusion of Rule 28(2) and (3)(b) is different from Rule 27. Incorporation of Rule 27(22) by Rule 28(8) should not be done simpliciter but should take into account the different purposes and uses of an examination obtained under Rule 28. The justifications for disallowing examination on opinion disappear within the Rule 28 context. In any event, the situation in this case involving an allegation of negligence against a medical man falls within a Rule 27(22) exception. It should not be that an expert will not be examined as a witness under Rule 28 just because he is an expert when he has material facts and opinion to provide.

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¶ 18 Treatment of the expert who is not retained as just another witness serves to minimize the distinction between fact and opinion. This is desirable because of the unworkable nature of the distinction. J. Wigmore, Evidence, (Boston: Little, Brown & Co., 1978) s. 1919 at 14 described the distinction as without virtue, a "self justifying dogma", a "vice of policy" which has been subject to "extensive and vicious development in this country". Here at home, J. Sopinka, The Law of Evidence in Canada (Toronto: Butterworths, 1992) at 524-528 has said that the distinction is inconsistently applied, unclear and illogical. I do not think that use of the distinction would benefit interpretation of the Rule.

¶ 19 Dr. Christensen has not been retained by anyone. The case involves allegations of negligence against the defendant, Dr. March, who is not capable of being examined for discovery. Dr. Christensen dealt with the plaintiff extensively over a number of years and had first hand experience with the surgery performed by Dr. March. He is an actor with information that was not obtained in anticipation of litigation. There is no doubt that Dr. Christensen has relevant information to this case. Expert testimony will be central to this litigation. Dr. Christensen did not deny that he expressed an opinion to plaintiff's counsel that the surgery was negligently performed. But, he has balked at being called as an expert. He gives no reason why he has changed his mind. No question of privilege arises. No unfairness will result to the other parties.

¶ 20 The primary duty of the court is to ascertain the truth. The plaintiff is entitled to know the facts and opinions formed by Dr. Christensen during his course of treatment of her. The plaintiff's access to all relevant information will assist in the ascertainment of the truth in this case. I expressly do not decide the extent of power in a litigant to compel expert testimony from an unwilling expert who does not otherwise have some tie to the litigation. The witness in question here has unique and irreplaceable knowledge. There is a demonstrated need for his opinion. It remains for another day to decide whether an expert without such connection could be compelled to be examined. There is no claim of oppression, privilege or confidence here.

¶ 21 The application is allowed to the extent that Dr. Christensen is able to answer the questions posed in the June 15, 2000 letter without specific new research. The examination is limited to previously formed opinions and knowledge without engagement in out-of-examination preparation except for review. He should not have to do a literature review as asked for in question 3.

¶ 22 The plaintiff will be required to pay to Dr. Christensen a reasonable expert fee for time spent responding to discovery requests. In future, an applicant should present a plan of compensation at the hearing of the application or the expert should give an indication of his fee so that the plaintiff can make a financial decision. Because the focus on opinion goes to the plaintiff's development of her own case and because Dr. Christensen is not a party to this action, the plaintiff shall pay the costs of this application to Dr. Christensen on a solicitor and own client basis. Presumably, the plaintiff will be able to recover this cost if she is successful at trial.

WEEK 7: Masters' Jurisdiction

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Practice Direction 34: Masters' Jurisdiction

April 25, 2012

PART A - Direction:

Restrictions on masters’ jurisdiction

1. Section 11(7) of the Supreme Court Act provides:

A master has, subject to the limitations of section 96 of the Constitution Act, 1867, the same jurisdiction under any enactment or the Rules of Court as a judge in chambers unless, in respect of any matter, the Chief Justice has given a direction that a master is not to exercise that jurisdiction.

2. Pursuant to section 11 (7) of the Supreme Court Act, the Chief Justice directs that a master is not to exercise jurisdiction:

a. to grant relief where the power to do so is conferred expressly on a judge by a statute or rule

b. to dispose of an appeal, or an application in the nature of an appeal, on the merits

c. to pronounce judgment by consent where any party in a proceedings is under a legal disability

d. to grant court approval of a settlement, compromise, payment or acceptance of money into court on behalf of a person under a legal disability, or court approval of a sale of assets of a person under a legal disability

e. in any matter relating to criminal proceedings or the liberty of the subject other than uncontested petitions under the Patients Property Act

f. to make an order holding any person or entity in contempt

g. to grant injunctive relief, other than as identified under paragraph 6 of this direction

h. to make an order under the Judicial Review Procedure Act or for a prerogative writ

i. to set aside, vary or amend an order of a judge, other than:

i. to abridge or extend a time prescribed by an order, provided that the original order, if made by a judge, was one that a master would have had the jurisdiction to make, and

ii. to vary the interim orders identified under paragraph 1 of this direction

j. to grant a stay of proceedings where there is an arbitration

k. to make a declaration under the Survivorship and Presumption of Death Act

l. to remove a suspension from the practice of a profession

m. to conduct trial management conferences.

Part B - Guidelines:

Matters within a master’s jurisdiction:

3. Paragraphs 4 - 7 set out guidelines as to the matters that are generally considered to fall within the jurisdiction of a master. These guidelines are for the assistance of the profession and the public and are not intended to be exhaustive.

Interlocutory Applications

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4. Subject to constitutional limitations and to the direction set out in paragraph 2, a master has jurisdiction to hear interlocutory applications under the Rules of Court, including applications for approval of sale in foreclosure proceedings.

Interim orders in family law cases

5. Subject to constitutional limitations and to the direction set out in paragraph 2, a master has jurisdiction to make interim orders in family law cases, including:

a. interim custody, access and maintenance orders under the Family Relations Act

b. interim corollary relief under the Divorce Act, 1985

c. interim restraining orders under ss. 36.1(a), 37.1(a) and (b), 37(5) and 53 of the Family Relations Act

d. orders for exclusive possession of the matrimonial home under s. 77 of the Family Relations Act

e. variation of the interim orders described in subparagraphs a-d, whether the initial order was made by a judge or a master.

Final orders

6. Subject to constitutional limitations and to the direction set out in paragraph 2, a master has jurisdiction to make the following final orders:

a. orders by consent

b. orders under Supreme Court Civil Rule 22-7 and Supreme Court Family Rule 21-5

c. orders for summary judgment under Rule 9-6 where there is no triable issue

d. orders striking out pleadings under Rule 9-5(1) provided there is no determination of a question of law relating to issues in the action

e. orders granting judgment in default

f. orders under Rule 21-7(5) where no matter is contested or where there is no triable issue

g. orders in respect of the Administration of Estates under Rule 21-5

h. declaratory orders under s. 57 of the Family Relations Act where there is no dispute.

Enforcement of orders

7. Subject to constitutional limitations and to the direction set out in paragraph 2, a master has jurisdiction to enforce orders under Rule 13-4, the Court Order Enforcement Act, the Family Maintenance Enforcement Act, and any statute which requires an application to the court to enforce under the Rules of Court an order made by a statutory board, statutory decision maker or tribunal.

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Fraser v. Houston

British Columbia Supreme Court Vancouver, British Columbia Oral judgment: May 22, 1997

1 SHAW J. (orally):— There are two orders requested by the defendants; (1) that the plaintiff post security for costs, failing which, his action be stayed; and (2) that the plaintiff be required to answer certain questions on his examination for discovery and produce certain documents to show his ability to pay a potential debt of $600,000 in December 1995.

2 I will deal first with the question of security for costs. The application is made solely under the inherent jurisdiction of the court.

3 It is a significant fact that the plaintiff, Mr. Fraser, is a resident of the Province of British Columbia. His counsel, Mr. Shapray, contends that because Mr. Fraser is a British Columbia resident, this court has no jurisdiction to order that Mr. Fraser pay security for costs, failing which his action should be stayed. To do so, he contends, would be to deny persons resident in the province access to our courts. Mr. Shapray contends, in the alternative, that if there is jurisdiction, it should only be exercised in the most egregious of circumstances and that this is not such a case.

4 Mr. Church, for the defendants, contends that there is jurisdiction. He relies upon the decision of this court in Tordoff v. Canada Life Assurance Company (1985), 64 B.C.L.R. 46 (S.C.) where Proudfoot J. as she then was said at p. 49:

I firstly propose to deal with the argument put by counsel for the plaintiff that there is no jurisdiction to make the order asked for by the defendants because the plaintiff resides within the jurisdiction.

Prior to 1976 a rule existed dealing with applications for security for costs involving non-resident plaintiffs. That rule was repealed and at present no rule exists with reference to security for costs against non-residents. Counsel for the plaintiff takes the position that I have no jurisdiction to deal with the application because the plaintiff is a resident within the province. That is not how I interpret the law to be at this time. I suggest the court does have jurisdiction to deal with the application on the basis of its inherent jurisdiction.

5 Mr. Church contends, as well, that the jurisdiction should be sparingly used, and only in special circumstances. As Proudfoot J. said in Tordoff, supra, at p. 50:

I am satisfied the court does have the inherent jurisdiction to make an order in some cases. The power would have to be exercised cautiously, sparingly and indeed under very special circumstances.

6 Mr. Church submits that the circumstances here are special and that this is a case in which security for costs should be ordered.

7 Mr. Shapray submits that I should not follow Tordoff, contending that its authority has been undermined by the British Columbia Court of Appeal in Boylan v. Chouhan (1988) 32 C.P.C. (2d) 204 at 206. In referring to the finding of Proudfoot J. in Tordoff as to jurisdiction, Esson J.A. for the court said by way of obiter dicta:

The question whether that is a correct conclusion is not before us today and I, therefore, will say no more about it other than I do not, with respect, think that the conclusion is supported by the authority referred to, which is the decision of this Court in Shiell v. Coach House Hotel Ltd. (1982), 27 C.P.C. 78, 37 B.C.L.R. 254, 136 D.L.R. (3d) 470 (C.A.). That dealt only with the

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question of a plaintiff outside the jurisdiction and the extent of the power to make an order against such a plaintiff subsequent to 1976 when the express rule was removed.

8 Mr. Shapray cited the following passages in Blackstone’s Commentaries on the Laws of England Vol. 1 at pp. 129 to 131, Rees Welsh & Company, Philadelphia, 1898:

In the three preceding articles we have taken a short view of the principal absolute rights which appertain to every Englishman. But in vain would these rights be declared, ascertained, and protected by the dead letter of the laws, if the constitution had provided no other method to secure their actual enjoyment. It has therefore established certain other auxiliary subordinate rights of the subject, which serve principally as outworks or barriers to protect and maintain inviolate the three great and primary rights, of personal security, personal liberty, and private property. These are: ..........

3. A third subordinate right of every Englishman is that of applying to the court of justice for redress of injuries. Since the law is in England the supreme arbiter of every man’s life, liberty, and property, courts of justice must at all times be open to the subject, and the law be duly administered therein. The emphatical words of magna carta, spoken in the person of the king, who in judgment of law (says Sir Edward Coke) is ever present and repeating them in all his courts, are these; nulli vendemus, nulli negabimus, aut differemus rectum vel justitiam: “and therefore every subject”, continues the same learned author, “for injury done to him in bonis, in terris, vel persona, by any other subject, be he ecclesiastical or temporal, without any exception, may take his remedy by the course of the law, and have justice and right for the injury done to him, freely without sale, fully without any denial, and speedily without delay.”

9 Mr. Church contends that I ought to follow the Tordoff decision. He submits that the Court of Appeal did not purport to overrule Tordoff and that I ought to follow it unless or until it is overruled. He points out that it is a considered decision and that it has been followed by a further considered decision of this court which specifically dealt with the Court of Appeal’s obiter dicta in Boylan. That case is Gajic v. Wolverton Securities Ltd., [1995] B.C.J. No. 2622, December 18, 1995, Vancouver Registry No. C942859. In that decision Errico J. said, at p. 14:

The Court of Appeal expressed some doubt about that principle in Boylan v. Chouhan (1989), 32 C.P.C. (2d) 204 but expressly did not rule on the point. In Boylan, supra, Esson J.A., as he then was, made reference to the Tordoff decision but not to this passage in Whitfield nor the cases cited by Murray J. The considered opinions of Proudfoot J. and Murray J. not having been overruled, I should follow them and find that the court does have this inherent jurisdiction.

10 In my view, I should follow Tordoff. I say that not only because of judicial comity, but also because I am of the view that the inherent jurisdiction of the court should not be so limited that the court can never order a resident plaintiff to post security for costs no matter what the circumstances may be. In the seminal article on inherent jurisdiction, entitled The Inherent Jurisdiction of the Court published in Current Legal Problems (1970) p. 23, Master I.H. Jacob explored the juridical basis of inherent jurisdiction. He said, at pp. 27 and 28:

For the essential character of a superior court of law necessarily involves that it should be invested with a power to maintain its authority and to prevent its process being obstructed and abused. Such a power is intrinsic in a superior court; it is its very life-blood, its very essence, its immanent attribute. Without such a power, the court would have form but would lack substance. The jurisdiction which is inherent in a superior court of law is that which enables it to fulfil itself as a court of law. The juridical basis of this jurisdiction is therefore the authority of the judiciary to uphold, to protect and to fulfil the judicial function of administering justice according to law in a regular, orderly and effective manner.

11 The conclusion I draw from the foregoing authorities is that while the court must have jurisdiction to do what is necessary to prevent its jurisdiction from being abused, the court in exercising this power must weigh carefully the right of our citizens to have access to the courts. In my view, the court should not make an order which

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would preclude the right of access except in egregious circumstances amounting to a likely abuse of the court’s jurisdiction.

12 In an ordinary case where a resident plaintiff is not sufficiently wealthy to be able to pay the costs of a defendant if the plaintiff loses the lawsuit, that, in itself, would not justify an order for security for costs being made. The bringing of a lawsuit without sufficient funds to pay loser’s costs would clearly not be an abuse of the court’s jurisdiction. The plaintiff would simply be seeking recourse to the courts which must be available to all members of the public whether they are wealthy or poor.

13 In summary, I am in basic agreement with the test laid down by Proudfoot J. in Tordoff.

14 Mr. Church argues that Mr. Fraser is pressing a claim that is clearly spurious and without merit. Mr. Shapray, for Mr. Fraser, has taken me in some detail through the basis of Mr. Fraser’s claim. Suffice it to say that I am not satisfied that the claim is without merit. It may prove to be without merit upon the trial of the case where matters such as credibility can be taken into account. It may prove to be a case with merit. I certainly cannot say at this point that it is a case that is necessarily doomed to failure.

15 Mr. Church argues that Mr. Fraser is either without exigible assets, or if he has assets of value, he is actively trying to avoid payment of judgments that have been taken against him, principally but not entirely, by the Department of National Revenue.

16 Mr. Shapray points out that Mr. Fraser has been embroiled in matrimonial litigation for several years and, as a result, his principal assets are tied up pending outcome of that litigation. The materials before me bear out this submission. Mr. Church, for the defendants, submits that I should draw the inference that Mr. Fraser is actively seeking to avoid paying the judgments against him. I do not think this is an inference that I can properly draw and I decline to do so.

17 In my view this is not a case in which the inherent jurisdiction of the court should be exercised to order a resident plaintiff to pay security for costs. The application is therefore dismissed.

18 I turn next to the application for an order requiring the plaintiff to answer certain questions on examination for discovery and produce certain documents to show his ability to pay a potential debt of $600,000 in December 1995. The significance of that date is that it was during that month that a document, which the defendants claim is an agreement which would preclude the plaintiff’s claim, was signed.

19 In the statement of claim, paragraph 39 thereof, Mr. Fraser alleges that the agreement was entered into under circumstances of undue influence and/or economic duress. Mr. Church contends that he ought to be entitled to explore the question of Mr. Fraser’s assets at and about the time of the alleged economic duress. The questions are set out in the examination for discovery of Mr. Fraser. They are questions 114 through 124, as follows:

114 Q. At this point in December 1995 you were judgment-proof? You had made yourself judgment-proof?

A. I don’t understand where the -- I do not believe so at all.

115 Q. No, you have had assets available to satisfy a demand for $600,000?

A. Absolutely, I did.

116 Q. What were they?

A. Various.

Then Mr. Shapray interjects with the words, “Don’t answer that question”.

117 Q. I am suggesting you did not have the money? am suggesting to you that you made yourself judgment-proof?

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Then Mr. Shapray says, “Go ahead, he answered that question”.

Then Mr. Church, “Well, he said, no, and I am saying..........”

118 Q. Well, okay, what did you have at that time?

A. I had --

119 Q. You certainly didn’t have a million dollars, we know that.

Mr. Shapray interjects again.

120 Q. What did you have in December 1995 to satisfy a claim for $600,000?

A. Substantial real estate holdings.

121 Q. What?

A. What do you mean by “what”, sir?

122 Q. Did you own a house? Did you own a ranch? Did you own a farm?

A. I had a beneficial interest in several pieces of property.

123 Q. Well I am going to leave this inquiry with you. I want to know what you had in December 1995 that you say were your assets or your cash, whatever it was to satisfy a $600,000 debt, and you can provide that to me. Did you have any outstanding judgments against you in December 1995?

A. I am not sure.

124 Q. You certainly do now.

Mr. Shapray then says, “What has that got to do with anything? Don’t answer that question.”

20 Mr. Church takes the position that he is entitled to examine on that subject and Mr. Shapray takes the position that he is not.

21 I am going to rule against the motion. I do so with some hesitation, as I can see at least marginal probative value to this particular exploration. It might have some probative value in respect of the allegation of economic duress. At the same time, I am satisfied that this line of questioning, particularly if carried beyond the answers which were received, could result in a detailed exploration of a man’s state of wealth or state of non-wealth as the case may be, and that that is a major invasion into a man’s privacy which is generally only allowed in matters of execution on judgments that are not paid and perhaps, in some other circumstances. However, in the present case I am of the view that to allow an exploration of the nature that is requested by the defendants has a potential prejudicial effect upon Mr. Fraser’s privacy which well outweighs any apparent probative value that there may be.

22 The court is entitled to weigh prejudicial effect against probative value and if the court is of the view that the evidence that is sought is such that the prejudicial effect outweighs the probative value, the court may draw the line and say “no” to that avenue of exploration. I have in mind particularly the judgment of the Supreme Court of Canada in R. v. Seaboyer, [1991] 2 S.C.R. 577 at 610-11,where that particular issue, albeit it in the field of criminal law, was settled by the court.

23 There were other aspects to the application by the defendants. Counsel advised that they have, during the course of this hearing, met and been able to resolve those other matters by agreement. I think this leaves simply the matter of costs. Are there any submissions with respect to costs?

…………..

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Forliti (Guardian ad litem of) v. Woolley

2002 BCSC 858 British Columbia Supreme Court Vancouver, British Columbia

1. GARSON J.:— Three applications are before the court concerning the examinations for discovery of the plaintiff Mrs. Forliti, the defendant Dr. Woolley, and the defendant Dr. Kim Sing.

2. On all three examinations there were objections taken to the questions asked, or the form of the questions asked. The parties appear before me, as their case management judge, to request rulings on the objections taken at the three examinations for discovery.

3. I propose first to describe the facts alleged by the plaintiff to the extent that it is necessary to make determinations of relevancy, next to outline the legal principles that govern the conduct of examinations for discovery as those principles apply to these applications, and then to rule on each objection taken. Both counsel have requested that I rule on these objections despite the fact that neither counsel completed their oral submissions. Counsel have provided me with written briefs. I made rulings on some of the objections during the course of the oral hearing and I will not repeat those rulings in these Reasons.

Background Factual Allegations

4. Mrs. Forliti gave birth to Blue Forliti on October 18, 1997, at Burnaby Hospital. Blue Forliti was born by vaginal breech delivery.

5. The plaintiffs allege that the defendants were negligent in failing to apply reasonable skill in the provision of medical care, treatment and professional services, in failing to consider whether in all the circumstances a vaginal delivery was appropriate and in failing to intervene in a timely manner or at all to prevent injury to Blue Forliti.

6. The plaintiffs allege that as a result of the defendants’ negligence Blue Forliti has suffered severe injuries associated with a lack of oxygen during birth. I will not detail the extensive list of injuries alleged.

7. It is important to note (for the purposes of the rulings I am requested to make) that at some time before Mrs. Forliti’s labour began there was an attempt to reposition the baby in the womb, owing to the fact the baby was in a breech position. This procedure is called an ‘external version’. This procedure was not performed by Dr. Woolley. I am told that one of the issues to be determined in this action relates to Dr. Woolley’s knowledge of this earlier procedure. Some of the objections taken at the examination for discovery of Dr. Woolley relate to his knowledge of this earlier external version procedure.

Scope of Examination for Discovery

8. Examinations for discovery are governed by Rule 27 of the Rules of Court. Concerning the scope of the examination R.27(22) states, in part:

Unless the court otherwise orders, a person being examined for discovery shall answer any question within his or her knowledge or means of knowledge regarding any matter, not privileged, relating to a matter in question in the action ..........

9. The following are principles, relevant to this application, which emerge from the case law concerning the conduct of examinations for discovery:

(a) The scope of an examination for discovery extends to any matter relating to a matter in question in the action and is in the nature of a cross-examination. The question need not be focused directly on a matter in question in the action but need only relate to such a

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matter. “Rigid limitations rigidly applied can destroy the right to a proper examination for discovery.”

(Cominco Ltd. v. Westinghouse Canada Ltd. (No. 4) (1979), 11 B.C.L.R. 142 (C.A.))

(b) On an examination for discovery, questions are limited to relevant issues (relevance being broadly defined, in this context, by the judgment in Cominco) between the party conducting the discovery and the party being examined. In other words, questions may not be put which are relevant only to issues between the party conducting the discovery and another party (not being examined).

(Nikal et al. v. Caira (1993), 16 C.P.C. (3d) 119 (B.C.S.C.))

(c) A witness need not answer questions soliciting an opinion on an examination for discovery. There is an exception to this rule where the party examined is asked questions regarding his or her professional conduct or competence where that conduct and/or competence is in issue in the action. Questions soliciting an opinion must pertain to the area of expertise of the individual being examined. The party being examined need not answer questions pertaining to the conduct of another defendant. For example in this case the doctor sued for professional negligence may properly be asked questions which solicit from him his professional opinion concerning his own treatment of Ms. Forliti during her labour and delivery, but he may not be asked questions which solicit from him an opinion as to the negligence of another doctor or a nurse.

Teachers’ Investment & Housing Co-operative (Trustee of) Jennings Chong (Guardian ad litem of) v. Royal Columbian Hospital (1996), 2 C.P.C. (4th) 242; Gelt Holdings Ltd. v. Pannell, (1997), 13 C.P.C. (4th) 249 (B.C.S.C.).

Crocker v. MacDonald, (1992), 116 N.S.R. (2d) 181 (N.S.S.C.T.O.). (But see also Beber v. Bloch, [2000] O.J. No. 3142 (Ont. S.C.J.)) in which the Ont. S.C.J. per Lamek J. held that it was not “improper on discovery to seek the opinion of one defendant about the conduct of another”.)

(d) Hypothetical questions may properly be put to a witness where the witness has expertise and when the hypothetical question is relevant to some issue in the case, provided the question is not overly broad or vague.

Motaharian v. Reid (1989), 39 C.P.C. (2d) 141 (Ont. H.Court)

(e) Counsel for the party being examined may object to the form of a question on the grounds that it is vague, confusing, unclear, overly broad or misleading. An example of a misleading question is the misstatement of earlier testimony. The proper conduct of counsel in this instance is to state the objection to the form of the question and the reasons for objection. It is not appropriate for counsel to make comments, suggestions, or criticisms.

McLachlin & Taylor (British Columbia Practice, 2d ed. (Butterworths: Markham, 2002) at p. 27-114-120). say in their commentary on Rule 27(24):

The court will not order a question to be answered if the meaning of the question to be answered is not clear, or if it appears to involve questions of law:.......... [citations omitted] The questions should be set out in concrete form and should not depend for their meaning on previous questions or answers..........:

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(See also C.D. Cudmore, Choate on Discovery, 2d ed. (Carswell: Toronto, 2002) at 224; (G. Harris, Discovery Practice in British Columbia, looseleaf, (CLE: Vancouver, 2002) at 3.658, 3:85; F.D. Cass et al., Discovery Law, Practice and Procedure in Ontario (Carswell: Toronto, 1993) at p. 279).

Rulings on Examination for Discovery of Dr. Woolley

10. It serves no useful purpose to reproduce each portion of the transcript containing the questions objected to. In most cases the contentious questions, dialogue between counsel, and answers cover several pages. I therefore attach to these reasons, an appendix of the rulings I have made on the individual questions.

Conclusion

11. At the hearing of this matter I indicated to plaintiff’s counsel my views regarding certain intemperate comments which he made at the examinations for discovery when objections were made. I do not need to repeat my comments in these Reasons.

12. As mentioned above in Cominco, Mr. Justice Seaton said, at p. 151, “Rigid limitations rigidly applied can destroy the right to a proper examination for discovery.” Counsel should endeavour to be restrained in their objections. An examination for discovery is not a three-way conversation. It is best to follow a more formalistic approach to objections. Although, in this examination for discovery, many questions posed did require clarification because they were ambiguous, misleading, or vague there were many other instances in which the objections or interjections were overly rigid.

13. Counsel should contact the registry to arrange a convenient time to hear the application with respect to the examination for discovery of the plaintiff, Mrs. Forliti.

Appendix I

Examination for Discovery of Dr. Woolley

Q. 4 - Dr. Woolley was asked why he retired. - Not relevant to the issues in this action. Q. 36 - answered at Q. 37.

Q. 50 - answered at Q. 52 after interruption by defence counsel. Q. 52 - answered

Q. 85 - Dr. Woolley was asked “why” external versions to correct the breech position were performed. This event took place before Dr. Woolley’s involvement and concerned conduct of another doctor. Although defence counsel might have articulated her objection somewhat more clearly, the objection was correctly taken. There then followed an exchange between counsel which shifted to other questions. The next question put to Dr. Woolley was Q. 89 and it was answered.

Q. 106, 107 - answered at Q.108.

Q. 109 - Dr. Woolley was asked about normal procedure for external heart monitoring during an external version. This question was intended to solicit an opinion from Dr. Woolley on the standard of care of another physician or nurse. That is not a proper question. In his written submissions on this question, Mr. Lauk said that he was prevented from finding out what Dr. Woolley knew about the external versions performed on Mrs. Forliti. That is not what he asked at Q. 109.

Q. 110 - Q.112 - answered

Q. 116, 117 - answered

Q. 121 - this was an improper objection but the question was answered at Q. 126.

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Q. 128 - answered

Q. 138 - There was no objection by counsel. The question was answered, not the answer plaintiff’s counsel may have expected but he did not ask a follow-up question.

Q. 149 - The question asked was “What is the usual manipulation of a breached baby, of the placenta?” Defence counsel interrupted and asked for clarification. The question is confusing. The objection was proper.

Q. 150 - Dr. Woolley asked for clarification of what had been asked at Q.149 but plaintiff’s counsel then asked a different question. At Q. 150 plaintiff’s counsel purported to restate Dr. Woolley’s earlier testimony but did not do so accurately which lead to a further objection which was proper.

Q. 176 - answered at Q. 184 and following.

Q. 203 - Defence counsel improperly interjected. Plaintiff’s counsel is entitled to cross-examine the witness. The witness answered the question at Q.204 and following, there was an interjection by defence counsel that seemed to side-track plaintiff’s counsel and the question was not pursued. I order that Dr. Woolley may be examined further on the matters canvassed at questions 203 - 216.

Q. 223 - The question asked was “So in a differential diagnosis you would not know that one of the possibilities in Blue Forliti’s version attempts was an entanglement of the umbilical cord?” This again is a reference to an event before labour handled by another physician. The objection was proper because the question as worded seems to be soliciting an opinion from Dr. Woolley on another physician’s care, although the question is not clear. Plaintiff’s counsel explained after the objection, which was taken to this question, that he was attempting to determine what impact, knowledge of the previous versions attempts, would have had on Dr. Woolley at the time of the labour and delivery. Defence counsel said, “I think it’s not appropriate to put to Dr. Woolley today after the fact information he didn’t have at the time.” The question was put to Dr. Woolley, the answer was not responsive, but plaintiffs’ counsel then pursued another line of questions. The question was put in a somewhat different but hypothetical form at Q. 277. An improper objection was taken but plaintiff’s counsel pursued the question. Dr. Woolley answered the question at Q.286.

…

WEEK 7: Roitman

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Roitman v. Chan

British Columbia Supreme Court Vancouver, British Columbia Judgment: November 2, 1994

1 MASTER BOLTON:— This is an application by various defendants to strike out interrogatories delivered to them.

2. The plaintiff’s husband, Leigh Barry Roitman, was badly injured in a motor vehicle accident on March 28, 1992. He received significant orthopedic injuries, including several fractures. He was taken to St. Paul’s Hospital and underwent surgery the following day. On the evening of that day, he suffered a heart attack. This resulted in irreversible brain injury, and he remained unconscious until his death on April 16, 1994.

3. The plaintiff commenced this action under the Family Compensation Act against Kenneth Chi Chan and Lai Ling Chan, the driver and owner of the other vehicle involved in the collision. Subsequently, an order was made permitting the addition of the other defendants and the pleading of a claim of medical negligence against them.

4. In very general terms, the claim against the medical defendants rests on an allegation that they failed to recognize that Mr. Roitman was at special risk of heart complications associated with surgery and failed to act accordingly. One of the particulars alleged against the doctors is the improper prescription and administration of medication. As against the nurses, the particulars include an alleged failure to monitor Mr. Roitman’s post-operative condition. Both doctors and nurses are alleged to have taken inadequate steps to revive Mr. Roitman after the heart attack occurred.

5. Counsel for the medical defendants has by letter advised plaintiff’s counsel that several of the named doctors had no involvement with Mr. Roitman’s care or treatment and she has asked them to dismiss their claims against these doctors. Plaintiff’s counsel have demurred, as they are not yet sure of all the relevant facts and do not wish to risk dropping a party who may yet prove to be liable for the death of Mr. Roitman. Accordingly, counsel for the plaintiff drafted the impugned interrogatories which were directed to the defendants identified in the style of proceeding as being doctors. A principle objective of the interrogatories is to establish exactly who did exactly what in the days proceeding Mr. Roitman’s death, but some of the interrogatories go considerably beyond this.

6. Question No. 1 is not really a question at all. Instead, it peremptorily commands each recipient to:

“Describe in full and complete detail your involvement in the medical care and treatment of .......... Mr. Roitman from March 28, 1992 until April 16, 1992.”

7. Question No. 2 says:

“Describe in full and complete detail your knowledge of the involvement of other persons in the medical care and treatment of Mr. Roitman from March 28, 1992 until April 16, 1992. That is, who provided medical care and treatment to Mr. Roitman and what did they do.”

8. Questions No. 3 through No. 9 are basically repetitions of Question No. 2, broken down to focus on particular events of concern to the plaintiff.

9. Questions No. 14 and No. 15 ask what steps were taken to resuscitate Mr. Roitman once he went into cardiac arrest, how long it took, and why it took “as long as it did”. The balance of the questions from No. 10 through No. 17 ask for opinions on various aspects of Mr. Roitman’s treatment.

10. I will venture to say that there are few areas in the law relating to practice and procedure in this jurisdiction which are fraught with so many difficulties as interrogatories. Some of that difficulty may be removed by a recent decision of Baker J. in Tse-Ching v. Wesbild Holdings Ltd. et al., [1994] B.C.J. No. 2021, Vancouver Registry No.

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C934527 September 14, 1994, where Her Ladyship reviewed the authorities and extracted from them the following principles:

“1. Interrogatories must be relevant to a matter in issue in the action.

2. Interrogatories are not to be in the nature of cross-examination.

3. Interrogatories should not include a demand for discovery of documents.

4. Interrogatories should not duplicate particulars.

5. Interrogatories should not be used to obtain the names of witnesses.

6. Interrogatories are narrower in scope than examinations for discovery.

7. The purpose of interrogatories is to enable the party delivering them to obtain admissions of fact in order to establish his case and to provide a foundation upon which cross-examination can proceed when examinations for discovery are held.”

[The purpose of interrogatories was also considered recently by this court in Pierre v. Canadian Broadcasting Corporation, [1993] B.C.J. No. 2175, Vancouver Registry No. C913857. Smith J. held that Kennedy v. Dodson, [1895] 1 Ch. 334, which confined interrogatories to obtaining admissions of fact it was necessary for the interrogating party to prove, is no longer entirely correct, and that interrogatories by a party seeking to obtain admissions of the facts on which the other party bases affirmative pleadings and denials is also permissible.]

“8. Interrogatories are only one means of discovery. The court may permit the party interrogated to defer its response until other discovery processes have been completed, including examinations for discovery.”

11. Notwithstanding the clarity of these principles, it will no doubt continue to be difficult to apply them to the facts of many cases. My own view is that, subject always to particular rules laid down by binding authority, an important general principle governing the propriety of interrogatories should be the practicality of the procedure in any given case. All pre-trial disclosure procedures - generally those dealt with in Rules 26 through 32 plus demands for particulars - are tools with a common purpose of ascertaining relevant facts and narrowing the issues. As such, it seems to me that the law should encourage the selection of the tool which is likely to achieve the best result for the least effort and cost.

12. This analysis is particularly applicable to the choice between examinations for discovery and interrogatories. Generally speaking, issues involving extensive research, such as precise chronologies or exhaustive lists, would seem to be more appropriate for the more expansive time-frame permitted by interrogatories than for a more confrontational, time-pressured examination for discovery. Conversely, questions requiring a narrative answer are much more likely to remain in focus at an examination for discovery, where counsel can expand on and limit the witness’s answers as appropriate.

13. In view of the above, I have concluded that Question No. 1 should not be answered. This is not a question designed to obtain an admission of fact, and offends the seventh principle of the Tse-Ching decision referred to above. Moreover, it is a type of issue more conveniently dealt with as a narrative at examination for discovery.

14. Question No. 2 is a proper one, so long as it is interpreted to require a chronology of dates and times, names, and responsibilities, and not a request for a narrative. The reply will constitute an admission of fact, and it seems to me that it would be infinitely preferable to have this chronology sorted out from hospital records at relative leisure, rather than trying to cobble it together by comparing lists of documents with the unresearched answers of half a dozen witnesses under examination for discovery. Counsel for the defendants suggested that this question required so much detail from the individual defendants that it would be oppressive, but I cannot accept that contention. Any alternatives seems likely to result in less certainty for more work. I would suggest, without

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directing, that the defendant Hospital could have an all-inclusive chronology prepared by somebody in their records office, and that the individual defendants refer to those parts of it they are able to confirm from their own knowledge.

15. A further problem with regard to Question No. 2 relates to the stricture against the use of interrogatories to obtain the names of witnesses. This rule is subject to an exception, which requires the naming of witnesses whose identity is related to a material fact: Silvaggio v. Adamson (1988), 32 C.P.C. (2d) 227 (B.C.S.C.); Pierre v. Canadian Broadcasting Corporation, supra. Here, the question refers to “the involvement of other persons in the medical care and treatment of Mr. Roitman”. By limiting the names of the witnesses sought to persons involved in Mr. Roitman’s care, I am satisfied that the plaintiff has not strayed beyond the bounds of propriety. The identity of people involved in his care is a material fact, and there is no request for the names of uninvolved witnesses, such as nurses on shift in a particular ward at a particular time who were not involved with the care and treatment of Mr. Roitman.

16. Questions No. 3, No. 4 and No. 5 need not be answered. They do not seem to me to add anything permissible to the answer to Question No. 2 that I have already directed.

17. Question No. 6 is probably in the same category as Questions No. 3, No. 4 and No. 5 and, in any event, is not relevant to the particulars of negligence that have been pleaded, except as an undifferentiated part of the entire course of treatment given to Mr. Roitman while he was in the hospital.

18. Questions No. 7, 8 and 9 are as follows:

“7. To your knowledge, what person or persons were responsible for prescribing morphine to Mr. Roitman from March 28, 1992 until March 29, 1992 and what was the dosage prescribed. What factors are normally considered in the prescription and administration of morphine?

8. To your knowledge, what person or persons were responsible for administering the morphine to Mr. Roitman.

9. To your knowledge, what person or persons were responsible for determining the use of and monitoring Mr. Roitman’s Patient Controlled Analgesia (PCA) with morphine infusion?”

19. These are more specific questions than those dealt with in Question No. 2, and do relate to the pleadings in the amended Statement of Claim, where the particulars of negligence include the failure to properly prescribe and administer medication, and to properly monitor Mr. Roitman’s post-operative condition. The identity of the person prescribing morphine, the dosage prescribed and the PCA monitoring are all important issues on which the plaintiff is entitled to seek admissions. The more general chronology required by Question No. 2 may not zero in on the identity on the person prescribing the medication or responsible for the monitoring, and this knowledge may well enable counsel for the plaintiff to establish priorities as they plan the conduct of the litigation. An answer to the question about the prescribed dosage would be a necessary ingredient in any expert opinion sought on behalf of the plaintiff. It is at least as convenient to deal with these questions by interrogatories as by examination for discovery and these questions comply with all of the conditions set out in the Tse-Ching case.

20. But the third part of Question No. 7 is a different matter. It is more appropriate to wait for examinations for discovery to ask about the factors normally considered in the prescription and administration of morphine.

21. None of the remaining questions should be answered. The questions about resuscitating Mr. Roitman are too general to be the basis for proper interrogatories. They ask for a narrative, rather than for admissions of particular facts. And the questions relating to opinions about various issues involved in the case are clearly not designed to elicit admissions of fact. …………….

WEEK 9: R v. Imperial Tobacco

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R. v. Imperial Tobacco Canada Ltd. 2011 SCC 42

McLachlin C.J.

I. Introduction

[1] Imperial Tobacco (“Imperial”) is a defendant in two cases before the courts in British Columbia, British Columbia Canada v. Imperial Tobacco Canada Ltd., Docket: S010421, and Knight v. Imperial Tobacco Canada Ltd., Docket: L031300. In the first case, the Government of British Columbia is seeking to recover the cost of paying for the medical treatment of individuals suffering from tobacco-related illnesses from a group of 14 tobacco companies, including Imperial (“Costs Recovery case”). The second case is a class action brought against Imperial alone by Mr. Knight on behalf of class members who purchased “light” or “mild” cigarettes, seeking a refund of the cost of the cigarettes and punitive damages (“Knight case”).

[2] In both cases, the tobacco companies issued third-party notices to the Government of Canada, alleging that if the tobacco companies are held liable to the plaintiffs, they are entitled to compensation from Canada for negligent misrepresentation, negligent design, and failure to warn, as well as at equity. They also allege that Canada would itself be liable under the statutory schemes at issue in the two cases. In the Costs Recovery case, it is alleged that Canada would be liable under the Tobacco Damages and Health Care Costs Recovery Act, S.B.C. 2000, c. 30 (“CRA”), as a “manufacturer”. In the Knight case, it is alleged that Canada would be liable as a “supplier” under the Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2 (“BPCPA”), and its predecessor, the Trade Practice Act, R.S.B.C. 1996, c. 457 (“TPA”).

[3] In both cases, Canada brought motions to strike the third party notices under r. 19(24) of the Supreme Court Rules, B.C. Reg. 221/90 (replaced by the Supreme Court Civil Rules, B.C. Reg. 168/2009, r. 9-5), arguing that it was plain and obvious that the third-party claims failed to disclose a reasonable cause of action. In both cases, the chambers judges agreed with Canada, and struck all of the third-party notices. The British Columbia Court of Appeal allowed the tobacco companies’ appeals in part. A majority of 3-2 held that the negligent misrepresentation claims arising from Canada’s alleged duty of care to the tobacco companies in both the Costs Recovery case and the Knight case should proceed to trial. A majority in the Knight case further held that the negligent misrepresentation claim based on Canada’s alleged duty of care to consumers should proceed, as should the negligent design claims in the Knight case. The court unanimously struck the remainder of the tobacco companies’ claims.

[4] The Government of Canada appeals the finding that the claims for negligent misrepresentation and the claim for negligent design should be allowed to go to trial. The tobacco companies cross-appeal the striking of the other claims.

[5] For the reasons that follow, I conclude that all the claims of Imperial and the other tobacco companies brought against the Government of Canada are bound to fail, and should be struck. I would allow the appeals of the Government of Canada in both cases and dismiss the cross-appeals.

II. Underlying Claims and Judicial History

A. The Knight Case

[6] In the Knight case, consumers in British Columbia have brought a class action against Imperial under the BPCPA and its predecessor, the TPA. The class consists of consumers of light or mild cigarettes. It alleges that Imperial engaged in deceptive practices when it promoted low-tar cigarettes as less hazardous to the health of consumers. The class alleges that the levels of tar and nicotine listed on Imperial’s packages for light and mild cigarettes did not reflect the actual deliveries of toxic emissions to smokers, and alleges that the smoke produced by light cigarettes was just as harmful as that produced by regular cigarettes. The class seeks reimbursement of the cost of the cigarettes purchased, and punitive damages.


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[7] Imperial issued a third-party notice against Canada. It alleges that Health Canada advised tobacco companies and the public that low-tar cigarettes were less hazardous than regular cigarettes. Imperial alleges that while Health Canada was initially opposed to the use of health warnings on cigarette packaging, it changed its policy in 1967. It instructed smokers to switch to low-tar cigarettes if they were unwilling to quit smoking altogether, and it asked tobacco companies to voluntarily list the tar and nicotine levels on their advertisements to encourage consumers to purchase low-tar brands. Contrary to expectations, it now appears that low-tar cigarettes are potentially more harmful to smokers.

[8] Imperial also alleges that Agriculture Canada researched, developed, manufactured, and licensed several strains of low-tar tobacco, and collected royalties from the companies, including Imperial, that used these strains. By 1982, Imperial pleads, the tobacco strains developed by Agriculture Canada were “almost the only tobacco varieties available to Canadian tobacco manufacturers” (Knight case, amended third-party notice of Imperial, at para. 97).

[9] Imperial makes five allegations against Canada:

1) Canada is itself liable under the BPCPA and the TPA as a “supplier” of tobacco products that engaged in deceptive practices, and Imperial is entitled to contribution and indemnity from Canada pursuant to the provisions of the Negligence Act, R.S.B.C. 1996, c. 333.

2) Canada breached private law duties to consumers by negligently misrepresenting the health attributes of low-tar cigarettes, by failing to warn them against the hazards of low-tar cigarettes, and by failing to design its tobacco strain with due care. Consequently, Imperial alleges that it is entitled to contribution and indemnity from Canada under the Negligence Act.

3) Canada breached its private law duties to Imperial by negligently misrepresenting the health attributes of low-tar cigarettes, by failing to warn Imperial about the hazards of low-tar cigarettes, and by failing to design its tobacco strain with due care. Imperial alleges that it is entitled to damages against Canada to the extent of any liability Imperial may have to the class members.

4) In the alternative, Canada is obliged to indemnify Imperial under the doctrine of equitable indemnity.

5) If Canada is not liable to Imperial under any of the above claims, Imperial is entitled to declaratory relief against Canada so that it will remain a party to the action and be subject to discovery procedures under the Supreme Court Rules.

[10] Canada brought an application to strike the third-party claims. It was successful before Satanove J. in the Supreme Court of British Columbia (2007 BCSC 964, 76 B.C.L.R. (4th) 100). The chambers judge struck all of the claims against Canada. Imperial was partially successful in the Court of Appeal (2009 BCCA 541, 99 B.C.L.R. (4th) 93). The Court of Appeal unanimously struck the statutory claim, the claim of negligent design between Canada and Imperial, and the equitable indemnity claim. However, the majority, per Tysoe J.A., held that the two negligent misrepresentation claims and the negligent design claim between Canada and consumers should be allowed to proceed. The majority reasons did not address the failure to warn claim. Hall J.A., dissenting, would have struck all the third-party claims.

B. The Costs Recovery Case

[11] The Government of British Columbia has brought a claim under the CRA to recover the expense of treating tobacco-related illnesses caused by “tobacco related wrong[s]”. Under the CRA, manufacturers of tobacco products are liable to the province directly. The claim was brought against 14 tobacco companies. British Columbia alleges that by 1950, these tobacco companies knew or ought to have known that cigarettes were harmful to one’s health, and that they failed to properly warn the public about the risks associated with smoking their product.


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[12] Various defendants in the Costs Recovery case, including Imperial, brought third-party notices against Canada for its alleged role in the tobacco industry. I refer to them collectively as the “tobacco companies”. The allegations in this claim are strikingly similar to those in the Knight case. The tobacco companies plead that Health Canada advised them and the public that low-tar cigarettes were less hazardous and instructed smokers that they should quit smoking or purchase low-tar cigarettes. The tobacco companies allege that Canada was initially opposed to the use of warning labels on cigarette packaging, but ultimately instructed the industry that warning labels should be used and what they should say. The tobacco companies also plead that Agriculture Canada researched, developed, manufactured and licensed the strains of low-tar tobacco which they used for their cigarettes in exchange for royalties.

[13] The tobacco companies brought the following claims against Canada:

1) Canada is itself liable under the CRA as a “manufacturer” of tobacco products, and the tobacco companies are entitled to contribution and indemnity from Canada pursuant to the Negligence Act.

2) Canada breached private law duties to consumers for failure to warn, negligent design, and negligent misrepresentation, and the tobacco companies are entitled to contribution and indemnity from Canada to the extent of any liability they may have to British Columbia under the CRA.

3) Canada breached its private law duties owed to the tobacco companies for failure to warn and negligent design, and negligently misrepresented the attributes of low-tar cigarettes. The tobacco companies allege that they are entitled to damages against Canada to the extent of any liability they may have to British Columbia under the CRA.

4) In the alternative, Canada is obliged to indemnify the tobacco companies under the doctrine of equitable indemnity.

5) If Canada is not liable to the tobacco companies under any of the above claims, they are entitled to declaratory relief.

[14] Canada was successful before the chambers judge, Wedge J., who struck all of the claims, (2008 BCSC 419, 82 B.C.L.R. (4th) 362). In the Court of Appeal, the majority, per Tysoe J.A., allowed the negligent misrepresentation claim between Canada and the tobacco companies to proceed (2009 BCCA 540, 98 B.C.L.R. (4th) 201). Hall J.A., dissenting, would have struck all the third-party claims.

…

IV. Analysis

A. The Test for Striking Out Claims

[17] The parties agree on the test applicable on a motion to strike for not disclosing a reasonable cause of action under r. 19(24)(a) of the B.C. Supreme Court Rules. This Court has reiterated the test on many occasions. A claim will only be struck if it is plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action: Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263, at para. 15; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at p. 980. Another way of putting the test is that the claim has no reasonable prospect of success. Where a reasonable prospect of success exists, the matter should be allowed to proceed to trial: see, generally, Syl Apps Secure Treatment Centre v. B.D., 2007 SCC 38, [2007] 3 S.C.R. 83; Odhavji Estate; Hunt; Attorney General of Canada v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735.

[18] Although all agree on the test, the arguments before us revealed different conceptions about how it should be applied. It may therefore be useful to review the purpose of the test and its application.


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[19] The power to strike out claims that have no reasonable prospect of success is a valuable housekeeping measure essential to effective and fair litigation. It unclutters the proceedings, weeding out the hopeless claims and ensuring that those that have some chance of success go on to trial.

[20] This promotes two goods — efficiency in the conduct of the litigation and correct results. Striking out claims that have no reasonable prospect of success promotes litigation efficiency, reducing time and cost. The litigants can focus on serious claims, without devoting days and sometimes weeks of evidence and argument to claims that are in any event hopeless. The same applies to judges and juries, whose attention is focused where it should be — on claims that have a reasonable chance of success. The efficiency gained by weeding out unmeritorious claims in turn contributes to better justice. The more the evidence and arguments are trained on the real issues, the more likely it is that the trial process will successfully come to grips with the parties’ respective positions on those issues and the merits of the case.

[21] Valuable as it is, the motion to strike is a tool that must be used with care. The law is not static and unchanging. Actions that yesterday were deemed hopeless may tomorrow succeed. Before Donoghue v. Stevenson, [1932] A.C. 562 (H.L.) introduced a general duty of care to one’s neighbour premised on foreseeability, few would have predicted that, absent a contractual relationship, a bottling company could be held liable for physical injury and emotional trauma resulting from a snail in a bottle of ginger beer. Before Hedley Byrne & Co. v. Heller & Partners Ltd., [1963] 2 All E.R. 575 (H.L.), a tort action for negligent misstatement would have been regarded as incapable of success. The history of our law reveals that often new developments in the law first surface on motions to strike or similar preliminary motions, like the one at issue in Donoghue v. Stevenson. Therefore, on a motion to strike, it is not determinative that the law has not yet recognized the particular claim. The court must rather ask whether, assuming the facts pleaded are true, there is a reasonable prospect that the claim will succeed. The approach must be generous and err on the side of permitting a novel but arguable claim to proceed to trial.

[22] A motion to strike for failure to disclose a reasonable cause of action proceeds on the basis that the facts pleaded are true, unless they are manifestly incapable of being proven: Operation Dismantle Inc. v. The Queen, [1985] 1 S.C.R. 441, at p. 455. No evidence is admissible on such a motion: r. 19(27) of the Supreme Court Rules (now r. 9-5(2) of the Supreme Court Civil Rules). It is incumbent on the claimant to clearly plead the facts upon which it relies in making its claim. A claimant is not entitled to rely on the possibility that new facts may turn up as the case progresses. The claimant may not be in a position to prove the facts pleaded at the time of the motion. It may only hope to be able to prove them. But plead them it must. The facts pleaded are the firm basis upon which the possibility of success of the claim must be evaluated. If they are not pleaded, the exercise cannot be properly conducted.

[23] Before us, Imperial and the other tobacco companies argued that the motion to strike should take into account, not only the facts pleaded, but the possibility that as the case progressed, the evidence would reveal more about Canada’s conduct and role in promoting the use of low-tar cigarettes. This fundamentally misunderstands what a motion to strike is about. It is not about evidence, but the pleadings. The facts pleaded are taken as true. Whether the evidence substantiates the pleaded facts, now or at some future date, is irrelevant to the motion to strike. The judge on the motion to strike cannot consider what evidence adduced in the future might or might not show. To require the judge to do so would be to gut the motion to strike of its logic and ultimately render it useless.

[24] This is not unfair to the claimant. The presumption that the facts pleaded are true operates in the claimant’s favour. The claimant chooses what facts to plead, with a view to the cause of action it is asserting. If new developments raise new possibilities — as they sometimes do — the remedy is to amend the pleadings to plead new facts at that time.

[25] Related to the issue of whether the motion should be refused because of the possibility of unknown evidence appearing at a future date is the issue of speculation. The judge on a motion to strike asks if the claim has any reasonable prospect of success. In the world of abstract speculation, there is a mathematical chance that any number of things might happen. That is not what the test on a motion to strike seeks to determine. Rather, it operates on the assumption that the claim will proceed through the court system in the usual way — in an adversarial system where judges are under a duty to apply the law as set out in (and as it may develop from) statutes and precedent. The question is whether, considered in the context of the law and the litigation process, the claim has no reasonable chance of succeeding.


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[26] With this framework in mind, I proceed to consider the tobacco companies’ claims.

B. Canada’s Alleged Duties of Care to Smokers in the Costs Recovery Case

[27] In the Costs Recovery case, Canada argues that all the claims for contribution based on its alleged duties of care to smokers must be struck. Under the Negligence Act, Canada submits, contribution may only be awarded if the third party would be liable to the plaintiff directly. It argues that even if Canada breached duties to smokers, such breaches cannot ground the tobacco companies’ claims for contribution if they are found liable to British Columbia, the sole plaintiff in the Costs Recovery case. This argument was successful in the Court of Appeal.

[28] The tobacco companies argue that direct liability to the plaintiff is not a requirement for being held liable in contribution. They argue that contribution in the Negligence Act turns on fault, not liability. The object of the Negligence Act is to allow defendants to recover from other parties that were also at fault for the damage that resulted to the plaintiff, and barring a claim against Canada would defeat this purpose, they argue.

[29] I agree with Canada and the Court of Appeal that a third party may only be liable for contribution under the Negligence Act if it is directly liable to the plaintiff. In Giffels Associates Ltd. v. Eastern Construction Co., [1978] 2 S.C.R. 1346, dealing with a statutory provision similar to that in British Columbia, Laskin C.J. stated:

I am of the view that it is a precondition of the right to resort to contribution that there be liability to the plaintiff. I am unable to appreciate how a claim for contribution can be made under s. 2(1) by one person against another in respect of loss resulting to a third person unless each of the former two came under a liability to the third person to answer for his loss. [Emphasis added; p. 1354.]

[30] Accordingly, it is plain and obvious that the private law claims against Canada in the Costs Recovery case that arise from an alleged duty of care to consumers must be struck. Even if Canada breached duties to smokers, this would have no effect on whether it was liable to British Columbia, the plaintiff in that case. This holding has no bearing on the consumer claim in the Knight case since consumers of light or mild cigarettes are the plaintiffs in the underlying action.

[31] The discussion of the private law claims in the remainder of these reasons will refer exclusively to the claims based on Canada’s alleged duties of care to the tobacco companies in both cases before the Court, and Canada’s alleged duties to consumers in the Knight case.

…

(4) Could Canada Be Liable for Common Law Contribution?

[138] RBH and Philip Morris submit that if this Court rejects the contribution claim under the Negligence Act, it should allow a contribution claim under the common law. They rely on this Court’s decisions in Bow Valley and Blackwater v. Plint, 2005 SCC 58, [2005] 3 S.C.R. 3, in which this Court recognized claims of contribution which were not permitted by statute.

[139] I would reject this argument. In my view, the cases cited by RBH and Philip Morris support common law contribution claims only if the third party is directly liable to the plaintiff. In Bow Valley, the Court recognized a limited right of contribution “between tortfeasors”, and noted that the defendants were “jointly and severally liable to the plaintiff” (paras. 101 and 102). A similar point was made by this Court in Blackwater (per McLachlin C.J.), which stated that a “common law right of contribution between tortfeasors may exist” (para. 68 (emphasis added)). There is no support in our jurisprudence for allowing contribution claims in cases where the third party is not liable to the plaintiff.

…

H. The Claim for Equitable Indemnity


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[146] RBH and Philip Morris submit that if the tobacco companies are found liable in the Costs Recovery case, Canada is liable for “equitable indemnity” on the facts pleaded. They submit that whenever a person requests or directs another person to do something that causes the other to incur liability, the requesting or directing person is liable to indemnify the other for its liability. Imperial adopts this argument in the Knight case.

[147] Equitable indemnity is a narrow doctrine, confined to situations of an express or implied understanding that a principal will indemnify its agent for acting on the directions given. As stated in Parmley v. Parmley, [1945] S.C.R. 635, claims of equitable indemnity “proceed upon the notion of a request which one person makes under circumstances from which the law implies that both parties understand that the person who acts upon the request is to be indemnified if he does so” (p. 648, quoting A. Underhill, A Summary of the Law of Torts or Wrongs Independent of Contract (14th ed. 1941), at p. 43).

[148] In my view, the Court of Appeal, per Hall J.A., correctly held that the tobacco companies could not establish this requirement of the claim:

[I]f the notional reasonable observer were asked whether or not Canada, in the interaction it had over many decades with the appellants, was undertaking to indemnify them from some future liability that might be incurred relating to their business, the observer would reply that this could not be a rational expectation, having regard to the relationship between the parties. Likewise, if Canada through its agents had been specifically asked or a suggestion had been made to its agents by representatives of the appellants that Canada might in future be liable for any such responsibility or incur such a liability, the answer would have been firmly in the negative. [Costs Recovery case, para. 57]

When Canada directed the tobacco industry about how it should conduct itself, it was doing so in its capacity as a government regulator that was concerned about the health of Canadians. Under such circumstances, it is unreasonable to infer that Canada was implicitly promising to indemnify the industry for acting on its request. …

…

Appeals allowed and cross-appeals dismissed with costs.

WEEK 9: BC Ferry

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British Columbia Ferry Corporation v. T&N plc et al

British Columbia Supreme Court (In Chambers) Date of judgment: December 14, 1993

Braidwood J.

This is a trial brought by the third party Yarrows Limited for judgment pursuant to Rule 18A of the Rules of Court. Yarrows seeks to have the third party notice brought against it by the defendants be struck out on the basis that the defendants have no cause of action against it. The submission is founded on the fact that the plaintiff has released Yarrows of any obligation in the lawsuit and seeks no remedy against the third party.

The plaintiff owns and operates a fleet of ferries and alleges that the asbestos-related materials that the defendant produced were inter alia a dangerous or unsafe material which was installed from time to time in some of their ferries. They allege that because the products were hazardous, it was necessary to have them removed.

The defendant alleges against the third parties that if the allegations of the plaintiff are proven, Yarrows, who installed its product in the ferries, breached its contractual obligations or their duty of care to the plaintiff in that they: (a) failed to have warned the plaintiffs that asbestos is dangerous; and (b) failed to warn the plaintiff that they installed the asbestos products improperly.

These defendants do not allege any damage to its person or property. The relief claimed by the defendants against the third parties are stated as:

(a) a declaration that the plaintiff’s loss was caused or contributed by the third party;

(b) contribution or indemnity from the third party in respect of any amount awarded against the defendants in favour of the plaintiffs;

(c) indemnity for the defendants’ costs of defence; and

(d) taxable costs of the third party proceedings.

An agreement was entered into by the plaintiff and Yarrows on September 28, 1993. Paragraphs 1 and 2 read, as follows:

1. Neither B.C. Ferries nor the Province will seek to recover, either in the Action or by any other proceedings, any portion of the losses which It claims in the Action which a court or other tribunal may attribute to the fault of Yarrows. In particular, without limiting the generality of the foregoing, neither B.C. Ferries nor the Province will seek to recover such portion of its losses from the Defendants in the Action.

2. At the first reasonable opportunity, B.C. Ferries and the Province will advise the Court that they expressly waive any right to recover from the Defendants in the Action any portion of the losses which they claim and which the Court may attribute to the fault of Yarrows.

A number of cases were cited concerning the propositions applicable including Adams, Adams and Sealeigh Park Estates Ltd. v. Thompson, Berwick, Pratt & Partners et al. (1987), 15 B.C.L.R. (2d) 51; 39 D.L.R. (4th) 314; 22 C.P.C. (2d) 102 (C.A.); Sylte et al. v. Jackson Brothers Logging Co. Ltd. et al. (1988), 27 B.C.L.R. (2d) 357 (S.C.); Westcoast Transmission Company Limited v. Interprovincial Steel and Pipe Corporation Ltd. et al. (1985), 60 B.C.L.R. 368 (S.C.); Quintette Coal Ltd. v. Bow Valley Resource Services Ltd. (1986), 19 C.L.R. 153

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(B.C.S.C.); Tucker (Public Trustee of) v. Asleson (1991), 62 B.C.L.R. (2d) 78 (S.C.), rev’d in part (1993), 78 B.C.L.R. (2d) 173 (C.A.).

The question of division of fault between joint tortfeasors must be determined pursuant to the Negligence Act, R.S.B.C. 1979, c. 298, s. 4. It reads, as follows:

Liability of joint tortfeasors and right of contribution

4. Where damage or loss has been caused by the fault of 2 or more persons, the court shall determine the degree in which each person was at fault, and except as provided in section 5 where 2 or more persons are found at fault they are jointly and severally liable to the person suffering the damage or loss, but as between themselves, in the absence of a contract express or implied, they are liable to make contribution to and indemnify each other in the degree in which they are respectively found to have been at fault.

Rule 22(1)(c) of the Rules of Court reads, as follows:

(1) Where a defendant who has entered an appearance claims against any person, whether or not that person is a party to the action (in these rules called the third party),

(c) that any question or issue relating to or connected with the original subject matter is substantially the same as some question or issue arising between the plaintiff and the defendant and should properly be determined, not only as between the plaintiff and the defendant, but also as between the plaintiff and defendant and the third party, or between any or either of them,

the defendant may issue, .......... a third party notice in Form 17 setting out a statement of the defendant’s claim against the third party.

DISCUSSION:

The question arises then: When can a defendant in these circumstances claim for indemnity or contribution for all or part of the damages it is ordered to pay to the plaintiff? The answer to that question must be that it may claim for that part of the plaintiff’s damage it did not cause yet was compelled to pay. In my opinion, s. 4 of the Negligence Act, in effect, says just this:

.......... where 2 or more persons are found at fault they are jointly and severally liable to the person suffering the damage or loss, but as between themselves .......... they are liable to make contribution to and indemnify each other in the degree in which they are respectively found to have been at fault.

(Emphasis added)

If the plaintiff, at the hands of two tortfeasors, suffers a loss and despite the fact that the loss was caused from both, elects only to claim from one defendant that portion of the loss that the one defendant caused, that defendant can have no right to ask the third party to contribute. This is so because the defendant is only called upon to pay that part of the plaintiff’s damage that it caused and no more.

To put the proposition another way, the defendant would be free in the lawsuit even in the absence of the third party, to properly advance the proposition that it is either responsible for none of the plaintiff’s loss or only part of it namely, that part that it alone caused. Once it succeeds in this endeavour, it will only be liable for that part of the loss it caused and no more. This being so, it needs contribution from no one. It is obvious that if the defendant is only responsible for say, 30 per cent of the plaintiff’s loss, it cannot shift any part of that 30 per cent liability to another. These propositions are consistent with the cases cited above.

The propositions do not do violation to the decision of Finch, J., (as he then was) or the decision in the Court of Appeal in Tucker (Public Trustee of) v. Asleson, supra. In the Tucker case, it was held that the release of

WEEK 9: BC Ferry

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one joint tortfeasor by the plaintiff did not release the joint and several obligations of the remaining tortfeasor to claim for contribution and indemnity of the tortfeasor that the plaintiff released. This being so, the remaining tortfeasor was liable for its joint and several obligation to the plaintiff and could claim contribution or indemnity for any excess it was found to be obliged to pay to the plaintiff from the tortfeasor that was released. That principle is not violated here for the plaintiff only seeks that part of its loss actually caused by the defendant.

It is not the contract, itself which deprives the defendant of claiming against the third party, obviously the defendant is not a party to that contract but the fact that the plaintiff only seeks from the defendant that part of its loss which the defendant caused.

Mr. Macaulay in his forceful submission argued that it was premature even to consider this application because at this stage of the proceedings he had not been able to fully investigate various breaches of duty on the part of the several third parties. I have assumed throughout these reasons that the third parties would be found at trial to have caused or contributed to the damages caused by them in whole or in part.

There is, of course, no right for a defendant to join Yarrows as a party only to seek a procedural remedy, it must be able to claim a substantive remedy against Yarrows. Mr. Macaulay also advanced the proposition that he was entitled to take third party proceedings because of Rule 22(1)(c). The answer to that is that Rule 22(1)(c) confers no substantive remedy.

I note case of Wells (Wells), Wells and Wells v. McBrine; Smith (Smith) and Smith v. McBrine (1988), 33 B.C.L.R. (2d) 86 (C.A.), as authority for the proposition that the court may award a percentage of liability against persons who are not parties although the party that was sued need only pay the percentage properly found against it. In that case, Esson, J.A., wrote, at p. 87:

The issues arise from the verdict of the jury which apportioned fault 20 per cent against the plaintiff, 40 per cent against the defendant, and 40 per cent against persons who were not in any way parties to the action but who were identified by the jury as “the crowd” or “the troublemakers”. The plaintiff on this appeal submits that the jury should not have found her to be at fault in any degree and that, in any event, it was not open to it to attribute fault to persons who were not parties.

At p. 97, His Lordship wrote:

I return then to the specific grounds of error relied on by the appellant. As to the first two, for the reasons which I have given, I hold that it was open to the jury to attribute fault to the troublemakers even though they were persons who were not parties.

It follows that the relief sought by Yarrows should be granted and that part of the third party notice relating to a claim for relief for or indemnity by the defendants for the breach of duties of the third party to the plaintiff must be struck out.

It is not intended that these reasons will impact or effect para. (c) of the defendant’s prayer for relief against the third parties namely “Indemnity for the Defendant’s Costs of Defence;” . . . .

There were similar settlement agreements between the following third parties. They sought similar relief pursuant to Rule 18A of the Rules of Court, they are:

(a) Allied Shipbuilders Ltd.

(b) …

(c) Pinchin Harris, Holland Associates Limited

There may have been, at the hearing, other unrepresented defendants and in the event I have not listed them, they are at liberty to apply to be included in the result here obtained.

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It follows that each of these third parties should have similar relief.

WEEK 10: BC (Attorney General) v. Wale

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British Columbia (Attorney General) v. Wale

British Columbia Court of Appeal December 17, 1986

Seaton, Macdonald and McLachlin JJ.A.

[1] McLACHLIN J.A.:— This is an appeal from an interlocutory order enjoining the chiefs and members of three Indian bands from catching, transporting, bartering or selling fish in the Skeena, Kispiox and Bulkley Rivers, contrary to regulations of general application governing such activities.

[2] The fisheries in question fall under the jurisdiction of the federal government. In February 1986, the Indian bands passed by-laws purporting to regulate those parts of the fisheries on the rivers in question which fall within their reservations. The Minister of Indian Affairs did not disallow the by-laws as he might have done under the Indian Act s. 82(2), with the result that they became effective April 1, 1986. The Indians agreed not to fish under the by-laws until June 15, 1986, while negotiations took place with a view to establishing some form of cooperative control of the fisheries in question. Those negotiations failed.

[3] The by-laws provide, among other things, that the tribe members may “take unlimited quantities of fish at any time by any means except by explosive materials, rockets, combustibles; projectiles, shell or other like substances”, and forbid anyone else from fishing in the “waters of the Band.” They also permit tribe members to sell such fish without any limitations on amount, time and place. Sports fishing, other than as authorized by the Band Councils, is prohibited. No quota or other limits on fish taken by the Indians are set out in the by-laws.

[4] The Indians take the position that the boundaries of their reservations extend to mid-stream on the three rivers in question, with the result that their by-laws rather than federal fisheries regulations govern the fishery in such waters. The Indians have always been able to fish in those rivers, but only for their food. Under their by-laws, they claim the right to catch unlimited quantities of fish for sale purposes and to sell such fish without compliance with the usual regulations for inspection and quality control of the fish.

[5] The Province and various groups of fishermen take the position that the Indian by-laws are invalid as an improper delegation of the federal fisheries’ power, and that in any event, the reservation lands do not extend to mid-stream of the rivers. The Attorney General, on behalf of these groups, brought an action claiming an injunction prohibiting the Indians from dealing with the fish contrary to the regulations of general application. The action also asked that the Indians’ by-laws be quashed. On June 13, 1986 the Attorney General sought and obtained an interim injunction ex parte prohibiting the Indians from dealing with the fish other than as permitted by the Fisheries Act and Regulations of Canada and British Columbia. On June 23, 1986, that order was confirmed after a full hearing in the presence of all parties. This appeal is brought from that order.

[6] It is trite law that, the order appealed from being discretionary, this Court will not interfere unless it is demonstrated that the judge of first instance erred in principle or made an order not supported by the evidence or it appears that the decision will result in an injustice. …

[7] These contentions raise the issues of whether the chambers judge applied the correct tests for the granting of an injunction, and, if so, whether there was evidence upon which an injunction could be granted.

The Tests for Granting an Interim Injunction

[8] The traditional test for the granting of an interim injunction in British Columbia is two-pronged. First, the applicant must satisfy the Court that there is a fair question to be tried as to the existence of the right which he alleges and a breach thereof, actual or reasonably apprehended. Second, he must establish that the balance of convenience favours the granting of an injunction.


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[9] The decision in American Cyanamid Company v. Ethicon Limited [1975] A.C. 396 (H.L.) may be read as suggesting a three-stage test for the granting of interlocutory injunctions rather than the two-stage test to which I have referred, the requirements being (1) a fair question to be tried; (2) irreparable harm and (3) balance of convenience favouring the injunction. While I prefer to view the requirement of irreparable harm as integral to the assessment of the balance of convenience between the parties, the practical effect of the two approaches is the same.

[10] The first step in determining where the balance of convenience lies is to examine the adequacy of damages as a remedy for the respective parties. In most cases, an interlocutory injunction should not be granted unless there is doubt whether damages would be an adequate remedy in the event the applicant succeeds at trial. In other words, it must be shown that the applicant may suffer irreparable harm in the sense that “the remedy of damages is not such a compensation as will in effect, though not in specie, place the parties in the position in which they formerly stood:” Kerr On Injunctions, 6th ed., at pp. 17 - 18, applied in MacMillan-Bloedel Limited v. Mullin et al., [1985] 3 W.W.R. 577 (B.C.C.A.), per Seaton J.A. The requirement that there be doubt as to whether damages will be an adequate remedy is basically a matter of common sense. If damages will be an adequate remedy, and if it appears that the alleged offender can pay them, the court is generally not justified in giving one party his remedy to the detriment of the other before the issues have been tried.

[11] In many cases, assessing where the balance of convenience lies is a simple matter. Where there is a fair question to be tried and the applicant demonstrates that damages may not provide an adequate remedy, an interlocutory injunction may be justified. Similarly, if the only irreparable harm would be to the party against whom the injunction is sought, an injunction would not normally be granted.

[12] More difficult is the case where both parties demonstrate that damages might not be an adequate remedy - the applicant if no injunction is granted, the respondent if an injunction goes. In American Cyanamid Company v. Ethicon Limited, supra, considerations are discussed which may assist the court. One factor which may assist the court in assessing where the balance of convenience lies when the parties’ interests are relatively evenly balanced is the fact that one side bases his claim on existing rights, while enforcement of the other’s rights would change the status quo. To put it another way, where the only effect of an injunction is to postpone the date upon which a person is able to embark on a course of action not previously open to him, it is a counsel or prudence to preserve the status quo: Pacific Northwest Inc. v. Downs and Associates (1983), 42 B.C.L.R. 126 (B.C.C.A.) Another factor which may be considered at this stage is the strength of the applicant’s case. Finally, there may be special factors to be considered in the particular circumstances of the case.

[13] It is important to note that clear proof of irreparable harm is not required. Doubt as to the adequacy of damages as a remedy may support an injunction: American Cyanamid Company v. Ethicon Limited, supra.

[14] Having set out the usual procedure to be followed in determining whether to grant an interlocutory injunction, it is important to emphasize that the judge must not allow himself to become the prisoner of a formula. The fundamental question in each case is whether the granting of an injunction is just and equitable in all the circumstances of the case. Professor Sharp warns against the danger of insisting on slavish adherence to precise formulae in Injunctions and Specific Performance at p. 186:

The terms “irreparable harm”, “status quo”, “balance of convenience” do not have a precise meaning. They are more properly seen as guides which take colour and definition in the circumstances of each case. More importantly, they ought not to be seen as separate, watertight categories. These factors relate to each other, and strength on one part of the test ought to be permitted to compensate for weakness on another. It is not clear that the Cyanamid approach allows for this, and the decision suggests a misleading mechanical approach. The Manitoba Court of Appeal [in Lambair Limited v. Aero Trades (Western) Limited (1978), 87 D.L.R. (3d) 500, leave to appeal to the Supreme Court of Canada refused October 4, 1978] has quite properly held that it is not necessary .......... to follow the consecutive steps set out in the American Cyanamid judgment in an inflexible way; nor is it necessary to treat the relative strength of each party’s case only as a last step in the process.

The traditional “checklist” approach permits the individual judge to analyze all the factors coherently. It does not, however, require him to do so, and the flexibility, which permits one judge


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to weigh and balance the risk accurately, allows another to depart from the central question and allows for uncertainty and unevenness in approach. The checklist does not specifically relate the factors to one another, and while it provides a valuable guide in coming to the proper result, it has failed to articulate clearly an appropriate overall approach.

Treating the checklist as a “multi-requisite test” will often produce results which do not reflect the balance of risk and do not minimize the risk of non-compensable harm ..........

The checklist of factors which the courts have developed - relative strength of the case, irreparable harm, and balance of convenience - should not be employed as a series of independent hurdles. It should be seen in the nature of evidence relative to the central issue of assessing the relative risks of harm to the parties from granting or withholding interlocutory relief.

Whether the Chambers Judge Erred

[15] I turn now to a consideration of whether the chambers judge failed to apply the proper tests. She correctly inquired at the outset whether the applicant had made out a fair case for trial. Having concluded that he had, she went on to quote excerpts from Wheatley v. Ellis, [1944] 3 W.W.R. 462 (B.C.C.A.), and American Cyanamid, supra, and concluded that this was a case where the balance of convenience favoured the granting of an injunction to maintain the status quo. Her reasons do not expressly refer to the requirement of irreparable harm.

[16] In my opinion, the chambers judge’s failure to mention irreparable harm is not in itself fatal. She applied Wheatley, supra, where it was said that the applicant must satisfy the court that there is a fair question to be tried and “that the property should be preserved in its present actual condition until the question can be disposed of.” As Craig J.A. pointed out in MacMillan Bloedel v. Mullin, supra the court in Wheatley Ellis in effect had regard to the balance of convenience between the parties. The question of preservation of property, as Wheatley and MacMillan Bloedel illustrate, has repeatedly been treated as one of irreparable harm justifying an injunction. It is obvious that if property which is the subject of litigation is altered pending trial, damages may not offer complete compensation.

[17] The chambers judge clearly had this consideration in mind when she referred to the fact that the Attorney General’s claim in the case at bar was essentially a proprietary claim, based on the contention that the province owns the waters over which the Indian bands have asserted exclusive jurisdiction. The balance of her reasons, in which she discusses the Indians’ interest in fishing and disposing of fish pending trial, indicate the factors she was balancing - the Attorney General’s interest in the maintenance and protection of a public waterway and fishery against the Indians’ interest in using that waterway and fishery in accordance with their by-laws.

[18] The chambers judge founded her judgment on the statement in American Cyanamid (adopted by this Court in Pacific Northwest Inc. v. Downs and Associates, supra) that where other factors are evenly balanced, it is a counsel of wisdom to preserve the status quo. I must assume that, having considered the factors to which I have referred, she concluded that the parties’ cases were evenly balanced and that an injunction should be granted to preserve the status quo.

[19] I cannot conclude that the method by which the chambers judge proceeded was in error. Notwithstanding her failure to expressly allude to irreparable harm, she clearly had in mind the relative risks of harm to the parties from granting or withholding interlocutory relief and the fact that damages might not provide adequate compensation. To say that her conclusion is in error because of her omission to discuss irreparable harm as a separate element would be to adopt the formalistic approach against which Professor Sharp warns in the passage cited earlier. The question of irreparable harm may be properly reviewed as part of the assessment of the balance of convenience between the parties, notwithstanding its treatment as a separate element in American Cyanamid, supra.

[20] The only remaining question is whether there was evidence before the chambers judge upon which she could properly arrive at the conclusion that an injunction should be granted. In my view, there was such evidence.

[21] Clearly there was evidence supporting the conclusion that there was a fair question to be tried. Quite apart from the question of the power of the federal government to delegate its legislative powers to Indian bands, the province’s contention that the Indian lands do not extend to the mid-point of rivers bounded by reserves merits serious consideration by the courts on the material before the chambers judge.


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[22] On the question of balance of convenience, there was evidence that commercial fishing contrary to the regulations imposed by the Department might affect the salmon stocks in the rivers, with a consequent effect on the fishery resources in three or four years’ time which would be impossible to determine. There was also evidence that federal and provincial regulations had been and would continue to be flouted in the absence of an injunction. Finally, there was evidence of sales by the Indians of fish which did not meet the standards imposed for other fish commercially sold, raising the obvious possibility of damage to the market for British Columbia salmon. On the other side, there was evidence that interference with the Indians’ commercial fishery might deprive them of revenues from commercial fishing which would be difficult to estimate at the time of trial. In my opinion, there was abundant evidence upon which the chambers judge could conclude that damages might not be an adequate remedy, that the factors on each side were relatively evenly balanced, and that it was appropriate to maintain the status quo pending trial by granting an injunction.

[23] In summary, I cannot conclude that the chambers judge erred in principle or that there was an absence of evidence supporting an interim injunction. That being the case, I am of the view that it would be inappropriate to interfere with the chambers judge’s exercise of her discretion. I would allow the injunction to stand.

[24] I accept the respondents’ submission that it is neither the practice nor appropriate to require an undertaking as to damages where the Crown seeks to enforce by injunction what is prima facie the law of the land: Hoffman-La Roche v. Trade Sec., [1975] A.C. 295.

[25] As to the wording of the order, I would amend it to confine its effect to the three rivers which are at issue in the litigation. Subject to this, I would dismiss the appeal.

MACDONALD J.A.:— I agree.

AFFIRMED: [1991] 1 SCR 62

WEEK 10: Tracy

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Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd.

British Columbia Court of Appeal Judgment: filed October 5, 2007

Reasons for Judgment of the Honourable Madam Justice Saunders:

[1] These are two class actions. In June 2006 the representative plaintiff Ms. Tracy obtained a worldwide Mareva injunction, an impound order requiring the defendants to place all funds from sale of the businesses in issue in a lawyer's trust account, and an order requiring the defendants to file affidavits listing all their assets. The Mareva injunction was given without an undertaking as to damages from Ms. Tracy.

[2] The orders were made at the same time as the order certifying the actions as class actions.

[3] The appellants are the defendants in the actions. The corporate appellants are companies that have been in the payday loan and title loan business. I shall refer to them as the Instaloans companies. The individual appellants are the officers, directors and shareholders of the Instaloans companies. Collectively the appellants contend that the learned chambers judge erred in granting the Mareva injunction, in impounding certain assets, and in ordering a listing affidavit in over-broad terms.

…

[5] The actions are similar to actions that have been before this Court on several occasions, most recently Kilroy v. A OK Payday Loans Inc., 2007 BCCA 231, 278 D.L.R. (4th) 193. In Kilroy this Court upheld a judgment on liability, concluding that fees, charges and interest charged by a payday loan company to borrowers, collectively resulted in a payment by class members of interest at a criminal rate contrary to s. 347(1)(b) of the Criminal Code.

[6] In these two actions, Ms. Tracy contends that fees, charges and interest paid to the Instaloans companies on payday loan agreements and title loan agreements constituted interest at a criminal rate contrary to s. 347(1)(b) of the Criminal Code. She seeks an order requiring the Instaloans companies to disgorge all unlawful fees received by them, as well as all amounts received in the title loan business from the sale of vehicles, over and above lawful charges. Ms. Tracy seeks as well to pierce the corporate veil and to recover from the individual defendants, alleging conspiracy. Against all defendants she seeks punitive damages.

[7] The Instaloans companies, except 864556 Alberta Ltd., were first joined in MacKinnon v. National Money Mart (S030527) an action against more than 20 defendants operating more than 18 payday loan companies. In that action Mr. MacKinnon sought restitution and damages for fees alleged to be contrary to s. 347(1) of the Criminal Code. Proposed class proceedings were also commenced in both Alberta and Ontario in respect of the Instaloans companies.

[8] On March 1, 2005, the certification application in MacKinnon was dismissed on the basis that the issues in respect of the fees paid to different companies were not common issues and the class action was not found to be the preferable procedure for resolution of the plaintiff's claims: 2005 BCSC 271. That action was subsequently dismissed by consent against the Instaloans companies on April 8, 2003.

[9] On or around April 21, 2005, the Instaloans business was sold to Rent-Cash Inc. for a cash payment of $39.5 million. Rent-Cash Inc., a publicly traded company, was a competitor of Instaloans operating a payday loan business known as The Cash Store.

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[10] On April 29, 2005, Ms. Tracy commenced the action against the appellants in respect of the Instaloans' payday loan business. On August 15, 2005, she commenced her second action in respect of their title loan business.

[11] In the meantime, matters proceeded in the Ontario action, Bruley v. 864556 Alberta Ltd., formerly known as Instaloans Financials Solutions Centre Ltd. et al., (Court File No. 05-CV-294691CP). In October 2005, counsel in the Ontario action delivered materials in support of an application to certify Bruley as a national class proceeding and to approve a settlement. The terms of the settlement provided for a minimum payment of $1.28 million and a maximum payment of $8 million.

[12] Ms. Tracy on behalf of the British Columbia claimants elected not to share in the settlement, with the result that the Ontario settlement was approved for Instaloans' borrowers except those in British Columbia.

[13] In the present application, Ms. Tracy relied upon statements made in correspondence placed before the judge approving the Bruley settlement. One letter is from the accounting firm Watson Aberant that had acted as advisors to the individual defendants in that action. That letter stated:

We have acted as accountants for the Corporate Defendants for several years. In that capacity, we have information as to the recorded assets and liabilities of the Corporate Defendants. As accounting and tax advisors to the Individual Defendants for the last several years, we have information as to their reported assets and liabilities. Based on this information:

As of August 1, the cutoff date closest to the date of filing the Bruley claim, August 5, 2005:

a. The Corporate Defendants have net assets not exceeding $1.7 million; and

b. The Individual Defendants have exigible assets not exceeding $1 million.

[Emphasis added.]

[14] Another letter is from the law firm of Fraser Milner. It stated, referring to the Watson Aberant letter:

We have been asked to provide an independent commentary on the sale of the business assets of Instaloans to Rent-Cash Inc. and a subsidiary thereof, effective April 21, 2005, the dispensation of the proceeds derived therefrom and the various debtor protection strategies historically implemented by Tim Latimer and Marc Arcand (the "Individuals") and Instaloans. We have had no previous solicitor/client relationship with either Instaloans or the Individuals prior to this retainer.

…

Subject to the assumptions and understandings conveyed to [McLennan Ross] and set out in this letter and subject to the qualifications and restrictions set out in this letter, we are satisfied that a judgment rendered against Instaloans and the Individuals in due course in the class action proceedings will go unsatisfied except to the extent of the attachment of the assets referred to in the Watson Aberant Opinion.

[Emphasis added.]

[15] In addition, the affidavit filed by counsel in Bruley read:

Apart from the vagaries of litigation, it appeared to us that Instaloans had no substantial assets but was simply a group of shell companies operating out of retail locations and employing low paid staff. Thus, in the event that we were able to obtain a judgment against Instaloans, we would likely have been left with uncertain rights of recovery against the individual directors and officers, who might not have personal assets to meet a claim, and who had likely received sophisticated advice on asset protection.

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[16] Ms. Tracy filed her application for a Mareva injunction and listing affidavit March 16, 2006. She relied on the above related sequence of events, the letters before the Ontario Court in Bruley, the affidavit filed in Bruley, and the fact the appellants have no assets in British Columbia, to support her contention that the appellants had or were organizing their affairs to make themselves judgment proof and that a Mareva injunction and listing affidavit were essential to the ability of class members to recover any sums the Court may order the appellants to pay in this action.

The Reasons for Judgment

[17] In her reasons for judgment granting the orders, the chambers judge applied the two-part test set out by Huddart J. in Mooney v. Orr (1994), 100 B.C.L.R. (2d) 335, [1995] 3 W.W.R. 116 (S.C. Chambers) (Mooney No. 2):

The comparable approach to a Mareva injunction would be to require a strong prima facie (which seems to have been favoured in Aetna, supra) or a good arguable case (as expounded in Ninemia, supra) to cross the threshold, and then to balance the interests of the two parties, having regard to all the relevant factors in each case, to reach a just and convenient result. Included in such factors will be evidence that establishes the existence of assets within British Columbia (for a domestic injunction) or outside (for a national or international injunction) and a real risk of their disposal or dissipation so as to render nugatory any judgment. (¶ 44)

[18] The chambers judge then referred to Silver Standard Resources Inc. v. Joint Stock Co. Geolog (1998), 168 D.L.R. (4th) 309, 59 B.C.L.R. (3d) 196 (C.A.), in which this Court approved the approach taken in Mooney No. 2:

[92] … In [Silver Standard], Newbury J.A. said that "[t]he overarching consideration in each case is the balance of justice and convenience between the parties" (¶ 20). She went on to state at ¶ 21:

… it is clear that in most cases, it will not be just or convenient to tie up a defendant's assets or funds simply to give the plaintiff security for a judgment he may never obtain. Courts will be reluctant to interfere with the parties' normal business arrangements, and affect the rights of other creditors, merely on the speculation that the plaintiff will ultimately succeed in its claim and have difficulty collecting on its judgment if the injunction is not granted.

[19] The chambers judge also noted at para. 93 that Aetna Financial Services Ltd. v. Feigelman, [1985] 1 S.C.R. 2, [1985] 2 W.W.R. 97 required, on the balance of justice and convenience, that "the plaintiff establish there is a genuine risk of disappearance of assets."

[20] The chambers judge found that Ms. Tracy had established she had a good arguable case, including against the individual defendants. Referring to 642947 Ontario Ltd. v. Fleischer (2001), 56 O.R. (3d) 417, 209 D.L.R. (4th) 182 (C.A.) at 68, she said:

[95] The plaintiff has a good arguable case that the fees charged constitute interest in excess of the criminal rate; that the individual defendants as the directors and officers of the corporate defendants directed that wrongful thing to be done; and in light of the foregoing, that the court will pierce the corporate veil to affix liability to those individuals.

[21] On the issue of the balance of convenience, the chambers judge referred to the earlier decision of Newbury J. (as she then was) in Mooney v. Orr (1994), 98 B.C.L.R. (2d) 318 (S.C. Chambers) (Mooney No. 1), dealing with the ex parte application for a Mareva injunction. In Mooney No. 1 Newbury J. had quoted from Derby & Co. Ltd. v. Weldon (No. 2), [1989] 1 All E.R. 1002 (C.A.) at 325:

The fundamental principle underlying this jurisdiction [to issue a worldwide order pre-judgment] is that, within the limits of its powers, no court should permit a defendant to take action designed to ensure that subsequent orders of the court are rendered less effective than would

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otherwise be the case. On the other hand, it is not its purpose to prevent a defendant carrying on business in the ordinary way or, if an individual, living his life normally pending the determination of the dispute, nor to impede him in any way in defending himself against the claim. Nor is its purpose to place the plaintiff in the position of a secured creditor. In a word, whilst one of the hazards facing a plaintiff in litigation is that, come the day of judgment it may not be possible for him to obtain satisfaction of that judgment fully or at all, the court should not permit the defendant artificially to create such a situation. [emphasis in Mooney No. 1]

[22] The chambers judge referred to passages of Mooney No. 1 confirming the adaptability of the courts to new circumstances, the need to ensure a defendant does not take action designed to frustrate existing or subsequent orders of the court, and the caution to be applied in ensuring that there is a real risk of removal or dissipation of assets to avoid judgment. She then held:

[104] I am satisfied that the plaintiff has established a real risk of dissipation of assets, or, as some of the cases have put it, the "defendant taking action, the purpose of which is to render nugatory or less effective any judgment or order which the plaintiff may thereafter obtain": Polly Peck International plc v. Nadir (No. 2), [1992] 4 All E.R. 769 (C.A.). The sale of the business assets for $39.5 million, combined with the evidence before the Court on the national class action settlement is sufficient to establish a real risk.

[23] In the result, the chambers judge found that the balance of convenience favoured the injunction, provided that it was crafted so as not to interfere with the ordinary business of the defendants.

[24] The chambers judge next addressed the prospect of relieving Ms. Tracy from the obligation to provide an undertaking, and said:

[106] . . . I am satisfied that it is appropriate in this case not to require an undertaking: these proceedings are brought by the plaintiff, whose wherewithal is limited, on her own behalf and on behalf of others in similar circumstances. To require an undertaking would defeat the plaintiff's ability to obtain an injunction for the class. Given the circumscribed injunction in this case, damages, if any, have been minimized.

[25] Last, the chambers judge rejected the submission that the Court lacked jurisdiction because the defendants do not reside here and may not have assets in British Columbia. She did so, on the basis that a Mareva injunction is an in personam remedy for which British Columbia courts have jurisdiction over defendants who have attorned to the jurisdiction of the Court.

The Issues

[26] On this appeal the appellants contend that the chambers judge erred in issuing the Mareva injunction in:

1) failing to apply the proper test for granting a Mareva injunction;

2) ordering the injunction where the evidence does not support it and where none of the traditional hallmarks of conduct of a Mareva defendant are present; and

3) failing to address Ms. Tracy's delay in seeking the injunction.

[27] Further, the appellant contends that the judge erred in the terms of the listing affidavit by going beyond what is required to monitor compliance.

Discussion

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[28] The central issue in this appeal is the basis upon which a Mareva injunction may be granted. This question engages as a first step the criteria for the granting of an interlocutory injunction, and thereafter the finer points put upon a Mareva injunction in recognition of its special place as an exception to the rule that a party is not entitled to pre-judgment execution. To a degree this question also engages the proper role of Mareva injunctions in class proceedings, as the class proceedings aspect and the policy favouring the facilitation of a conglomerate of relatively small claims excused Ms. Tracy from providing an undertaking. The result is an order of potentially great impact on the defendants which does not contain within it the balancing aspect of jeopardy, for the effect of this order is to prohibit general use of assets without the balance of a personal undertaking.

[29] This Court, in Silver Standard, approved the two-armed test for a Mareva injunction set out by Huddart J. in Mooney No. 2. Mooney No. 2 states the criteria differently than does the Supreme Court of Canada in Aetna Financial, a case engaging different circumstances. Other courts of appeal in Canada have formulated the criteria differently, steering away from the approach articulated in British Columbia. Thus, the first question is whether the approach of Mooney No. 2 fits within the approach taken by the Supreme Court of Canada in Aetna Financial, or whether it requires modification.

[30] I start with a brief review of the law relating to interlocutory injunctions of the usual sort. In B.C. (A.G.) v. Wale (1986), 9 B.C.L.R. (2d) 333, [1987] 2 W.W.R. 331 (C.A.), aff'd [1991] 1 S.C.R. 62, McLachlin J.A. described the traditional test in British Columbia for the granting of an interlocutory injunction as two-part: (i) is there a fair question to be tried, and (ii) does the balance of convenience favour the granting of an injunction? She then said as to a three-part test at p. 345:

The decision in Amer. Cyanamid Co. v. Ethicon Limited [1975] A.C. 396, … (H.L.), may be read as suggesting a three-stage test for the granting of interlocutory injunctions rather than the two-stage test to which I have referred, the requirements being (1) a fair question to be tried, (2) irreparable harm, and (3) balance of convenience favouring the injunction. While I prefer to view the requirement of irreparable harm as integral to the assessment of the balance of convenience between the parties, the practical effect of the two approaches is the same.

[31] Madam Justice McLachlin described the essential question at p. 346:

Having set out the usual procedure to be followed in determining whether to grant an interlocutory injunction, it is important to emphasize that the judge must not allow himself to become the prisoner of a formula. The fundamental question in each case is whether the granting of an injunction is just and equitable in all the circumstances of the case. Professor Sharp warns against the danger of insisting on slavish adherence to precise formulae in Injunctions and Specific Performance (1983), at paras. 186-89:

The terms "irreparable harm", "status quo", "balance of convenience" do not have a precise meaning. They are more properly seen as guides which take colour and definition in the circumstances of each case. More importantly, they ought not to be seen as separate, watertight categories. These factors relate to each other, and strength on one part of the test ought to be permitted to compensate for weakness on another. It is not clear that the Cyanamid approach allows for this, and the decision suggests a misleading mechanical approach. The Manitoba Court of Appeal [in Lambair Ltd. v. Aero Trades (Western) Ltd. (1978), 87 D.L.R. (3d) 500, leave to appeal to the S.C.C. refused October 4, 1978] has quite properly held that "it is not necessary ... to follow the consecutive steps set out in the American Cyanamid judgment in an inflexible way; nor is it necessary to treat the relative strength of each party's case only as a last step in the process."

The traditional "checklist" approach permits the individual judge to analyze all the factors coherently. It does not, however, require him to do so, and the flexibility, which permits one judge to weigh and balance the risk accurately, allows another to depart from the central question and allows for uncertainty and

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unevenness in approach. The checklist does not specifically relate the factors to one another, and while it provides a valuable guide in coming to the proper result, it has failed to articulate clearly an appropriate overall approach.

Treating the checklist as a "multi-requisite test" will often produce results which do not reflect the balance of risks and do not minimize the risk of non-compensable harm....

The checklist of factors which the courts have developed - relative strength of the case, irreparable harm, and balance of convenience - should not be employed as a series of independent hurdles. They should be seen in the nature of evidence relative to the central issue of assessing the relative risks of harm to the parties from granting or withholding interlocutory relief.

[Emphasis added.]

[32] Some months after this Court's decision in B.C. (A.G.) v. Wale, the Supreme Court of Canada in Manitoba (Attorney General) v. Metropolitan Stores Ltd., [1987] 1 S.C.R. 110, 38 D.L.R. (4th) 321 used the three-part test: (i) is there a serious question to be tried, (ii) is there irreparable harm, (iii) does the balance of convenience favour the injunction? This approach was affirmed in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, 111 D.L.R. (4th) 385.

[33] The articulation of the criteria set out in B.C. (A.G.) v. Wale is often followed in British Columbia; for example, Canadian Broadcasting Corp. v. CKPG Television Ltd., [1992] 3 W.W.R. 219, 64 B.C.L.R. (2d) 96 (C.A.), and was not disapproved by the Supreme Court of Canada when B.C. (A.G.) v. Wale was before it in 1991. However, the three-part test of Metropolitan Stores also has application. In all of this, the caution expressed by Professor Sharp and noted by McLachlin J.A., that there is danger in slavish adherence to precise formulation, must be remembered. This is because the criteria are only a judicial expression or explanation of the statutory authority for injunctions in s. 39(1) of the Law and Equity Act, R.S.B.C. 1996, c. 253:

39(1) An injunction or an order in the nature of mandamus may be granted or a receiver or receiver manager appointed by an interlocutory order of the court in all cases in which it appears to the court to be just or convenient that the order should be made.

[Emphasis added.]

[34] The law on Mareva injunctions sits within this general framework. The history of Mareva injunctions is recounted in Aetna Financial by Estey J. The convenient starting place is Lister & Co. v. Stubbs, [1886-90] All E.R. 797 (C.A.). There Cotton L.J. affirmed the rule that security for a debt will not be ordered before judgment even where success of the claim is highly probable. Exceptions to this referred to in Aetna Financial at pp. 12-14 are:

1. for the preservation of assets, the very subject matter in dispute, where to allow the adversarial process to proceed unguided would see their destruction before the resolution of the dispute…;

2. where generally the processes of the court must be protected even by initiatives taken by the court itself;

3. to prevent fraud both on the court and on the adversary…;

4. quia timet injunctions … generally permitted under extreme circumstances which included a real or impending threat to remove contested assets from the jurisdiction.

[35] Aetna Financial concerned the fourth exception, a quia timet injunction. In Aetna Financial, Estey J. grappled with the jurisdiction of a Canadian court to issue a Mareva injunction. He concluded that the courts must exercise caution, and that the issue of removing assets from a jurisdiction bore different considerations in a federal state such that a province-to-province transfer lacked the impact of a transfer outside the federal jurisdiction.

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[36] In reaching this conclusion, Estey J. first alluded to the classic criteria for an interlocutory injunction and then dealt with what he terms "the second and higher hurdle" created by the general rule against execution before judgment. He considered the jurisdiction to issue a Mareva injunction and, referring to Chitel v. Rothbart (1982), 39 O.R. (2d) 513 (C.A.), said at pp. 26-27:

… although [the Court of Appeal of Ontario] refused the injunction in the circumstances of that case, it recognized in a detailed and comprehensive review of the authorities that the jurisdiction existed in the court to grant such a remedy in a proper case. The test there established (per MacKinnon A.C.J.O., at pp. 532-33) is somewhat narrower than that generally applied by the courts in the United Kingdom:

The applicant must persuade the court by his material that the defendant is removing or there is a real risk that he is about to remove his assets from the jurisdiction to avoid the possibility of a judgment, or that the defendant is otherwise dissipating or disposing of his assets, in a manner clearly distinct from his usual or ordinary course of business or living, so as to render the possibility of future tracing of the assets remote, if not impossible in fact or in law.

The condition precedent to entitlement to the order is the demonstration by the plaintiff of a "strong prima facie case" (p. 522) and not merely as stipulated in some of the U.K. authorities, "a good arguable case", (per Lord Denning in Rasu, supra, and per Megarry V.C. in Barclay-Johnson v. Yuill, supra.) In summary, the Ontario Court of Appeal recognized Lister as the general rule, and Mareva as a "limited exception" to it, the exceptional injunction being available only where there is a real risk that the defendant will remove his assets from the jurisdiction or dissipate those assets to avoid the possibility of a judgment ....

In other provinces the courts have reached approximately the same result. …

[37] Mr. Justice Estey concluded on this note of caution at p. 37:

There is still, as in the days of Lister, a profound unfairness in a rule which sees one's assets tied up indefinitely pending trial of an action which may not succeed, and even if it does succeed, which may result in an award of far less than the caged assets. The harshness of such an exception to the general rule is even less acceptable where the defendant is a resident within the jurisdiction of the court and the assets in question are not being disposed of or moved out of the country or put beyond the reach of the courts of the country. This sub-rule or exception can lead to serious abuse. A plaintiff with an apparent claim, without ultimate substance, may, by the Mareva exception to the Lister rule, tie up the assets of the defendant, not for the purpose of their preservation until judgment, but to force, by litigious blackmail, a settlement on the defendant who, for any one of many reasons, cannot afford to await the ultimate vindication after trial. I would, with all respect to those who have held otherwise, conclude that the order should not have been issued under the principles of interlocutory quia timet orders in Canadian courts functioning as they do in a federal system.

[38] In contrast, Mooney No. 2 concerned the second exception referred to by Estey J., the court acting to protect its own process.

[39] In Mooney No. 2, the plaintiff had a monetary claim on an agreement denied by the defendant. The defendant counterclaimed. The plaintiff was found to have always organized his affairs by stowing assets out of the jurisdiction. It was the attempt to use the court's process to recover a monetary judgment while simultaneously putting his assets beyond the reach of an order for costs or a monetary judgment on the counterclaim that was in issue.

[40] In that context, Huddart J. cited B.C. (A.G.) v. Wale at paras. 43 and 44:

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[43] This relaxed approach to applications for Mareva injunctions may be seen as fitting well with the established approach for granting interim injunctions in British Columbia. While there is a longstanding two-pronged test for the granting of an interim injunction, the Court of Appeal cautioned in British Columbia (Attorney General) v. Wale (1986), 9 B.C.L.R. (2d) 333 … (C.A.), at 346, that "... the judge must not allow himself to become the prisoner of a formula. The fundamental question in each case is whether the granting of an injunction is just and equitable in all the circumstances of the case." The Court of Appeal affirmed the traditional test in Canadian Broadcasting Corp. v. CKPG Television Ltd. (1992), 64 B.C.L.R. (2d) 96, … (C.A.) and added (at p. 102) that:

Resort to the decided cases in which the test has been applied will provide the necessary limits to that flexibility, not so much through what those cases say, but more through what they decide about whether an interim injunction should be granted on each set of particular facts.

[44] The comparable approach to a Mareva injunction would be to require a strong prima facie (which seems to have been favoured in Aetna, supra) or a good arguable case (as expounded in Ninemia, supra,) to cross the threshold, and then to balance the interests of the two parties, having regard to all the relevant factors in each case, to reach a just and convenient result. Included in such factors will be evidence that establishes the existence of assets within British Columbia (for a domestic injunction) or outside (for a national or international injunction) and a real risk of their disposal or dissipation so as to render nugatory any judgment.

[41] The Mooney No. 2 approach was affirmed by this Court in Silver Standard. There, in the context of a foreign defendant entitled to receive funds from a Canadian defendant, the Court approved an order setting aside a Mareva injunction against the foreign defendant and reinstated a garnishing order against the second defendant. In doing so, Newbury J.A., for the Court, considered the criteria for a Mareva injunction. With reference to Mooney No. 2, she held:

[20] I agree with this approach, which in my view is true to the historical roots of injunctions generally and Mareva injunctions in particular. Thus I would be reluctant to adopt a hard and fast rule, as counsel for the defendants urged upon us, that a Mareva injunction may never be made or continued unless there is a fraudulent intent on the part of the debtor; or where the payment in question is one proposed to be made in the ordinary course of business; or where it would materially and adversely affect an innocent third party. (In the latter regard, Mr. Moshonas referred us to Galaxia Maritime S.A. v. Mineralimportexport (Eleftherios), [1982] 1 All E.R. 796 (C.A.) at 800, Northern Sales Co. v. Government Trading Corp. of Iran, supra, at 75-6. But this factor cannot be taken too far, for almost every Mareva injunction is likely to inconvenience another party in some way.) The overarching consideration in each case is the balance of justice and convenience between the parties, and those concepts can embrace many factors that do not fit easily into the "rules" or "conditions" advanced by the defendants.

[21] Having said that, however, it is clear that in most cases, it will not be just or convenient to tie up a defendant's assets or funds simply to give the plaintiff security for a judgment he may never obtain. Courts will be reluctant to interfere with the parties' normal business arrangements, and affect the rights of other creditors, merely on the speculation that the plaintiff will ultimately succeed in its claim and have difficulty collecting on its judgment if the injunction is not granted.

…

[23] … As an appellate court, we are in a position to interfere with the Chambers judge's exercise of his discretion only if he acted on a wrong principle or was otherwise clearly wrong in his conclusion. I cannot say that that occurred, and indeed I believe he properly applied the law to the facts before him. It may be that the cautious approach to Mareva injunctions favoured in Aetna now requires some refinement almost 15 years later in light of the globalization of business transactions and the speed with which assets may now be moved across borders. As Mooney v. Orr indicates, the law is moving incrementally in that direction. At present, however, the balance of convenience and justice is generally seen to weigh against the granting of an injunction that will

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prevent a defendant from paying a debt incurred in the ordinary course of business, simply in order to provide pre-judgment security to a plaintiff. That factor, and the consideration of Dukat's position, led the Chambers judge to conclude that the Mareva injunction should be set aside in this case. No basis for our interference has been shown.

[42] Counsel for the appellants urged us to apply the three-part test, as refined by five extra requirements set out in Front Carriers Ltd. v. Atlantic & Orient Shipping Corp., 2006 FC 18 at para. 16 [which are said to come from Third Chandris Shipping Corp. v. Unimarine S.A., [1979] 1 Q.B. 645, 2 Lloyd's Rep. 184 (C.A.), and Marine Atlantic Inc. v. Blyth (1993), 113 D.L.R. (4th) 501 (F.C.A.)]:

1. The plaintiff should make full and frank disclosure of all matters in his knowledge which are material for the judge to know.

2. The plaintiff should give particulars of his claim against the defendant, stating the ground of his claim and the amount thereof, and fairly stating the points made against it by the defendant.

3. The plaintiff should give some grounds for believing that the defendant has assets [in the jurisdiction].

4. The plaintiff should give some grounds for believing that there is a risk of the assets being removed before the judgment or award is satisfied.

5. The plaintiff must, of course, give an undertaking in damages ... [which] in a suitable case ... should be supported by a bond or security: and the injunction only granted on it being given, or undertaken to be given

[43] The appellants bolster their submission by reference to Clark v. Nucare PLC, 2006 MBCA 101, 274 D.L.R. (4th) 479, wherein the Manitoba Court of Appeal held:

[41] In my opinion, the preponderance of authority supports the view that Mareva injunctions are unavailable against defendants who do not evidence an intention to frustrate the plaintiff's potential judgment. See, for example, R. v. Consolidated Fastfrate Transport Inc. (1995), 125 D.L.R. (4th) 1 (Ont. C.A.) at 12, Marine Atlantic Inc. v. Blyth (1993), 113 D.L.R. (4th) 501 (F.C.A.), Scotia Wholesale Ltd. and Flynn v. Magliaro (1987), 81 N.S.R. (2d) 201 (S.C.A.D.).

[42] I also agree with the observation of Professor Robert J. C. Deane, "Varying the Plaintiff's Burden: An Efficient Approach to Interlocutory Injunctions to Preserve Future Money Judgments" (1999), 49 Univ. of Toronto L.J. 1, UTLJ 61 (QL), when he concludes that, in the absence of improper intention, an injunction may still be granted where there is a very compelling and strong claim. As Estey J. observed in Aetna, "Mareva was conceived to fend off the depradations [sic] of shady mariners operating out of far-away havens, usually on the fringe of legally organized commerce" (at p. 35).

In Clark, Scott C.J.M., speaking for the Court, rejected the suggestion that a Mareva injunction may serve simply as a form of security.

[44] I do not consider that the general approach to Mareva injunctions in British Columbia requires modification. It may, however, require clarification and a reminder that it is a species of interlocutory injunction with special requirements. Those requirements relate to the general rule against pre-judgment execution and may vary depending on the nature of the exception into which the injunction fits (with reference to the four categories of exception given as examples in Aetna Financial). While the term "Mareva injunction" is used to denote any order impounding assets or freezing assets before judgment (outside of statutory remedies such as builders liens or garnishing orders), they are not all alike. Awareness of the root issue is helpful in sorting out the exercise of discretion.

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[45] Unlike a quia timet injunction, in which the issue is removal of assets from the jurisdiction, an injunction to protect the processes of the court may not involve extra-territorial considerations but may engage issues of dissipation. But at its root, the issue is the risk of harm through either dissipation of assets or removal of them to a place beyond the court's reach.

[46] In all cases, great caution is to be shown to avoid the mischief of litigious blackmail or bullying, and due regard must be paid to the basic premise that a claim is not established until the matter is tried. Great unfairness may be occasioned, and the administration of justice brought into disrepute, by an order which impounds assets before the merits of the claim are decided. It is useful to recall the words of Huddart J.A. in Grenzservice Speditions Ges.m.b.H. et al. v. Jans et al. (1995), 129 D.L.R. (4th) 733, 15 B.C.L.R. (3d) 370 (S.C.) at 755-756 at p. 23:

[Mareva and Anton Pillar orders] represent an extraordinary assumption of power by the judiciary. Judges must be prudent and cautious in their issue.

[47] At the same time, assets are easily moved from jurisdiction to jurisdiction, and if, as in Mooney, a party seeks the intervention of the court and also seeks to put his assets beyond reach, the court has the ability to respond. As said by Newbury J. in Mooney No. 1:

[11] … The reasons for extending Mareva injunctions to apply to foreign assets are valid in British Columbia no less than in England and Australia - the notion that a court should not permit a defendant to take action designed to frustrate existing or subsequent orders of the court, and the practical consideration that in this day of instant communication and paperless cross-border transfers, the courts must, in order to preserve the effectiveness of their judgments, adapt to new circumstances. Such adaptability has always been, and continues to be, the genius of the common law.

[48] With this background, I turn to the order appealed. It is an order made in the exercise of discretion. In B.C. (A.G.) v. Wale, McLachlin J.A. defined the task for this Court in these terms at p. 344:

It is trite law that, the order appealed from being discretionary, this Court will not interfere unless it is demonstrated that the judge of first instance erred in principle or made an order not supported by the evidence or it appears that the decision will result in an injustice. …

[49] The issue can also be formulated as a question of whether the judge of first instance erred in the exercise of her discretion in that no weight or not sufficient weight has been given to relevant considerations: Friends of the Old Man River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3 at 76-77.

[50] The first aspect of the appeal is the order made as against the companies.

[51] The chambers judge issued the injunctions against all defendants on the basis that Ms. Tracy had "made out the first condition: that her claim advances a good arguable case"; and that she had "established a real risk of dissipation of assets, or, '… the defendant taking action, the purpose of which is to render nugatory or less effective any judgment or order which the plaintiff may thereafter obtain'". She based this latter conclusion on the "sale of the business assets for $39.5 million, combined with the evidence before the Court on the national class action settlement" which she found "sufficient to establish a real risk". She found the balance of convenience favoured granting the injunction.

[52] The corporate appellants contend that the chambers judge erred in assessing the strength of the action, at least in the magnitude of potential damages.

[53] Counsel for Ms. Tracy says the claim is for all revenues over and above lawful interest plus punitive damages, an amount that could approach the proceeds from the sale of the Instaloans companies.

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[54] The chambers judge used the test of "good arguable case". I do not consider that a strict formula should be applied. Whereas, the Supreme Court of Canada in Aetna appeared to favour "strong prima facie case", that Court also appeared to leave considerable room for courts to frame the test as fits the nature of the case before them. Mooney No. 2 recognized both standards, "strong prima facie case" and "good arguable case," as formulations that have been used. I expect that the difference in words is a difference without practical consequence. In either case, it is more than an arguable case, and may be met by an assessment that does not reach the "bound to succeed" threshold.

[55] As against the Instaloans companies, and given the conclusion of this Court in Kilroy, supra, I have no doubt that the central claim that the companies charged interest at a rate contrary to the Criminal Code meets the test.

[56] The quantum, however, is a different matter. Where, as here, the assets sought to be impounded are a large sum, I consider that it is incumbent upon the applicant to establish that the extent of the viable claim bears some relation to the value of assets sought to be impounded or frozen. This was not done in this case, and the issue of the scale of the order was not addressed by the chambers judge.

[57] On my review of the evidence, mindful that this Court is not well placed to assess the evidence afresh but endeavouring to get a sense of the realistic scale of the claim, I note that there is evidence that the pan-Canadian value of the Instaloans business book in the class period was about $80 million. Likewise there is evidence that British Columbia accounted for about 18% of that amount. Even assuming the entire amount of the charges were recoverable, these numbers put the value of the plaintiffs' claims at considerably less than the $39.5 million sought to be impounded, or the open-ended amount caught by the language of the injunction.

[58] But for the evidence before the court on the actual scale of the assets of the Instaloans companies as not exceeding $1.7 million, I would consider this evidentiary gap sufficient to direct the matter back to the trial court for consideration of the merits of the claim, including the quantum of damages alleged, in the context of the terms of the injunction sought.

[59] In this case, however, it is clear that the central claim against the companies has a degree of merit that would justify an injunction restraining the disposal of assets that are not greater than $1.7 million. From the evidence filed that appears to be the assets held by the companies at the time of the Bruley settlement.

[60] The next issue is the question of the balance of convenience. In this, the issue of irreparable harm plays a significant part, such that it must be considered, whether addressed separately or under the balance of convenience issue.

[61] The chambers judge found that the balance favoured the injunction, largely because of the risk of dissipation of assets. This finding of potential for non-recovery may be viewed as a conclusion of irreparable harm for purposes of a Mareva injunction. Here, it tilted the balance in favour of this extraordinary remedy.

[62] The appellants say that the evidence could not reasonably support this conclusion. The evidence they say, amounts to no more than evidence: (i) of the sale of the business at a time when there was no action in British Columbia, (ii) in a transaction that we know, because of its nature, was negotiated over a period of some months (and thus not done to take advantage of the discontinuance in MacKinnon), (iii) with parties that had an historic asset protection strategy, (iv) resulting in the dispersal of sale proceeds between the date of the sale and September 2005. They note that the evidence shows that some of the companies were limited partnerships. They say there is no evidence that the companies have defaulted on their obligations. They refer to a term of the Bruley settlement whereby principals of the companies commit to making up the companies' shortfall in monies committed under that plan as evidence negating the concern that the companies have adopted a strategy of defaulting on their legal obligations.

[63] This case may well be at the outer limits of a threat of dissipation of assets. The evidence in support of the injunction does not reveal steps taken to dispose of assets after the action was commenced. At most there is a reference to an unexplained historical strategy of protection of assets, reference to a limited partnership, and

WEEK 10: Tracy

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evidence of the apparent dispersal of sale proceeds in the general time frame of the action's commencement and while there was litigation outstanding in other provinces. We do not know whether those proceeds were already bespoke at the time of the sale, or compelled by agreement to flow out of the companies soon after receipt of the funds. As is often stated, a Mareva injunction does not create a security, and could not give priority to the claimants over security already existing, or that may exist in the future. Nor do we have evidence that the companies defaulted on obligations of the past.

[64] The granting of an injunction, however, is discretionary. The chambers judge concluded that the history recited above created a real risk of dissipation of assets. It seems to me that, although the evidence was not strong, it was open to her to draw that conclusion. Combined with the evidence that little in the way of corporate assets remain in the companies (a feature that impacts upon the balance of convenience), and that the case against the companies is strong, the conclusion was sufficient to permit her to exercise her discretion by issuing an injunction against the companies. I would not interfere with that aspect of the order.

[65] I turn now to the injunction freezing the assets of the two shareholders. This aspect of the order, in my view, stands in a different position than does the order against the company in that it is more aggressive. It is trite law that the corporate veil is not easily pierced. While the chambers judge correctly referred to the principle that permits a court, in the guise of considering fraud or conspiracy, to pierce that veil, it is to be remembered that the kernel of this case is in the lending activities of the companies. In that sense a claim against the shareholders, even if it succeeds, is the secondary, not primary, conclusion on liability.

[66] It is not clear to me that the case for damages against the shareholders has the same strength as the case against the companies. The impugned activities here were an established part of the consumer finance industry and were obvious to any viewer. To say this claim is strong is to assume a type of behaviour on the part of shareholders and directors that is not, on my review of the affidavits filed, in evidence. Thus while I cannot say the case against the shareholders has no merit, likewise I would not accord it the strength I accord the case against the companies. In my view the chambers judge erred in according this claim sufficient merit to satisfy the first criterion for injunctive relief.

[67] Further, in my view, the chambers judge erred in failing to consider the quantum of damages that may be assessed against the individuals as part of her determination that the injunction in the terms ordered, was justified.

[68] Moreover, I do not consider that the balance of convenience favoured the injunction. There is, on my review of the affidavit material filed, no evidence that the principals of the companies have taken steps since the action was commenced to move assets outside of the jurisdiction, or have defaulted on obligations, or otherwise dissipated assets in the sense discussed in the many cases as justifying this pre-judgment order.

[69] Whether couched as a failure to meet the higher second hurdle, or as a failure to meet the classic criteria for an injunction in the context of the relief sought, the result is the same. The individual defendants have not had their day in court, and yet, by the order, are compelled to reveal all of their assets and are strictly limited in their use of such assets. Those are consequences generally faced by a judgment creditor, not a mere litigant. In the circumstances revealed in the record, I consider that the degree of caution required on an application for a Mareva injunction has not been applied.

[70] This factor alone persuades me that the second and higher hurdle, discussed in Aetna Financial, that must be met on an application to enjoin a party from using his or her own assets prior to judgment, has not been met.

[71] It is relevant, as well, to this discussion that the order was made in a class action. The policy favouring class actions is set out in Western Canada Shopping Centres Inc. v. Dutton, 2001 SCC 46, 2 S.C.R. 534. It must be remembered that class actions provide the plaintiff's side of the case with advantages not enjoyed by a plaintiff in an ordinary action. One advantage in British Columbia is protection as to costs. This extra leverage in the litigation was a matter that should have been considered by the chambers judge, in my respectful view. The order as it stands compounds the plaintiff's advantage. In these circumstances, it tips the playing field away from anything that could approximate level ground.

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[72] Lastly, there is the matter of the lack of an undertaking as to damages. For good reasons stemming from the class action nature of the case, the chambers judge did not require an undertaking from Ms. Tracy. However, in that conclusion she again tipped the field in favour of the plaintiff. In the result an order was issued against the individual defendants, tying up their assets for anything other than ordinary living expenses, in effect freezing their business life, while there was little jeopardy faced by Ms. Tracy in the event she does not establish damages against them to a scale anywhere near the magnitude of the assets frozen.

[73] In my view the order as it affects the assets of the individual respondents must be set aside.

[74] I turn now to the listing affidavit. A listing affidavit was first ordered in British Columbia in Sekisui House Kabushiki Kaisha v. Nagashima (1982), 42 B.C.L.R. 1 (C.A.). The purpose is to permit enforcement of the order. As I would set aside the Mareva injunction against the individual appellants, the order requiring them to list their assets must also be set aside. However, the order as it relates to the Instaloans companies is fit, and I would not disturb it.

[75] The third aspect of the order was the provision impounding the assets derived from the sale of the businesses. In my view, that order ought not to have issued at this time. The purpose of the listing affidavit is to ensure compliance. There is no evidence that more than that is required. In the event Ms. Tracy obtains judgment and on execution discovers that assets were not disclosed that should have been, or that the funds listed were dissipated, she will have her remedy against the company and its directing minds for failure to comply with the injunction and the listing affidavit. Ms. Tracy will also have recourse to full execution procedures available to all judgment creditors.

[76] Last, is the matter of time. As courts have repeatedly said, a Mareva injunction is extraordinary. I do not consider that an injunction should issue without a commitment by the applicant to expedite the trial. Whether an interim injunction with an end date should be considered to focus the parties' minds on the need to bring the matter to a conclusion, is a matter for the chambers judge. However, in any case, it is not in the interests of the administration of justice that a Mareva injunction should persist for an indefinite period. The expected duration of such an order should be addressed before it is made.

[77] For these reasons, I would allow the appeal to the extent of setting aside the order as against the individual appellants, and the order impounding the proceeds from the sale of the businesses that are still in the control of the corporate appellants.

WEEK 10: ICBC v. Patko

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Insurance Corp. of British Columbia v. Patko

British Columbia Court of Appeal Judgment: February 18, 2008

Finch C.J.B.C.:

…

II. Facts:

[10] The facts on which the Mareva injunction application was based are as follows. In 2005, J. Patko leased a 2004 Ford F150 truck, insuring it in his name with ICBC under a policy in effect from 5 January 2005 to 4 January 2006.

[11] At about 2:15 a.m. on 27 January 2005, J. Patko’s truck collided with a hydro pole. The vehicle was seriously damaged in the collision. Three occupants were in the truck at the time, one of whom was Amanda Hunt, a friend of J. Patko’s. Although injured in the accident, all three occupants fled the scene before police arrived.

[12] Later that day, at about 5:45 p.m., J. Patko telephoned ICBC to report the accident. He told the claims adjuster that he was at home on the night of the accident and that his uncle, F. Patko, was driving the truck when the accident occured. F. Patko later gave a statement to ICBC in which he stated that he had borrowed the truck from J. Patko and was giving two women – one of whom was a friend of J. Patko’s (Ms. Hunt) – a ride home. Ms. Hunt gave a statement confirming that F. Patko was driving at the time of the accident.

[13] F. Patko and the two women filed bodily injury claims. J. Patko filed a claim for the total loss of the truck. ICBC paid J. Patko’s claim for the damage to the truck, the bodily injury claims of the two women and property damage to B.C. Hydro and the City of Port Coquitlam. It did not pay F. Patko’s claim. The total amount paid out by ICBC was $55,818.40.

[14] ICBC began an investigation into the circumstances of the accident. In addition to the appellant’s investigation, the police initiated an investigation into the identity of the driver of the truck. The investigators were aware that if J. Patko was the driver at the time of the accident, he would have been in breach of the terms of a curfew imposed upon him pursuant to a recognizance of bail.

[15] In their investigation, the police obtained evidence showing that J. Patko had been at a cabaret on the night of 27 January 2005. They also obtained a statement from Ms. Hunt admitting that J. Patko was driving the truck that night, and explaining that she lied to ICBC because she did not want to get J. Patko into trouble for breach of his curfew. In March 2005 the police charged J. Patko with breach of his recognizance. In July 2006, J. Patko pleaded guilty to that charge.

[16] In this action, ICBC claims that J. Patko, and not F. Patko, was driving the truck at the time of the accident. ICBC claims that J. Patko lied to ICBC because he did not want to be charged with a breach of his recognizance of bail. ICBC claims that J. Patko and F. Patko “wrongfully and maliciously conspired together in a joint enterprise to deceitfully cheat, hoodwink, defraud and injure” ICBC, and to that end, caused, required or conspired with each other to report falsely that F. Patko was driving the truck at the time of the accident. ICBC says that the false statements rendered J. Patko’s insurance void and, as a result, it is entitled to be indemnified by J. Patko for the amount paid out under the insurance. It also claims punitive damages of up to $100,000.

…

WEEK 10: ICBC v. Patko

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1. Must the applicant show a real risk that assets will be dissipated?

[23] ICBC asserts that Madam Justice Fisher erred in law by failing to follow established British Columbia authority holding that victims of fraud may apply for and obtain an injunction as security for their damages sought in the litigation without having to show that there is a real risk the defendant will dissipate assets.

[24] In my view, Madam Justice Fisher did not err in her interpretation of the authorities. Madam Justice Fisher applied the “flexible approach” from Mooney No. 2, the leading case with respect to the test for granting a Mareva injunction in British Columbia. The approach in that case was approved by this Court in Silver Standard Resources Inc. v. Joint Stock Co. Geolog, supra. This approach has been recently affirmed by a five-judge panel of this Court in Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd., 2007 BCCA 481, [2007] B.C.J. No. 2182 (QL).

[25] Under the flexible Mooney No. 2 approach, the fundamental question in each case is whether the granting of an injunction is just and equitable in all the circumstances of the case: Mooney No. 2 at para. 43. In order to obtain an injunction, the applicant must first establish a strong prima facie or good arguable case on the merits. Second, the interests of the two parties must be balanced, having regard to all the relevant factors, to reach a just and convenient result. Two relevant factors are evidence showing the existence of assets within British Columbia or outside, and evidence showing a real risk of their disposal or dissipation, so as to render nugatory any judgment: Mooney No. 2 at para. 44.

[26] The root of the Mareva injunction is the risk of harm either through dissipation of assets or removal of assets to a place beyond the court’s reach: Tracy at para. 45. In most cases it will not be just or convenient to tie up a defendant’s assets merely on “speculation that the plaintiff will ultimately succeed in its claim and have difficulty collecting on its judgment if the injunction is not granted”: Silver Standard at para. 21. Thus, though a party may apply for and obtain an injunction as security for damages sought in the litigation without showing that there is a real risk the defendant will dissipate assets, in most cases a real risk of dissipation must be established before a party will be granted a Mareva injunction in British Columbia.

…

WEEK 10: Celanese Canada

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Celanese Canada Inc. v. Murray Demolition Corp.

2006 SCC 36

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO

BINNIE J.:— An Anton Piller order bears an uncomfortable resemblance to a private search warrant. No notice is given to the party against whom it is issued. Indeed, defendants usually first learn of them when they are served and executed, without having had an opportunity to challenge them or the evidence on which they were granted. The defendant may have no idea a claim is even pending. The order is not placed in the hands of a public authority for execution, but authorizes a private party to insist on entrance to the premises of its opponent to conduct a surprise search, the purpose of which is to seize and preserve evidence to further its claim in a private dispute. The only justification for such an extraordinary remedy is that the plaintiff has a strong prima facie case and can demonstrate that on the facts, absent such an order, there is a real possibility relevant evidence will be destroyed or otherwise made to disappear. The protection of the party against whom an Anton Piller order is issued ought to be threefold: a carefully drawn order which identifies the material to be seized and sets out safeguards to deal, amongst other things, with privileged documents; a vigilant court-appointed supervising solicitor who is independent of the parties; and a sense of responsible self-restraint on the part of those executing the order. In this case, unfortunately, none of these protections proved to be adequate to protect against the disclosure of relevant solicitor-client confidences. Inadequate protections had been written into the order. Those which had been provided were not properly respected. The vigilance of the supervising solicitor appears to have fallen short. Celanese's solicitors in the aftermath of the search seem to have lost sight of the fact that the limited purpose of the order was to preserve evidence not to rush to exploit it. In the result, the party searched (Canadian Bearings) now seeks the removal of Celanese's solicitors (Cassels Brock & Blackwell LLP ("Cassels Brock")) and to bar Celanese from making further use of their U.S. counsel (Kasowitz, Benson, Torres & Friedman LLP ("Kasowitz")).

¶ 2 This appeal thus presents a clash between two competing values -- solicitor-client privilege and the right to select counsel of one's choice. The conflict must be resolved, it seems to me, on the basis that no one has the right to be represented by counsel who has had access to relevant solicitor-client confidences in circumstances where such access ought to have been anticipated and, without great difficulty, avoided and where such counsel has failed to rebut the presumption of a resulting risk of prejudice to the party against whom the Anton Piller order was made.

¶ 3 This Court's decision in MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235, makes it clear that prejudice will be presumed to flow from an opponent's access to relevant solicitor-client confidences. The major difference between the minority and majority in that case is that while the majority considered the presumption of risk of prejudice open to rebuttal in some circumstances (pp. 1260-61), the minority would not have permitted even the opportunity of rebuttal (p. 1266). In the MacDonald Estate situation, the difficulty of dealing with the moving solicitor was compounded by the fact the precise extent of solicitor-client confidences she acquired over a period of years, was unknown, possibly unknowable, and in any event not something that in fairness to her former client should be revealed. Thus Sopinka J. wrote that "once it is shown by the client that there existed a previous relationship which is sufficiently related to the retainer from which it is sought to remove the solicitor, the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant. This will be a difficult burden to discharge" (p. 1260).

¶ 4 The Anton Piller situation is somewhat different because the searching solicitors ought to have a record of exactly what was seized and what material, for which confidentiality is claimed, they subsequently looked at. Here again, rebuttal should be permitted, but the rebuttal evidence should require the party who obtained access to disclose to the court what has been learned and the measures taken to avoid the presumed resulting prejudice. While all solicitor confidences are not of the same order of importance, the party who obtained the wrongful access is not entitled to have the court assume in its favour that such disclosure carried no risk of prejudice to its opponent, and therefore does not justify the removal of the solicitors. For the reasons that follow, I conclude, contrary to the view taken by the Court of Appeal, with respect, that Celanese and its lawyers did have the onus to rebut the presumption


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of a risk of prejudice and they failed to do so. Accordingly, the appeal is allowed, the order of the Ontario Court of Appeal is set aside and the order of the Divisional Court is restored removing Cassels Brock as solicitors for Celanese and precluding the latter from continuing to seek the advice of Kasowitz, in connection with any Canadian litigation arising out of the facts alleged in the amended statement of claim.

I. Facts

¶ 5 The underlying litigation in this case, which does not directly affect the disposition of this appeal, involves alleged industrial espionage. Celanese operated a plant for the production of vinyl acetate in Edmonton. It decided for business reasons to demolish the facility rather than sell it. Celanese eventually retained the defendant, Murray Demolition, to undertake the demolition. Precautions were put in place to prevent the unauthorised disclosure during demolition of valuable proprietary information evident in the plant's design and processes. Celanese discovered in April 2003 that certain of the defendants, including Canadian Bearings, were engaged in what appeared to be an attempt, under the cover of the demolition, to copy in various ways proprietary processes and equipment. As a consequence, Canadian Bearings and others who had been given access to the site by Murray Demolition, were ordered off the property. Celanese is now suing Canadian Bearings, among others, for allegedly stealing technology discovered during the demolition and making unauthorized use of it in the construction of a vinyl acetate facility in Iran.

¶ 6 On June 19, 2003, the motions judge granted Celanese's ex parte application for an Anton Piller order against Canadian Bearings and others. The issue of how to deal with privileged documents was not considered in the draft order placed before the motions judge and his formal order did not contain such a provision. Nevertheless, all parties recognize that an Anton Piller order provides no authority whatsoever for access to a defendant's privileged documents.

¶ 7 The order was executed on June 20 and 21, 2003, in the presence of two police officers by an independent accounting firm, BDO Hayes Smith ("BDO") and was overseen by an independent supervising solicitor, Bernard Eastman, Q.C. At the outset, Mr. Eastman spoke at the search site with a senior executive of Canadian Bearings. He gave the executive a copy of the order and related documents, and explained its terms. Mr. Eastman advised the executive that, pursuant to the terms of the order, he would have one hour to seek legal advice. Shortly thereafter, the solicitors for Canadian Bearings, Borden Ladner Gervais LLP ("BLG"), arrived at the scene. The search was conducted over a period of 18 hours in circumstances that could be described as mildly chaotic. Cassels Brock was not present at the search, but members of the firm were in frequent telephone communication with Mr. Eastman.

¶ 8 In the course of the search, privilege was claimed for certain paper documents which were then placed in a sealed folder in the custody of BDO until the merits of the claim could be resolved. The issue of privilege arises at this stage only in connection with the electronic documents seized.

¶ 9 When it became apparent that some of the electronic documents might be subject to solicitor-client privilege, the BDO representative enlisted the help of BLG lawyers to facilitate their identification. The process was rushed. Given the volume of electronic materials and the pace at which the search proceeded, BLG lawyers later complained that they were not given time to review the material adequately. Frequently, entire folders would be copied electronically without examination of individual documents. However, material that could be identified as potentially privileged was segregated into an electronic folder which was labelled "Borden Ladner Gervais".

¶ 10 In the course of the search, approximately 1,400 electronic documents thought to be relevant, but not as yet effectively screened for potential solicitor-client privilege claims, were downloaded by BDO onto a portable hard drive and "burned" onto CD-ROMs. These were placed in a plastic envelope and sealed. The seal was initialled by a BLG lawyer and by Mr. Eastman. The envelope was given to BDO. Contrary to the express provision in the Anton Piller order, no complete list of the seized records was made prior to their removal from the searched premises.

¶ 11 On June 23, 2003, lawyers from Cassels Brock and Kasowitz went to BDO to retrieve the seized documents. The Cassels Brock lawyer called the supervising solicitor, Mr. Eastman, to enquire about the sealed envelope containing the hard drive and CD-ROMs. Apparently satisfied there was no agreement that Cassels Brock would


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have to deal directly with BLG on the issue, he opened the envelope and directed BDO to copy the contents. After some delay, a CD containing copies of various e-mails was copied onto Cassels Brock's computer. A copy of the CD was not sent to BLG. Subsequently, a Cassels Brock lawyer e-mailed colleagues: "On June 24, 2003 representatives of Celanese, counsel from Kasowitz .......... and I attended at the offices of BDO .......... and reviewed all of the electronic documents seized from all of the defendants".

¶ 12 The CD turned out to contain privileged communications. The Cassels Brock lawyer admitted to having reviewed "a few dozen e-mail[s] in full", but said he did not recall reviewing "any e-mail that originated from or were sent to BLG".

¶ 13 A copy of the CD was also provided to Kasowitz and was reviewed by Todd Colvard, a Kasowitz lawyer based in Houston. He was directed to classify the electronic documents as "Relevant, Irrelevant, Proprietary, and Hot". Colvard noticed that some of the e-mails were addressed to or from BLG, and so saved these in a separate fifth electronic folder which he marked "Privileged". He later found additional privileged documents in the folder marked "Relevant", thus evidencing a measure of misclassification. Other than for purposes of segregation, Colvard says he did not review "the substance of those messages".

¶ 14 When BLG discovered, on June 24, 2003, that the sealed envelope had been opened, some heated correspondence ensued. Cassels Brock declined to provide BLG with copies of the seized Canadian Bearings electronic documents until late Friday, June 27, 2003, after the motions judge so ordered.

¶ 15 On July 11 or 12, 2003, BLG became aware that privileged documents had been transferred to Cassels Brock and Kasowitz. BLG dispatched a letter dated July 14, 2003, enclosing a list of some 82 "privileged documents which were among those documents removed from my clients' computer system and deleted from my clients' computer system by those individuals executing the order of [Nordheimer J.] dated June 19, 2003" (emphasis added) and requesting the immediate return of the privileged documents "whether in print form or electronic" and identification of all individuals who may have reviewed them.

¶ 16 Eventually, Cassels Brock and Kasowitz, rather than returning the privileged electronic material as requested, advised BLG that the documents had been deleted from their respective systems. The Court of Appeal noted that "it is common ground that 13 lawyers, 3 clerks and 2 law students from Cassels [Brock] and 12 lawyers from Kasowitz would have been able to access the privileged electronic documents in the two to three week period that they remained in the possession of the law firms following the search".

¶ 17 Canadian Bearings brought a motion to disqualify Cassels Brock and Kasowitz from continuing to act for Celanese, which was dismissed by the motions judge. Canadian Bearings appealed to the Divisional Court, which allowed the appeal and ordered that Cassels Brock and Kasowitz be removed. Celanese, Cassels Brock and Kasowitz appealed to the Ontario Court of Appeal, which allowed the appeal, finding that neither of the courts below had applied the correct test for removal and remitted the matter back to the motions judge to be reconsidered on the basis of the appeal court's reasons. The appeal thus comes to this Court to determine the proper test and, in particular, which of the parties bears the onus to show (or rebut) the prejudice arising from disclosure of solicitor and client privileged documents.

….

III. Analysis

¶ 28 Anton Piller orders have been available in Canada for close to 30 years. Unlike a search warrant they do not authorize forcible entry, but expose the target to contempt proceedings unless permission to enter is given. To the ordinary citizen faced on his or her doorstep with an Anton Piller order this may be seen as a distinction without a meaningful difference.

¶ 29 Originally developed as an "exceptional remedy" in the context of trade secrets and intellectual property disputes, such orders are now fairly routinely issued in ordinary civil disputes, Grenzservice Speditions Ges.m.b.H.


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v. Jans (1995), 15 B.C.L.R. (3d) 370 (S.C.), in employment law, Ridgewood Electric Ltd. (1990) v. Robbie (2005), 74 O.R. (3d) 514 (S.C.J.), and Netbored Inc. v. Avery Holdings Inc., [2005] F.C.J. No. 1723 (QL), 2005 FC 1405 and even in matrimonial litigation, Neumeyer v. Neumeyer (2005), 47 B.C.L.R. (4th) 162, 2005 BCSC 1259. In one egregious case, a designated search team attempted to execute an Anton Piller order on the 10-year-old son of the defendant at a time when his parents were not at home: Ridgewood Electric.

¶ 30 With easier access to such orders, there has emerged a tendency on the part of some counsel to take too lightly the very serious responsibilities imposed by such a draconian order. It should truly be exceptional for a court to authorize the massive intrusion, without advance notice, of a privately orchestrated search on the privacy of a business competitor or other target party. As it was put by Lord Denning, M.R., in the original Anton Piller case:

We are prepared, therefore, to sanction its continuance [i.e. of the order], but only in an extreme case where there is grave danger of property being smuggled away or of vital evidence being destroyed. [Emphasis added.]

(Anton Piller KG v. Manufacturing Processes Ltd., [1976] 1 Ch. D. 55 (C.A.), at p. 61)

Anton Piller orders, obtained ex parte, now regularly permit searches and seizures not only from places of business but from residential premises. While most Anton Piller orders are executed properly, they are capable of giving rise to serious abuse, as in Ridgewood Electric, mentioned earlier, where Corbett J. of the Ontario Superior Court of Justice protested the unacceptable conduct of those executing the order:

Nigel Robbie arrived home on April 14, 2004, to find a neighbour barricading his front door. His ten-year-old son had been taken to another neighbour's house, distraught. The neighbourhood was in an uproar. A cadre in suits stood at the front of his house brandishing a thick wad of papers, demanding to be let in.

..........

While everyone is taken to know the law, the Robbies and their neighbours might be excused for not knowing about Anton Piller orders. And so the Robbies and their neighbours were left to wonder what kind of country we live in, where one's former employer, acting secretly, may obtain a court order and then enter and search one's private residence. [paras. 1 and 4]

As Sharpe J.A., writing in a scholarly mode, has pointed out, "excessive zeal in this area is apt to attract criticism which will impair the ability of the courts to use injunctions in innovative ways in other areas" (R. J. Sharpe, Injunctions and Specific Performance (looseleaf ed.), at para. 2:1300).

¶ 31 The search in the present case was conducted by reputable and responsible people, under the supervision of a senior member of the Ontario bar. The disclosure of solicitor-client confidences came about not by egregious misconduct, but through a combination of carelessness, overzealousness, a lack of appreciation of the potential dangers of an Anton Piller order and a failure to focus on its limited purpose, namely the preservation of relevant evidence.

¶ 32 Experience has shown that despite their draconian nature, there is a proper role for Anton Piller orders to ensure that unscrupulous defendants are not able to circumvent the court's processes by, on being forewarned, making relevant evidence disappear. Their usefulness is especially important in the modern era of heavy dependence on computer technology, where documents are easily deleted, moved or destroyed. The utility of this equitable tool in the correct circumstances should not be diminished. However, such orders should only be granted in the clear recognition of their exceptional and highly intrusive character and, where granted, the terms should be carefully spelled out and limited to what the circumstances show to be necessary. Those responsible for their implementation should conform to a very high standard of professional diligence. Otherwise, the moving party, not its target, may have to shoulder the consequences of a botched search.


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¶ 33 Much of the argument before us about privileged documents turned on a supposed "spectrum" of situations. At one end of the spectrum, it was said, lie the "inadvertent disclosure" cases, where one party's counsel receives a privileged document due to an error of opposing counsel, for example a letter is faxed or e-mailed to the wrong party. In such cases, the remedy is often limited to an order requiring the document, which is clearly identified, to be deleted or returned and a direction that no use is to be made of it. At the other end of the spectrum is said to be the "moving solicitor" or "merging firm" cases, where counsel who has acted for a client ends up at a law firm that is acting for an opposing party - as in MacDonald Estate itself. In the latter cases, the precise confidences seen or heard by the moving solicitor may not be readily determined. Unless adequate measures have been taken (usually in advance) to avoid "tainting" the new firm, the remedy is frequently disqualification. I agree with the intervener Advocates' Society that the emphasis on "inadvertence" is overly simplistic. As the Society submits:

The notion of "inadvertence" is also analytically unhelpful because it conflates two questions that should be distinct: (a) how did the documents come into the possession of [Celanese] or its counsel; and (b) what did [Celanese] and its counsel do upon recognition that the documents were potentially subject to solicitor-client privilege?

¶ 34 Whether through advertence or inadvertence the problem is that solicitor-client information has wound up in the wrong hands. Even granting that solicitor-client privilege is an umbrella that covers confidences of differing centrality and importance, such possession by the opposing party affects the integrity of the administration of justice. Parties should be free to litigate their disputes without fear that their opponent has obtained an unfair insight into secrets disclosed in confidence to their legal advisors. The defendant's witnesses ought not to have to worry in the course of being cross-examined that the cross-examiner's questions are prompted by information that had earlier been passed in confidence to the defendant's solicitors. Such a possibility destroys the level playing field and creates a serious risk to the integrity of the administration of justice. To prevent such a danger from arising, the courts must act "swiftly and decisively" as the Divisional Court emphasized. Remedial action in cases such as this is intended to be curative not punitive.

A. Requirements for an Anton Piller Order

¶ 35 There are four essential conditions for the making of an Anton Piller order. First, the plaintiff must demonstrate a strong prima facie case. Second, the damage to the plaintiff of the defendant's alleged misconduct, potential or actual, must be very serious. Third, there must be convincing evidence that the defendant has in its possession incriminating documents or things, and fourthly it must be shown that there is a real possibility that the defendant may destroy such material before the discovery process can do its work: Nintendo of America, Inc. v. Coinex Video Games Inc., [1983] 2 F.C. 189 (C.A.), at pp. 197-99; Indian Manufacturing Ltd. v. Lo (1997), 75 C.P.R. (3d) 338 (F.C.A.), at pp. 341-42; Netsmart Inc. v. Poelzer, [2003] 1 W.W.R. 698, 2002 ABQB 800, at para. 16; Anton Piller KG, at pp. 58-61; Ridgewood Electric, at para. 27; Grenzservice, at para. 39; Pulse Microsystems Ltd. v. SafeSoft Systems Inc. (1996), 67 C.P.R. (3d) 202 (Man. C.A.), at p. 208; Ontario Realty Corp. v. P. Gabriele & Sons Ltd. (2000), 50 O.R. (3d) 539 (S.C.J.), at para. 9; Proctor & Gamble Inc. v. John Doe (c.o.b. Clarion Trading International), [2000] F.C.J. No. 61 (QL) (T.D.), at para. 45; Netbored Inc., at para. 39; Adobe Systems Inc. v. KLJ Computer Solutions Inc., [1999] 3 F.C. 621 (T.D.), at para. 35.

¶ 36 Both the strength and the weakness of an Anton Piller order is that it is made ex parte and interlocutory: there is thus no cross-examination on the supporting affidavits. The motions judge necessarily reposes faith in the candour and complete disclosure of the affiants, and as much or more so on the professional responsibility of the lawyers participating in carrying out its terms. We are advised that such orders are not available in the United States (Transcript, at p. 70).

….

B. Terms of the Anton Piller Order

¶ 39 In Grenzservice, a case which dealt with an application to remove counsel who had seen privileged documents in the course of an Anton Piller execution, Huddart J. (later J.A.) observed: "This case suggests that


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safeguards cannot remain implicit in the supervision order. They must be specified" (para. 84). I agree. In Lavallee, Rackel & Heintz v. Canada (Attorney General), [2002] 3 S.C.R. 209, 2002 SCC 61, Arbour J. for the majority set out at para. 49 a number of relevant concerns in the criminal law context, which may have some application by analogy. Notwithstanding the general recognition of the need for standard terms, many safeguards which one would expect to have become customary (such as a provision dealing with claims of privilege) are frequently omitted. Corbett J. commented in Ridgewood Electric that the Anton Piller order "has been with us for nearly 30 years, yet its 'standard terms' vary considerably across the province" (para. 3). In the United Kingdom, a set of standardized rules and a model order have been developed. In Australia, Order 25B of the Federal Court Rules and Practice Note No. 24 set out a number of standard safeguards for Anton Piller orders (5 May 2006). See also Thermax Ltd. v. Schott Industrial Glass Ltd., [1981] F.S.R. 289 (Ch. D.).

¶ 40 Anton Piller orders are often conceived of, obtained and implemented in circumstances of urgency. They are generally time-limited (e.g., 10 days in Ontario under Rule 40.02 (Rules of Civil Procedure, R.R.O. 1990, Reg. 194) and 14 days in the Federal Court, under Rule 374(1) (Federal Court Rules, 1998, SOR/98-106)). Despite the urgency, the more detailed and standardized the terms of the order the less opportunity there will be for misunderstandings or mischief. As noted by Lamer J. in Descôteaux v. Mierzwinski, [1982] 1 S.C.R. 860, at p. 889:

Searches are an exception to the oldest and most fundamental principles of the common law, and as such the power to search should be strictly controlled.

Unless and until model orders are developed by legislation or recommended by law societies pursuant to their responsibility for professional conduct, the following guidelines for preparation and execution of an Anton Piller order may be helpful, depending on the circumstances:

(1) Basic Protection for the Rights of the Parties

(i)

The order should appoint a supervising solicitor who is independent of the plaintiff or its solicitors and is to be present at the search to ensure its integrity. The key role of the independent supervising solicitor was noted by the motions judge in this case "to ensure that the execution of the Anton Piller order and everything that flowed from it, was undertaken as carefully as possible and with due consideration for the rights and interests of all involved". He or she is "an officer of the court charged with a very important responsibility regarding this extraordinary remedy". See also Grenzservice, at para. 85.

(ii)

Absent unusual circumstances the plaintiff should be required to provide an undertaking and/or security to pay damages in the event that the order turns out to be unwarranted or wrongfully executed. See Ontario Realty Corp., at para. 40; Adobe Systems, at para. 43; Nintendo of America, at pp. 201-02; Grenzservice, at para. 85; Havana House Cigar & Tobacco Merchants Ltd. v. Jane Doe (2000), 199 F.T.R. 12, aff'd (2002), 288 N.R. 198, 2002 FCA 75.

(iii)

The scope of the order should be no wider than necessary and no material shall be removed from the site unless clearly covered by the terms of the order. See Columbia Pictures Inc. v. Robinson, [1987] Ch. 38.

(iv)

A term setting out the procedure for dealing with solicitor-client privilege or other confidential material should be included with a view to enabling defendants to advance claims of confidentiality over documents before they come into the possession of the plaintiff or its counsel, or to deal with disputes that arise. See Grenzservice, at para. 85; Ontario Realty Corp., at para. 40. Procedures developed for use in connection with search warrants under the Criminal Code, R.S.C. 1985, c. C-46, may provide helpful guidance. The UK practice direction on this point provides as follows:

Before permitting entry to the premises by any person other than the Supervising


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Solicitor, the Respondent may, for a short time (not to exceed two hours, unless the Supervising Solicitor agrees to a longer period) - (a) gather together any documents he [or she] believes may be .......... privileged; and (b) hand them to the Supervising Solicitor for [an assessment of] whether they are .......... privileged as claimed.

If the Supervising Solicitor decides that .......... any of the documents [may be] privileged or [is in any doubt as to their status, he or she] will exclude them from the search .......... and retain [them] pending further order of the court [(if in doubt as to whether they are privileged), or return them to the respondent and retain a list of the documents (if the documents are privileged)].

[A] Respondent [wishing] to take legal advice and gather documents as permitted .......... must first inform the Supervising Solicitor and keep him [or her] informed of the steps being taken.

Experience has shown that in general this is a workable procedure. Counsel supporting the appellants suggested the basic "two-hour" collection period permitted in the U.K. is too short. This is a matter to be determined by the judge making the order, but it must be kept in mind that unnecessary delay may open the door to mischief. In general, the search should proceed as expeditiously as circumstances permit.

(v)

The order should contain a limited use clause (i.e., items seized may only be used for the purposes of the pending litigation). See Ontario Realty Corp., at para. 40; Adobe Systems, at para. 43; Grenzservice, at para. 85.

(vi)

The order should state explicitly that the defendant is entitled to return to court on short notice to (a) discharge the order; or (b) vary the amount of security. See Adobe Systems, at para. 43; Grenzservice, at para. 85; Nintendo of America, at pp. 201-02.

(vii) The order should provide that the materials seized be returned to the defendants or their counsel as soon as practicable.

(2) The Conduct of the Search (i)

In general the order should provide that the search should be commenced during normal business hours when counsel for the party about to be searched is more likely to be available for consultation. See Grenzservice, at para. 85; Universal Thermosensors Ltd. v. Hibben, [1992] 1 W.L.R. 840 (Ch. D.).

(ii) The premises should not be searched or items removed except in the presence of the defendant or a person who appears to be a responsible employee of the defendant.

(iii)

The persons who may conduct the search and seize evidence should be specified in the order or should specifically be limited in number. See Adobe Systems, at para. 43; Grenzservice, at para. 85; Nintendo of America, at pp. 201-02.

(iv)

On attending at the site of the authorised search, plaintiff's counsel (or the supervising solicitor), acting as officers of the court should serve a copy of the statement of claim and the order and supporting affidavits and explain to the defendant or responsible corporate officer or employee in plain language the nature and effect of the order. See Ontario Realty Corp., at para. 40.

(v)

The defendant or its representatives should be given a reasonable time to consult with counsel prior to permitting entry to the premises. See Ontario Realty Corp, at para. 40; Adobe Systems, at para. 43; Grenzservice, at para. 85; Sulpher Experts Inc. v. O'Connell (2000), 279 A.R. 246, 2000 ABQB 875.

(vi)

A detailed list of all evidence seized should be made and the supervising solicitor should provide this list to the defendant for inspection and verification at the end of the search and before materials are removed from the site. See Adobe Systems, at para. 43; Grenzservice, at para. 85; Ridgewood Electric, at para. 25.

(vii) Where this is not practicable, documents seized should be placed in the custody of the independent supervising solicitor, and defendant's counsel should be given a reasonable


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opportunity to review them to advance solicitor-client privilege claims prior to release of the documents to the plaintiff.

(viii) Where ownership of material is disputed, it should be provided for safekeeping to the supervising solicitor or to the defendant's solicitors.

(3) Procedure Following the Search (i)

The order should make it clear that the responsibilities of the supervising solicitor continue beyond the search itself to deal with matters arising out of the search, subject of course to any party wishing to take a matter back to the court for resolution.

(ii)

The supervising solicitor should be required to file a report with the court within a set time limit describing the execution, who was present and what was seized. See Grenzservice, at para. 85.

(iii)

The court may wish to require the plaintiff to file and serve a motion for review of the execution of the search returnable within a set time limit such as 14 days to ensure that the court automatically reviews the supervising solicitor's report and the implementation of its order even if the defendant does not request such a review. See Grenszervice, at para. 85.

….

¶ 41 It is evident that the draft order placed before the motions judge in this case was deficient in many respects. At issue here is the absence of any provision to deal with solicitor-client confidences. The absence of specific terms in the Anton Piller order does not relieve the searching solicitors from the consequences of gaining inappropriate access. Such consequences may include removal. A precisely drawn and clearly thought out order therefore will not only protect the defendant's right to solicitor-client privilege, but also protect the plaintiff's right to continue to be represented by counsel of choice by helping to ensure that such counsel do not stumble into possession of privileged information.

C. The Governing Authority for Removal of Counsel for Possession of Confidential Information Is MacDonald Estate

¶ 42 In MacDonald Estate, the Court held, in the context of a moving solicitor, that once the opposing firm of solicitors is shown to have received "confidential information attributable to a solicitor and client relationship relevant to the matter at hand" (p. 1260), the court will infer "that lawyers who work together share confidences" (p. 1262) and that this will result in a risk that such confidences will be used to the prejudice of the client, unless the receiving solicitors can show "that the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur" (p. 1260). Only where there is "clear and convincing evidence" (p. 1262) to the contrary will the presumption be rebutted. Thus "a fortiori undertakings and conclusory statements in affidavits without more" (p. 1263) will not suffice to rebut the presumption of dissemination. For the purposes of the present case, it is important to note that Sopinka J. imposed no onus on the moving party to adduce any further evidence as to the nature of the confidential information beyond that which was needed to establish that the receiving lawyer had obtained confidential information attributable to a solicitor and client relationship which was relevant to the matter at hand.

¶ 43 There is no doubt Canadian Bearings has discharged this onus. The motions judge noted "the admission by [Celanese] that some privileged material found its way into the possession of both the Cassels Brock and Kasowitz firms". The material must be taken to be relevant to the pending claim, otherwise it would not have been within the scope of the seizure laid down in the Anton Piller order.

¶ 44 We do not know, and the courts below were not told, the nature of the privileged information. On this point, the motions judge stated:

The privileged information that found its way into the hands of the two firms here might be


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mundane, or may even be irrelevant to the underlying issues. Conversely, of course, it might also be crucial to the defence of the claim. I have no way of knowing. [Emphasis added.]

¶ 45 The courts below seemingly agreed that if the privileged confidences were "crucial to the defence of the claim" removal of the searching solicitors would be called for. They also agreed (as I do) that on this record, as the motions judge said, we "have no way of knowing". The appeal, therefore, turns on whether Celanese had the onus of rebutting a presumption of prejudice (as MacDonald Estate held) or the onus should be shifted to Canadian Bearings to establish "a real risk of prejudice" (as required in this case by the Court of Appeal).

¶ 46 Kasowitz submits that "[t]he facts of this case do not raise the concerns whatsoever addressed by the Court in MacDonald Estate [because] Kasowitz had no relationship whatsoever with the Appellants". I do not agree. The relevant elements of the MacDonald Estate analysis do not depend on a pre-existing solicitor-client relationship. The gravamen of the problem here is the possession by opposing solicitors of relevant and confidential information attributable to a solicitor-client relationship to which they have no claim of right whatsoever.

D. The Court of Appeal Erred in Placing the Onus of Proof on Canadian Bearings

¶ 47 Moldaver J.A. and his colleagues took the view that MacDonald Estate must be read in the context of a moving solicitor who clearly had substantial exposure to important solicitor-client confidences, whereas the present context, in their view, can raise no such inference. The privileged documents, while relevant, could be of such negligible significance that there is no real risk such privileged material could be used to the detriment of Canadian Bearings.

¶ 48 I accept, as mentioned earlier, that a distinction may be drawn between the moving solicitor situations and the inadvertent disclosure situation on the basis that in the latter cases, but not the former, the content and extent of the confidential information at issue is (or ought to be) identifiable. I do not agree that this distinction switches the onus to the defendant to prove the risk of significant prejudice, rather than leave the onus with Celanese to rebut a presumption of prejudice.

…

¶ 54 In my view, the present proceeding should not be seen as punitive in any way. I accept, as did the courts below, that neither Cassels Brock nor Kasowitz set out to obtain access to, or to gain some advantage from privileged material. Their problem stems from carelessness and an excessively adversarial approach in circumstances that called for careful restraint in recognition of the exceptional position of responsibility imposed by the unilateral and intrusive nature of an Anton Piller order. The protection of solicitor-client confidences is a matter of high importance. On the present state of the record, Canadian Bearings can have no confidence that the privileged material to which Cassels Brock and Kasowitz obtained access will not be used to their prejudice.

¶ 55 In summary, I agree with the Divisional Court that lawyers who undertake a search under the authority of an Anton Piller order and thereby take possession of relevant confidential information attributable to a solicitor-client relationship, bear the onus of showing there is no real risk such confidences will be used to the prejudice of the defendant. Difficulties of proof compounded by errors in the conduct of the search and its aftermath should fall on the heads of those responsible for the search, not of the party being searched. The onus was not met by the respondents in this case.

E. The Appropriate Remedy

¶ 56 I agree with the courts below that if a remedy short of removing the searching solicitors will cure the problem, it should be considered. As the intervener Canadian Bar Association ("CBA") puts it in its factum, the task "is to determine whether the integrity of the justice system, viewed objectively, requires removal of counsel in order to address the violation of privilege, or whether a less drastic remedy would be effective". The right of the plaintiff to continue to be represented by counsel of its choice is an important element of our adversarial system of litigation.


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In modern commercial litigation, mountains of paper are sometimes exchanged. Mistakes will be made. There is no such thing, in these circumstances, as automatic disqualification.

¶ 57 Nordheimer J. cited a number of inadvertent disclosure cases which, in his view, leaned against removal. The first, Tilley v. Hails (1993), 12 O.R. (3d) 306 (Gen. Div.), was not a motion to remove counsel, but rather an application for an injunction enjoining the respondents from using an inadvertently disclosed privileged document. Similarly, Aviaco International Leasing Inc. v. Boeing Canada Inc. (2000), 9 B.L.R. (3d) 99 (Ont. S.C.J.), was a motion to expunge from the record various privileged documents inadvertently faxed to the plaintiffs' counsel, which the plaintiffs' counsel attempted to use and of which copies were made and retained. The documents were expunged from the record. Coulombe v. Beard (1993), 16 O.R. (3d) 627 (Gen. Div.), was also relied on by Nordheimer J. for the "reluctance" of courts to impose the "drastic" remedy of removal where the nature of the privileged material inadvertently disclosed is not significant. In that case, Salhany J. had access to the letter disclosed and so was able to make an assessment of its significance. In all of these cases, the court knew with precision what the opposing lawyer had seen and what had been done about it. What the Coulombe case shows is that even where a confidential document is inflicted on a surprised opponent, the court will still take care to review the document to assess the risk of prejudice (as well, no doubt, as to assess whether the apparently inadvertent disclosure was a tactical gambit). In these cases, counsel avoid disqualification by demonstrating both that they were blameless in receiving the material, and that they did the "right thing" upon recognition that the material was potentially privileged. See also Nova Growth Corp. v. Kepinski, [2001] O.J. No. 5993 (QL) (S.C.J.), at paras. 13 and 18, leave to appeal refused [2002] O.J. No. 2522 (QL) (Div. Ct.), leave to appeal refused [2003] 1 S.C.R. xiv, [2003] S.C.C.A. No. 396.

¶ 58 Both Nordheimer J. and Moldaver J.A. distinguished the present case from Grenzservice which removed from the record solicitors who had botched execution of a Mareva injunction with elements of an Anton Piller order. In that case, it was held that counsel had behaved "egregiously". While Huddart J. (now J.A.) did make that finding, she also relied upon the principles laid down in MacDonald Estate as the governing authority. I would certainly not describe the conduct of the solicitors here as "egregious", but as MacDonald Estate itself shows, a violation of privilege that is not the result of "egregious" misconduct may nonetheless give rise to disqualification.

¶ 59 In helpful submissions, the interveners Advocates' Society and the CBA suggest a number of factors to be considered in determining whether solicitors should be removed: (i) how the documents came into the possession of the plaintiff or its counsel; (ii) what the plaintiff and its counsel did upon recognition that the documents were potentially subject to solicitor-client privilege; (iii) the extent of review made of the privileged material; (iv) the contents of the solicitor-client communications and the degree to which they are prejudicial; (v) the stage of the litigation; (vi) the potential effectiveness of a firewall or other precautionary steps to avoid mischief. Other factors may, of course, present themselves in different cases, but I agree that the foregoing list of factors is appropriate and seems to me sufficient to dispose of the present appeal.

¶ 60 As to the first factor, the privileged documents came into the hands of Cassels Brock and Kasowitz under the exceptional Anton Piller order in a way that was unintended but avoidable. Inadequate precautions were taken. Those who fail to take precautions must bear the responsibility. As mentioned earlier, Mr. Colvard testified that quite apart from the as yet unclassified electronic documents he segregated into a "Privileged" file, he found other potentially privileged documents in reviewing material earlier classified as "Relevant". Those, at least, Mr. Colvard agreed he "reviewed in some detail in order to decide where to put them". We do not know the contents of even these documents.

¶ 61 As to the second factor, Cassels Brock failed to have the electronic documents listed at the search site as required by the order and thereafter ignored the obvious significance of BLG's initials on the sealed envelope containing the electronic documents and then declined to return the material over which privilege was claimed to BLG "whether in print form or electronic" as requested. Cassels Brock did take steps, as did Kasowitz, to contain the resulting damage, but as a result of their errors the Court does not know (and Canadian Bearings cannot know) the potential scale of that damage.

¶ 62 As to the third factor, the CBA submits that the plaintiff's counsel should not only promptly return the inadvertently disclosed privileged materials, but also "advise the adversary of the extent to which those materials


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have been reviewed". I agree. Here, Cassels Brock and Kasowitz deny any "substantive review", but the review must have been sufficiently thorough to classify documents as "Relevant, Irrelevant, Proprietary, and Hot". How could anyone classify a document as "Hot" or "Relevant" without reading it? And, to repeat, some of the documents initially read and classified as "Relevant" turned out (on a second reading) to be potentially subject to a claim of privilege. In the absence of knowing what Celanese's solicitors and counsel looked at we are left in the dilemma anticipated by Sopinka J. in MacDonald Estate, at p. 1263:

.......... conclusory statements in affidavits without more are not acceptable. These can be expected in every case of this kind that comes before the court. It is no more than the lawyer saying "trust me". This puts the court in the invidious position of deciding which lawyers are to be trusted and which are not.

¶ 63 As to the fourth factor, Cassels Brock and Kasowitz failed to discharge the onus of identifying the contents of the solicitor-client communications which they accessed in the course of classifying the material. It is therefore not possible to determine "the degree to which they are prejudicial". As stated, Celanese's solicitors and counsel created this problem by their failure to proceed with prudence and they and Celanese will now have to shoulder the consequences.

¶ 64 As to the fifth factor, the litigation is at an early stage. At advanced stages of complex litigation, an order removing counsel can be "extreme" and may have a "devastating" effect on the party whose counsel is removed (Michel v. Lafrentz (1992), 12 C.P.C. (3d) 119 (Alta. C.A.), at para. 4). That is not the case here. No doubt substantial costs have been incurred by all parties, but BLG advised Cassels Brock by letter dated July 15, 2003, i.e. within less than a month after commencement of the litigation, and a few days after learning of the privilege controversy, that "[t]his is a most serious matter and we intend to bring it to the attention of the Court at the earliest opportunity". The removal motion was launched July 24, 2003. There was therefore ample early notice that removal was being sought.

¶ 65 Sixth, and finally, with respect to "the potential effectiveness of a firewall or other precautionary steps", Cassels Brock advised the court of a number of measures taken (although, in the defendant's view, too little and too late). The motions judge held that "an affidavit from the attorney in charge of this matter for the Kasowitz firm ought to have been filed confirming that such [privileged] material had been deleted and that no one at that firm had accessed the information prior to such deletion (with the obvious exception of Mr. Colvard who has been isolated from the case)". I agree. In a matter of such sensitivity the court and the defendant are entitled to the best available evidence. It seems apparent that appropriate firewalls were not in place prior to the occurrence of the mischief.

¶ 66 In view of all the circumstances, I agree with the Divisional Court that Cassels Brock and Kasowitz have not produced sufficient evidence to satisfy the MacDonald Estate test, namely "that the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur" (p. 1260).

¶ 67 I also agree with the Divisional Court that the right of Celanese to choose counsel yields to what occurred in the execution of the Anton Piller order in this case and its aftermath, and that "[t]he reasonable perception of the integrity of the administration of justice would be adversely affected were Cassels Brock .......... permitted to remain solicitors of record for [Celanese]". As to future role of Kasowitz however, I think the Divisional Court went too far in holding that "[Celanese] should be precluded in this litigation or any related proceeding from receiving advice or information directly and/or indirectly from the firm" (emphasis added). Celanese has worldwide interests and Kasowitz is its primary legal advisor. As the vinyl acetate plant is to be built in Iran, there may well be related litigation outside Canada. I think Canadian Bearings will be sufficiently protected if Celanese is ordered not to seek or receive advice or information directly or indirectly from Kasowitz in connection with any litigation in Canada arising out of the matters referred to in the amended statement of claim, or related thereto, provided Kasowitz files affidavit(s) satisfactory to the case management judge confirming that the firewalls it had undertaken to install were and are in place, and sworn confirmation that all of the material for which privilege is claimed that came into Kasowitz's possession as a result of the Anton Piller order has been returned or destroyed.

IV. Disposition


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¶ 68 The appeal is allowed with costs in this Court. Cassels Brock are removed as solicitors of record for the respondents in these proceedings. They are not to act for or advise the respondents, directly or indirectly, with respect to this proceeding or with respect to any related proceedings arising out of the facts pleaded in the amended statement of claim.

¶ 69 Neither the respondents or anyone on their behalf is to communicate with or receive advice or information directly or indirectly, from Kasowitz with respect to this proceeding or any related proceedings in Canada arising out of or related to the facts pleaded in the amended statement of claim.

¶ 70 Any and all materials subject to the claim of privilege still in the possession of the respondents, Cassels Brock or Kasowitz seized from the premises of Canadian Bearings on June 20 and 21, 2003, pursuant to the Anton Piller order shall be returned forthwith to Canadian Bearings without retention of copies whether printed, electronic or of any other type.

¶ 71 Kasowitz is to file affidavits satisfactory to the case management judge confirming the existence of adequate firewalls and the destruction or return of all allegedly privileged material that came into its possession as a result of the Anton Piller order made in this case.

WEEK 10: Western Delta Lands Partnership #1

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Western Delta Lands Partnership v. 3557537 Canada Inc. #1

2000 BCSC 54 Vancouver, British Columbia

[1] ALLAN J.:— In this action, the plaintiff (“Western Delta”) alleges that the defendants (the “Corporate Defendant” and “Seaman”) have breached the terms of a partnership agreement dated January 18, 1999 (the “Partnership Agreement”) and claims special damages in excess of $19.5 million in addition to general damages.

[2] The parties executed the Partnership Agreement for the purpose of forming Delta Fraser Properties Partnership (“Delta Fraser” or the “Partnership”) to develop lands that comprise most of the “Burns Bog” in Delta, B.C. The purpose of the Partnership was described in a development plan appended as a schedule to the Partnership Agreement (the “Development Plan”):

The Partners wish to form the Partnership for the purpose of developing on the Partnership Lands, a project which will include the Pacific National Exhibition [the “PNE”], a shopping centre, an entertainment district and major tourist destination [the “Project”].

[3] On January 25, 1999, the parties executed an addendum to the Partnership Agreement that, inter alia, modified the Development Plan to provide that the project “may” include the PNE (the “Addendum”).

[4] The terms of the Partnership Agreement required the plaintiff to contribute 5,500 acres (the “Partnership Lands”) to the Partnership, and the defendants to contribute certain funds and ongoing working capital. On or about February 3, 1999, the Province of British Columbia advanced Delta Fraser a loan of $25 million charging most of the Partnership Lands (the “Government Loan”). On February 17, 1999, the Province announced publicly that the PNE would not move to the Burns Bog.

[5] The plaintiff claims that, under the Partnership Agreement, both defendants agreed that they would do the following:

(a) pay the plaintiff $11 million within a year of the date that the Province advanced the Government Loan, which was to be secured by a mortgage charging certain portions of the Partnership Lands; and

(b) provide “all working capital required to obtain government approvals as necessary to develop the Project” and required for “all debt service (including principal and interest) in respect of financial encumbrances and charges charging the Partnership Lands, including property taxes”.

[6] The plaintiff complains that although Seaman continues, as its Managing Director, to control Delta Fraser, he has failed to honour his financial commitments to the plaintiff and Delta Fraser.

On this application, the defendants seek an order pursuant to Rule 18A(8)(b) dismissing the plaintiff’s motion for summary trial on the ground that the issues raised by the notice of motion are not suitable for disposition under Rule 18A and that a summary trial will not assist the efficient resolution of the litigation. In the alternative, the defendants seek an order pursuant to Rule 18A(8)(a) adjourning the summary trial. Mr. Voith, counsel for the plaintiff, submits that there is no basis upon which to conclude that the matter is inappropriate for disposition by Rule 18A, and that issue should be left for determination by the judge hearing the Rule 18A application.

The applicable law

[7] Before the introduction of Rule 18A in 1983, parties who sought an expeditious resolution of the litigation by way of judgment or dismissal were restricted to the summary judgment provisions of Rule 18. As Chief


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Justice McEachern noted in Inspiration Management Ltd. v. McDermid St. Lawrence Ltd (1989), 36 B.C.L.R. (2d) 202 (C.A.) at 211, “artful pleaders” could easily establish a bona fide triable issue and Rule 18 was often ineffective in avoiding unjust delay or unnecessary expense.

[8] Rule 18A was introduced to expedite the early and economical resolution of appropriate cases in chambers. Judgment will issue if the Court can find the necessary facts on the evidence to decide disputed questions of fact and law and if, in the circumstances, it would be just to decide the issues summarily. Since 1983, there has been a trend to resolve more complex litigation summarily. Increasingly, “summary trials” are set for a week or more. In part, the expansion of the summary trial procedure has been driven by the high costs of litigation and delays in the trial process.

[9] The procedures under Rule 18A have been shaped both by the jurisprudence and continuing amendments to the Rule. Inspiration Management, supra, articulated the practical considerations underpinning the summary resolution of cases. At 213, McEachern C.J.B.C. stated:

In my judgment, it must be accepted that while every effort must be made to ensure a just result, the volumes of litigation presently before our courts, the urgency of some cases, and the cost of litigation do not always permit the luxury of a full trial with all traditional safeguards in every case, particularly if a just result can be achieved by a less expensive and more expeditious procedure.

[10] Before the implementation of Rule 18A(8), Madam Justice Southin had held, in Murchie v. Cadillac Fairview Corp. (1988), 24 B.C.L.R. (2d) 378 (S.C.), that counsel could not raise, as a preliminary objection, the submission that the case was not suitable for disposition. Rather, that submission went to the heart of the summary trial application. On the other hand, in Sinnott v. Westbridge Computer Corp. (1993), 78 B.C.L.R. (2d) 28 (S.C.), Chief Justice Esson held that a preliminary determination that a case was not suitable for disposition under Rule 18A was appropriate in certain circumstances. He noted that a Rule 18A application should not be brought close to trial in respect of an issue that is not entirely severable from the remaining issues and will require significant time to be heard. Such an application creates a substantial risk of wasting time and effort and creating unnecessary complexity. Esson C.J.S.C. held that the Court’s power to make a preliminary determination arose under Rule 18A(5) or, in any event, under its inherent jurisdiction to control its own process. He observed that a pre-trial management judge would likely be in the best position to determine whether a Rule 18A application was appropriate in long and complex cases.

[11] The introduction of Rule 18A(8) removed any doubt that a party may bring a preliminary application as of right to determine the suitability of a case for summary disposition.

[12] Rule 18A(8), which was introduced in 1996, provides as follows:

(8) Ancillary orders and directions - On or before the hearing of an application under this rule, the Court may

(a) adjourn the application, or

(b) dismiss the application on the ground that

(i) the issues raised by the notice of motion are not suitable for disposition under this rule, or

(ii) the application will not assist the efficient resolution of the proceeding.

[13] The new sub-rule has received some judicial consideration. In The Corporation of the District of North Vancouver v. Fawcett et al. (1998), 162 D.L.R. (4th) 402 (C.A.), Lambert J.A., on behalf of the Court, expressed concern that Rule 18A(8) had not been considered in the Chambers application under appeal. At para. 33, he criticized the inefficient use of summary trial proceedings:

With respect, it seems to me that if the answer to an issue sought to be tried under Rule 18A will only resolve the whole proceeding if one answer is given, but not if a different answer is given,


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then the applicant should be required to demonstrate, and the judge should be expected to decide, that the administration of justice, as it affects not just the parties to the motion, but also the orderly use of court time, will be enhanced by dealing with the issue as a separate issue. It can not be enough simply that the parties have agreed to a summary trial of one or more issues, but not all of the issues, raised in the proceeding, without any consideration for the effective use of court time, or the efficient resolution of the proceeding.

…

[19] While Rule 18A(8) obviously seeks to “short-circuit” long and expensive Rule 18A hearings that are doomed to fail, it does not necessarily lead to increased efficiency and economy in the litigation. Even if the matter appears appropriate for summary disposition on a preliminary review, the judge hearing the Rule 18A application may reach a different conclusion on the basis of further material and arguments made at that later date.

[20] On the one hand, a preliminary application should be brought in cases where a summary trial is clearly inappropriate. On the other hand, chambers judges have imposed a heavy onus on a Rule 18A(8) applicant to demonstrate that the issues should not be decided summarily.

[21] Unless used in appropriate circumstances, Rule 18A(8) has the potential to impose yet another costly layer of litigation on the parties. If the preliminary application fails, and a subsequent summary trial of the issues does not resolve the issues in the litigation, the parties will have endured far greater expense and delay than if they had directed their efforts to a conventional trial of the issues.

[22] In this case, counsel spent two days on this Rule 18A(8) application reviewing extensive documentation and jurisprudence. Mr. Wallace, counsel for the defendants, said that, by the end of the application, counsel had spent six court days dealing with the issue of whether the Rule 18A application should be heard or adjourned. If I decided that the matter was suitable for summary trial, and if another judge heard the four day Rule 18A application, then counsel would be required to duplicate much of their submissions at considerable cost to their clients and the Court. Further, as a preliminary ruling cannot fetter the discretion of the summary trial judge to decide whether disposition by Rule 18A would be appropriate, counsel who is opposed to proceeding summarily could effectively have “two kicks at the can.”

[23] Without purporting to restrict the application of Rule 18A(8), I suggest that a motion is likely to fail unless one or more of the following circumstances apply:

(a) the litigation is extensive and the summary trial hearing itself will take considerable time;

(b) the unsuitability of a summary determination of the issues is relatively obvious; e.g., where credibility is a crucial issue;

(c) it is clear that a summary trial involves a substantial risk of wasting time and effort and of producing unnecessary complexity; or

(d) the issues are not determinative of the litigation and are inextricably interwoven with issues that must be determined at trial.

[24] Nevertheless, the utility of Rule 18A(8) may be enhanced where a single judge has conduct of complex litigation. In recent years, there have been numerous procedural changes affecting the management of lengthy cases. Litigation that is anticipated to require at least 20 trial days is case managed by a judge who is expected to hear all interlocutory applications, including Rule 18A motions, as well as the trial itself. In complex litigation, this procedure avoids the unnecessary time and expense that is incurred if counsel has to “re-educate” the Court on each application. It also reduces the risk that a subsequent trier of facts and law will be hampered by findings made by a different judge. Many of the dangers inherent in hiving off issues from the litigation and disposing of them summarily can be avoided by the appointment of a case management judge. With some exceptions, that judge hears all of the applications, including the


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preliminary application, the summary trial application (if any) and the trial, and can assist counsel in the orderly and efficient management of pre-trial procedures.

[25] Further, a Practice Direction of November 20, 1998 provides for case management of cases with an estimated trial length of less than 20 days upon the request of a party or the recommendation of a judge or master. In such cases, the case management judge may, in his or her discretion, hear interlocutory applications and, if assigned by the Chief Justice, preside as the trial judge.

[26] In this case, the parties have appeared before two masters and two judges on the issues relating to the suitability and timing of the plaintiff’s Rule 18A application. It would appear, in hindsight, that the appointment of a case management judge prior to the various motions would have had a salutary effect on the proceedings. In any event, at the conclusion of this application, I agreed to case manage these proceedings. Given the vast amount of material produced, it is appropriate that the same judge hear the Rule 18A(8) application and any subsequent summary trial.

Discussion

Suitability

[27] Several factors determine whether the issues raised are suitable for disposition by Rule 18A: the amount of damages in issue, the complexity of the matter, its urgency, the potential for prejudice by reason of delay, the cost of taking the case forward to a conventional trial in relation to the amount involved, the course of the proceedings, and other relevant considerations: Inspiration Management, supra. The defendants submit that the following factors compel the conclusion that a summary disposition of this case is unsuitable or, at least, premature.

(a) The complexity of the matter

[28] Not surprisingly, the litigation is described by the defendants as a factually and legally complex commercial transaction and by the plaintiff as a straightforward debt action. Mr. Voith submits that the issues can readily be resolved on affidavit material and the relevant law and that the defendants seek to create the illusion of complexity.

[29] The defendants assert that the Partnership Agreement was frustrated when the provincial government announced that the PNE would not move onto the Partnership Lands. They claim to have been induced to enter into the Partnership Agreement on the basis of representations and warranties which they discovered were untrue. The defendants also submit that they never agreed to a term of the Addendum to the Partnership Agreement, which provided that the Project “may include the PNE”. Mr. Wallace submits that the change in the Development Plan from “a project that will include” the PNE to “a project that may include” the PNE was made under a mutual mistake of fact and should be rectified.

[30] The amended statement of defence raises the following issues, inter alia: whether the Partnership Agreement came into effect and is valid and enforceable; the obligations of the parties under that agreement; whether the Addendum is enforceable; whether the plaintiff was obliged to act with “utmost good faith and fairness” and make full disclosure to Seaman; whether the defendants were induced to enter into the Partnership Agreement by misrepresentations of the plaintiff or its agents; and whether the defendants’ alleged obligations are enforceable.

[31] Mr. Wallace submits that a determination of those issues involves an interpretation of a complicated series of transactions and the underpinning negotiations, an assessment of the conduct of the parties, and a determination of the fairness of the Partnership Agreement. Further, Mr. Wallace says that it will be necessary to obtain expert appraisal evidence with respect to the value of the Partnership Lands because of “a huge discrepancy” between the cost of those lands to the Partnership and the values assigned to the lands by the plaintiff for other purposes. The defendants also wish to obtain expert evidence with respect to environmental issues relating to the Partnership Lands.


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[32] In response, the plaintiff submits that many of the defences raised are “technical defences” which are refuted by Seaman’s own evidence on discovery. The plaintiff claims that Seaman’s evidence clearly establishes that that he was not misled by the plaintiff prior to executing the Partnership Agreement and that he has failed to contribute working capital to Delta Fraser simply because he does not wish to commit any more of his resources to the Project.

[33] Mr. Voith describes Seaman as a sophisticated and experienced businessman and investor who entered into the Partnership Agreement with full knowledge of the relevant background of the Partnership Lands, including the history of the lands’ ownership by the McLachlin family, the present and historical appraised value of the lands, and the environmental concerns concerning the Burns Bog

[34] Mr. Voith also notes that Seaman executed the Addendum on behalf of both defendants and says that there is ample documentation to support the plaintiff’s position that the B.C. government had contemplated, but never committed to, moving the PNE to the Burns Bog.

[35] Mr. Voith submits that the plaintiff owed no fiduciary duty to Seaman in the negotiations leading to the formation of the Partnership. The parties entered into a commercial venture at arms length and no issue of dependency or vulnerability arises: Lac Minerals v. International Corona Resource, [1989] 2 S.C.R. 574. Mr. Wallace responds that a breach of fiduciary duty may lie for a material non-disclosure in a business relationship: Hodgkinson v. Simms, [1994] 3 S.C.R. 377.

(b) The amount of damages involved

[36] In this case, the plaintiff’s claim for damages is a large one. While that is a factor for consideration, it is not, by itself, a bar to proceedings by way of Rule 18A: British Columbia (Minister of Crown Lands) v. Cressey Development Corp. (1992), 66 B.C.L.R. (2d) 146 (S.C.); Canadian Imperial Bank of Commerce v. Charbonnages de France International S.A. (1994), 95 B.C.L.R. (2d) 104 (C.A.).

(c) Credibility issues inherent in the claims and defences raised

[37] The defendants allege that the plaintiff breached its duty to act in good faith and make adequate disclosure to Seaman before the Partnership Agreement was executed. They contend that a summary disposition is inappropriate where the Court will have to examine the evidence relating to the knowledge and conduct of the parties in order to determine the nature of their contractual relationship and the interpretation of the contractual documents: Blair v. Carstens, [1987] B.C.J. No. 1082 (S.C.). Mr. Wallace further submits that a Rule 18A application is unsuitable where the issues are legally or factually complex, and the credibility of the witnesses is a serious issue. In Iacobucci v. WIC Radio Ltd., (1997) 37 C.C.E.L. (2d) 112 (B.C.S.C.), the Court was unable to make the necessary findings of credibility to determine the issue of bad faith summarily.

[38] On the other hand, the plaintiff submits that the issues do not raise questions of credibility and the allegations of the defendants can be answered by the extensive documentary evidence, Seaman’s own admissions on discovery, and the relevant law.

(d) The stage of the proceedings

[39] The writ and statement of claim were filed on July 19, 1999. The defendants filed a statement of defence on August 25 and an amended statement of defence on November 16. A statement of defence to the counterclaim was filed on December 3.

[40] Initial and supplemental lists of documents have been exchanged although there are outstanding document requests. The defendant by counterclaim, Peel Financial Holding Ltd., had not disclosed documents as of the date of this hearing.

[41] Examinations for discovery were conducted on December 6, 7 and 10 but the defendants seek further discoveries.The defendants also wish to obtain expert evidence on a number of issues.


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[42] In early September, Mr. Voith gave notice of intention to proceed by summary trial and advised the defendants to make discovery as appropriate. On November 19, the plaintiff set down its motion for summary trial returnable December 8-10. The defendants, who object to a summary resolution of the issues, brought an application under Rule 18A(8). The plaintiff’s summary trial motion was adjourned, first to January 5-7, 2000, and subsequently to March 13-16, 2000.

[43] It is clear that Barry Ferguson and Roger Howay are potential witnesses in this litigation. The plaintiff says that Seaman and Ferguson were engaged in an earlier joint venture to purchase some of Partnership Lands (the “Ferguson Group”). Although Ferguson was the proposed purchaser, Seaman put up some $6.5 million in non-refundable deposits for repeated extensions of the closing date. The earlier transaction did not close and, the plaintiff alleges, Seaman was at risk of losing all of that money until the Corporate Defendant entered into the Partnership Agreement. Mr. Howay is a lawyer who apparently acted for the Ferguson Group and then for the Partnership. Mr. Wallace submits that there is no evidence Howay acted for Seaman.

[44] The defendants allege that Seaman and Howay were agents of the plaintiff. However, on discovery, representatives of the plaintiff testified that they relied on Ferguson and Howay to deal with Seaman. Both Seaman and Howay have refused the defendants’ requests for interviews. The defendants expect that they will have to bring Rule 28 applications in order to obtain their evidence.

[45] Rule 28 provides an investigative technique to obtain evidence from a reluctant witness who is not a party to the proceedings. However, Rule 18(3) sets out the types of evidence that may be adduced on the application and it does not include a transcript of evidence of a witness taken pursuant to Rule 28: Kuryliw v. Kuryliw (1994), 89 B.C.L.R. (2d) 52 (S.C.). The reason for this “omission” is clear. An examination conducted under Rule 28 cannot be read in at any trial as an admission against the opposite party: Aintree Investments Ltd. v. West Vancouver Dist.(1977), 5 B.C.L.R. 216 (S.C.).

[46] Accordingly, if the evidence of Ferguson and Howay is necessary for the resolution of certain issues, it may not be possible to resolve those issues on a Rule 18A application.

(e) The urgency of the matter

[47] The plaintiff submits that Delta Fraser is in desperate need of at least $85 million in working capital as a result of the loans and encumbrances charging the Partnership Lands, including the following:

(a) foreclosure proceedings and demands under mortgages that are in default;

(b) outstanding property taxes exceeding $830,000, payment of which is a condition of the Government Loan;

(c) monthly interest payments on the Government Loan; and

(d) other outstanding obligations and accounts for Delta Fraser.

[48] The plaintiff suggests that those defaults may also constitute events of default under the Government Loan and there is a danger that the Province may take foreclosure proceedings or other steps to realize on its loan.

[49] The plaintiff is also concerned with Seaman’s “threats of bankruptcy” and apparently deteriorating financial position.

[50] However, the defendants submit there is no urgency for a claim for damages and that the plaintiff’s claim of urgency is artificial. They deny any obligation to make the payments claimed by the plaintiff and assert that there is no risk the Partnership Lands will be lost for non-payment of any of the debts referred to by the plaintiff. Further, they suggest that the plaintiff could mitigate any potential loss by bringing the mortgages and tax debt into good standing and claiming those expenses against the defendants in this action. In


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response, the plaintiff alleges that the risk of losing the Partnership Lands is real and it cannot provide the necessary working capital because it is “cash poor”.

[51] This dispute concerns an ongoing partnership (at least in the absence of any judicial decision determining otherwise). The plaintiff’s allegations that the defendants have ceased to carry out their obligations under the Partnership Agreement deserve consideration by the Court as soon as possible.

[52] With respect to suitability, the defendants have raised numerous defences, some of which appear to have more substance than others. The defendants have not persuaded me, on this application, that all, or most, of the issues are unsuitable for summary disposition. In a case of this size, where a single judge hears all applications and trial proceedings, it is likely that resolving even some of the issues will expedite the resolution of the litigation generally.

…..

Judgment

[57] The defendants’ application is dismissed. The plaintiff’s application for summary trial will proceed on the dates scheduled for hearing, March 13-16, 2000.


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Western Delta Lands Partnership v. 3557537 Canada Inc. #2

2000 BCSC 1096 Vancouver, British Columbia

Allan J. (In Chambers)

INTRODUCTION:

¶ 1 The plaintiff, Western Delta Lands Partnership ("Western Delta"), alleges that the defendants, 3557537 Canada Inc. ("3557537") and Byron Seaman ("Seaman"), have breached the terms of a partnership agreement dated January 18, 1999 and executed in early February 1999 (the "Partnership Agreement") and related covenants. The plaintiff submits, and the defendants adamantly dispute, that its claims can be resolved summarily.

¶ 2 The parties executed the Partnership Agreement for the purpose of forming Delta Fraser Properties Partnership ("DFPP" or the "Partnership") to develop 5,456 acres in Delta, B.C that comprise Burns Bog (the "Lands"). The Lands constitute the largest tract of undeveloped non-agricultural land in Greater Vancouver.

¶ 3 Western Delta and 3557537 are the partners in DFPP. Seaman, the sole shareholder, officer, and director of 3557537, is a party, although not a partner, to the Partnership Agreement. Seaman contributed money to the Partnership and undertook management and financial obligations under the terms of the Partnership Agreement. Western Delta contributed the Lands.

¶ 4 Western Delta characterizes this action as a simple one, easily capable of resolution by summary trial: it contributed the Lands to the Partnership and the defendants undertook -- but have failed -- to fulfill certain financial obligations. Specifically, the plaintiff says the defendants were to contribute working capital as required by the Partnership ("Working Capital") to service debts relating to existing charges on the Lands, and to pay Western Delta $11 million within a year of closing. As a result of the defendants' failure to make those payments, the plaintiff says mortgages exceeding $32 million encumbering the Lands are in default and the proposed development of the Lands (the "Project") has come to a standstill.

¶ 5 Western Delta does not seek a dissolution of the Partnership. Rather, it seeks judgment for the sum of $11 million and accrued interest, an additional sum of $9 million as Working Capital to stave off foreclosures and loan obligations, and rectification of a portion of the Partnership Agreement.

¶ 6 The defendants raise a myriad of defences in their pleadings. Even those defences that appear to have little merit must be carefully scrutinized.

¶ 7 The threshold question is whether a summary trial would be an appropriate vehicle for the resolution of all or any of the following issues:

(1) Should certain sections of the Partnership Agreement be rectified as suggested by the plaintiff? (2) What is the scope of the defendants' obligation to provide Working Capital? (3) Should Schedule B to the Partnership Agreement be rectified to provide that the proposed Project

"will" include the PNE as proposed by the defendants?

(4) Does the plaintiff have a sustainable cause of action and is it the proper party to bring this action?

(a) Is the action properly brought as one for damages rather than debt? (b) Is the action properly brought by Western Delta rather than DFPP?

(i) Can Western Delta sue the defendants for their obligation to pay $11 million?


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(ii) Can Western Delta sue the defendants for their obligation to provide Working Capital to DFPP? (5) Did Western Delta owe a fiduciary duty to the defendants as intending partners prior to the

execution of the Partnership Agreement?

(6) Was the Partnership formed for a single undertaking or purpose? If so, was the Partnership Agreement "frustrated" by the failure of the PNE to relocate to the Lands?

(7) Is Seaman's personal covenant to pay $11 million enforceable?

¶ 8 An understanding of the lengthy and complex history preceding the execution of the Partnership Agreement is crucial to the determination of the legal issues.

…………………………………….

Are the issues in this case suitable for resolution by summary trial?

¶ 46 I am mindful of the (obiter) remarks of Esson J. A. in Cannaday v. McPherson (1998), 44 B.C.L.R. (3d) 195 (C.A.) at 218, that the summary trial procedure is not well suited to factually complex cases, and that "it is doubtful that its [Rule 18A's] place extends beyond cases which are relatively straightforward on their facts". He also noted, at 218: "All too often, proceedings such as these place an inordinate burden on the judge and in the end prove to be a waste of time and effort."

¶ 47 It is fair to say that these proceedings strain the boundaries of the summary trial procedure. However, I have concluded that in this case most, although not all, of the issues can and should be resolved summarily. It would be a harsh injustice to require the plaintiff to wait for a lengthy and expensive trial some years hence to respond to the voluminous defences raised by the defendants, some of which can be described as spurious.

¶ 48 Since the writ and statement of claim were issued on July 19, 1999, there has been a multitude of proceedings. Prior to this application, the parties appeared before two masters and two judges on the issues relating to the suitability of the plaintiff's Rule 18A application. On January 6 and 7, 2000, I heard the defendants' application for an order pursuant to Rule 18A(8) that the issues raised on the plaintiff's Rule 18A application were not suitable for summary disposition and that the summary trial procedure would not assist the effective resolution of the litigation. In written reasons (2000 BCSC 54), I dismissed that application. The parties had then spent a total of six court days dealing with the issues of the suitability and timing of the Rule 18A application. Much of that time was spent "re-educating" different members of the Court. I agreed to case manage the file, hear interlocutory applications including the summary trial and, if necessary and appropriate, preside as the trial judge. It was my hope that such a procedure would avoid the dangers inherent in summary trials when some of the factual and legal issues are hived off and disposed of summarily before one trier of fact and law and the remaining issues are left for determination by a different judge.

¶ 49 In Inspiration Mgmt. Ltd. V. McDermid St. Lawrence Ltd. (1989), 36 B.C.L.R. (2d) 202 (C.A.), at 214, McEachern C.J.B.C., for the majority, set out the test for determining whether a summary trial is appropriate. Judgment will issue if the Court can find the necessary facts on the evidence to decide disputed questions of fact or law and if, in the circumstances, it would be just to decide the issues summarily. McEachern C.J.B.C. also articulated the general principles governing a determination of whether Rule 18A is suitable in a particular case. However, because those principles overlap and may even conflict, their application is often problematic. For instance, it is a basic tenet of our legal system that litigants are entitled to the proper adjudication of their disputes. However, a summary process may be required to prevent the delay inherent in a full blown trial where such delay will work a substantial injustice to one party.

¶ 50 The defendants submit that the case is unsuitable for summary disposition. They describe the case as complex, both factually and legally, and seek a full trial to develop their defences including rectification, non est factum and misrepresentation, as well as the issues involved in the interpretation of the Partnership Agreement, the nature of the plaintiff's fiduciary obligations to Seaman, the characterization of Seaman as a principal debtor or a surety, and other defences. They complain that they have had insufficient time to prepare their case and obtain the


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information and expert reports required to present their case fully. The defendants also suggest that there are important issues of credibility and that they require the evidence of potential witnesses such as Ferguson, who declined to swear an affidavit or even attend to be examined pursuant to a Rule 28 Order in these proceedings. The defendants also oppose "a rush to judgment" in view of the magnitude of the damages sought by the plaintiff. Finally, they characterize the plaintiff's claim of urgency as "artificial".

¶ 51 In this case, I consider the following factors determinative:

*

While many of the factual issues are complex, their resolution (e.g. the interpretation of the Partnership Agreement) does not involve findings of credibility. There are few, if any, serious issues of credibility.

*

There is urgency. DFPP is in default of its financial obligations, which may result in judicial sales of portions of the Lands and an inability to obtain government approvals necessary to proceed with development of the Lands.

* Although the defendants argue that the Partnership Agreement is void or spent for several reasons, Seaman continues to act as Managing Director on behalf of DFPP.

*

The defendants' complaint that they have been unable to obtain the evidence of crucial witnesses is untenable. I granted Rule 28 orders permitting the defendants to examine Mr. Howay and Ferguson. It was understood that while the plaintiff could not use their evidence to prove its case (cf. Kuryliw v. Kuryliw (1994), 89 B.C.L.R. (2d) 52 (S.C.)), it could be relevant to the defendants' submission that the evidence of one or more of those witnesses at trial was essential to the resolution of certain issues and hence that Rule 18A was inappropriate.

*

Ferguson refused to comply with a Rule 28 order requiring him to attend for an examination. However, the defendants' suggestion that he was an "agent" of the plaintiff at the material time is untenable. Indeed, he and Seaman continue to enter into contractual agreements to share the future profits generated by development of the Lands. Their latest agreement, concluded January 22, 2000, requires Ferguson to assist Seaman in this litigation.

* The defendants did examine Mr. Howay and they cross-examined him on an affidavit he filed in these proceedings.

* The defendants conducted a lengthy interview of Viner. They did not seek to examine DFPP's Project Director, Russ Anthony ("Anthony"), pursuant to Rule 28.

* There is no basis upon which I could conclude that the evidence of Ferguson, Anthony, Viner, Mr. Howay, and Mr. Nielsen is essential to the resolution of the issues.

¶ 52 Not all of the voluminous evidence on this application -- the Chambers Record alone consists of some 25 volumes -- is admissible. Examples of inadmissible evidence include a number of documents that the plaintiff suggests prove certain facts, which Seaman says he never saw at the material time. The affidavits of Seaman, McLaughlin and Westeinde also contain some inadmissible hearsay (and double hearsay). Further, transcripts of the evidence taken of witnesses pursuant to Rule 28 are inadmissible.

¶ 53 I conclude that it is possible to find the necessary facts to decide all but one of the issues raised by the plaintiff and that it is not unjust to do so. The exception concerns the defendants' obligation to provide Working Capital to DFPP.

……………………

¶ 199 In practical terms, the plaintiff is entitled to judgment against the defendants in the sum of $11 million together with contractual interest of 10%. ………………

WEEK 10: Orangeville Raceway

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Orangeville Raceway Ltd. v. Wood Gundy Inc.

British Columbia Court of Appeal Vancouver, British Columbia Judgment: June 6, 1995.

[1] GOLDIE J.A.— This is an appeal by the plaintiff from a judgment of the Supreme Court of British Columbia pronounced 3 June 1993 by Mr. Justice E.R.A. Edwards after a summary trial under Rule 18A of the Rules of Court.

[2] The appellant (sometimes “Orangeville”) sued the respondent (“Wood Gundy”) and its employee, the respondent, Mr. Jeremy Wentworth-Stanley, for all benefits received by them from the sale and purchase of securities on which Wood Gundy acted as a principal and not, as the appellant said it understood at the time, as its agent.

[3] In dismissing the plaintiff’s claim the chambers judge concluded it was not credible that Orangeville was not aware of Wood Gundy’s status.

[4] The issue is whether the chambers judge erred in trying this action summarily under Rule 18A where credibility was the decisive issue.

Facts

[5] On 28 May 1991 Orangeville, by its general manager, Mr. James Keeling, bought and sold securities through Wood Gundy as follows:

On 28 May 1991, settlement date 4 June 1991, it sold for $2,987,575.34 Government of Canada bonds in the principal amount of $3,400,000 paying interest at 8.5 percent and maturing 1 June 2011. On the same date, with a settlement date of 5 June 1991, it bought for $2,982,670.34 NHA mortgage backed securities in the principal amount of $2,990,000 paying interest at 9.625 percent and maturing 1 June 1996.

[6] In both cases Wood Gundy acted as a principal, that is to say, it bought the Canada bonds for its own account and it owned the NHA mortgage backed securities it sold. The transactions were related in this sense: Mr. Keeling says when Mr. Jeremy Wentworth-Stanley recommended Orangeville sell the Canada bonds and purchase the NHA mortgage backed securities he assumed he was receiving this recommendation from Orangeville’s agent, Wood Gundy. Mr. Wentworth-Stanley says Mr. Keeling agreed to the purchase based on a comparison of prices and yield without any advice from Wood Gundy.

[7] Mr. Keeling says Orangeville thought Wood Gundy was acting as an agent throughout and that its remuneration would be in the form of a commission.

[8] Originally, it appears Mr. Keeling thought Wood Gundy had charged an excessive commission. But in the statement of claim the relief sought is for an accounting of all benefits realized by the defendants, and either of them, “.......... as a result of or in any way arising from effecting the sale to the plaintiff of the said NHA securities and the sale by the plaintiff of the said Government of Canada securities; ..........” and for damages for breach of duty to warn the client of the role Wood Gundy was playing.

[9] Orangeville says it is entitled to whatever benefits accrued to Wood Gundy because of the latter’s failure to inform it of the true nature of the transaction.

[10] In effect, the claim against an allegedly greedy agent was dropped in favour of one against a fiduciary alleged to be duplicitous.

Background


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[11] Rule 18A(5) provides:

Judgment

(5) On the hearing of the application, the court may grant judgment in favour of any party either upon an issue or generally, unless

(a) the court is unable on the whole of the evidence before the court on the application, to find the facts necessary to decide the issues of fact or law, or

(b) the court is of the opinion that it would be unjust to decide the issues on the application, and may impose terms respecting enforcement of the judgment, including a stay of execution, as it thinks just, and may award costs.

[12] Mr. Justice Edwards asked himself the relevant question under clause (a) in these words:

The issue on the motion under Rule l8A ultimately turns on the question of whether there is a sufficient evidentiary basis upon which to make a determination on the question of the alleged duty to alert the plaintiff that the defendant Woody Gundy Inc. was acting as principal in respect of the May 28, l99l transaction.

…

[16] On 10 March 1993 Wood Gundy and Mr. Wentworth-Stanley moved for an order under Rule 18A dismissing Orangeville’s claim with costs.

[17] The two applications came before Mr. Justice Edwards on 3 June 1993. In dismissing Orangeville’s action he rejected Mr. Keeling’s claim that he, Mr. Keeling, was ignorant of the nature of the transaction. In that circumstance it was unnecessary for him to consider whether there was a duty to warn. Nor was it necessary for him to consider Orangeville’s application with respect to the unanswered interrogatories.

[18] There is nothing indicating a lack of willingness on anyone’s part in the court below to the disposition of the two motions on other than the affidavit evidence.

[19] The following extracts from three affidavits illustrate the contest between the parties:

1. Paragraph 8.1 of Mr. Keeling’s affidavit sworn 16 April 1993:

8. At about the time the account was opened in Owen Sound, I told Wentworth-Stanley that the Plaintiff would be purchasing bonds with a value of approximately $3 million and I had one or more discussions with him about the basis on which commissions were charged. From such discussions, I understood that:

8.1 Wood Gundy would act as my agent in purchasing bonds and would add on a commission (or “spread”) to the price which the Plaintiff or I were obliged to pay; and

….

2. Paragraph 2 of Mr. Keeling’s affidavit sworn 3l May 1993:

2. To clarify the facts stated in Paragraph 8 of my affidavit herein sworn the 16th day of April, 1993, I confirm that I had discussions with the Defendant Jeremy Wentworth-Stanley about the basis on which commissions were charged and he told me that:


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2.1 Wood Gundy would act as my agent (in transactions for my account) or the Plaintiff’s agent (in transactions for the Plaintiff) in purchasing bonds and would add on a commission (or “spread”) to the price which the Plaintiff or I were obliged to pay; and

2.2 the commissions would decrease as the value of the sale increased; and

2.3 because of the size of the account (involving approximately $3 million), he would charge the lowest commission that he was allowed to charge.

3. Paragraph 7 of Mr. Jeremy Wentworth-Stanley’s affidavit sworn 27 May 1993:

7. In reply to paragraph 8 of the James Keeling Affidavit, I do not know what James Keeling understood from any discussions that he had with me at the time of the account being opened but at no time did I say to James Keeling any of the things that he deposes to in paragraph 8. Specifically, as to paragraph 8.1, I understood from James Keeling that James Keeling was a sophisticated and experienced investor. As is indicated on the confirmation document set out as Exhibit “F” to my First Affidavit, the actual business relationship between Wood Gundy and Orangeville and the Defendant was that of Vendor and Purchaser and at all material times, from my discussions with James Keeling, it was my understanding that the transactions he would engage in would likely involve Vendor and Purchaser transactions.

[20] If this was all there was to enlighten the chambers judge it would be difficult for him to come to a reasoned conclusion without the benefit of viva voce evidence subjected to cross-examination.

[21] There was, however, documentary evidence both in respect of the transactions in question and others in which Wood Gundy confirmed the transaction to or from it in writing. Six transactions preceded those which took place 28 May 1991:

Date Nature of Transaction

Security bought or sold Amount Involved

7 Sept. 1990 Sale Canada bonds $2,700,000 3 Dec. 1990 Sale Canada bonds $2,990,000 3 Dec. 1990 Purchase Canada bonds $2,700,000 11 Dec. 1990 Sale Canada bonds $3,080,000 11 Dec. 1990 Purchase Canada bonds $2,990,000 19 Dec. 1990 Sale Canada bonds $3,400,000

[22] The upper part of each confirmation slip provides the mailing address of both Wood Gundy and Orangeville together with the date, the name of the account executive, the client account number and the order number. Below this upper part are the following words in capitals:

AS PRINCIPALS, WE CONFIRM PURCHASE TO YOU OF The same format is used in the case of a sale with the word “SALE” appearing instead of “PURCHASE”.

[23] The lower part consists of squares in which are recorded the particulars of the transaction. The square marked “Commission” is, in each case, vacant.

[24] It is to these confirmation slips that the chambers judge referred when he said:


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In effect, the plaintiff is pleading that the defendants had an obligation, before the transaction of May 28, l99l to advise that they would be acting in the capacity of principals, not agents, in respect of that transaction. The defendant Wood Gundy Inc. did so on six previous occasions by providing Confirmation Notices which in unequivocal terms explained the nature of the transactions and made no reference to a commission.

Regardless of what undertakings or assurances Mr. Keeling may have believed he received from Mr. Wentworth-Stanley (and I make no finding on that point) it is not credible that confronted with notices in this form, in respect of transactions in the millions of dollars, the plaintiff through its officer Mr. Keeling had not been disabused of any misconceptions he may have had about the nature of these transactions. I can’t imagine what other evidence could alter the conclusion that the plaintiff knew or ought to have known at the time of the transaction that the defendant Wood Gundy Inc. would or might be acting as principal.

Discussion

[25] In this Court, Orangeville said the chambers judge erred in relieving Wood Gundy, a fiduciary, of the obligation to disclose it was acting in its own interest as a principal and not as an agent in Orangeville’s interest. Alternatively, it was contended he should have directed the case be placed on the trial list if he was unable to conclude Wood Gundy was a fiduciary.

[26] In my view, the sole issue here is whether it was an error on the part of the chambers judge, reviewable by this Court, to find on affidavit evidence that the plaintiff’s principal witness was not credible.

[27] We sat five as this raised a question of general importance in respect of summary trials under Rule 18A of the Rules of the Supreme Court of British Columbia.

[28] Rule 18A was brought into force in the mid 1980s to meet the needs of the day: a rising volume of litigation with concomitant increases in cost and delay.

[29] In its present form its provenance is local. Its reception both in the trial court and by the bar was mixed. It is now, however, accepted as an essential tool in the administration of justice. Surveys conducted in Vancouver in 1991 indicate that close to the same number of actions are disposed of by summary trial as the number of actions disposed of by trial conducted in the conventional manner. Its utility, as marked by its present acceptance, is an important factor in the disposition of appeals in this Court.

[30] The locus classicus on the scope and purpose of Rule 18A is the judgment of this Court in Inspiration Management Ltd. v. McDermid St. Lawrence Ltd. (1989), 36 B.C.L.R. (2d) 202.

[31] In that case the trial judge had held that a summary trial under Rule 18A was to be resorted to only if a conventional trial could not possibly make any difference. This was held to be an error in law. The distinction between an application under Rule 18 and a summary trial under Rule 18A was again emphasized in Inspiration: in the former, summary judgment may not be given if there is a bona fide triable issue while in the latter, the court actually tries the issues raised by the pleadings on affidavits.

[32] There is substituted for the traditional safeguards associated with a conventional trial other procedural safeguards, notably those contained in Rule 18A(5) which for the sake of convenience I set out again:

Judgment

(5) On the hearing of the application, the court may grant judgment in favour of any party either upon an issue or generally, unless

(a) the court is unable on the whole of the evidence before the court on the application, to find the facts necessary to decide the issues of fact or law, or

(b) the court is of the opinion that it would be unjust to decide the issues on the application,


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and may impose terms respecting enforcement of the judgment, including a stay of execution, as it thinks just, and may award costs.

[33] In Inspiration the Chief Justice, speaking for the majority, approved earlier observations in this Court that a chambers judge is not obliged to place an action on the trial list simply because there is conflicting affidavit evidence.

[34] The chambers judge expressly asked and answered the question: was there sufficient evidence? Implicitly it must be taken that he concluded it would not be unjust to proceed on that evidence.

[35] We were urged by Orangeville that he was simply wrong in his conclusion.

[36] It was said on behalf of Orangeville that its Mr. Keeling was an inexperienced investor who looked to Mr. Wentworth-Stanley and Wood Gundy for advice and guidance.

[37] The relationship thus sought to be established was said to be similar to that examined by the Supreme Court of Canada in Hodgkinson v. Simms, [1994] 3 S.C.R. 377, where a would-be investor in tax shelters consulted an accountant reputed to be knowledgeable in the field. The latter advised him to invest in certain projects but failed to disclose he had provided professional services to the developers of those projects.

[38] Thus, the analysis of a project the defendant provided the plaintiff was, in large part, a reflection of the work he had done for the developers. A majority of the Supreme Court of Canada agreed with the trial judge the defendant actively cultivated the plaintiff’s vulnerability as a neophyte in this field of tax driven projects.

[39] The relationship was held to be fiduciary in character and the defendant was held to be in breach of this relationship in failing to disclose his relationship with the developers of the projects he was recommending to the plaintiff.

[40] In the case at bar, unlike the plaintiff in Hodgkinson, supra, who lost everything he invested and more, Orangeville’s transactions with Wood Gundy were apparently profitable. The chambers judge said:

The dispute in this case is being treated by both parties as a matter of principle. The amount of money potentially involved is small relative to the size of the transaction from which it arose.

This is not wholly irrelevant. As was acknowledged by the Chief Justice for the majority of the Court in Inspiration, supra, at 213:

In my judgment, it must be accepted that while every effort must be made to ensure a just result, the volumes of litigation presently before our courts, the urgency of some cases, and the cost of litigation do not always permit the luxury of a full trial with all traditional safeguards in every case, particularly if a just result can be achieved by a less expensive and more expeditious procedure. ..........

and at 214:

The procedure prescribed by R. 18A may not furnish perfect justice in every case, but that elusive and unattainable goal cannot always be assured even after a conventional trial and I believe the safeguards furnished by the rule and the common sense of the chambers judge are sufficient for the attainment of justice in any case likely to be found suitable for this procedure.

[41] The parties before us agreed to join issue under Rule 18A. The plaintiff undertook to prove by affidavit Mr. Keeling’s naivety and reliance. This was contested by affidavits asserting his experience and lack of reliance. The plaintiff undertook to prove representations from which the chambers judge could reasonably conclude Wood Gundy was acting as Orangeville’s agent on the lowest commission basis. This too was controverted by affidavit.


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[42] The chambers judge made no findings on these contested issues. What he did do was to determine that the decisive question was: did the plaintiff know, or should it reasonably have known, from the disclosure made by the defendant in six preceding transactions as well as the transaction in question, that Wood Gundy was acting as a principal, selling or purchasing on its own behalf?

[43] The chambers judge found, upon undisputed documentary evidence, that it was not credible for Mr. Keeling to assert he never noticed the inscription on the confirmation notices. Thus, this case does not turn on the determination of credibility from conflicting affidavits alone.

[44] This brings me, however, to the last consideration: are we entitled to set aside the judgment below and to substitute our own views for those reached by the chambers judge simply because he did not have the advantage of observing the witnesses as their testimony was tested by cross-examination?

[45] In my view, the answer to this question must be in the negative. I think, with respect, that what was stated by Mr. Justice Taylor in an unreported judgment of this Court provides an appropriate answer: Colliers Macaulay Nicolls Inc. v. Brigid Anne Clarke and Thomas Kevin Clarke, [1989] B.C.J. No. 2455 (29 September 1989), Vancouver Registry, CA009621 (B.C.C.A.) at p. 6:

So far as findings of fact are concerned, the onus on the appellant in an appeal against a summary disposition of issues made without oral testimony under Rule 18A cannot be merely to persuade the appeal court to a different view of the evidence. The appellant must show that the chambers judge reached a conclusion which cannot reasonably be supported. That is a heavier burden than merely to establish that the appeal court would have made different findings, or have drawn different inferences.

[46] Applying that standard to the case at bar I think this appeal must fail.

[47] It has been said that an appellate court is in as good a position to draw inferences from proven facts as the trial judge. But this states only half the equation. The appellate court may be in as good a position but the burden is still on the appellant to demonstrate error, that is to say, that the position reached below after a summary trial cannot reasonably be supported.

[48] This does not require demonstration of “no evidence” - if that be done, the error is one of law, not of fact. In this case, there is ample evidence to support the conclusion of the trial judge, with which I agree. Where the appellant adopts the transaction in question but asserts a right to the benefits received by the other it is not reasonable to accept the appellant’s story where it is controverted by its silence in six similar prior transactions.

[49] I would dismiss the appeal.

HINKSON J.A.:— I agree. TAYLOR J.A.:— I agree. ROWLES J.A.:— I agree. PROWSE J.A.:— I agree.

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Chu v. Chen

2002 BCSC 906 Vancouver, British Columbia BOUCK J.:

INTRODUCTION

[1] The plaintiffs bring this Rule 18A application seeking declaratory relief and other remedies. They say a declaratory judgment will give them an interest in certain lands that are the subject matter of the dispute.

[2] Chen & Leung is a law firm named as a third party. It also applies under Rule 18A for an order dismissing the defendants’ claim. As third parties Peter Kong Chu and Mei Yee Sung (the Chus) ask for an order dismissing the defendants’ third party claim against them

[3] The plaintiffs commenced the action in November 1997. It is set for trial in October 2002.

OUTLINE OF FACTS

…

[8] These proceedings concern a land development scheme at 71-77 East Pender Street, Vancouver B.C. (the property). The project began in 1995 when the plaintiffs and the defendant Mr. Chen acquired the land for $1,000,000.00. In October 1996, by separate agreements, the plaintiffs agreed to transfer their interests to the defendants Mr. Chen and Ms. Lee. To secure the amount Mr. Chen owed the plaintiffs for the transfer, he gave them cheques post-dated to 30 June 1997. Depending upon each plaintiff’s interest, the amount of the cheques ranged from $247,293.22 to $143,418.22.

[9] Sometime in 1996, the defendants proceeded to construct a building on the property. The scheduled completion date was in June 1997. Apparently, the defendants ran out of money. I am told that unpaid workers and suppliers filed liens against the property to secure their claims. I am also told the property may be sold for unpaid taxes in December 2002.

[10] On 30 June 1997, the plaintiffs presented Mr. Chen’s cheques for payment but they were not honoured. They now seek a declaration that the October 1996 agreement entitles them to unpaid vendors’ liens or equitable mortgages against the property in the amount of the cheques. If they obtain such a declaration, they ask for an order allowing them to sell the property on the open market. They hope the sale price will pay for all or part of Mr. Chen’s indebtedness to them arising out of the dishonoured cheques. In addition they want judgment against Mr. Chen for the amount of the cheque debt.

[11] By way of reply, Mr. Chen argues that if the plaintiffs do have a right to an unpaid vendor’s lien or an equitable mortgage, they waived that right by their conduct.

[12] In the third party proceedings, the defendants claim their former law firm, Chen & Leung, was negligent in failing to protect their interests. Mr. Chen and Ms. Sung contend that Chen & Leung ought to have included clauses in the October 1996 agreements releasing the defendants from any future claims the plaintiffs might have against them for unpaid vendors’ liens or equitable mortgages. Mr. Chen says that if the plaintiffs succeed, Chen & Leung ought to indemnify him for his loss.

[13] In the third party proceedings, the defendants claim over against the Chus. They allege the Chus conspired together to induce the other plaintiffs to breach a separate agreement dated 18 November 1994. The defendants also ask for a declaration that they be indemnified by the Chus for any judgment debt.

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ANALYSIS

[14] For the most part, no party complained this matter was unsuitable for resolution under Rule 18A. However, that does not bind me in reaching an opposite conclusion. I am entitled to dismiss all or part of the application if it is “unsuitable” for disposition - Rule 18A(8)(b)(i) - or if it would be “unjust” to decide the issues - Rule 18A(11)(a)(ii).

1. Rule 18A(8) and (11) - Interpretation

[15] Is this dispute suitable for disposition under Rule 18A? Alternatively, would it be unjust to decide the disputed matters under the Rule? The Lieutenant Governor in Council (the LGIC) enacts the Supreme Court Rules under what is now called the Court Rules Act, R.S.B.C. 1996, c. 80. The relevant sub-rules of Rule 18A read in part as follows:

(8) On or before the hearing of an application under this rule, the court may ..........


(i) the issues raised by the motion are not suitable for disposition under this rule, or

(ii) the application will not assist in the efficient resolution of the proceeding.

..........

(11) On the hearing of the application, the court may

(a) grant judgment in favour of any party, either on an issue or generally, unless

..........

(ii) the court is of the opinion that it would be unjust to decide the issues on the application ..........

[16] The definitions of the word “suitable” in the Shorter Oxford English Dictionary, p. 2183, and Black’s Law Dictionary 7th ed., p. 1448, are more or less in agreement to its meaning as: ”fit and appropriate for its intended purpose.”

[17] In the same authorities, the word “unjust” means: ”not acting justly or fairly; not observing the principles of justice or fair dealing;” Oxford, supra, at 2422; and “contrary to justice; not just” Black’s, supra, at 1536. The word “just” means: inter alia, “That is such properly, fully, or in all respects; complete in amount or character; full; proper, regular;” Oxford, supra, at 1144; and, “legally right; lawful; equitable” Black’s, supra, at 868.

2. Rule 18A - History

[18] Until Rule 18A came along in 1983 (B.C. Reg. 178/83, s. 3), the LGIC Rules provided for summary disposition of actions or defences under Rule 18. That rule still exists today. Without proceeding to a conventional trial, a plaintiff may apply for summary judgment against a defendant on the grounds there is no defence to the plaintiff’s claim: Rule 18(1). Similarly, a defendant may apply summarily for dismissal of a plaintiff’s claim on the grounds there is no merit to the claim: Rule 18(6).

[19] The main difference between Rule 18 and Rule 18A is that under Rule 18, the trial court judge hearing the application cannot decide questions of fact or law. His or her function is to determine whether there is a triable issue: Golden Gate Seafood (Vancouver) Co. v. Osborn & Lang Inc. (1986), 1 B.C.L.R. (2d) 145 at 171 (B.C.C.A.). Under Rule 18A, however, the hearing judge may enter judgment following an application, even

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though some of the facts may be disputed and the law may be in conflict: Inspiration Management Ltd. v. McDermid St. Lawrence Ltd. (1989), 36 B.C.L.R. (2d) 202 at 214-215 (B.C.C.A.). Frequently, counsel and judges disagree as to whether the facts are sufficiently in dispute to deny relief to the Rule 18A applicant.

[20] The question then arises as to what was the intended purpose of Rule 18A when first enacted in 1983? From counsel’s perspective, two articles published in The Advocate speak positively about Rule 18A’s usefulness: M. F. Welsh: ”Judging the Summary Trial Rule” (1988) 44 The Advocate, 173; D. W. Roberts Q.C., “Rule 18A Summary Trials - Under Attack Again”, (1992) 50 The Advocate, 49.

[21] In Mr. Welsh’s words, supra, apparently the LGIC hoped the Rule would, “weed out those cases that do not (or should not) require a full scale trial.” Or using Mr. Roberts’ words, supra: the LGIC anticipated the Rule would provide a “quick fix” that would “avoid lengthy delays in disposing of unmeritorious defences or claims.”

[22] The LGIC Rules are based upon the English Rules of 1883. Under these rules, the parties control the pace of litigation, not the court. The court does not set a trial date until a party applies for one after the close of pleadings: Rule 39(2). Parties may postpone that application to a time when it suits their convenience. Generally, the shorter the estimate of the trial length by counsel, the earlier a trial date can be provided by the court. Rule 39(4) gives the court the right to set an action down for trial at a specific date but, judges rarely exercise that right and only then at a party’s request. This is because court administration officials are responsible for co-ordinating the trial list, not individual judges.

[23] As a trial judge since 1974, I have some knowledge about why Rule 18A came into existence. In the mid to late 1970’s there was a time interval of about 6 to 9 months from the date a party applied to the court for a trial date and the first day the court assigned for the trial’s commencement. When that trial date did arrive, few cases were “bumped”, because there was little overbooking. By the early 1980’s, the time interval from application for a trial date to the conventional trial date itself increased from about 6 to 9 months to around 12 to 18 months.

[24] Overbooking was tried - about 1000% - in an attempt to shorten the time interval. It often had the unfortunate result of bumping more cases because, when the trial date arrived there were more cases ready for trial than there were judges available to hear them. Sometimes cases would get bumped a second time, after waiting 6 or so months for a second trial date. In this environment, Rule 18A seemed to promise relief from the long waiting period for a trial and the prospects that a trial date could be fictional.

[25] During that era, every weekday in Vancouver there was always a judge (a Chambers judge) sitting to hear motions or applications such as Rule 18A. In most other parts of the province a Chambers judge sat at least once a week. A party seeking a Rule 18A summary trial could set the application down for hearing on one of those weekly sitting days. Applicants did not have to apply for a hearing date as they did for a conventional trial or be too concerned that a Chambers judge would not be available because of overbooking.

[26] At first Rule 18A worked reasonably well. Most applications did not involve contested issues of fact or require further extensive research and writing by the Chambers judge. In other words, the Rule provided a “quick fix” where the issues were not complex and the facts were simple and generally uncontested. But as time went by, more frequently counsel chose a Rule 18A summary trial over a conventional trial. Rule 18A applications began to involve contested issues of fact and law that counsel suggested the Chambers judge easily could resolve

[27] Today, a special division of the court exists to hear these and similar types of applications in Vancouver. We are told that Vancouver judges or juries decided 810 conventional civil trials in 1995, while in 2001 that figure had diminished to 390. Perhaps this significant reduction in conventional trials may be due to the convenience offered to the parties by way of Rule 18A summary trials. Perhaps it could also be due to long lasting conventional trials, some of which may have substantially exceeded their original time estimates.

3. Rule 18A - Administrative Alternatives

[28] For many years in the 1980’s and early 1990’s the interval from the writ’s filing date to the first day of a conventional trial was about 3 to 5 years. Outside the Lower Mainland it was about 2 to 4 years. Those figures may still be true today since trials now take much longer than they once did. That tends to sustain the unsatisfactory interval from the time a plaintiff files a writ until the day the trial begins.

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[29] This case is an example of the 5 year estimate. It will be almost 5 years after the plaintiffs filed their writ in November 1997 until the scheduled commencement of the trial in October 2002. Probably, it will be an additional 2 to 3 months after the trial completes before the trial judge delivers reasons for judgment.

[30] That interval contrasts with the much shorter time period between filing and disposition or judgment in many large metropolitan, U.S. state superior trial courts that have case management systems. According to a 1996 U.S. Bureau of Justice survey, 70% of judge alone trials and 56% of jury trials were disposed of in less than 2 years from filing. The median processing time from filing to verdict was 22.1 months for jury trials and 17.8 months for judge alone trials.

[31] Many of those courts strive to meet the 1984 American Bar Association guidelines recommending that superior state trial courts dispose of 90% of civil cases within 12 months of filing; 98% within 18 months of filing and 100% within 24 months of filing.

[32] The British Columbia Supreme Court does not have a universal case management system. It has what is called the master calendar system (the MCS) where the parties control the pace of litigation. No Canadian bar organization has recommended target times that Canadian superior trial courts should try and meet in processing cases from filing to trial. However, in 1995, British Columbia Supreme Court judges and B.C. lawyers asked the provincial government to finance a pilot project for the purpose of testing the suitability of an individual case management system (the ICS), where the court controls the pace of litigation. The request was denied.

[33] In other common law jurisdictions the ICS system has had the effect of reducing the time from filing to trial and improving trial court efficiency. The 1990’s Ontario Commission on Civil Justice acknowledged that “those jurisdictions which have achieved the most dramatic results with case flow management are those which have used the individual calendar system”.

[34] Rule 18A probably would not be necessary if the court had a 100% ICS. Experience proves the ICS results in a much shorter interval from filing to a conventional trial than does the MCS. The ICS would have the effect of reducing or eliminating the need for litigants to seek a Rule 18A summary trial because there would not be such a long wait for a conventional trial.

[35] Frequently, counsel for both sides will ask a Rule 18A hearing judge to render a judgment, even though there are conflicts in the evidence. They say that the parties just want to end the matter rather than wait any longer for a far off conventional trial date.

[36] For hundreds of years our legal ancestors and others struggled mightily to design a civil trial system that would produce a just decision. The result of these efforts is the modern conventional trial, where litigants appear before an independent judge or a judge and a jury and the parties call witnesses who testify to the facts. Those witnesses may be cross-examined by the opponent. The public may attend and view the proceedings. The judge or jury finds the facts, applies the law to those facts and renders a verdict. This kind of a trial is the envy of many other countries where an independent judiciary and the rule of law have not yet taken root.

[37] Reform of the conventional trial process should be ongoing. Rule 18A has the unfortunate effect of impeding its improvement. If we did not have Rule 18A, perhaps by now the LGIC rules would have modernized the conventional trial system in the way it has been done in the U.S. and England. For example, modern LGIC rules could:

* require each party to disclose the names of their witnesses well before trial (U.S. and English courts);

* allow each party to depose all the other party’s witnesses, including experts (U.S. courts);

* postpone interlocutory appeals until after the trial (U.S. courts);

* compel discovery of insurance policies (U.S. and Ontario courts);

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* detail the manner in which parties can exercise their right under the Jury Act, R.S.B.C. 1996, c. 242, to examine potential civil jurors and challenge for cause (U.S. courts);

* experiment with the process called findings of fact and conclusions of law where counsel write the decision for entry and appeal purposes after the trial judge gives his or her oral or written conclusions (U.S. and English courts);

* prescribe a method whereby parties would appear at a pre-trial conference well before every trial (U.S. and English courts);

* require each party to file and exchange a trial brief well before trial (U.S. and English courts);

* allow trial judges to restrict the amount of unnecessary examination in chief and cross-examination (U.S. and English courts).

4. Rule 18A - Summary Trial Defects

[38] A conventional trial does not necessarily result in perfect justice. Given humanity’s inherent weaknesses, it is the best we can do. On the other hand, a Rule 18A summary trial is a far less perfect trial than a conventional trial. This is because Rule 18A allows counsel to present the evidence in affidavit form and the affidavit’s deponents seldom are cross-examined before the Rule 18A judge to test their credibility.

[39] In a conventional trial, the trial judge rules on the admissibility of evidence. On a Rule 18A summary trial, the parties present the evidence in affidavit or written form without a judge first ruling on the admissibility of statements contained within the affidavits. These affidavits probably do not reflect the deponent’s exact words. For practical reasons they usually are the affidavit drafter’s best interpretation of the deponent’s words. Without objection from counsel for the other party, drafters often insert into the affidavits inadmissible argument dressed up as evidence or they may add explicit or disguised hearsay. During the later research and writing component of a Rule 18A summary trial judges must sift out these inadmissible words and find the necessary facts from the admissible evidence that remains.

[40] For example, in this instance, Mr. Chu’s affidavit contains inadmissible hearsay and opinion statements such as: ”to the best of my knowledge;” “I had the impression;” “it was my understanding;” and the like. Mr. Chen’s affidavit contains similar defects. I do not mean to imply that affidavit drafters intentionally decide to ignore the rules of evidence. Rather, they easily may have forgotten those rules because they have been under-exposed to conventional trials. Arguably, Rule 18A has a negative effect on counsel’s conventional trial skills of presenting evidence, cross-examining witnesses and persuading juries. Judges’ conventional trial skills can suffer in a similar way.

[41] From the point of view of trial court efficiency, in many Rule 18A summary trials the presiding judge often cannot tell whether the issues are suitable for a just disposition under the rule until long after the hearing is over. This is because counsel want to compress the Rule 18A hearing into the shortest time possible. The longer a Rule 18A hearing takes, the more likely it is the application will be dismissed as being unsuitable for resolution.

[42] However, a Rule 18A hearing that takes counsel little time to present does not necessarily result in fewer hours of judicial research and writing time. A Rule 18A hearing judge must still examine all the affidavits and all the authorities, including those that counsel may have just mentioned in passing. This may often require many hours, days, weeks and sometimes even months of research and writing by the Rule 18A judge.

[43] In the end, if a Rule 18A judge decides not to resolve the issues because of unsuitability or unjustness, the judicial time spent hearing the application and explaining the reasons for its dismissal is wasted. It can also result in considerable extra expense to the parties because the dispute must then wait in line for disposition at a future conventional trial.

[44] A Rule 18A hearing effectively excludes the public from the process; few ordinary citizens possess the necessary patience and boredom threshold to sit in the gallery listening to counsel and the court debate dry questions

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of law based on material the observers never see. Rule 18A tends to distance the public from the justice system to the disadvantage of our democracy.

[45] Another weakness of Rule 18A arises where there is an appeal from the hearing judge’s decision dismissing the application. If the Court of Appeal upholds the hearing judge by dismissing the application that does not end the dispute. It must still be tried at a future conventional trial. Again an added expense to the parties in what is already an overly expensive exercise.

[46] Rule 18A can provide the parties with three trials instead of one conventional trial. First, there is a Rule 18A summary trial application before a hearing judge in the trial court where the judge may dismiss the application because of unsuitability. Second, there is another “trial” in the Court of Appeal. While it is called an appeal, it is in fact a trial because the Court of Appeal decides the issues on the identical written material that was before the Rule 18A hearing judge. Third, if the Court of Appeal upholds the Rule 18A hearing judge’s ruling of unsuitability, there is then a conventional or real trial before a judge or a judge and jury.

[47] No one can say for certain that the result of a Rule 18A summary trial would be the same if the dispute were tried by a judge or a jury at a conventional trial. For all these reasons, a conventional trial is a first rate trial when compared to a Rule 18A trial. An impartial observer might ask: ”Why should the LGIC rules offer a second rate trial to the public? Should not those rules pursue excellence and shun mediocrity?”

5. Rule 18A - Trial Judges’ Sitting Schedules

[48] Something should be said about how trial judges try to administer Rule 18A applications within their own sitting schedules. Lacking empirical data I must again rely on my own experience. Until the early 1970’s judges committed themselves to perform their judicial work by sitting in court for 10 months of the year with 2 months of holidays in July and August. A week long trial was a very long trial. There was no overbooking. If a trial settled, it usually meant the judge could use the time allotted for that trial to complete other judicial duties.

[49] In that pre-1970’s era, judges tried cases and gave oral judgments shortly after the trial or handed down written judgments within a few weeks following the trial. Trials and hearings started at 10:30 a.m. and lasted until 4:00 p.m.

[50] Issues were much simpler to resolve than they are today. For example, in personal injury cases, a judge could give a lump-sum damage award without having to apportion the amount under various heads of damages. Trials took less time than today. Correspondingly, trial judge’s written decisions were shorter. Most trial judgments were under 10 pages. A 20 to 25 page judgment was rare.

[51] With the increase in litigation in the early 1970’s, judges individually agreed to commit themselves to sit for about 33-34 weeks of the year. In order to meet this promise, they agreed to hear cases for 3 weeks and then have 1 week to research and write any reserved judgments they may have accumulated during the previous 3 weeks of sitting. On an annual basis, that worked out to about 46 weeks of sitting and writing time and 6 weeks of holidays. The holiday time soon became shorter as cases became more complex, took longer to try and longer to decide. Some judges did not get holidays because they used that time to catch up on accumulated reserve decisions.

[52] In the late 1970’s, trials commenced at 10:00 a.m. rather than 10:30 a.m. and they ended at 4:00 p.m., for a total sitting time of abut 4.5 hours per day. Those still are the sitting hours. Some might say they are rather short. Given the degree of concentration trial judges must apply to the process and the tiresome business of taking longhand notes of the evidence, the hours are long enough.

[53] In addition to regular or active judges we now have supernumerary judges. These are judges who elected supernumerary status after serving as active judges for at least 15 years and reaching the age of 65. Supernumerary judges commit themselves to sit from 33% of the time, or 11 weeks per year, to 50% of the time, or 16 weeks per year. The 11 week supernumerary judges commit to about 4 weeks of reserve time; for the 16 week supernumerary judges, their reserve week commitment is about 5-6 weeks. Active judges and supernumerary judges often sit more than just their committed sitting weeks.

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[54] When the LGIC enacted Rule 18A in 1983, how did it fit into the judges’ sitting schedules? At first, it did not impose many difficulties. Counsel usually presented applications that were on the low side of the complexity scale. Many could be disposed of by the judge delivering oral reasons from the bench. Often others could be decided within a relatively few hours of writing and research time. A few required more intensive study. Over the years, the length of many written Rule 18A judgments has increased from just a few pages to 50 pages or more.

[55] A two- to three-day Rule 18A summary trial hearing probably would occupy about 10 to 15 days of conventional trial time. In a conventional trial, the evidence comes in gradually, witness by witness. Judges rule on admissibility questions. They see and hear the witnesses testify and assess their credibility. If necessary, judges can question witnesses to resolve potential misunderstandings. Issues often disappear without credible evidence to support claims or defences. A Rule 18A hearing deprives the judge of these important safeguards for reaching a just result.

[56] It is reasonable to estimate that it takes a Rule 18A judge about two to three times longer to decide the issues on a Rule 18A application than it would have taken after a conventional trial.

[57] Hence, a significant problem confronting a Rule 18A hearing judge is the lack of reserve time the present three and one sitting system allows for reading, researching and writing. The 1983 Rule 18A drafters probably never contemplated that litigants would choose a summary trial to dispose of the kinds of complex disputes that increasingly come before the court.

[58] In addition, judges now have many more out-of-court duties than they had 20 to 30 years ago. Frequently they are asked to prepare papers for discussion at judicial seminars or at lawyers’ educational meetings. They serve on court committees and national judicial committees. They attend judicial educational programs. They often conduct settlement conferences and pre-trial conferences before and after normal court hours. Some take French language instruction. The list goes on.

[59] As best they can, judges must squeeze these extra judicial responsibilities into their 4 to 15 or so annual reserve or research and writing weeks. Most judges now do research and writing in their offices or chambers during their sitting weeks, their lunch and coffee breaks during conventional trials and in the hours before 10:00 a.m. and after 4:00 p.m. Many judges either take work home at night and on weekends or work in their courthouse chambers.

[60] In effect, the sitting schedule designed for the early 1970’s does not meet the real life requirements of the 21st Century. A more realistic schedule would be 20 to 25 weeks of sitting. It exists in at least one other province. However, it is difficult to make such a change because it would have the result of imposing much longer delays on parties who seek a conventional trial.

6. Rule 18A - Judicial Support Services

[61] Something must be said about judicial support services in the Supreme Court of British Columbia. B.C. superior court trial judges do judicial work of a similar nature to that of U.S. Federal District Court trial judges.

[62] By way of support services, U.S. Federal District Court trial judges usually have their own secretaries. B.C. trial court judges share the secretarial services of one person with 3 or 4 other judges. Each U.S. Federal District Court trial judge has at least 2 Law Clerks. They assist judges in researching and drafting their judgments or opinions. British Columbia trial court judges share the services of one Judicial Law Clerk with about 4 or 5 other judges.

[63] Increasingly the Supreme Court of Canada refers to American authorities in its judgments. That means trial court judges should examine American law when they write their decisions. But of all the courthouse law libraries in British Columbia, only the Vancouver Law Society Library has a relatively small collection of American case law, statutes and texts.

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7. Rule 18A (8)(b)(ii) - Suitability in These Proceedings

[64] To determine whether the declaratory relief dispute in these proceedings is suitable for disposition under Rule 18A (8)(b)(ii), it is necessary to keep in mind the preceding remarks. In other words, did the LGIC contemplate that this dispute is fit and appropriate for Rule 18A’s intended purpose?

[65] First, I will outline the nature of the written material the parties presented at the hearing.

A. Pleadings

[66] Volumes I and II of the 3-ring binders contain the pleadings and motions. The pleadings come from about 12 documents. They occupy about 45 pages.

B. Affidavits and Exhibits

[67] Volume I contains 10 affidavits. Including the exhibits to the affidavits, they occupy around 400 pages of evidence.

C. Discovery Material

[68] There are 10 excerpts from the examinations for discovery of the parties, including certified translations of exhibits from the Chinese language into the English language. They occupy about 100 or so pages.

D. Outlines of Arguments

[69] Volume I contains about 7 written outlines of arguments occupying approximately 75 written pages. During the hearing counsel added written amendments to those outlines.

E. Legal Authorities

[70] There are 3 bound volumes of legal authorities. They contain photocopies of various rules, statutes and case law. During the course of the hearing, counsel handed up additional authorities. Altogether, they amount to about 250 pages of reading. As well, counsel handed up photocopies of pages from various legal texts that referenced many other allegedly relevant cases.

[71] The total comes to around 850 to 900 pages of written material. Counsel mentioned a very small portion of that material at the two and one-half day hearing. The remainder I have scanned.

[72] Our Court of Appeal recommends that Rule 18A hearing judges give reasons for judgment in every case: Golden Gate Seafood (Vancouver) Co. v. Osborn & Laing Inc., supra, at 157:

It must be obvious that in appeals like this one this Court labours under a distinct disadvantage when it does not have before it reasons for judgment of the trial judge.

[73] I estimate it will take me about 20 to 30 working days to read, absorb, organize and fashion all of this material into an acceptable written judgment for Appeal Court purposes. The law on the right of unpaid vendors to recover a declaration for a lien or an equitable mortgage against the property in these circumstances is not simple to resolve. Nor is the application of the law on waiver. As well, counsel introduced an argument on novation during the hearing.

[74] Taking all of these factors into consideration as best I can, I find that the application for declaratory relief is unsuitable for disposition under Rule 18A because the summary trial procedure is being used by the plaintiff for something other than its intended purpose.

[75] In other words, the intended purpose of Rule 18A was not meant to apply to a dispute involving this amount of material and requiring such a significant amount of judicial out-of-court research and writing time. Therefore, the plaintiffs’ Rule 18A declaratory application is dismissed.

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8. Rule 18A (11)(a)(ii) - Unjust to Decide the Issues

[76] In addition to the concept of unsuitability, a Rule 18A hearing judge may decide it is “unjust” “to decide the issues” on a Rule 18A application: Rule 18A (11)(a)(ii). In the context of this sub-rule, a judge may find it is unjust to decide the issues if the result may amount to an injustice.

[77] It may be unjust for a judge to decide Rule 18A issues if “the complexity of the action is in issue” or because “any other matters arise for consideration” by the hearing judge: Canadian Imperial Bank of Commerce v. Charbonnages de France International S.A., [1994] 10 W.W.R. 232 (B.C.C.A.) at 255.

[78] A trial judge has a broad discretion to refuse to proceed with a Rule 18A application if it would be unjust to decide the issues raised in the application: Placer Development Ltd. v. Skyline Explorations Ltd (1985), 67 B.C.L.R. 366 (B.C.C.A.) at 385-86;

.......... Rule 18A .......... clothe(s) the judge with a broad discretion to refuse to proceed with the application where he decides he cannot find the facts necessary to decide the issues of fact or law or if it would be unjust to decide the issues raised on the application.

(emphasis mine)

[79] In the unlikely event a trial judge decided disputed matters at a conventional trial without seeing the witnesses testify under oath and being subjected to cross-examination, there is little doubt an appeal court would find the result unjust. The question then arises as to the meaning of the word “unjust” within the context of Rule 18A. When a Rule 18A judge decides the issues without the advantage of seeing the witnesses, is not that decision just as unjust as if it had happened at a conventional trial? Does Rule 18A mean to excuse this kind of an injustice but not other kinds of injustices?

[80] Counsel did not argue this point at the Rule 18A hearing. Therefore, it will have to wait for others to do so in future cases.

….

10. Suggested Limits on Material for Future Rule 18A Applications

[82] Paraphrasing the reported words of Albert Einstein, the kind of thinking that got us into the predicament arising from Rule 18A, is not the kind of thinking that is going to get us out.

[83] To assist counsel on future Rule 18A applications, I offer the following guidelines. However, I wish to emphasize that each judge will have his or her own level of tolerance depending upon their own individual circumstances; they are in no way bound by my suggestions. Some judges may have considerable out-of-court time available to research and write decisions in complex Rule 18A applications. Others may not.

A. Pleadings

[84] Pleadings should be kept to a maximum of 5 pages per party.

B. Affidavits and Exhibits

[85] Affidavits and exhibits attached to them should be kept to a maximum of 20 pages per party.

C. Discovery Material

[86] Extracts from transcripts of examinations for discovery should occupy no more than 10 pages per party.

D. Briefs or Outlines of Argument

[87] These briefs should be restricted to no more than 10 pages per party.

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E. Legal Authorities

[88] Photocopies of relevant rules, statutory sections and case law should occupy no more than 30 pages per party.

[89] Assuming there are only 2 parties, that works out to a total of 75 double spaced, typewritten or printed pages per party. When the amount of material submitted by the parties exceeds that figure, a Rule 18A hearing judge may decide the application should be dismissed as unsuitable because the Rule is being employed for something other than its intended purpose. Counsel should keep in mind that a summary trial implies a summary disposition.

[90] Of course, where the parties cannot confine the quantity of material within the suggested limits, they still retain the right to a conventional trial.

[91] JUDGMENT

1. The Rule 18A application by the plaintiffs against the defendants for declaratory relief is dismissed.

2. The Rule 18A application by the plaintiffs for judgment arising out of the dishonoured cheques is allowed.

3. Because the plaintiffs failed on item 1 but won on item 2, there will be no order as to costs.

4. The Rule 18A application by the third party Chen & Leung to dismiss the defendants’ claim against it is allowed with costs payable by the defendants to Chen & Leung forthwith.

5. The Rule 18A application by the Chus to dismiss the defendants’ third party claim against them is referred to the conventional trial set for hearing in October 2002. The defendants will recover their costs of this application from the plaintiffs if the defendants succeed on this issue at the trial.

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Prevost (Committee of) v. Vetter

2002 BCCA 202

SMITH J.A.:— This negligence action arises from a motor vehicle accident. The plaintiff (respondent), Adam Prevost, was seriously injured when he was thrown from an automobile being driven by the defendant (respondent) Desiree Vetter (a niece of the appellants) as it left the highway and overturned. The appellants are defendants in the action because they are the joint owners of the home from which Desiree Vetter and Adam Prevost began the short trip that culminated in the accident and because Desiree Vetter had consumed alcoholic beverages on their property and was, according to the finding below, intoxicated when she and Adam entered her automobile. Thus, it is a case in which Adam Prevost asserts what is commonly described as "social-host liability" against the appellants.

¶ 2 The appeal is from an order of a judge of the Supreme Court made after a summary trial conducted under Rule 18A of the Supreme Court Rules of Court pursuant to the appellants' application to dismiss the action against them. The notice of motion was not included in the appeal book but the summary trial judge set out his understanding of the issues to be determined as follows:

The issues before the court on the Application were:

(a) did the Vetters owe the plaintiff a duty of care to prevent him from coming to harm while off their premises, at the hands of a person who became impaired while on their premises?

(b) if so, did the Vetters breach that standard of care?

¶ 3 In the result, the summary trial judge made the following order:

THIS COURT DECLARES that:

1. the Defendants, Gregory Adam Vetter and Shari Irene Vetter, owed the plaintiff, Adam Prevost, a duty of care; and

2. the Defendants, Gregory Adam Vetter and Shari Irene Vetter, breached their duty of care to the Plaintiff.

His initial reasons may be found at [2001] B.C.J. No. 323, 2001 BCSC 297, and his supplemental reasons at 197 D.L.R. (4th) 292, 5 C.C.L.T. (3d) 266, [2001] B.C.J. No. 495, and 2001 BCSC 312.

¶ 4 It is agreed that the parties did not intend that the summary trial judge should decide whether the appellants' breach of duty was causative of the injuries suffered by Adam Prevost. Rather, they contemplated that causation, assessment of damages, and issues of contributory negligence would be decided in a subsequent trial, if necessary, should the appellants fail in their attempt to have the action dismissed summarily.

¶ 5 Desiree Vetter took no part in the summary trial or in the appeal, although excerpts from her testimony on examination for discovery were relied upon by both sides below. In her statement of defence, Desiree Vetter denied that Adam Prevost's injuries were caused by her negligence and, in particular, denied Adam Prevost's allegation that the accident was caused by her driving while her ability to drive was impaired by alcohol. The appellants, in their statement of defence, denied all of the allegations in the statement of claim and, in the alternative (although obscurely), adopted the impaired-driving allegation, among others, and asserted fault against Desiree Vetter for the injuries claimed. A third party claim brought against the appellants by Desiree Vetter has been settled and I assume that the settlement resolves all issues between them. However, as we were not advised otherwise, I assume that Desiree Vetter is maintaining her defence of the action and that whether her ability to drive was impaired by alcohol

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at the material times and whether her impairment, if any, was a cause of the accident and resulting injuries remain at issue between her and Adam Prevost.

¶ 6 The appellants contend that the summary trial judge erred in finding that they owed a duty of care to Adam Prevost, in finding that they breached their duty of care to Adam Prevost, and in making those findings on a summary trial conducted pursuant to Rule 18A.

¶ 7 I would allow the appeal on the basis that the issues ought not to have been determined summarily under Rule 18A on the grounds set out in sub-rules 18A(8)(b)(i) and (ii) and sub-rule 18A(11)(a)(ii), which are emphasized in this excerpt:

18A(1) A party may apply to the court for judgment, either on an issue or generally, in any of the following:

(a) an action in which a defence has been filed, ..........

…

(8) On or before the hearing of an application under this rule, the court may

…


(i) the issues raised by the notice of motion are not suitable for disposition under this rule, or

(ii) the application will not assist the efficient resolution of the proceeding.

…

(11) On the hearing of the application, the court may

(a) grant judgment in favour of any party, either on an issue or generally, unless

…

(ii) the court is of the opinion that it would be unjust to decide the issues on the application, ..........

¶ 8 In my view, it was not possible in this case for the summary trial judge to determine the existence of a duty of care, the appropriate standard of care, or a breach of the standard of care without also determining facts that the plaintiff must establish in order to succeed on the issue of causation. The summary trial judge made such findings of fact and those findings will be embarrassing to the subsequent trial judge, who will be asked by the appellants to make contrary findings on the basis of further and full evidence. The potential for prejudice to the appellants, and to Desiree Vetter if she maintains her defence, is obvious. Moreover, if the subsequent trial judge should come to different conclusions than did the summary trial judge on these important facts, the findings of duty, standard of care, and breach may have to be reconsidered.

¶ 9 The facts to which I refer are those relating to whether Desiree Vetter's ability to drive was impaired by alcohol when she left the appellants' property to enter her automobile; whether her impairment, if any, was

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objectively manifest; whether she became impaired, if she did, on the appellants' property; and whether her impairment, if any, was causative of the accident and the resulting injuries to Adam Prevost.

¶ 10 As the findings of the summary trial judge are set out comprehensively in his reasons, it is not necessary to reproduce them here in detail.

¶ 11 It is sufficient for present purposes to note that he found the duty of care to exist on the basis that the appellants, who have two teenage sons, frequently allowed their home to be used by young persons in their small community for social gatherings; that, although they did not serve alcoholic drinks, they knew that their guests often consumed their own drinks on the property; that, although they had a rule against minors drinking on their property, they knew that minors often broke the rule; and that when Shari Vetter observed intoxicated minors at her home she took steps to try to prevent them from driving their automobiles. He expressed his conclusion on the duty-of-care issue as follows:

[61] .......... Those precautions persuade me that she was alert to the danger of minors drinking at their home and driving from it. She established a "paternalistic relationship" .......... with underage drinkers at their home.

[61] .......... Those precautions persuade me that she was alert to the danger of minors drinking at their home and driving from it. She established a "paternalistic relationship" .......... with underage drinkers at their home.

[63] .......... the Vetters [created the opportunity for a dangerous situation to exist] by creating the opportunity for their home to be a place where minors congregated and consumed alcohol. The danger consisted of minors, alcohol consumption (which, according to Mr. Samila [an expert who opined on the basis of subsequent breathalyzer readings that Desiree Vetter's ability to drive was impaired by alcohol at the time of the accident], has an enhanced effect on teenagers), and driving.

¶ 12 Having found that the appellants owed a duty of care to the classes of persons he identified ("minors" and "those who might drive with them"), the summary trial judge went on to find that the appellants had breached the standard of care on this occasion. He found that, after the appellants had fallen asleep on the evening in question and without their knowledge, their sons, Scott and Geoff, returned to their home with three or four of their friends; that shortly thereafter, at about 11:00 p.m., a group of about fifteen persons, including Desiree Vetter and two of her friends, arrived uninvited; that Adam Prevost arrived on the property about a half-hour later; that Scott asked everyone to leave because of the appellants' rule that there should be no parties after 11:00 p.m. but no one left; that shortly thereafter a large group of intoxicated adult strangers came onto the property, where they consumed beer; that the group, that had by this time swelled to about thirty persons, created noise on the front street; that the police attended at about 1:00 a.m. in response to a complaint from a neighbour; that the police officer asked Scott to break up the party and that Scott told everyone to leave; that during the approximately one-half hour that it took to disperse the group, Scott went into the house and awakened his mother; that Scott told his mother that there had been a party going on, that the police had attended and had asked him to break it up, and that he had asked everyone to leave; that his mother asked Scott if he needed her help and that he responded that he could "handle it"; and that his mother did not get up and returned to sleep.

¶ 13 The summary trial judge concluded:

[64] .......... The moment she spoke to her son, Scott, she knew there was a party and she knew it had resulted in a visit by the police. She did not trouble herself to ensure that young people were sober enough to drive without endangering themselves and others. In the past, the Vetters had established a "paternalistic relationship" with intoxicated teenagers. Gregory Vetter spoke of having "welcomed minors who had got drunk" on the theory it was better for them to be "in trouble" in a "safe environment", namely, the Vetter home. On June 19/20, 1998, there were at least two persons at the party who were "in trouble" - Desiree Vetter who was intoxicated and Dylan Bolger who had consumed a considerable quantity of beer. In the past, Shari Vetter had

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exercised control when a dangerous situation was created by over-indulgence by minors at her home. She failed to do so on this occasion. She left it to her 17 year-old son, Scott, to manage the situation. She had the opportunity and the duty to exercise control and it was reasonably foreseeable that harm could result from her failure to do so.

¶ 14 The summary trial judge went on to find that, had she "exercised control of the party", Shari Vetter would probably have seen Desiree Vetter; that she would probably have seen and recognized Desiree's car; that she would probably have discerned from observing Desiree that Desiree was intoxicated; that she would probably have taken steps to prevent Desiree from driving; and that, had she asked Desiree to surrender her keys, Desiree would probably have done so.

¶ 15 He summarized his findings as follows:

[71] In conclusion, I find that the Vetters created a dangerous situation by permitting minors to drink at their home and drive from it. They recognized the danger, and in the past, Shari Vetter had established a "paternalistic relationship" with minors who drank - she had taken steps to prevent minors who were intoxicated at their home, driving from it. She failed to do so on June 20, 1998. The danger to minors who drove with an intoxicated driver was foreseeable. The Vetters had a duty and they failed in that duty.

¶ 16 The findings summarized at para. 14 above are matters that the appellants wish to contest in their defence that their breach of the standard of care, if any, was not causative of the injuries suffered. If these findings should stand, they would advance the plaintiff's case on causation substantially.

¶ 17 On the other hand, whether Desiree Vetter was obviously intoxicated when she left the appellants' property and entered her automobile is central to whether there was, in the circumstances, a reasonable foreseeability of harm to Adam Prevost, which, in turn, is fundamental to the existence of a duty of care and to the identification of the appropriate standard of care.

¶ 18 In order to find that the appellants owed a duty of care to Adam Prevost, it was necessary for the summary trial judge to find not only that Desiree Vetter's ability to drive was impaired by alcohol but also that the appellants ought reasonably to have foreseen that she intended to drive and that her driving while in that condition posed a risk of harm to passengers in her automobile. In Stewart v. Pettie, [1995] 1 S.C.R. 131, where the question was whether a commercial host owed a duty of care to a passenger in an automobile driven by an intoxicated patron of the host's premises, Major J., giving the judgment of the Court, explained, at p. 143:

It is clear that a bar owes a duty of care to patrons, and as a result, may be required to prevent an intoxicated patron from driving where it is apparent that he intends to drive. Equally such a duty is owed, in that situation, to third parties who may be using the highways. In fact, it is the same problem which creates the risk to the third parties as creates the risk to the patron. If the patron drives while intoxicated and is involved in an accident, it is only chance which results in the patron being injured rather than a third party. The risk to third parties from the patron's intoxicated driving is real and foreseeable.

¶ 19 The "same problem" to which Major J. referred was earlier elucidated in Crocker v. Sundance Northwest Resorts Ltd., [1988] 1 S.C.R. 1186, where the plaintiff was injured when he participated, while grossly intoxicated, in a "tubing" competition sponsored by the operator of a ski resort. In that case, Wilson J., speaking for the Court, said at p. 1197, after reviewing previous case law concerning the imposition of a duty to take positive action to protect another:

.......... one is under a duty not to place another person in a position where it is foreseeable that that person could suffer injury. The plaintiff's inability to handle the situation in which he or she has been placed - either through youth, intoxication or other incapacity - is an element in determining how foreseeable the injury is.

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¶ 20 Thus, whether the appellants owed a duty of care to Adam Prevost was a function of the reasonable foreseeability of the risk of harm to him in all of the circumstances and that, in turn, depended upon what a reasonable person in the position of the appellants would have perceived as the ability or inability of Desiree Vetter "to handle the situation in which .......... she [had] been placed - either through youth, intoxication or other incapacity."

¶ 21 Accordingly, the summary trial judge could not decide the first issue placed before him without deciding facts that are important on the issue of causation.

¶ 22 A similar difficulty arises with respect to the standard of care. In Crocker v. Sundance Northwest Resorts Ltd., supra, Wilson J. said, at p. 1198, that the standard of care is dependent on context. In rejecting the argument that the defendant owed only a duty to warn and that the consequences of a failure to heed the warning were the responsibility of the plaintiff she said, at p. 1200:

The fact that Crocker was an irresponsible individual and was voluntarily intoxicated during the tubing competition is the very reason why Sundance was legally obliged to take all reasonable steps to prevent Crocker from competing. While it may be acceptable for a ski resort to allow or encourage sober able-bodied individuals to participate in dangerous recreational activities, it is not acceptable for the resort to open its dangerous competitions to persons who are obviously incapacitated. (emphasis added)

¶ 23 Thus, in this case, the summary trial judge could not identify the reasonable standard of care without reference to the condition of Desiree Vetter at the material time. As before, findings of fact about her condition at that time are important on the issue of causation.

¶ 24 Since it was not possible for the summary trial judge to determine the issues of duty of care and breach of the standard of care in this case without making findings of fact that are crucial to the issue of causation, and as the parties agree that causation remains a live issue, they should not have asked the summary trial judge to determine these issues on a summary trial and he should not have done so. In these circumstances, the issues were not suitable for determination under Rule 18A (Rule 18A(8)(b)(i)).

¶ 25 Further, even if it could be said that the findings of duty and breach can stand and that the question of causation can be tried separately, the risk would be run that the ultimate trial judge might arrive at contrary findings as to Desiree Vetter's impairment, or as to the manifestations thereof, after hearing full evidence on that issue. It is possible, as well, that the trial judge might find that impairment, if any, was not a causative factor in the accident. In this respect, there was evidence on the summary trial that Desiree's driving immediately before the accident was unremarkable and that the accident occurred when, as she approached a curve, she took her eyes momentarily from the road to operate the CD player in response to Adam Prevost's changing the song that was playing. There is, therefore, the possibility that the findings reached on this summary trial will be irrelevant. If so, the summary trial would have been a waste of judicial time and would have served only to delay the ultimate resolution of the case which, it appears, had been set for hearing on a conventional trial on a date shortly after the summary trial. The result would be an inefficient resolution of the proceeding (Rule 18A(8)(b)(ii)).

¶ 26 As well, in the circumstances it would be unjust to the appellants (and perhaps to Desiree Vetter) to decide these issues on a summary trial because the decision would saddle them with important findings of fact that are adverse to them on the undecided issue of causation or would, at the least, make it awkward for the trial judge to find contrary facts. Similarly, the findings of intoxication in relation to Desiree Vetter may embarrass the next trial judge on the issues of contributory negligence, since the nature and the degree Desiree's fault, if any, will be weighed in the balance. Where there is such an overlapping of issues, one issue ought not to be tried discretely on a summary trial: see Kaba v. Cambridge Western Leaseholds Ltd., [1997] B.C.J. No. 2152 (C.A.).

¶ 27 Finally, whether social hosts ought to be held liable for the negligent actions off their property of persons who became intoxicated while on their property is a controversial and unsettled question that might well engage the attention of the Supreme Court of Canada in this case. In Bacchus Agents (1981) Ltd. v. Philippe Dandurand Wines

WEEK 10: Prevost

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Limited, [2002] B.C.J. No. 377, this Court dealt with a similar situation. There, the parties held a Rule 18A trial on one issue in an action for damages for breach of a contract of purchase and sale of corporate assets, namely, whether the plaintiff was entitled to recover damages for a loss suffered by an undisclosed associated company whose assets were included with the plaintiff's in the proposed sale. In allowing an appeal, Southin J.A., speaking for the Court, observed that the case might ultimately fail on a defence pleaded but not argued on the summary trial, and that, if it did not fail on that ground, it might raise "important, rare and unsettled questions of law" [paras. 21-23]. She went to say, at para. 25:

The orderly development of the common law is not enhanced by this Court addressing issues of law of the nature of these issues unless the case at hand, in all its aspects, requires it to do so.

She added, at para. 29:

.......... A trial judge should bear in mind, as must we, that the loser in this Court has a right to seek leave to appeal to the Supreme Court of Canada. That court ought not to be faced, in deciding whether to grant or refuse leave, with a court of appeal having made pronouncements, allegedly erroneous, on important questions of law in an action which may ultimately fail on its facts.

Those comments are appropriate in the circumstances of this case, and I adopt them.

¶ 28 Accordingly, I would allow the appeal, dismiss the application that was brought before the summary trial judge, and direct a new trial, all without prejudice to the rights of the parties.

¶ 29 Subject to submissions, it is my opinion that there should be no costs awarded of the appeal because counsel guided the summary trial judge to the mistaken course that he followed. However, I would consider written submissions on costs if counsel should file them within two weeks of the publication of these reasons.

WEEK 11: Bank of Credit and Commerce

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Bank of Credit and Commerce International

(Overseas) Ltd. (Liquidator of) v. Akbar

2001 BCCA 204

FINCH JA I

[1] These two appeals were brought with leave and were ordered to be heard together. The first appeal is brought by the plaintiffs from the order of Madam Justice Dillon pronounced 23 September 1998. She ordered the plaintiffs to pay, as special costs, the costs of three defendants, Syed Taslim Akbar (“Taslim”), Syed Nasim Akbar (“Nasim”) and Gulf International Securities Investment Ltd. (“Gulf”) of their successful applications to set aside an ex parte Mareva injunction that she pronounced against them on 31 July 1997. The second appeal is brought by two other defendants, Syed Mohammed Akbar (“Mohammed”) and Travaco Investments Limited (“Travaco”) from the order of Madam Justice Satanove pronounced 3 June 1999. She held that the ex parte Mareva injunction granted by Madam Justice Dillon on 31 July 1997 should continue against those defendants.

[2] The lawsuit in which the Mareva injunction was granted arises from the insolvency of the Bank of Credit and Commerce International (Overseas) Ltd. and related companies (“BCCI”). Liquidators were appointed by the Grand Court of the Cayman Islands to trace and recover monies believed to be the property of the Bank, and of which it had been defrauded or otherwise wrongfully deprived in a series of complex international transactions. The liquidators obtained information that funds belonging to the Bank had been transferred to British Columbia, and were held here in the accounts of a Vancouver brokerage house.

[3] The liquidators alleged that Mohammed, formerly a senior executive with the BCCI group, engineered a number of appropriations of BCCI’s funds in the 1980s. They alleged that for that purpose he used a corporate structure, including the corporate defendants. Some members of Mohammed’s family were officers, directors and shareholders of the corporation. The defendants Taslim, Nasim, and Syed Salim Akbar (“Salim”) are all sons of Mohammed. The defendant Nazneen Begum is Mohammed’s wife. Another son, Shamim, not named as a defendant, has passed away.

[4] The liquidators sought a Mareva injunction to preserve assets believed to be the funds of BCCI held in accounts of a local brokerage house, Midland Walwyn. The liquidators had information that those accounts were within the management and control of Taslim and that they held liquidated assets with a value in the range of $2 to 5 million. The liquidators also sought a world-wide Mareva injunction to enable them to freeze assets in the names of the defendants pending further investigation and trial.

[5] The application for the Mareva injunction came before Madam Justice Dillon on 31 July 1997. Counsel for the liquidators were D.G. Cowper, Q.C. and R.M. Lonergan. There is no transcript of what was said on the application. However, Mr. Cowper has filed two affidavits setting out his recollection of the proceedings, and annexing the plaintiffs’ written submission that was filed with the court. Mr. Cowper’s affidavits are not contradicted by any other evidence, and counsel for the defendants on the hearing before us accepted Mr. Cowper’s affidavit evidence as true “without reservation”.

[6] The liquidators relied upon three affidavits on the application for the Mareva injunction. The principle affidavit was sworn by Mr. K.M. Krys, a chartered accountant employed by the liquidators. Dillon J. granted the Mareva injunction against all defendants. The injunction was served on a number of the defendants and several financial institutions, some of which were not identified in the material before the learned chambers judge or mentioned in the injunction.

[7] The defendants, Taslim, Nasim and Gulf, applied to set aside the Mareva injunction. The motion was returnable on 26 September 1997. Affidavits of Taslim, Nasim and Shamim sworn 22 and 23 September were filed in support. On 25 September 1997 plaintiffs’ counsel advised that they were instructed to consent to an order setting


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aside the injunction against those three defendants. The consent order was made on 26 September 1997. The defendants’ application for special costs was adjourned.

[8] Before the hearing of the defendants’ application for special costs was heard, Mr. Krys swore and filed a further affidavit dated 13 October 1997 in which he responded to some statements in the defendants’ affidavits. He explained the rationale behind his original affidavit and how the liquidators and their staff attempted to comply with their duties to the court.

[9] The application for special costs of the successful defendants was argued before Dillon J. on 26 and 27 January and 27 March 1998. She also received written submissions. Prior to the conclusion of the special costs application, Mr. Krys filed a further affidavit dated 3 March 1998. It outlined evidence obtained by the liquidators pursuant to an order of the Cayman Court made after the discharge of the Mareva injunction against the three defendants. This affidavit contained evidence of transactions involving accounts in the name of Travaco with a bank called “Coutts”.

[10] On 23 September 1998, [1998] B.C.J. No. 2320, Dillon J. pronounced reasons for judgment awarding special costs to the three successful defendants.

[11] The plaintiffs appeal from that order.

[12] In April 1999, the defendants Mohammed, Nazneen Begum and Travaco applied to set aside the Mareva injunction as against them. The parties agreed that the application should be heard de novo, and that the plaintiffs bore the burden of establishing a strong prima facie case. Madam Justice Satanove pronounced reasons for judgment on 3 June 1999, [1999] B.C.J. No. 1285. She held that there was no evidence to support a strong prima facie case against Nazneen Begum and discharged the injunction against her. She also found that a strong prima facie case had been established against Mohammed and Travaco, and that it was “unaffected by any mistakes Mr. Krys may have made in his original affidavit.” She ordered that the injunction continue as against Mohammed and Travaco.

II

Special Costs

[13] The defendants Taslim, Nasim and Gulf sought an order for special costs. They based their claim on what they said were unfounded allegations of fraud, failure to make full and frank disclosure of facts, misstatement of facts, and the use of hearsay evidence.

[14] The plaintiffs denied any conduct that would justify an order for special costs. They argued that the non-disclosure of any relevant material on the original application was the result of inadvertence by the accountants. They said that the conduct did not rise to the level of wilful or reckless conduct necessary to support an order for special costs.

[15] In her reasons for judgment ordering the plaintiffs to pay special costs, the learned chambers judge found that fraud had been alleged against the three defendants, acting in concert with Mohammed, that there was no direct evidence of fraud and that a strong prima facie case had not been made out against the three defendants. She said that the accountant’s affidavit had cast a “web of suspicion” over all of them. She declined to consider any of the affidavit evidence filed after the hearing of the Mareva injunction application. She found that the plaintiffs had relied upon hearsay evidence that was inadmissible because its source was not identified. The learned chambers judge set out particulars of what she considered to be the liquidators’ misstatements, and non-disclosures in paras. 11-13 of her reasons. She concluded at para. 14:

An award of special costs is warranted here because allegations of fraud have been made which do not bear scrutiny as sufficient to establish a substantial prima facie case, because the proceeding was improperly conducted by inclusion of inadmissible evidence, because there was significant, careless misstatements of fact, and because there was undisclosed factual matters that should have been within the foresight of an experienced forensic accountant and his solicitor as relevant to the court. Delivery of the injunction to financial institutions not named in the order further exacerbates the conduct. An ex parte application for a Mareva injunction is fraught with the potential for injustice


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and the abuse of the court power. The applicant must be scrupulous in his attention to detail and to fair representation of facts favouring the other side. The conduct in this case is deserving of rebuke by an order for payment of special costs.

[16] The plaintiffs’ first ground of appeal is that the learned chambers judge erred in law in awarding special costs for conduct that she characterized as “careless”, and that she did not find to be either reckless or wilful. The test of conduct that will justify an award of special costs is set out in Leung v. Leung (1993), 77 B.C.L.R. (2d) 314, where Esson C.J.S.C. (as he then was) said, at paras. 4-5:

The concept of special costs was introduced to our rules in the 1990 amendments. It has been held that entitlement to special costs is to be determined on the same principles formerly applied to awarding solicitor-client costs. The test for awarding such costs was stated thus by Lambert, J.A. in Stiles v. British Columbia (Workers’ Compensation Board) (1989), 38 B.C.L.R. (2d) 307 at 311:

.......... 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.

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”.

[17] Here the learned chambers judge said the conduct was “deserving of rebuke.”

[18] Counsel for the plaintiffs says that mere carelessness is not conduct deserving of rebuke. He conceded that on an ex parte application for a Mareva injunction a high degree of care is required. He says that failure to meet that high standard may justify the setting aside of the injunction, as was done by consent in this case. However, he says it does not follow that the same conduct would merit an order for special costs. Conduct deserving of rebuke must be something approaching that which is “scandalous, reprehensible or outrageous.” Lack of care, even in circumstances where a high degree of care is called for, will not meet the test. In Leung, the conduct deserving of rebuke was bringing the application for an injunction ex parte. Chief Justice Esson held that the circumstances did not justify bringing the application without notice. He did, however, observe that “[m]aterial non-disclosure or misrepresentation on the ex parte application could be grounds for special costs” (at para. 6) (my emphasis), although he found against the applicants on that point. I observe that he did not suggest that such non-disclosure or misrepresentation need be either wilful or reckless in order to support such an order.

[19] I have not been persuaded that the learned chambers judge erred as to the legal standard to be applied on an application for special costs. As is evident from Leung conduct deserving of reproof or rebuke need not rise to that which is scandalous, outrageous or constitutes misbehaviour. “Milder forms of misconduct” will suffice. It was open to the chambers judge to characterize “carelessness” in the circumstances, as conduct deserving of censure by the court. I would not give effect to this ground of appeal.

….

LAMBERT J.A.:— I agree. HALL J.A.:— I agree.

WEEK 11: RBC v BMP

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Royal Bank of Canada v BMP Global Distribution Inc.

2011 BCSC 1650 The Honourable Madam Justice Ross

Introduction

[1] The plaintiff, Royal Bank of Canada (“RBC”), and the third party, Bank of Nova Scotia (“BNS”), seek orders for special costs following a summary trial (Reasons indexed at 2011 BCSC 458), in which RBC was granted judgment for $127,226.96 (the “Unrecovered Amount”), and both the counterclaim and third party notice were dismissed from B.M.P. Global Distribution Inc., (“BMP”), 636651 B.C. Ltd., Audie Hashka and Paul Backman (collectively the “BMP Parties”). In addition, RBC seeks an order that Debra Backman pay RBC’s costs, jointly and severally, with the BMP Parties from the date she was added as a defendant. In the alternative, RBC seeks an order for double costs based upon the delivery of offers to settle before the summary trial.

[2] The factual background and history of this litigation and the companion action, in which the defendants in this action sued BNS in relation to transactions concerning the proceeds of the same counterfeit cheque at issue in this litigation, are summarized in those Reasons from the summary trial and will not be repeated here.

…

Special Costs

Legal Principles

[7] The general purposes to be served by an award of costs were summarized by Frankel J.A., speaking for the court, in Giles v. Westminster Savings and Credit Union, 2010 BCCA 282 at para. 74 as follows:

The purposes for which costs rules exist must be kept in mind in determining whether appellate intervention is warranted. In addition to indemnifying a successful litigant, those purposes have been described as follows by this Court:

[D]eterring frivolous actions or defences": Houweling Nurseries Ltd. v. Fisons Western Corp. (1988), 37 B.C.L.R. (2d) 2 at 25 (C.A.), leave ref'd, [1988] 1 S.C.R. ix;

[T]o encourage conduct that reduces the duration and expense of litigation and to discourage conduct that has the opposite effect": Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201 at para. 28 (C.A.);

[E]ncouraging litigants to settle whenever possible, thus freeing up judicial resources for other cases: Bedwell v. McGill, 2008 BCCA 526, 86 B.C.L.R. (4th) 343 at para. 33;

[T]o have a winnowing function in the litigation process" by "requir[ing] litigants to make a careful assessment of the strength or lack thereof of their cases at the commencement and throughout the course of the litigation", and by "discourag[ing] the continuance of doubtful cases or defences": Catalyst Paper Corporation v. Companhia de Navegaçao Norsul, 2009 BCCA 16, 88 B.C.L.R. (4th) 17 at para. 16.

[8] The test for an award for special costs is whether the litigant's conduct has been reprehensible, as that term has been defined in the jurisprudence. Reprehensible conduct has been found to encompass scandalous or outrageous conduct, but it also encompasses milder forms of misconduct deserving of reproof or rebuke. Special costs may be warranted when the court seeks to disassociate itself from the conduct of a litigant; see Garcia v. Crestbrook Forest Industries Ltd. (1994), 119 D.L.R. (4th) 740, 9 B.C.L.R. (3d) 242 (C.A.). Special costs have been awarded:

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(a) where a party unsuccessfully alleges criminal conduct: Kurtakis v. Canadian Northern Shield Insurance Co. (1995), 17 B.C.L.R. (3d) 197, 70 B.C.A.C. 76 at para. 9;

(b) where there is a totally unfounded allegation of fraud: Paz v. Hardouin (1996), 25 B.C.L.R. (3d) 201, 138 D.L.R. (4th) 292 (C.A.) at para. 9;

(c) where the plaintiff shows reckless indifference to the legitimate interests of the defendant by failing to come to terms with "the manifest deficiency in its claim at an early stage in the proceedings": Concord v. 371773 B.C. Ltd., 2002 BCSC 900 at para. 27., McLean v. Gonzalez-Calvo, 2007 BCSC 648 and Stach v. Younger, 2009 BCSC 476;

(d) where a party is found to be attempting to re litigate previously decided issues, see Muller v. Muller, 2010 BCSC 1381 and Mott et al. v. P.N.E. et al. (unreported) Supreme Court of British Columbia, Vancouver Registry No. S013035, August 23, 2001;

(e) where there was improper conduct in the litigation including delay and hindering the proceedings, see Genesee Enterprises Ltd. v. Rached, 2001 BCSC 1172.

RBC

[9] RBC sought and was awarded judgment against the defendants, jointly and severally, for a portion of funds derived from the negotiation of a counterfeit cheque (the “Counterfeit Cheque”), drawn on the account of one of RBC’s customers, and spent by or for the benefit of the defendants. Negotiation of the Counterfeit Cheque resulted in a substantial fraud loss to RBC. This has been known by the defendants since on or about November 9, 2001.

[10] The Counterfeit Cheque was created by a third party whose true identity and whereabouts are unknown. It was negotiated by the BMP Parties to the account of BMP at the BNS. The defendants dispersed the proceeds of the Counterfeit Cheque (the “Funds”) to other accounts they held at BNS, and spent a portion of the Funds for their personal benefit (the “Unrecovered Amount”), primarily to pay pre-existing debts. A further portion of the Funds continued to stand to their credit with BNS when the fraud was discovered (the “Recovered Amount”).

[11] The Recovered Amount was subsequently returned to RBC by BNS voluntarily, pursuant to an indemnity agreement.

[12] In early 2002, the BMP Parties sued BNS to pursue the Recovered Amount for their benefit in the BNS Action, alleging various improprieties and illegality on the part of BNS, including breach of their account agreement. Insofar as the main thrust of the BNS Action was pursuit of the Recovered Amount, the BMP Parties were ultimately entirely unsuccessful, with the Supreme Court of Canada affirming that BNS and RBC acted lawfully and prudently in returning the Recovered Amount to RBC in the unusual circumstances of this case.

[13] When the fraud was discovered, RBC immediately claimed an entitlement to return of the Recovered Amount. In June 2002, RBC commenced this lawsuit solely, at that time, to recover the Unrecovered Amount from the BMP Parties. Debra Backman was added as a proper and necessary party by Court Order on October 3, 2007.

[14] RBC submitted that the defendants have conducted themselves in a reprehensible manner throughout this action that ought to sound in special costs. In particular, they have:

(a) knowingly and persistently advanced frivolous defences and counterclaims;

(b) conducted themselves unreasonably, in a manner that unnecessarily increased the duration and expense of the litigation, in the absence of any reasonably plausible basis upon which to explain their conduct; and

(c) refused to carefully assess their position as the case progressed, maintaining untenable positions, defences and counterclaims through to trial, including very serious claims of theft, fraud, breach of trust, conspiracy and malicious prosecution which wrongfully and intentionally impugned the reputation of RBC (the “Counterclaims”).

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[15] RBC submitted that during the course of the RBC Action, the BMP Parties made every effort to avoid consideration of the underlying merits of the claim, and sought to retain the benefit of the fraud at the expense of RBC. The BMP Parties did this by complicating and expanding the proceedings in an effort to seek to retain all or a portion of the Funds as their windfall, all without any legitimate claim to the Funds in law or equity. For example, the BMP Parties failed to make reasonable admissions of fact, resisted provision of listed documents, refused to answer interrogatories, resisted discoveries and sought to delay the hearing of the summary trial in the RBC Action.

[16] After a hearing and a denied request for rehearing before the Supreme Court of Canada, and a clear confirmation of the propriety of the return of the Funds to RBC, the BMP Parties continued to assert allegations of illegality of return of the Recovered Amount to RBC in defence of the RBC Action. Such untenable positions were relied upon in both the BMP Parties’ defence and expanded upon in support of their Counterclaims and Third Party Proceedings.

[17] RBC submitted that issues in the BNS Action decided against the BMP Parties have simply been rolled over to be argued again on the theory that the Supreme Court of Canada did not have proper jurisdiction to make the order it did. In that regard, RBC notes that the defences advanced by the BMP Parties relied upon express or implied assertions of entitlement to retain the Funds, purported illegality on the part of RBC and BNS in returning the Recovered Amount and upon the BMP Parties’ continued denial that the Counterfeit Cheque was a fraudulent item.

[18] That the Counterfeit Cheque was fraudulent was found as a fact at trial in the BNS Action. That finding of fact was not challenged on appeal. It was also affirmed and relied upon by the Court of Appeal and the Supreme Court of Canada in the BNS Action. Despite this, and the express finding of the Supreme Court of Canada that BNS’ return of the Recovered Amount to RBC was lawful and proper, the BMP Parties and Debra Backman maintained their allegations of illegality through trial. They also persisted in raising as a defence, an allegation that the cheque was not counterfeit which they asserted from the earliest defence through to inclusion in their written argument at trial in the RBC Action.

[19] Mr. Jaffe submitted on behalf of the BMP defendants that this was not a case in which the defendants made spurious allegations of misconduct in their pleadings. In my view, particularly after the Reasons of the Supreme Court of Canada, that assertion is simply wrong. The defendants alleged serious misconduct against RBC including, but not limited to, malicious prosecution, fraud and conspiracy. The pleas were never withdrawn and were found to be entirely without foundation.

[20] The elements of malicious prosecution were stated in Miazga v. Kvello Estate, 2009 SCC 51, as follows at para. 3:

To succeed in an action for malicious prosecution, a plaintiff must prove that the prosecution was: (1) initiated by the defendant; (2) terminated in favour of the plaintiff; (3) undertaken without reasonable and probable cause; and (4) motivated by malice or a primary purpose other than that of carrying the law into effect.

The suit brought by RBC was to recover funds derived from the negotiation of a counterfeit cheque. From the outset, it could not be said that the action was taken without reasonable and probable cause. There is no evidence that the bank’s motivation was malicious or otherwise improper. Thus, the allegation of malicious prosecution was spurious from the outset. As to the other misconduct alleged against the bank, it should have been clear, at least after the judgment of the Supreme Court of Canada, that those allegations were without foundation.

[21] Counsel submits on behalf of the BMP Parties that the allegations made concerning the bank’s conduct were founded in the defendants’ honest belief about the nature of the bank’s conduct. However, as Levine J., as she then was, noted in Genesse Enterprises Ltd. v. Rached, 2001 BCSC 1172 at para. 10 and 11:

The defendants' claims of fraudulent misrepresentation, unlawful conspiracy and breach of fiduciary duty were all dismissed. The evidence simply did not support them. The defendants repeatedly failed to give the plaintiff and defendants by counterclaim particulars of the alleged fraud, conspiracy, breach of fiduciary duty, or damages, and failed to provide any particulars of damages in their closing submissions at trial.

Defendants' counsel says that because Mr. Abou-Rached sincerely and honestly believed that Jean de Grasse and Robert de Grasse conspired against him, the bringing of these unmeritorious claims should not be

WEEK 11: RBC v BMP

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censured. I disagree: a party may honestly believe that he has been wronged, but he has a responsibility as a litigant to bring claims that have a reasonable prospect of success (Garcia at p. 252). He risks censure for bringing claims that have the effect of besmirching the reputation of other parties (Hannan v. Methenex Corp. (1998), 46 B.C.L.R. (3d) 230 at 247 (C.A.)) or making unfounded allegations about the conduct of counsel (Interstate Investments Ltd. v. Pacific International Securities Inc. (1995), 10 B.C.L.R. (3d) 265 at 269 (S.C.)).

[22] In my view, the defendants in this litigation ignored these responsibilities identified by Levine J. The claims were advanced with no prospect of success.

[23] Mr. Jaffe submits that RBC should be deprived of costs, or disentitled to an order for special costs, because RBC alleged fraud against the defendants and its allegations were not made out, and because it did not succeed with respect to the submission for recovery on the Indemnity. However, RBC did succeed in its claim for the Unrecovered Amount.

[24] In my view, RBC’s allegations could not be characterized as spurious or unfounded even though not all were made out at the summary trial. It is the case that RBC did not succeed in relation to its claim on the Indemnity. However, in dismissing that claim, I stated at para. 171 of those Reasons:

In my view, RBC has not established that it is entitled to reimbursement as damages for the costs paid and payable under the Indemnity. I agree that the conduct of the BMP parties and their pursuit of the BNS litigation and in relation to this litigation is a matter that sounds in costs.

[25] In my view, the conduct of the BMP Parties in relation to the defence of the action and prosecution of the Counterclaim, and of Debra Backman in relation to the defence of the action is reprehensible as that term is defined in the jurisprudence and warrants the imposition of special costs. The defendants alleged criminal conduct, fraud and other serious corporate misconduct and continued to press these allegations throughout the litigation. The allegations were wholly without foundation and never withdrawn. The defendants attempted to re-litigate matters that had been adjudicated in the BNS Action; notably that the Counterfeit Cheque was not fraudulent, and that RBC and BNS had engaged in illegal and dishonest conduct in relation to the return of the Recovered Amount. Moreover, the conduct of the defendants throughout the litigation increased the expense and duration of the litigation.

[26] Accordingly, I order that RBC is entitled to special costs of its claim and the defence of the counterclaim against the BMP Parties. RBC is entitled to special costs of its claim, excluding the defence of the counterclaim, against Debra Backman, from the date she was added as a party.

BNS

[27] BNS seeks an order for special costs of the action. BNS had been joined as a third party to the action by all defendants except Debra Backman. The Third Party Notice alleged:

1. The Plaintiff has claimed against these Defendants for an alleged loss arising from the Indemnity as referred to at paragraphs 41, 44 and 70 of the Further Amended Statement of Claim.

2. The Indemnity was entered into between the Third Party and the Plaintiff, without the knowledge or consent of these Defendants and for the improper purpose of protecting the Third Party from the consequences of misconduct induced by the Plaintiff, which misconduct included the Third Party’s breach of contractual and common law duties to these Defendants and was unlawful.

3. If the Plaintiff did suffer any loss arising from the Indemnity, which allegation is denied by these Defendants, then such loss was caused by the above conduct of the Third Party.

4. In addition, if a failure to investigate and/or disclose suspicious circumstances about the Cheque to the Plaintiff caused a loss to the Plaintiff, an allegation denied by these Defendants, such loss was caused by the failure of the Third Party as collecting bank for B.M.P. Global Distribution Inc. to take whatever steps were warranted in the circumstances, and by exposing these Defendants to the claims of the Plaintiff herein, was conduct which breached the Third Party’s duties to these Defendants.

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5. In addition or in the alternative, the conduct of the Third Party caused or contributed to the loss claimed by the Plaintiff herein and, in the event any liability may be imposed on these Defendants, they seek contribution and indemnity from the Third Party pursuant to section 4 of the Negligence Act, R.S.B.C. 1996, c 333.

[28] Following the decision of the Supreme Court of Canada in the BNS Action, the parties were given leave to amend their pleadings in the present action. Mr. Greenberg, counsel for BNS, then wrote to Mr. Jaffe, counsel for the BMP defendants, suggesting that the Supreme Court of Canada decision has rendered the claims in the third party notice entirely res judicata, suggesting that the third party notice be discontinued, failing which BNS would bring an application to strike the third party notice as disclosing no reasonable cause of action, as res judiciata and an abuse of process, and that it would seek special costs.

[29] No notice of discontinuance was filed. BNS brought an application to strike the third party notice which was heard in conjunction with the summary trial. The application was granted for reasons summarized at para. 185 as follows:

I agree with the submission of counsel for BNS that BNS's role in the litigation ought to have been complete following the decision of the Supreme Court of Canada. Instead, the defendants have maintained the allegations in the third party notice which disclosed no reasonable claim against BNS and which seek to re-litigate the very issues determine conclusively by that Court. The third party claims are unnecessary and would require this court to contradict the Supreme Court of Canada in respect of the very matters that were before the Court. In the circumstances, I conclude that the third party notice is without merit and an abuse of process. The third party notice is dismissed.

[30] Rule 9-5(1) provides:

Scandalous, frivolous or vexatious matters

(1) At any stage of a proceeding, the court may order to be struck out or amended the whole or any part of a pleading, petition or other document on the ground that

(a) it discloses no reasonable claim or defence, as the case may be,


(c) it may prejudice, embarrass or delay the fair trial or hearing of the proceeding, or


and the court may pronounce judgment or order the proceeding to be stayed or dismissed and may order the costs of the application to be paid as special costs.

[31] BNS notes that the rule explicitly provides the court with the power to order a party to pay special costs where the proceedings are found to be meritless or an abuse of process. BNS submits that the inclusion of express reference to special costs in Rule 9-5 signals that bringing meritless proceedings and abusing the court processes is conduct that is, prima facie, deserving of rebuke.

[32] BNS submits that the third party proceeding, particularly in light of the findings of the Supreme Court of Canada, was clearly a manifestly unmeritorious claim. BNS notes that such conduct has been held to be reprehensible conduct providing a basis for an award of special costs. In addition, BNS submits that the defendant’s submissions expressly invited this Court to reconsider and come to conclusions different than those of the Supreme Court of Canada. BNS submits that there could be no clearer example of an attempt to re-litigate issues which have been conclusively decided.

[33] The defendants submit that BNS should not be entitled to special costs because of the Indemnity. Counsel submits further that there were no discrepant issues between BNS and RBC, and therefore, there was no need for BNS to have separate counsel. The argument with respect to the indemnification was, however, specifically rejected by Mr. Justice Vickers in Wright v. Wright, [1994] 93 B.C.L.R. (2d) 358, relying upon the decision of the Court of Appeal

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in Fullerton v. Matsqui (District) (1992), 74 B.C.L.R. (2d) 311. As to the suggestion that BNS need not have retained its own counsel, the interests of RBC and BNS on the pleadings are not identical. But in any event, it hardly lies in the mouth of the parties that brought BNS into the action to take a position on BNS’s counsel, particularly when they had previously taken the position that it was inappropriate for BNS and RBC to have the same counsel in the BNS Action.

[34] The defendants submit that special costs ought not to be ordered because it was reasonable to argue that this Court should not follow the decision and findings of the Supreme Court of Canada. I disagree. Counsel submitted that it was necessary to bring BNS into this action because the defendants had to deal with what counsel described as the “illegal and improper conduct” of the banks. However, the “illegal and improper conduct” was either irrelevant to the issues in this action (the breach of privacy, defamation and the small amount ultimately determined to have been wrongly taken from the defendant’s account), dealt with in the BNS Action, or found not to have been improper and illegal by the Supreme Court of Canada and hence exemplifying the attempt to re-litigate.

[35] It was submitted that RBC made it necessary to bring BNS into the action because of its claim for recovery of the costs it has incurred pursuant to the Indemnity. However, in that regard, I note that the claims advanced in the third party notice go beyond issues raised in relation to the Indemnity.

[36] In my view, special costs should be awarded in the circumstances of this case. The claims sought to be advanced in the Third Party Notice were manifestly deficient, and constituted an attempt to relitigate matters that had been determined by the Supreme Court of Canada. They amounted to an abuse of the process of the court.

[37] Accordingly, I order that the BMP Parties pay the special costs of the action to BNS.

Double Costs

…

[39] On the eve of the summary trial, RBC offered to settle both the RBC and the BNS Actions on payment by the BMP Parties to RBC of $113.50 and a waiver of costs in all proceedings throughout (the “2010 Offer”). In essence, the offer would have permitted the BMP Parties to keep the $127,000, and the $80,000 advanced in 2005. BNS would waive its costs as then outstanding at the Supreme Court of Canada and the one cost in any event of the cause order in favour of BNS then extant and any costs in the BNS Action.

[40] The 2010 Offer contained the following:

We expressly reserve the right to refer to and rely upon this offer for the purposes of seeking double costs for further preparation and attendance at the hearing.

[41] BNS confirmed that the offer was acceptable. The offer was not accepted by the BMP Parties.

[42] Rule 9-1 of the Rules defines an “offer to settle” as:

(a) an offer to settle made and delivered before July 2, 2008 under Rule 37 of the former Supreme Court Rules, as that rule read on the date of the offer to settle, and in relation to which no order was made under that rule,

(b) an offer of settlement made and delivered before July 2, 2008 under Rule 37A of the former Supreme Court Rules, as that rule read on the date of the offer of settlement, and in relation to which no order was made under that rule, or

(c) an offer to settle made after July 1, 2008 under Rule 37B of the former Supreme Court Rules, as that rule read on the date of the offer to settle, or made under this rule, that

(i) is made in writing by a party to a proceeding,

(ii) has been served on all parties of record, and

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(iii) contains the following sentence: "The ............[party(ies)]............, ............[name(s) of party(ies)]............, reserve(s) the right to bring this offer to the attention of the court for consideration in relation to costs after the court has pronounced judgment on all other issues in this proceeding."

…

[53] In the result, I conclude that the 2007 Offer is not valid under either Rule 37 or Rule 37A.

[54] The 2010 Offer was made on or around December 5, 2010, and therefore Rule 9-1, as it was in December of 2010, is applicable. As such, the offer has to comply with the requirements of Rule 9-1(1)(c).

[55] Madam Justice Prowse discussed a similar requirement in former Rule 37B in Roach v. Dutra, 2010 BCCA 264, saying that strict compliance with the wording in Rule 37B’s version of Rule 9-1(1)(c)(iii) is not necessary, at para. 52:

[S]urely it could not have been intended that the omission of the words, “for the consideration of the Court”, or the substitution of the words, “for consideration by the Court”, or some other proximate expression, would prove fatal to an offer under the Rule. That said, I am also of the view that the wording of the offer must be substantially compliant with the wording of subrule 1(c)(iii) such that no reasonable person could be misled as to the intent of the offer or the fact that it was an offer within the meaning of Rule 37B. In other words, the offer must be in writing, the wording must make it clear what party is making the offer and to whom it is made, and it must include the fact that the party making the offer is reserving the right to bring the offer to the attention of the court in relation to costs after judgment on all other issues in the proceeding.

[56] As Madam Justice Humphries observed in Northern Sun Developments Ltd. v. Cook, 2011 BCSC 1008 at para. 36:

Under the new rule, which is substantially the same as the former Rule 37B, the considerations in respect of costs following an offer to settle are now more flexible and subject to the exercise of judicial discretion than they were under some previous iterations of the “costs after offers to settle” rule.

[57] Therefore, if an offer to settle substantively complies with Rule 9-1(1)(c), the court will have broad discretion to consider the effect of the offer for costs consequences.

[58] If it is compliant on that basis, global offers appear to be possible under Rule 9-1. Madam Justice Humphries faced a similar situation with one offer settling two actions in Northern Sun and said at para. 54:

While it is not good practice to make one offer to settle two actions, in these circumstances there would be no difficulty allocating the settlement funds between NSD and Young’s Plumbing, given that Young’s Plumbing had a single invoice.

[59] Rule 9-1(5) sets out the cost options for the court in proceedings where an offer to settle has been made. It provides:

5) In a proceeding in which an offer to settle has been made, the court may do one or more of the following:

(a) deprive a party of any or all of the costs, including any or all of the disbursements, to which the party would otherwise be entitled in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle;

(b) award double costs of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle;

(c) award to a party, in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle, costs to which the party would have been entitled had the offer not been made;

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(d) if the offer was made by a defendant and the judgment awarded to the plaintiff was no greater than the amount of the offer to settle, award to the defendant the defendant's costs in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle.

[60] I conclude that it is open to consider the 2010 Offer pursuant to Rule 9-1(1)(c). Rule 9-1(5) enumerates factors to be considered as follows:

Considerations of court

(6) In making an order under subrule (5), the court may consider the following:

(a) whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was delivered or served or on any later date;

(b) the relationship between the terms of settlement offered and the final judgment of the court;

(c) the relative financial circumstances of the parties;

(d) any other factor the court considers appropriate.

[61] The rationale for the Rule was summarized in Hartshorne v. Hartshorne, 2011 BCCA 29 at para. 25 as follows:

[25] An award of double costs is a punitive measure against a litigant for that party's failure, in all of the circumstances, to have accepted an offer to settle that should have been accepted. Litigants are to be reminded that costs rules are in place "to encourage the early settlement of disputes by rewarding the party who makes a reasonable settlement offer and penalizing the party who declines to accept such an offer" (A.E. v. D.W.J., 2009 BCSC 505, 91 B.C.L.R. (4th) 372 at para. 61, citing MacKenzie v. Brooks, 1999 BCCA 623, Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201 (C.A.), Radke v. Parry, 2008 BCSC 1397).

[62] In Hartshorne, the court addressed factors relevant to the consideration of the first factor at para. 27 as follows:

The first factor - whether the offer to settle was one that ought reasonably to have been accepted - is not determined by reference to the award that was ultimately made. Rather, in considering that factor, the court must determine whether, at the time that the offer was open for acceptance, it would have been reasonable for it to have been accepted: Bailey v. Jang, 2008 BCSC 1372, 90 B.C.L.R. (4th) 125 at para. 24; A.E. v. D.W.J. at para. 55. As was said in A.E. v. D.W.J., "The reasonableness of the plaintiff's decision not to accept the offer to settle must be assessed without reference to the court's decision" (para. 55). Instead, the reasonableness is to be assessed by considering such factors as the timing of the offer, whether it had some relationship to the claim (as opposed to simply being a "nuisance offer"), whether it could be easily evaluated, and whether some rationale for the offer was provided. We do not intend this to be a comprehensive list, nor do we suggest that each of these factors will necessarily be relevant in a given case.

[63] It was submitted on behalf of the defendants that because the trial costs for the BNS Action remain to be determined, the offer could not be evaluated by the defendants and should have no effect with respect to costs of this proceeding.

[64] There are certain costs issues that are open in the BNS Action. BNS was awarded costs against the BMP Parties at the Supreme Court of Canada. Mr. Justice Cohen awarded costs in favour of BNS in any event of the cause for certain protracted interlocutory matters heard by Mr. Justice Cohen. The plaintiffs in the BNS Action were awarded party and party costs at scale 4 to December 23, 2003 and double costs at scale 4 thereafter. The trial costs in the BNS Action were re-opened for consideration pursuant to the February 18, 2010 order of the Supreme Court of Canada. BNS had advanced the sum of $80,000 to the BMP Parties on account of damages and costs, if any, as could be awarded to the BMP Parties in the BNS Action. However, given the substantial reversal of the trial decision by the Supreme Court of Canada, I agree with the submission of counsel for RBC that, whatever the final outcome of that reconsideration, the BMP Parties could have no reasonable expectation of improving their position and, therefore, were in a position to evaluate the offer.

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[65] Following the decision of the Supreme Court of Canada it was clear that the central issue for determination in the summary trial was whether there had been a good faith change of position by the defendants with respect to the Unrecovered Amount. The defendants were aware of all of the facts necessary to evaluate this matter, given that the facts concerned their conduct and their knowledge. In my view, in all of the circumstances the offer was one that it would have been reasonable to accept.

[66] The offer was clearly superior to the results of the summary trial. Clearly, RBC has a far superior financial position; however, in my view, given the parties’ roles in this litigation, that factor has limited weight. The defendants were attempting to retain a windfall for which they had given no consideration to the detriment of RBC, which had been the victim of a fraud.

[67] In all of the circumstances, I am satisfied that it is an appropriate case to award RBC double costs for all steps taken in the litigation after the delivery of the 2010 Offer. However, it is not appropriate for RBC to receive both double and special costs. Accordingly, for the steps taken in the litigation after the delivery of the 2010 Offer, RBC is entitled to the greater of special costs or double costs.

Disposition

[68] RBC is entitled to special costs of its claim and the defence of the counterclaim against the BMP Parties except that for the steps taken in the litigation after the delivery of the 2010 Offer, RBC is entitled to the greater of special costs or double costs.

[69] RBC is entitled to special costs of its claim, excluding the defence of the counterclaim, against Debra Backman from and after the date that Ms. Backman was added as a defendant.

[70] BNS is entitled to special costs of its defence of the Third Party Notice against the BMP Parties.

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Nazmdeh v. Spraggs

2010 BCCA 131 Judgment: March 17, 2010

The Honourable Chief Justice Finch

I. Introduction

[1] The plaintiff’s lawyer, Thomas L. Spraggs, appeals from that part of an order pronounced by Madam Justice Humphries in Supreme Court Chambers on 1 December 2008 holding him personally responsible to pay the costs of two applications brought by the defendants in an action in which the plaintiff claimed damages for injuries suffered in a motor vehicle accident. The application to compel Mr. Spraggs to pay costs personally was brought by the defendants under Rule 57(37)(c) of the Supreme Court Rules which gives the court a discretion to make such an order where a lawyer has caused costs to be incurred “without reasonable cause, or has caused costs to be wasted through delay, neglect or some other fault”.

[2] Counsel for the lawyer says the learned trial judge erred in making the order because she made no finding that the lawyer’s conduct was “reprehensible”, and the decision of this Court in Kent v. Waldock, 2000 BCCA 357, requires such a finding before an order for costs against a lawyer can be made. In response, the defendants submitted that Kent is distinguishable, and if it is not distinguishable, that it was wrongly decided. For this reason, the lawyer’s appeal was heard by a division of five judges. The Law Society of British Columbia intervened and made submissions in support of the lawyer’s position.

[3] For the reasons that follow, I am of the view that the learned chambers judge did not err in her interpretation and application of Rule 57(37). I would dismiss the appeal.

II. Background

[4] The learned chambers judge began her reasons on costs in this way:

[1] This action involved a motor vehicle accident on July 13, 2004. In the Statement of Claim, the plaintiff alleged that she suffered soft tissue injuries and accompanying symptoms, as well as various other losses. Liability was admitted. The trial was set for September 29, 2008. The matter has now been settled.

[2] Earlier this year, the defendants brought five motions for various pre-trial matters, two dated February 7, and others dated February 29, March 7, and May 6, 2008, which were all set for hearing on June 11 and 12, 2008. One aspect of one of the motions – a request for an independent medical examination – was granted on a prior occasion by another judge pursuant to an application for short leave brought by counsel for the defendants, with costs left to the judge who heard the remainder of the motion. The remainder of that motion and the other four were heard and dealt with by me at the June hearing. Counsel for the defendants asked that costs on all motions be heard separately at a later date because the defendants intended, if successful on the motions, to ask for costs personally against the plaintiff’s solicitor.

[3] Those arguments were heard on November 7, 2008. The defendants contend they were substantially successful on all motions. At the conclusion of their argument on the basic issue of costs, they submitted that costs should be paid by the solicitor pursuant to Rule 57(37).

[5] The five applications referred to by the judge were the defendants’ applications:

1. for an order compelling production of medical records;

2. for an order compelling discovery and production of documents relating to wage loss;

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3. for an order compelling answers to interrogatories;

4. for an order compelling delivery of particulars of allegations in the statement of claim;

5. for an order compelling the plaintiff to execute authorizations for the production of documents by third parties.

[6] The first motion was heard by a judge other than the chambers judge. The matter of costs on that application was left to the judge who heard the other four applications.

[7] Madam Justice Humphries heard the other applications on 11 and 12 June 2008. On each application the defendants sought costs in any event of the cause payable by the plaintiff, or “in the alternative payable by Thomas L. Spraggs personally pursuant to Rule 57(37)”.

[8] Mr. Spraggs was represented separately by counsel on the applications in respect of costs.

[9] The learned chambers judge granted the substantive relief claimed on the defendants’ motions for discovery of documents (No. 2) and for answers to interrogatories (No. 3). She granted partial relief in respect of the motion for particulars (No. 4) and found it unnecessary to make an order with respect to the authorizations (No. 5), because the defendants had received those authorizations by the time the motion was heard.

[10] On 11 September 2008 the plaintiff accepted the defendants’ formal offer of settlement. Disposition of the applications concerning costs remained outstanding.

[11] The hearing with respect to the costs of the applications was adjourned to 7 November 2008. Counsel for Mr. Spraggs appeared on this hearing.

[12] The learned chambers judge delivered written reasons for judgment on 1 December 2008. She held the parties should each bear their own costs of the first motion. She held that the plaintiff should pay the costs of the second and fifth motions. She held that the plaintiff’s lawyer should pay personally the costs of the third and fourth motions which concerned interrogatories and particulars.

[13] The chambers judge also held the lawyer should pay personally one-half the costs for the hearing of applications numbered 2, 3, 4 and 5, and the disbursements for applications 3 and 4.

[14] All costs ordered were party and party costs to be assessed on Scale B.

III. Reasons for Judgment

[15] The learned chambers judge dealt with the defendants’ applications for costs against the plaintiff in advance of, and separately from, the application for the plaintiff’s lawyer to pay costs personally.

[16] With respect to costs for the applications to compel answers to the interrogatories the learned chambers judge said:

[14] While there may be cases where incessant pre-trial discoveries requests and processes are overloaded by a defendant with means upon a plaintiff with none, in this particular case, a substantial claim for loss of a business opportunity was advanced by the plaintiff subsequent to oral examination for discovery. The defendants’ use of interrogatories in this situation was appropriate (see Plumrose Inc. v. A&A Foods, (1994) B.C.J. 2250 (B.C.S.C.)).

[15] After argument, the court ordered that the plaintiff respond to the interrogatories or state why she objected to doing so. The defendants were successful on this motion and should not have had to bring it. They should have their costs in any event of the cause.

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[17] With respect to costs for the motion to compel particulars, the chambers judge said:

[19] After argument, the plaintiff was ordered to provide responsive replies to the request for particulars in respect of the claims of nervous tension, depression, anxiety and apprehension, shock and other injuries, so the defendants would know the case it [sic] they had to meet. As well, the plaintiff was directed to respond to the application for particulars of special damages and wage loss. The request in respect of loss of amenities was held not to be suitable for particulars.

[20] The response to the request for particulars was obviously deficient. The defendants should not have had to bring the application. They should have their costs in any event of the cause.

[18] On the question of whether the plaintiff’s lawyer should be ordered to pay costs personally, the learned chambers judge had her attention directed to Kent, (supra); Ross v. Henriques, 2007 BCSC 1381, leave to appeal to B.C.C.A. refused, 2008 BCCA 282; Grewal v. Brown (1997), 15 C.P.C. (4th) 66 (B.C.S.C.); and Young v. Young, (1990), 75 D.L.R. (4th) 46 (B.C.C.A.), aff’d, [1993] 4 S.C.R. 3.

[19] The judge said:

[32] I accept that Rule 57(37) is applicable to these motions and the words should be given their ordinary meaning. The test is simply whether the solicitor “caused costs to be incurred without reasonable cause, or has caused costs to be wasted through delay, neglect, or some other fault.” This does not require the proof of reprehensible behaviour on the part of the solicitor.

[20] She held that the applications numbered 2 and 5 did not result from any fault on the part of the lawyer. With respect to the other two applications, number 3 concerning interrogatories, and number 4 concerning particulars, she held:

[38] However, the failure to respond to the interrogatories in any fashion whatsoever (application #3), thus necessitating the motion, and the wholly inadequate response to the request for particulars (application #4) can only fall at the feet of counsel.

[39] Application #3: Rule 29(8) provides for delivery of interrogatories to a solicitor. Rule 29(9) requires the solicitor to inform the person to whom the interrogatories are directed. Rule 29(5) provides for objections to interrogatories by affidavit. Rule 29(7) provides for striking out interrogatories.

[40] None of these steps were followed. On the material before me, the interrogatories were simply ignored by plaintiff’s counsel. The defendants were obliged to bring a motion. Costs were thus incurred without reasonable cause, or through the solicitor’s delay or neglect.

...

[43] Counsel for the defendants sent a demand for particulars. Having received the demand, it was the responsibility of counsel to ensure that a responsive reply was provided. The solicitor was required to obtain instructions from his client in order to answer them responsively. The unsatisfactory manner in which that obligation was undertaken here is obviously his fault and not that of his client’s. Once again, the defendants were obliged to bring a motion. Costs were thus incurred without reasonable cause.

[44] In the result, then, with respect to applications #3 and #4, I am satisfied that the costs were incurred without reasonable cause, or were wasted through the delay or neglect of the solicitor and he should pay them.

[21] The chambers judge concluded:

[48] These motions were all argued together over the course of a day and a half. Most of the time was taken up with the issues concerning the production of medical records on which I have said the parties should bear their own costs. Costs for the hearing on applications # 2, 3, 4 and 5 will be assessed on the basis that all

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four together consumed half a day. Half of the hearing costs are payable by the plaintiff; half by the solicitor personally. Disbursements on applications # 2 and # 5 are payable by the plaintiff; disbursements on applications #3 and #4 are payable by the solicitor personally. All costs are at Scale B, to be determined after taxation, if necessary.

IV. Positions on Appeal

[22] Counsel for the appellant lawyer says the learned chambers judge erred in ordering him to pay costs personally when there was no finding that his conduct was “reprehensible”. Counsel argued that reprehensible conduct was the standard set by this Court in Kent, and that the chambers judge was bound to follow that ruling.

[23] Counsel for the lawyer also contended that there was no evidence to support the chambers judge’s conclusion that the lawyer was responsible for the absence of a response to the interrogatories, and for the inadequate response to the demand for particulars. Counsel says the lawyer could not have adduced evidence on those two matters without breach of the solicitor/client privilege.

[24] Counsel for the Law Society of British Columbia supported the position taken for the lawyer on the standard of conduct required to found an order for costs against a lawyer personally. He submitted that costs ordered to be paid by a lawyer personally required conduct on the lawyer’s part that was so reprehensible as to amount to an abuse of court process, or a contempt of court.

[25] The Law Society advanced a number of policy-based submissions. It contended that maintaining the high standard for imposing costs against a lawyer will maintain the important distinction between the role of the Law Society and the role of the court, the former to regulate professional conduct and the latter to maintain the integrity of the court’s process.

[26] Counsel for the Law Society also submitted that a lower standard for costs against a lawyer increased the risk of a conflict between the lawyer’s duty to the client and his duties to the court, and between those duties and his self-interest for fear of an order under Rule 57(37).

[27] Finally, counsel submitted that a lower or uncertain standard could have a chilling effect on litigation and on advocacy, spawn “satellite” litigation, and undermine collegiality. Counsel contended that orders against lawyers made under Rule 57(37) should only be made on application by the lawyer’s own client, and not by another party, such as the defendants in this case.

[28] Counsel for the defendants supports the orders for costs against the plaintiff’s lawyer personally, and says the learned chambers judge correctly interpreted and applied Rule 57(37). He says the judge’s interpretation gives full effect to the plain meaning of the language used in the Rule. He contended that the decisions in Kent and Young were addressed to cases where there were orders for special costs in issue rather than the party and party costs in issue in this case. He says Kent should be restricted to cases involving orders for special costs against lawyers, and that if it is not so limited, it was wrongly decided.

[29] Finally, counsel for the defendants submitted that there was a proper evidentiary basis for the judge’s findings that the plaintiff’s lawyer was responsible for the costs wasted on the motions for interrogatories and particulars. He said the necessary evidence was put before the court without in any way infringing or impairing the solicitor/client relationship.

V. Issues

[30] The first issue on this appeal is what standard of conduct must be shown before the court may exercise its discretion under Rule 57(37), and specifically, before the court may order the lawyer to pay personally party and party costs.

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[31] The second issue is whether there was a satisfactory evidentiary basis for holding that the lawyer was responsible for the absence of a response to the interrogatories and for the inadequate response to the demand for particulars.

VI. Analysis

A. Introduction

[32] The first issue requires an analysis and determination of the true interpretation and plain meaning of Rule 57(37) of the Rules of Court. The specific question is the nature of lawyer’s conduct required before the Court can make an award of party and party costs against him personally under Rule 57(37).

[33] In addition to an interpretation of the Rule, one must also examine the case law that has interpreted the court’s power to award costs against a lawyer. One must recognize that the court’s authority to award costs against a lawyer has changed over time, both in source and form.

[34] The current form of Rule 57(37) has resulted from a lengthy evolution. Rule 57(37) was created in 1990. It amended and modified the old Rule 57(30), the language of which differed from the new Rule. When analyzing the cases it is necessary to examine the language of the rule being applied.

[35] Not only have different forms of the Rule been enacted, but the court has also retained the power to award costs against a lawyer under its inherent jurisdiction. This jurisdiction derives from authority in the English courts, where the leading case is Myers v. Elman, [1939] 4 All E.R. 484 (H.L.).

[36] In considering the case law, whether English or Canadian, one must determine whether those decisions were based on the inherent jurisdiction of the court, or the rules enacted by the Legislature, and if the latter, the particular language of the rule interpreted and any material differences between that rule and Rule 57(37)(c).

…

VII. Conclusions

[101] Prior to the enactment of the Rules, the Supreme Court of British Columbia had power to make orders against lawyers to pay costs personally under the court’s inherent jurisdiction. Such orders were generally made only in cases of “serious misconduct”. The Rules, particularly Rule 57(30) and its successor Rule 57(37), have, however, expanded the scope of conduct which might support costs orders against lawyers. The Court now has a discretion to order a lawyer to pay costs where he has “caused costs to be incurred without reasonable cause, or has caused costs to be wasted through delay, neglect or some other fault”.

[102] Under Rule 57(37), mere delay and mere neglect may, in some circumstances, be sufficient for such an order against a lawyer. Under the Rule there is no requirement for “serious misconduct”, the standard required under the court’s inherent jurisdiction. The requirement in Young and in Kent of “reprehensible” conduct applies only in cases of orders against a lawyer for special costs. Young and Kent are not authority for requiring such a standard when making an order for party and party costs against a lawyer. In such circumstances, the lower standard mandated by the Rule is sufficient.

[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.

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[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.

[105] Nothing in these reasons is a comment upon the immunity of barristers for their conduct in court. This case is not about contempt, abuse of process or similar egregious conduct. It concerns only what a lawyer did or did not do in response to interrogatories and a demand for particulars.

[106] In my respectful view, the learned chambers judge did not err in interpreting the rule according to the plain meaning of its words.

…

[111] I would dismiss the appeal.

“The Honourable Chief Justice Finch”

I Agree:

“The Honourable Mr. Justice Hall”

I Agree:

“The Honourable Mr. Justice Low”

I Agree:

“The Honourable Mr. Justice Lowry”

I Agree:

“The Honourable Madam Justice Kirkpatrick”

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Robson v. Chrysler

Oral Reasons for Judgment May 25, 2001

The Honourable Madam Justice Neilson

[1] THE COURT: The parties appeared before me on May 22nd to make submissions with respect to the costs arising from my reasons for judgment of January 5, 2001, allowing the application of the American defendants under Rule 14(6)(c).

[2] The plaintiffs argue that it would be appropriate to depart from the usual order that costs follow the event, and to direct that each party bear its own costs, given the unique character of class proceedings. The plaintiffs advance their argument under ss. 12 and 37 of the Class Proceedings Act, R.S.B.C. 1996, c.50 or, alternatively, under the discretionary power in Rule 57(9) of the Supreme Court Rules.

Sections 12 and 37 of the Class Proceedings Act

[3] The relevant parts of these sections read:

12 The court may at any time make any order it considers appropriate respecting the conduct of a class proceeding to ensure its fair and expeditious determination and, for that purpose, may impose on one or more of the parties the terms it considers appropriate.

37(1) Subject to this section, neither the Supreme Court nor the Court of Appeal may award costs to any party to an application for certification under section 2(2) or 3, to any party to a class proceeding or to any party to an appeal arising from a class proceeding at any stage of the application, proceeding or appeal.

(2) A court referred to in subsection (1) may only award costs to a party in respect of an application for certification or in respect of all or any part of a class proceeding or an appeal from a class proceeding

(a) at any time that the court considers that there has been vexatious, frivolous or abusive conduct on the part of any party,

(b) at any time that the court considers that an improper or unnecessary application or other step has been made or taken for the purpose of delay or increasing costs or for any other improper purpose, or

(c) at any time that the court considers that there are exceptional circumstances that make it unjust to deprive the successful party of costs.

[4] The plaintiffs argue, first, that it is the clear intent of s. 37 that at the point of application for certification and thereafter in a class proceeding the court is not to award costs to any party except in the circumstances permitted by s. 37(2). Those circumstances have no application here.

[5] The plaintiffs say that the general policy underlying class actions as set out in Endean v. Canadian Red Cross Society et al. (1997), 148 D.L..R. (4th) 158 (B.C.S.C.), particularly that of access to justice, suggests that s. 37(1) should apply to costs relating to issues heard before an application for certification as well. The plaintiffs frankly concede that to succeed in that argument I must distinguish this case from that of Edmonds v. Actton Super-Save Gas Stations Ltd. (1997), 5 C.R.C. (4th) 105 (B.C.S.C.).

[6] In Edmonds, Brenner J., as he then was, dealt with the issue of costs on a successful application under Rule 34 brought by the defendants prior to certification in an intended action under the Class Proceedings Act. He

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considered the effect of s. 37 and held at paras. 4 and 8 that that section only becomes operative at the stage of an application for certification. He found that until that point a class proceeding is an ordinary action governed by the Rules of Court, including Rule 57 with respect to costs. He found no basis to depart from the usual rule that costs follow the event, and awarded costs to the successful defendants.

[7] The plaintiffs say that since the decision in Edmonds, the law in class proceedings has evolved and more recent cases emphasize the importance of access to justice. They urge a re—examination of Edmonds in light of those more recent authorities. However, having examined these cases, I am unable to find anything cited by the plaintiffs to sufficiently distinguish Edmonds and permit me to depart from its conclusions.

[8] The plaintiffs also argue that the general powers in S. 12 of the Class Proceedings Act permit me to alleviate the hardship of costs for the representative plaintiffs. The authorities to which I have been referred from this court on the application of s. 12 prior to certification are divided, see Scott v TD Waterhouse Investor Services (Canada) Inc. (2001), 83 BC.L.R. (3d) 365 (S.C.) at paras. 4 and 26; Endean v. Canadian Red Cross Society [1997], B.C.J. No. 295 (Q.L.) (S.C.) at para. 10; and Matthews v. Servier Canada Inc. (1999) 52 B.C.L.R. (3d) 268 (S.C.) at paras. 8 and 12. None of these dealt with the issue of costs. In the face of Edmonds, I am not prepared to use the general powers in s. 12 to depart from the usual rule with respect to costs at this stage of the proceeding. The arguments of the plaintiffs under the Class Proceedings Act therefore fail.

Rule 57

[9] The plaintiffs argue that this is a case in which I should exercise my discretion under Rule 57(9) to depart from the usual order that costs follow the event due to the novelty and complexity of the issues which were raised on the application, the public interests aspects of the issues involved, and the financial repercussions to the representative plaintiffs of an order for costs.

[10] With respect to the novelty and complexity of the issues, the plaintiffs say that this application was the first proceeding to raise jurisdictional issues in the context of the Trade Practice Act, R.S.B.C. 1996, c. 457 and the Class Proceedings Act. While that may be the case, I do not think it could be regarded as a case of first instance. Instead, to my mind, it was largely a matter of developing an approach to a jurisdictional challenge under the Trade Practice Act based on existing authorities.

[11] In Kumar v. Mutual Life Assurance Co. of Canada, [2001] O.J. No. 445 (Q.L.) (Sup. Ct. J.), Cumming J., at para. 23, noted: It is not enough to assert that every time a class action raises a legal issue for the first time there is a “novel point of law” involved.

I agree with that comment and find that the issues raised in this application were not sufficiently novel or complex to justify departure from the usual order with respect to costs.

[12] Nor can I agree with the plaintiffs that the application raised issues of public interest. While it dealt with consumer protection legislation, Brenner J. in Edmonds was dealing with GST legislation and held at paras. 5 and 7 of that decision that that was not an issue of public import, but an action seeking damages from individual defendants. As well, in Kumar, supra, at para. 24, Gumming J. made the following comment, with which I agree:

There is, of course, a public interest component in respect of any litigation. However, in my view, to be a “matter of public interest” the class action must have some specific, special significance for, or interest to, the community at large beyond the members of the proposed class. This might be the situation where, for example, fundamental human rights are in issue or an environmental issue is present.

[13] With respect to the financial repercussions of an award for costs, the plaintiffs point out that the American defendants each seek costs which will be in the range of $1,500 to $4,300, whereas the cost of repainting their own vehicles would only be in the range of $2,000 to $4,000. Thus, if costs are awarded against the plaintiffs, they may exceed the value of their individual claims. The plaintiffs also point out that ordinarily such claims would be in the jurisdiction of the small claims court where costs would generally not be awarded. They say they should not effectively be penalized for bringing this action under the Class Proceedings Act in the interests of efficiency. Awarding costs against them in such circumstances will have a chilling effect on the commencement of future class

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proceedings and in this context is contrary to the objective of the Class Proceedings Act to create improved access to justice.

[14] I am sympathetic to these arguments, as the representative plaintiffs are carrying the action forward at this stage for what may become a larger group of people who will ultimately benefit from their activity and financial sacrifice. However, I again find Edmonds instructive in dealing with this argument. As in that case, this is private litigation in which the plaintiffs seek individual damages from corporate defendants for the cost of repainting their vehicles. Those defendants have succeeded in convincing me that this court has no jurisdiction over them. They have acted expeditiously and effectively in bringing the claim against them to an early end and in doing so they have incurred costs. In the ordinary course, they are entitled to be reimbursed by way of an order for costs. I am again unable to distinguish this case from Edmonds, and cannot find a sufficient basis upon which to depart from the usual rule as to costs based on the financial considerations presented here.

[15] In conclusion, I find that the decision in Edmonds substantially governs most of the arguments raised by the plaintiffs and I am bound by it. If, as the plaintiffs argue, evolution of the law and the policy underlying class proceedings requires re-examination of that decision, in my view, that process must take place at the appellate level. The defendants will have their costs at scale 3.

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Ward v. Klaus

2012 BCSC 99 The Honourable Mr. Justice Goepel

INTRODUCTION

[1] Following a 14-day trial, Justice Rice, in reasons indexed at 2010 BCSC 1211, awarded the plaintiff damages totalling $433,103.63.

[2] The trial commenced on June 7, 2010. On May 3, 2010, the defendant made a formal offer to settle the plaintiff’s claim for $493,234.04 (the “First Offer”). On June 4, 2010, the defendant made a formal offer to settle the plaintiff’s claim for $595,000 (the “Second Offer”). Both offers were made pursuant to the provisions of Rule 37B.

[3] The defendant now seeks an order that the plaintiff should be deprived of her costs from the date of the First Offer, and the defendant should be entitled to his costs thereafter. In the alternative, the defendant submits that the plaintiff should be deprived of her costs from the date of the Second Offer, and the defendant should be entitled to his costs thereafter.

[4] As Justice Rice has now retired, the Chief Justice appointed me, pursuant to Rule 23-1(10), to hear this application.

BACKGROUND

[5] The plaintiff was injured in a motor vehicle accident on February 4, 2002. The defendant admitted liability. The trial was set to commence on Monday, June 7, 2010.

[6] On May 3, 2010, the defendant’s counsel faxed the First Offer to the plaintiff’s counsel. The defendant offered to pay Ms. Ward $493,234.04 together with costs to the date of delivery of the offer. The First Offer was open for acceptance up to 4:00 p.m. on the last business day before the first day of trial.

[7] I note that by May 3, 2010, the parties had exchanged expert reports and the expert evidence ultimately adduced at the trial consisted of the reports available to the parties as of May 3, 2010, supplemented by the oral evidence of the experts.

[8] On May 28, 2010, Ms. Ward’s counsel faxed to the defendant’s counsel an offer to settle the plaintiff’s claim under Rule 37B for $750,000 in new money. The offer was stated to be open until the start of trial or until withdrawn in writing.

[9] On Friday, June 4, 2010, at 11:04 a.m., the defendant’s counsel faxed to plaintiff’s counsel the Second Offer. The pertinent terms of the Second Offer, including the time for acceptance were the same as those of the First Offer, except the amount offered was increased to $595,000. By its terms the offer expired at 4:00 p.m. on the last business day before the first day of trial, being approximately five hours after the offer was delivered.

[10] None of the offers to settle were accepted. The case proceeded to trial on June 7, 2010. The trial lasted some 14 days.

[11] In her submissions at the end of the trial, Ms. Ward asked for damages totalling $1,779,636.96 broken down as follows:

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Non-pecuniary Damages $190,000.00 Past Loss of Income $165,000.00 Loss of Future Earning Capacity $650,000.00 Loss of Homemaking Capacity $420,000.00 Cost of Future Care $328,580.00 Special Damages $26,056.96

[12] The defendant’s final submissions suggested an award of between $335,000 - $375,000 calculated as follows:

Non-pecuniary Damages $100,000.00 - $120,000.00 Past Loss of Income: $5,000.00 Loss of Future Earning Capacity $100,000.00 - $120,000.00 Cost of Future Care $130,000.00 Special Damages To be determined

[13] The trial judgment required counsel to do certain calculations to determine the cost of future care, loss of future earning capacity and past income loss. The parties’ respective calculations differ by approximately $1,000. The parties agree that the difference is not relevant in relation to the issues that I have to deal with. In the result, the trial judgment with adjustments is either $434,229.33 or $433,103.63. The breakdown is as follows:

PLAINTIFF DEFENDANT

Non-pecuniary Damages $150,000.00 $150,000.00 Past Loss of Income $41,674.00 $41,674.00 Loss of Future Earning Capacity $118,650.00 $118,650.00 Cost of Future Care $117,173.70 $116,048.00 Special Damages __$6,731.63 __$6,731.63 TOTAL $434,229.33 $433,103.63

From these amounts must be subtracted the s. 83 deductions of $17,081.32 leaving a net award of either $417,148.01 or $416,022.31. In either case, the plaintiff was awarded a sum substantially less than either of the defendant’s pre-trial offers.

[14] The parties have both provided draft bills of costs. The plaintiff’s bill indicates that subsequent to the First Offer she incurred taxable costs and disbursements of approximately $61,000. The defendant’s bill indicates that subsequent to the First Offer he incurred taxable costs and disbursements of approximately $88,000.

POSITION OF THE PARTIES

[15] The defendant seeks an order that the plaintiff should be deprived of her costs after the First Offer and the defendant should be awarded his costs thereafter. In the alternative, the defendant submits that the plaintiff should be deprived of her costs after the Second Offer and the defendant should be awarded his costs thereafter.

[16] The defendant submits that both his offers should have been accepted. If either offer had been accepted the parties would have both saved the not inconsiderable costs of a 14-day trial. The defendant submits consequences must flow from the plaintiff’s decision to proceed to trial.

[17] The plaintiff submits that in the circumstances the offers made by the defendant were not ones that the plaintiff ought reasonably to have accepted. She points out that prior to the trial she had evaluated her claim at $975,000 calculated as follows:

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Non-pecuniary Damages $175,00.00 Past Loss of Income $125,000.00 Loss of Future Earning Capacity $350,000.00 Loss of Housekeeping Capacity $50,000.00 Cost of Future Care $275,000.00 TOTAL: $975,000.00

Taking into account the risk and costs of trial, she made a formal offer to settle of $750,000.

[18] The plaintiff submits that her evaluation of the case before trial was reasonable and she should not be punished for failing to accept the defendant’s offer. She also submits that the Second Offer was only open for acceptance for a matter of hours and the defendant should not be entitled to rely on same. Further, both offers contained unreasonable conditions.

[19] In the alternative, the plaintiff submits that if the court is to give some effect to the defendant’s offers, it should be for some lesser penalty than those sought by the defendant. She notes that if the court makes the award the defendant seeks, the cost to her, taking into account the amounts she must forego, and assuming the accuracy of the draft bills, would be approximately $149,000.

DISCUSSION

A. Pre-Rule 37B: Legislative and Judicial History

[20] In A.E. v. D.W.J., 2009 BCSC 505, 91 B.C.L.R. (4th) 372 at paras. 35-47 (“A.E.”), aff’d 2011 BCCA 279, 19 B.C.L.R. (5th) 350 (“A.E. Appeal”) I traced the legislative and judicial history of pre-trial settlement offers. The defendant’s right to make a payment into court while maintaining a denial of liability can be traced back to the initial Supreme Court Rules adopted in 1890 (o. 22 r. 6). The rule initially only arose in circumstances in which the defendant paid into court a sum greater than the plaintiff recovered. In such cases, the default position was that the plaintiff would be awarded costs up to the time of the offer, while the defendant would be entitled to the costs thereafter.

[21] In 1993, Rule 37 was recast (B.C. Reg. 55/93). Payments into court were replaced by offers to settle. For the first time, plaintiffs were given the right to make offers to settle.

[22] Rule 37 provided different cost consequences depending on who made the offer. In the case of defendant, the rule remained that if the plaintiff obtained judgment for the amount of money specified in the offer or a lesser amount, the plaintiff would be entitled to costs assessed to the date the offer was delivered, and the defendant to costs thereafter. In regard to plaintiffs, if they received an award greater than their offer, they would be entitled to double costs thereafter.

[23] In 1999, Rule 37(24) was further amended in order to allow awards of double costs to defendants when an action was dismissed subsequent to an offer to settle (B.C. Reg. 149/99). The amended Rule read:

(24) If the defendant has made an offer to settle a claim for money and the offer has not expired or been withdrawn or been accepted,

(a) if the plaintiff obtains judgment for the amount of money specified in the offer or a lesser amount, the plaintiff is entitled to costs assessed to the date the offer was delivered and the defendant is entitled to costs assessed from that date, or

(b) if the plaintiff's claim is dismissed, the defendant is entitled to costs assessed to the date the offer was delivered and to double costs assessed from that date.

[24] The 1999 amendment was introduced after a series of trial decisions in which judges had awarded double costs to defendants in cases where the action had been dismissed: Jetha v. Shefield & Sons-Tobacconists Inc., [1997] B.C.J. No. 317 (Q.L.) (S.C.); 32262 B.C. Ltd. v. Balmoral Investments Ltd., [1998] B.C.J. No. 23 (Q.L.) (S.C.); and

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Cook v. Bhanwath reflex, (1999), 73 B.C.L.R. (3d) 305 (S.C.). The rationale for the award of double costs to both plaintiffs and defendants was that in cases in which they succeeded they would already be entitled to ordinary costs.

[25] Over time the cost provisions of Rule 37 were determined to be a complete code with respect to offers to settle, allowing for no judicial discretion: Cridge v. Harper Grey Easton, 2005 BCCA 33, 37 B.C.L.R. (4th) 62.

[26] The operation of Rule 37(24)(a) was the subject of some criticism. It was suggested that it worked an unfair hardship on plaintiffs because an injured plaintiff was deprived not only of costs and disbursements to which he or she would otherwise be entitled, but also had to pay the defendant’s costs and disbursements. The amount of those costs and disbursements would often be unknown in advance of trial making it difficult for a plaintiff to calculate with precision their potential exposure if unsuccessful. Counsel’s attempt to convince the Court of Appeal to modify the rule did not meet with success: Bedwell v. McGill, 2008 BCCA 526, 86 B.C.L.R. (4th) 343.

[27] Some controversy arose as to whether double costs should be paid to a defendant who made a nominal offer to settle an action which was subsequently dismissed. In Clark v. Sidhu, 2005 BCSC 914, 51 B.C.L.R. (4th) 119 (“Clark”), the defendant had made an offer to settle a motor vehicle case in the sum of $1.00. After the action was dismissed, the trial judge held at para. 23 that an offer must be reasonable to attract the sanction of double costs.

[28] In Kurylo v. Rai, 2006 BCCA 176, 53 B.C.L.R. (4th) 214 (“Kurylo”), Southin J.A. held that Clark was wrongly decided and must be overruled. At paras. 7-8, she said:

[7] In my opinion, with great respect, the judgment in Clark v. Sidhu is wrong and must be overruled. There is an underlying reason. When a defendant assesses his position in litigation of any kind he may consider that the plaintiff has no case and if the case goes to trial, will fail. But the defendant may also be willing to make some minor offer which would carry with it the costs in the hope that the action will go away and that he will not, thereafter, incur large legal bills to establish his legal position that the plaintiff has no case.

[8] The reasonableness of an offer under Rule 37 is no business of the Court when it is a monetary offer. ... But the reasonableness of the offer when it is a monetary claim, whether made by the plaintiff or the defendant, is not a matter for judicial consideration.

B. Rule 9-1

[29] Rule 37B came into effect on July 1, 2008. It is now Rule 9-1. The relevant provisions of the Rule are:

(4) The court may consider an offer to settle when exercising the court’s discretion in relation to costs.

(5) In a proceeding in which an offer to settle has been made, the court may do one or more of the following:

(a) deprive a party of any or all of the costs, including any or all of the disbursements, to which the party would otherwise be entitled in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle;

(b) award double costs of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle;

(c) award to a party, in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle, costs to which the party would have been entitled had the offer not been made;

(d) if the offer was made by a defendant and the judgment awarded to the plaintiff was no greater than the amount of the offer to settle, award to the defendant the defendant's costs in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle.

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(6) In making an order under subrule (5), the court may consider the following:





[30] Rule 9-1(5) sets out the various cost options open to the court in a proceeding in which an offer to settle has been made. The court is limited to those options: A.E. Appeal at paras. 35-40.

[31] In BCSPCA v. Baker, 2008 BCSC 947, Justice Preston, at para. 15, concluded that Rule 9-1(5) was permissive and empowered the court to make any of the orders mentioned therein. He noted that by necessary implication, the Rule contemplated that the court may deny any of the forms of relief.

[32] Since its inception in 2008, much ink has been spilled explaining the Rule. LexisNexis Quicklaw presently references some 231 decisions in which the Rule has been discussed. From the decisions, some broad principles of general application have emerged concerning how the Rule should be applied.

[33] It is now generally recognized that the Rule provides for the exercise of a broad discretion by trial judges and provides principles to guide in the exercise of that discretion: Roach v. Dutra, 2010 BCCA 264, 5 B.C.L.R. (5th) 95.

[34] In Hartshorne v. Hartshorne, 2011 BCCA 29, 14 B.C.L.R. (5th) 33 at para. 25 (“Hartshorne”), the Court discussed the guiding principles:

[25] An award of double costs is a punitive measure against a litigant for that party’s failure, in all of the circumstances, to have accepted an offer to settle that should have been accepted. Litigants are to be reminded that costs rules are in place “to encourage the early settlement of disputes by rewarding the party who makes a reasonable settlement offer and penalizing the party who declines to accept such an offer” (A.E. v. D.W.J., 2009 BCSC 505, 91 B.C.L.R. (4th) 372 at para. 61, citing MacKenzie v. Brooks,1999 BCCA 623, Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201 (C.A.), Radke v. Parry, 2008 BCSC 1397). In this regard, Mr. Justice Frankel’s comments in Giles are apposite:

[74] The purposes for which costs rules exist must be kept in mind in determining whether appellate intervention is warranted. In addition to indemnifying a successful litigant, those purposes have been described as follows by this Court:

• “[D]eterring frivolous actions or defences”: Houweling Nurseries Ltd. v. Fisons Western Corp., (1988), 37 B.C.L.R. (2d) 2 at 25 (C.A.), leave ref’d, [1988] 1 S.C.R. ix; “

• “[T]o encourage conduct that reduces the duration and expense of litigation and to discourage conduct that has the opposite effect”: Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201 at para. 28 (C.A.);

• “[E]ncouraging litigants to settle whenever possible, thus freeing up judicial resources for other cases: Bedwell v. McGill, 2008 BCCA 526, 86 B.C.L.R. (4th) 343 at para. 33;

• “[T]o have a winnowing function in the litigation process” by “requir[ing] litigants to make a careful assessment of the strength or lack thereof of their cases at the

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commencement and throughout the course of the litigation”, and by “discourag[ing] the continuance of doubtful cases or defences”: Catalyst Paper Corporation v. Companhia de Navegação Norsul, 2009 BCCA 16, 88 B.C.L.R. (4th) 17 at para. 16.

[35] In A.E. Appeal the court discussed at para. 41 the importance of certainty and consequences in applying the Rule:

[41] This conclusion is consistent with the importance the Legislature has placed on the role of settlement offers in encouraging the determination of disputes in a cost-efficient and expeditious manner. It has placed a premium on certainty of result as a key factor which parties consider in determining whether to make or accept an offer to settle. If the parties know in advance the consequences of their decision to make or accept an offer, whether by way of reward or punishment, they are in a better position to make a reasoned decision. If they think they may be excused from the otherwise punitive effect of a costs rule in relation to an offer to settle, they will be more inclined to take their chances in refusing to accept an offer. If they know they will have to live with the consequences set forth in the Rule, they are more likely to avoid the risk.

C. Rule 9-1(6) Guiding Principles

i. Should the Offer Have Been Accepted

[36] There is now general agreement that in determining whether the offer to settle should reasonably have been accepted the court does not consider the final result. The reasonableness of a decision not to accept an offer to settle must be assessed not by reference to the award that was ultimately made, but rather the circumstances existing when the offer was open to acceptance: Bailey v. Jang, 2008 BCSC 1372, 90 B.C.L.R. (4th) 125 at para. 24 (“Bailey”); and Hartshorne at para. 27. It is important to note that this factor is considered from the perspective of the person receiving the offer.

[37] In Giles v. Westminster Savings & Credit Union, 2010 BCCA 282, 5 B.C.L.R. (5th) 252 (“Giles”), the Court appears to suggest that the reasonableness of an offer may be decisive in determining the nature of an award of costs that should be made. At para. 88 it says:

[88] I appreciate there are no mandatory factors under Rule 37B(6) and that trial judges have discretion to take into account whatever factors they consider appropriate in a given case. However, the ultimate discretion as to double costs must be exercised in a just, principled, and consistent way. One of the goals of Rule 37B is to promote settlement by imposing consequences on parties who have refused to accept an offer that ought reasonably to have been accepted. While it may not invariably be the case, I consider that it would be generally antithetical to that goal to penalize an unsuccessful plaintiff with double costs for proceeding to trial in the face of an unreasonable offer. Virtually all litigation comes with a degree of risk. When faced with settlement offers, plaintiffs must carefully consider their positions. However, they should not to be cowed into accepting an unreasonable offer out of fear of being penalized with double costs if they are unable to "beat" that offer. Put somewhat differently, plaintiffs should not be penalized for declining an offer that did not provide a genuine incentive to settle in the circumstances. In this case, the Credit Union and Mr. Thomas have not pointed to anything that would support a finding that the plaintiffs' decision to refuse their offer was, at the time of the refusal, an unreasonable one.

[38] I have some difficulty with that analysis. It appears to suggest that plaintiffs who decline an offer that did not provide a genuine incentive to settle should not be subject to costs sanctions regardless of the outcome of the trial. That proposition would appear to be counter to the guiding principles set out in the subsequent decision in Hartshorne.

[39] In that regard it is important to note that the Rule does not make any reference to the impact of “unreasonable offers”. Further, it is with respect difficult to describe an offer as being “unreasonable” when it provides a better result to the plaintiff than that which he has obtained at trial. The fact that an offer does not provide

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an incentive to settle cannot be determinative. As Savage J. noted in MacKinlay v. MacKinlay Estate, 2008 BCSC 1570, 44 E.T.R. (3d) 48 at para. 34, in comments echoing Southin J.A. in Kurylo:

[34] While a nominal offer might be described as strategic, it was a strategy aimed at persuading the Plaintiffs to discontinue the proceeding, an outcome that is favourable as compared to the outcome the Plaintiffs obtained at trial. Such an offer is one of the few tools in the arsenal of a defendant of relatively modest means which might exert pressure on a plaintiff pursuing an unmeritorious claim.

[40] In certain circumstances a nominal offer may in fact be reasonable and should be accepted to spare all parties the costs of an expensive trial.

ii. Relationship Between Offer and Judgment

[41] In Giles, at para. 89, it is suggested that the fact that an action is ultimately dismissed in its entirety is not a consideration with respect to double costs:

[89] I am also of the view that when an offer made by a defendant for the purpose of achieving a pre-trial settlement is reasonably refused, the mere fact that the action is ultimately dismissed in its entirety is not a consideration with respect to double costs. To take the disposition of the action into account would result in the "hindsight analysis" that Mr. Justice Hinkson, as he then was, cautioned against in Bailey v. Jang, 2008 BCSC 1372, 90 B.C.L.R. (4th) 125 at para. 24. See also: Dodge v. Shaw Cablesystems Ltd., 2009 BCSC 1765 at para. 17. While I acknowledge that the relationship between the offer and the result at trial is specifically mentioned in subrule 37B(6)(b), I consider it to have no relevance in circumstances such as the present.

[42] That comment appears contrary to the Rule which mandates that the court consider the relationship between the terms of settlement and the final judgment. I note in Hartshorne, the Court appears to have resiled from that position at para. 30 where it notes that the relationship of the offer to the court’s order is “an independent factor to be considered in deciding whether a double costs order should be made”.

iii. Relative Financial Circumstances of the Parties

[43] In the first cases decided under Rule 37B, most judges concluded that the fact that an insurer was involved should not be taken into account: Bailey at paras. 32-34; and Arnold v. Cartwright Estate, 2008 BCSC 1575, 86 B.C.L.R. (4th) 99 at para. 23. In Smith v. Tedford, 2010 BCCA 302, 7 B.C.L.R. (5th) 246 at para. 19, the Court of Appeal held otherwise. In that decision the court recognizes that in certain circumstances the existence of an insurer can be taken into account. As I read the case, that is not the inevitable result. In this regard I adopt the analysis of Humphries J. in Mazur v. Lucas, 2011 BCSC 1685 at paras. 48-53 in which she concluded at para. 53 “insurance coverage is not automatically a factor to be considered... the facts of a particular case will govern whether it should be considered, and if so, what weight should be given to it”.

iv. Other Factors the Court Considers Appropriate

[44] This part of the Rule gives the court wide latitude to consider case specific matters in determining how its discretion should be exercised. For example, a case that fails on a difficult causation issue may lead to a different exercise of discretion than one that is lost because of credibility: A.E. at para. 59. In my opinion, this is the appropriate place in the analysis to consider whether an offer was intended to encourage a settlement.

D. Application of Rule 9-1(6) Factors

i. Should the Offer Have Been Accepted

[45] Prior to the trial, the plaintiff’s counsel had carefully assessed the strengths and weaknesses of the case and valued the claim at $975,000. Recognizing the risks of trial, the plaintiff made an offer to settle for $750,000. It

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is noteworthy that the plaintiff did suffer a significant injury which led to an award of non-pecuniary damages of $150,000. Given counsel’s assessment of the case, it was entirely reasonable to take the case to trial rather than accept either of the offers that were made. In these circumstances, I cannot find that the offer was one that ought reasonably to have been accepted.

ii. Relationship Between Offer and Judgment

[46] Both offers were substantially greater than the amount awarded to the plaintiff at trial. Clearly, the plaintiff would have been better off if she had accepted either of the subject offers. While this disparity is a factor to properly consider, it is not in itself determinative.

iii. The Relative Financial Circumstances of the Parties

[47] The evidence indicates that the plaintiff is a full-time homemaker. She lives with her husband and two sons. Her only source of income is the Canadian Pension Plan disability benefit of $969.04 a month. Her husband is an electrician and one of several shareholders in a company that carries on an electrical business. In 2009, he earned approximately $121,000, which included a bonus of $50,000. His 2010 estimated income, in which he did not receive a bonus, is approximately $70,000. The family owns their own home which has an assessed value as of July 2010 of $352,000. The mortgage on the home is approximately $120,000 and the family also has a line of credit which was used to finance a major renovation.

[48] The plaintiff will not be impoverished if she has to pay an award of costs. However, such an award will certainly significantly reduce the value of the judgment.

[49] I have no information concerning the personal defendant. I assume that the cost award will be borne by his insurer.

[50] There is no suggestion in this case that the insurer has used its financial strength to take any unfair advantage. In my view, the relative financial position of the parties in the circumstances of this case is of no import.

iv. Other Factors the Court Considers Appropriate

[51] The defendant made a significant offer of settlement. While it may have been reasonable, from the perspective of the plaintiff, to take the case to trial, the defendant’s offer was more than generous and was well in excess of what was awarded at trial.

[52] The main reason the plaintiff failed to exceed the offer was because the trial judge did not accept her evidence concerning her intentions to return to work. He determined that she was never likely to have earned more than $6,000 a year and awarded only $160,324 for past income loss and loss of future earning capacity. Prior to trial, plaintiff’s counsel had calculated awards under those heads of $475,000. A relatively modest increase in the trial judge’s award under these heads of damage would have enabled the plaintiff to best the defendant’s offers.

E. Conclusion

[53] For the reasons I have stated, it cannot be said that the plaintiff should have accepted either offer. That is, however, the beginning, not the end of the analysis. Unlike Rule 37 which mandated the outcome regardless of the circumstances, Rule 9-1 gives the court a broad discretion to determine the consequence of a successful offer to settle. While the Rule is intended to reward the party who makes a reasonable settlement offer and penalizing the party who fails to accept it, the several options set out in Rule 9-1(5) allows the court to determine with greater precision the penalty or reward appropriate in the circumstances.

[54] In this case, regardless of the merits of the plaintiff’s case, the defendant’s offers to settle cannot be ignored. To do so would undermine the purpose of the Rule. Having decided to proceed in the face of two not insignificant and ultimately successful offers to settle, the plaintiff cannot avoid some consequences. That said, in the circumstances of this case, to deprive the plaintiff of her costs and have her in addition pay the costs of the

WEEK 11: Ward

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defendant would be too great a penalty. It would not be fair or just to require the plaintiff to pay the defendant’s costs after the date of the First Offer. Similarly, however, I find that the defendant should not pay the costs of the plaintiff after the delivery of the First Offer, which costs were only incurred because the plaintiff decided to proceed.

[55] Accordingly, I find that the plaintiff is entitled to her costs up to May 3, 2010. The parties will bear their own costs thereafter.

WEEK 11: Mide-Wilson

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Mide-Wilson v. Hungerford Tomyn Lawrenson and Nichols

2013 BCCA 559 Reasons for Judgment of the Honourable Madam Justice Newbury

[1] This appeal and cross appeal concern a contingent fee agreement between the respondent Ms. Mide-Wilson (the “Client”) and the appellant law firm (the“Firm”). The appeals pit two different conceptions of contingency agreements against each other. The Firm’s view is of a contract made between sophisticated parties in circumstances that were objectively “fair”, which contract enabled the Client to achieve her singular goal (ownership of a large corporation thought at the time to be worth up to $100,000,000) against considerable odds and within eight months of her retaining the Firm. This was the view largely adopted by the Registrar below, who observed that in general, parties to contingent fee agreements should be held to their bargains. The Firm had undertaken a large risk; the Client knew what she was about; and contingency agreements are an important and accepted means of facilitating access to justice for would-be litigants. The Client on the other hand characterizes the contingency agreement as a special type of contract overlaid with equitable, and even fiduciary, considerations including policy concerns relating to the integrity of the legal profession. A lawyer, she argues, is not a “venture capitalist,” and a contingency agreement is not a “lottery ticket”, even for a lawyer who has undertaken considerable risk and achieved surprising success. On this approach, the fee originally charged by the Firm in this case – some $16,971,015– was “grossly excessive”, as was the “fair fee” of $9,000,000 determined by the Registrar. The chambers judge below agreed substantially with the Client’s argument and allowed her appeal from the Registrar’s certificate, reducing the fee to $5,000,000. (See 2013 BCSC 374 (CanLII).)

[2] The Firm appeals the chambers judge’s order and seeks to have the Registrar’s certificate reinstated; the Client cross appeals, seeking a quantum meruitassessment of the appropriate fee at $2,500,000.

Legislative Background

[3] This proceeding arises from an appointment filed by the Client in the Supreme Court of British Columbia on April 26, 2011, seeking the cancellation of the contingent fee agreement as both unfair and unreasonable unders. 68 of the Legal Profession Act, S.B.C. 1998, c. 9, and seeking the determination of the appropriate fee under ss. 70-71. I will examine the applicable statutory provisions more closely later in these reasons, but for now I set out the ones that are most relevant to this case:

65(1) A lawyer or law firm may enter into an agreement with any other person, requiring payment for services provided or to be provided by the lawyer or law firm.

(2) Subsection (1) applies despite any law or usage to the contrary.

(3) A provision in an agreement that the lawyer is not liable for negligence, or that the lawyer is relieved from responsibility to which the lawyer would otherwise be subject as a lawyer, is void.

(4) An agreement under this section may be signed on behalf of a lawyer or law firm by an authorized agent who is a practising lawyer.

66 (1) Section 65 applies to contingent fee agreements.

(2) The benchers may make rules respecting contingent fee agreements, including, but not limited to, rules that do any of the following:

(a) limit the amount that lawyers or law firms may charge for services provided under contingent fee agreements;


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(b) regulate the form and content of contingent fee agreements;

(c) set conditions to be met by lawyers and law firms making contingent fee agreements.

…

67 (1) This section does not apply to contingent fee agreements entered into before June 1, 1988.

(2) A contingent fee agreement must not provide that a lawyer is entitled to receive both a fee based on a proportion of the amount recovered and any portion of an amount awarded as costs in a proceeding or paid as costs in the settlement of a proceeding or an anticipated proceeding.

…

68 (1) This section does not apply to agreements entered into before June 1, 1988.

(2) A person who has entered into an agreement with a lawyer or law firm may apply to the registrar to have the agreement examined.

…

(5) On an application under subsection (2), the registrar must confirm the agreement unless the registrar considers that the agreement is unfair or unreasonableunder the circumstances existing at the time the agreement was entered into.

(6) If the registrar considers that the agreement is unfair or unreasonable under the circumstances existing at the time the agreement was entered into, the registrar may modify or cancel the agreement.

(7) If an agreement is cancelled under subsection (6), a registrar

(a) may require the lawyer to prepare a bill for review, and

(b) must review the fees, charges and disbursements for the services provided as though there were no agreement.

(8) A party may appeal a decision of the registrar under subsection (5) or (6) to the court.

…

70 (1) Subject to subsection (11), the person charged or a person who has agreed to indemnify that person may obtain an appointment to have a bill reviewed before

(a) 12 months after the bill was delivered under section 69, or

(b) 3 months after the bill was paid,

whichever occurs first.

…

(13) The procedure under the Supreme Court Civil Rules for the assessment of costs, review of bills and examination of agreements applies to the review of bills under this section.

(14) The registrar may refer any question arising under this Part to the court for directions or a determination.

71 (1) This section applies to a review or examination under section 68(7), 70, 77(3),78(2) or 79(3).

(2) Subject to subsections (4) and (5), the registrar must allow fees, charges and disbursements for the following services:

(a) those reasonably necessary and proper to conduct the proceeding or business to which they relate;


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(b) those authorized by the client or subsequently approved by the client, whether or not the services were reasonably necessary and proper to conduct the proceeding or business to which they relate.

(3) Subject to subsections (4) and (5), the registrar may allow fees, charges and disbursements for the following services, even if unnecessary for the proper conduct of the proceeding or business to which they relate:

(a) those reasonably intended by the lawyer to advance the interests of the client at the time the services were provided;

(b) those requested by the client after being informed by the lawyer that they were unnecessary and not likely to advance the interests of the client.

(4) At a review of a lawyer's bill, the registrar must consider all of the circumstances, including

(a) the complexity, difficulty or novelty of the issues involved,

(b) the skill, specialized knowledge and responsibility required of the lawyer,

(c) the lawyer's character and standing in the profession,

(d) the amount involved,

(e) the time reasonably spent,

(f) if there has been an agreement that sets a fee rate that is based on an amount per unit of time spent by the lawyer, whether the rate was reasonable,

(g) the importance of the matter to the client whose bill is being reviewed, and

(h) the result obtained.

(5) The discretion of the registrar under subsection (4) is not limited by the terms of an agreement between the lawyer and the lawyer's client.

[Emphasis added.]

Factual Background

[4] The facts are largely undisputed and were reviewed by both the Registrar (whose reasons were exceedingly thorough and numbered 141 pages) and the chambers judge below (who was no less thorough). I will therefore recount them in summary form and only to the extent necessary to explain the issues raised on appeal.

[5] The Client, Ms. Mide-Wilson, was the granddaughter of Jack Cewe, the founder and principal of a group of companies engaged in gravel extraction, road construction, paving and related activities. Mr. Cewe died at the age of 86 on June 7, 2008, having been predeceased by his wife, his only child (Ms. Mide-Wilson’s mother) and his grandson.

[6] Ms. Mide-Wilson obtained a business degree from Simon Fraser University in 1994 and worked full-time at Jack Cewe Ltd. (“JCL”) after graduation. Her husband, Mr. Ryan Wilson, also has a business degree and is an executive of a large multi-national corporation. He earns some $700,000 per year and also has business interests in common with his father.

[7] The Registrar found that Ms. Mide-Wilson had worked for some time at JCL, taking on an increasingly significant role, until March 2005 when her third child was born. Around that time, she and her grandfather had had a“very public and heated argument” about some aspects of the business. In the course of that argument, Ms. Mide-Wilson swore at her grandfather and left the office, never to return. (Para. 24.) She testified, however, that she and Mr. Cewe later reconciled privately and that he visited her and her family several times prior to his death.


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[8] Between October 2007 and May 2008, Mr. Cewe made substantial changes to his testamentary arrangements, executing a series of instruments that ultimately transferred most of his business assets, including his shares in Jack Cewe Ltd. (“JCL”), to a trust called the “Jack Cewe Alter Ego Trust”. Mr. George Home (a long-time friend and advisor) and Ms. Alice Gibson (Mr. Cewe’s long-time companion and an employee of JCL) were to be appointed trustees of the Trust on Mr. Cewe’s death and were entitled to “keep” the trust assets personally and/or to give them to such charities as they might decide. By his last will, executed in April 2008, Mr. Cewe left his Port Moody residence and a cash bequest of $500,000 to Ms. Mide-Wilson.

[9] Upon Mr. Cewe’s death, Mr. Home and Ms. Gibson commenced a proceeding in the Supreme Court of British Columbia seeking to have Mr. Cewe’s will pronounced in solemn form. Ms. Mide-Wilson was one of the defendants.

[10] Evidently, Mr. Cewe’s financial arrangements on death came as a complete surprise to Ms. Mide-Wilson. She had understood from comments Mr. Cewe had made that he intended JCL to remain within the family and to continue operating after his death. (Para. 23.) On learning of the Alter Ego Trust, she suspected that Mr. Home and Ms. Gibson had somehow unduly influenced her grandfather, who suffered from macular degeneration and had suffered various illnesses over the last several years of his life. Ms. Mide-Wilson began to seek legal advice, first from the “Legacy” firm, and then from McCarthy Tétrault, which prepared a draft statement of defence in the proceeding initiated by Mr. Home and Ms. Gibson. Eventually, she felt the litigation was not moving quickly enough. She consulted Mr. Dave Rennie, a chartered accountant and advisor to her father, who suggested other lawyers for her to consider. Mr. Wilson also spoke with a lawyer who was willing to take on her case and who estimated that her legal fees could be as much as $2,000,000 if the matter were to go to the Supreme Court of Canada.

[11] One of the law firms suggested by Mr. Rennie was the appellant Firm. Mr. Rennie was familiar with both Mr. Tomyn and Mr. Crickmore, whom he regarded as a “talented litigator”. A meeting was set up on October 1, 2008 to discuss the Firm’s taking over the defence of the action for Ms. Mide-Wilson. The matter had become urgent in the minds of Ms. Mide-Wilson and her husband because Mr. Home had told Mr. Wilson that he expected JCL would “go under because of the tax payable on [Mr. Cewe’s] death” and that JCL was in debt to the tune of some $6 million. (Para. 39.) Even more importantly, Mr. Home told Mr. Rennie that although he “might have earlier been prepared to give Ms. Mide-Wilson some $5 to $10 million dollars, he no longer intended to do so. She would simply receive the share of her grandfather’s estate that had been provided to her in the April 2008 Will.” (Para. 42.)

[12] The Firm had various meetings with Ms. Mide-Wilson, her husband and her father Mr. Mide, and gathered information concerning the circumstances under which Mr. Cewe had established the Alter Ego Trust and executed his last will (referred to as the “New Instruments”). By late October, Ms. Mide-Wilson had made it clear she wished to retain the Firm on a contingency arrangement.

[13] At a meeting held on December 5, 2008, Mr. Tomyn provided Ms. Mide-Wilson with a draft contingent fee agreement. She took it home with her for review and she and her husband again met with the Firm on December 8. After an initial discussion, Ms. Mide-Wilson and her husband went downstairs to a coffee shop, where they spoke with Mr. Rennie. They then returned to the Firm’s offices and negotiated some changes (described at para. 38 of the chambers judge’s reasons) to the proposed financial terms. The Firm incorporated these changes into the document and the parties signed it.

[14] The Agreement (or “CFA”) provided that the Firm’s fees for representing the Client in connection with the challenge to the New Instruments were to be:

a) 20% of any settlement entered into before December 9, 2009; or

b) 25% of any settlement entered into after December 8, 2009 and before December 9, 2011; or

c) one-third of any settlement entered into on the earlier of:

a. December 9, 2011 or thereafter; and


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b. six weeks before the first day of trial of any issue; or

d) one-third of any judgment.

[15] Mr. Crickmore proceeded with the filing of a notice of change of solicitor, and the Client’s statement of defence in the existing proceeding, together with a counterclaim that named Davis LLP (the law firm that had advised Mr. Cewe in connection with the New Instruments), and Home and Gibson as defendants. The pleading asserted that Mr. Cewe’s assets were worth more than $100,000,000.

[16] The Registrar described what happened next in the litigation, beginning at para. 52 of her reasons. The Firm obtained an expert opinion with respect to testamentary capacity which was expected to give strong support to the Client’s case. (Para. 63.) As well, the Firm succeeded in a motion to have Mr. Kirkham, the solicitor for Home and Gibson, removed as counsel of record on the basis of conflict of interest. Home and Gibson offered to settle the action for $22,000,000 − in response to which Ms. Mide-Wilson made a counteroffer to settle by paying Home and Gibson collectively the sum of $5,000,000 in return for all the Trust assets.

[17] Once the order removing Mr. Kirkham had been granted, the Firm suggested that mediation might be promising −a proposal to which Mr. Kirkham was favourably disposed provided his Firm did not have to withdraw as counsel in accordance with the court order. (Para. 67.) The mediation was held over two days on July 28 and 30, 2009. On the first day, the Client refused to move from her counter offer. The Registrar described the events of the second day of the mediation as follows:

Several times during the first day of mediation Mr. Rennie and Home had one-on-one discussions about the matter during a number of cigarette breaks they apparently took at the same time. Towards the end of the day, Mr. Rennie reported to the Client and HTLN [the Firm] that he had proposed a settlement figure of $10,000,000 (paid by the client to Home and Gibson) while Home was looking for payment in the $12,000,000 range. Ryan Wilson was apparently not happy with that number – he felt the $5,000,000 offer already made by Ms. Mide-Wilson was sufficient.

Somewhat to everyone’s surprise Home left the mediation at 4:30 p.m. on July 28.

On July 29, Mr. Rennie met directly with Home at the Vancouver Golf Club to see if an agreement might be reached. During their meeting, Home suggested that the matter might be settled if the Client offered to pay him and Gibson some $8,000,000, although he told Mr. Rennie that he intended, when the mediation resumed the next day, to open the negotiations at $10,000,000 and then (likely) settle at the $8,000,000 level.

Early in the morning on July 30, Home and Gibson agreed to settle the Action in exchange for payment to them of the sum of $8,000,000. The rest of the day was used to negotiate the details of the settlement. Mr. Tomyn spent his time drafting an agreement. Mr. Crickmore spent time reviewing it with the Client and with Home, and resolving their various concerns. A final settlement agreement was reached and signed on July 30, 2009 whereby the Client agreed to pay Home and Gibson $4,000,000 each. [At paras. 69-72; emphasis added.]

(Davis LLP was not required to pay any amount.)

[18] The Firm prepared the documents to reflect the deal, which was closed on August 31, 2009. (The settlement funds payable to Home and Gibson came from JCL and not Ms. Mide-Wilson’s personal resources.) The Client received letters of administration of her grandfather’s estate (including, I gather, effective ownership of the Trust assets) by consent order filed in mid-September.

[19] On September 30, 2009 Ms. Mide-Wilson met with Messrs. Tomyn and Crickmore to discuss their fees. Again, the Registrar described the events that followed:

… No agreement was made as to an appropriate amount for the fees. The parties met again on October 7, 2009. At that meeting Mr. Tomyn suggested a fee of $12,000,000 based on a net value of the Jack Cewe estate (including the assets in the Jack Cewe Alter Ego Trust) in the


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$100,000,000 range, from which amount was to be subtracted the $8,000,000 paid to Home and Gibson and some $12,000,000 in taxes to be paid in respect of the Jack Cewe Alter Ego Trust resulting in fees of $16,000,000 which Mr. Tomyn said he (HTLN) was prepared to discount to $12,000,000. Ms. Mide-Wilson was upset at the amount of fees proposed and left that meeting without any resolution regarding what fee she would pay HTLN for their work on her behalf in the Action.

On October 19, Ms. Mide-Wilson and Mr. Wilson met Mr. Crickmore at a restaurant in Burnaby to try and resolve (or at least discuss) HTLN’s fees. At some point during that meeting Mr. Crickmore suggested that some “adult supervision” might be in order. He then told the Client that HTLN had consulted counsel about the fee issue. He suggested to Ms. Mide-Wilson that she do the same and even recommended Mr. Macintosh, Q.C. to her as potential counsel.

Throughout October, November and December, HTLN continued to act on Mide-Wilson’s behalf in the Action (filing probate documents, for example).

On January 27, 2010, Ms. Mide-Wilson formally ended the solicitor-client relationship. On that same date, Mr. Macintosh, Q.C. filed the appointment to examine the agreement made between Ms. Mide-Wilson and HTLN. [At paras. 76-9.]

[20] The Firm’s first bill was issued on June 30, 2010 and simply referred to a fee equal to 20% of the net value of Mr. Cewe’s estate and the Trust assets. The final bill was issued on March 25, 2011 following completion of two expert reports prepared by expert valuators. The Firm now sought a fee of $16,971,015 based on a total “Business Value” of $115,850,000, less taxes and the amounts paid to Home and Gibson, resulting in a net value of $84,895,075. Once GST and disbursements were added in, the total fee was calculated to be $19,044,549.78. (Para. 82.)

The Registrar’s Reasons (2011 BCSC 1440)

Fairness

[21] The Registrar began her analysis of the issues before her with a brief reference to Anderson v. Elliott (1998), 60 B.C.L.R. (3d) 131 (S.C.), in which Sigurdson J. had described a contingent fee agreement as a “type of joint venture”, albeit not one between equals. The Registrar noted that such agreements have been permitted in this province only since 1969, in order to“allow persons who might not otherwise have the financial means to hire counsel to have access to justice.” (Paras. 85-6.)

[22] The Registrar observed that clients in Ms. Mide-Wilson’s position are protected not only by the common law but also by what is now s. 68 of the Act, and quoted from Commonwealth Investors Syndicate Ltd. v. Laxton (1990), 50 B.C.L.R. (2d) 186 (C.A.), known as “Commonwealth No. 1”, in which this court had described the considerations relevant to “fairness” and“reasonableness” respectively, under what was then s. 99(2) of the Barristers and Solicitors Act, R.S.B.C. 1979, c. 26:

The first step investigates the mode of obtaining the contract and whether the client understood and appreciated its contents. The inquiry would include whether, at the time the contract was entered into, there was any lack of capacity on the part of the client, whether there was any undue influence exercised or unfair advantage taken by the solicitor, whether any mistake was made, or whether any other flaw arose in the formation of the contract which would indicate that the client did not understand and appreciate its content. The onus would be upon the solicitor to satisfy the foregoing requirements of the inquiry. Should any of those be found, the contract would not be "fair" in the sense of the statute and Re Stuart. The court would declare the contract cancelled, or would modify it, or the bill could be remitted for taxation.

The second inquiry, assuming the contract is found to be “fair” involves an investigation of the "reasonableness" of the contract. On this investigation, extending from the time of the making of the contract until its termination or its completion, all of the ordinary factors which are involved in


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the determination of the amount a lawyer may charge a client are to be considered, and each factor may be the subject of professional evidence to assist the judge in determining the reasonableness of the fee in the particular circumstances. [At 198-99.]

[23] In Randall & Co. v. Hope (1996) reflex, 13 E.T.R. (2d) 257 (B.C.S.C.), Levine J. (as she then was) confirmed that the “two-step inquiry” approved in Commonwealth No. 1 continued to apply under s. 68(5) of the present Act and that as a result of statutory changes (about which more will be said below) since Commonwealth No. 1 was decided, both steps of the inquiry are concerned with the circumstances existing at the time the contract in question was entered into. In her words:

...The only change in the legislation from the Barristers and Solicitors Act [R.S.B.C. 1979, c. 26] to the Legal Profession Act [S.B.C. 1987, c. 25] is with respect to the time at which the reasonableness of the agreement is to be determined. Both fairness and reasonableness are to be determined under the circumstances existing at the time the contract was entered into. This may change some of the questions asked, but not the matters to be determined: fairness still involves the mode of obtaining the contract and whether the client understood and appreciated its content, and reasonableness still involves the amount of the fee. [At para. 36.]

Counsel in the case at bar did not challenge the assumption that the parameters confirmed in Commonwealth No. 1 and Randall remain good law.

[24] The Registrar also noted Rule 8-1 of the Law Society of British Columbia Rules, which provides:

(1) A lawyer who enters into a contingent fee agreement with a client must ensure that, under the circumstances existing at the time the agreement is entered into,

a) the agreement is fair, and

b) the lawyer's remuneration provided for in the agreement is reasonable.

(2) A lawyer who prepares a bill for fees earned under a contingent fee agreement must ensure that the total fee payable by the client

a) does not exceed the remuneration provided for in the agreement, and

b) is reasonable under the circumstances existing at the time the bill is prepared.

Fairness and Reasonableness under Section 68(5)

[25] With respect to “fairness” and the factors listed in Commonwealth No. 1, the Registrar found, inter alia, that:

• The Client was “clearly a well-educated, well-spoken and reasonably sophisticated businesswoman” and had the capacity to contract with the Firm.

• The Client had not been specifically told by the Firm that she should get independent legal advice before signing the CFA, but this fact was not sufficient to “raise the spectre of ‘undue influence’”.

• The Client had had experience with lawyers, knew that other lawyers could take her case if she was not satisfied with the Firm until the time she signed the CFA, and knew Mr. Hordo would “help out” at any time if the need arose.

• The Client’s suggestion that she felt she had to “go with” the Firm if she wanted to have Mr. Rennie as part of her “team” was not borne out by the evidence.

• Sometime prior to the signing of the CFA, the Client was told that the Firm could bill her on four possible bases − hourly rates multiplied by hours spent; hourly rates plus a “bonus for success”; a contingent fee based on a percentage of settlement or recovery; and a hybrid of a contingent fee and hourly rate retainer.


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• The Client had had “ample opportunity to consider her options”and decide for or against a contingent fee arrangement, which was the option clearly preferred by her father.

• The Client had had “adequate opportunity to seek independent legal advice” and knew various lawyers to whom she could have turned.

• No “pressure” had been asserted on the Client to sign the CFA; rather it was “the Client (or at least Mr. Wilson) who was pushing to get the pleadings in place”, rather than the Firm.

• Once Mr. Crickmore had drafted the pleadings, the Client could have taken them to any other lawyer of her choosing and instructed that lawyer to file it in the action.

• The Firm did not pressure Ms. Mide-Wilson to sign the CFA.

(At paras. 98-127.)

. . .

[29] In accordance with Commonwealth No. 1 and Randall, the Registrar next turned to the question of whether the CFA had been reasonable when entered into. She quoted a passage from Long, Miller and Mullins v. Sawchuk 2002 BCSC 542 (CanLII), in which Goepel J. (as he then was) had observed:

... The New Oxford Dictionary of English defines “unreasonable” as “beyond the limits of acceptability or fairness”. In my opinion, once it is determined that a contract has been fairly entered into, a registrar should be most reluctant, other than in an obvious case, to find a contract upon which the parties have relied to govern their relationship, to be unreasonable. The registrar should only do so if satisfied that the contract is beyond the limits of acceptability or fairness. [At para. 52, quoted by the Registrar at para. 180; emphasis added.]

[30] The Registrar had before her expert opinions provided by Mr. John Hunter, Q.C. and Mr. Darrell Roberts, Q.C. respectively, regarding the reasonableness of the CFA. Mr. Hunter wrote inter alia that:

There certainly [is] an expectation in a contingency fee arrangement that a higher fee will be paid for a successful outcome than would be paid on a conventional fee-for-services basis. The reasonableness of the increased fee then becomes a matter of degree.

In this case I understand that HTLN [the Firm] is taking the position that the contingency fee agreement yields a fee of $16 million, based on a value of the estate of $100 million and taking account of the required payments out to the plaintiffs and to tax authorities. In my opinion, a fee of $16 million for legal work having an opportunity cost of about $1 million and which involved drafting two pleadings, arguing two motions (plus a leave application) and assisting and setting a productive strategic course cannot be described as a reasonable fee. [At para. 184; emphasis added.]

For his part, Mr. Roberts opined that this was “very clearly” a case in which it would have been reasonable for the Firm to conclude that a court would find the Agreement to be fair and reasonable under s. 68(5). He emphasized that if Ms. Mide-Wilson had lost the case she would not have been out-of-pocket for any legal expenses other than some disbursements – in short, that she was “not putting any serious money of her own at risk”. On the other hand, the Firm had undertaken a “very big risk indeed … [The Firm] was putting at risk anywhere up to $2 million in a very uncertain endeavour.” (Paras. 186-87.)

[31] Applying the factors referred to in Randall, the Registrar found that:

• The challenges and strengths of the Client’s case lay somewhere between“average” and “formidable”. In the Registrar’s words, the case was “neither average, nor formidable.”

• Ms. Mide-Wilson was not required to establish “liability” and was not interested in a monetary payment: she “only wanted to become the primary beneficiary of the Jack Cewe Estate and sole trustee of the Jack Cewe Alter Ego Trust.”


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• At the time the Agreement was entered into, the parties“appeared” to be of the view that the assets at stake had a value of approximately $100,000,000. Evidently, this estimate was based on figures supplied to Mr. Tomyn by Mr. Rennie and the Client. The Firm had no independent evidence of value. The Registrar said it was appropriate to assume, therefore, that when the parties signed the Agreement they were all of the opinion that the value of the assets at issue was “in the $100 million range.”

• The Client’s only instruction was to “Get me the company back”.

• A lengthy trial “would have been contemplated”, involving all the usual matters undertaken by solicitors in the conduct of litigation.

• The required work would be “very technical” in nature.

• The Client’s retainer was an “all or nothing” proposition. Thus the risk to the Firm had been “considerable” and was not to be minimized. It could not have been contemplated that a trial could have been completed within one year.

• The Firm had the “requisite skill and expertise” to take on the matter for Ms. Mide-Wilson, who believed they would do a good job for her.

(At paras. 206-29.)

[32] Finally in connection with reasonableness, the Registrar referred again to Mr. Hunter’s opinion that a fee of $20 million would bring the legal profession into disrepute. He was of the view that a court would regard s. 68 of the Act and Part 8 of the Law Society Rules as ‘capping’ the fee that could be charged and found it particularly difficult to see “how such a huge fee could be justified for simply being the lawyer of record if the case happened to settle, independent of any consideration of the work done by the law firm.” Mr. Roberts did not deal with this matter specifically in his opinion, conceding in cross-examination only that if the action against Ms. Mide-Wilson had settled on the day after the agreement was signed, it would “likely be unreasonable for the law firm to request and be paid a fee in the $16-20 million range.” (Para. 231.)

[33] The Registrar reasoned, however, that:

… the question I must pose is not: If the Action settled on December 9, 2008 would the contemplated fee be reasonable? Rather, I must ask myself: Whether, on December 8, 2008, considering what the parties knew, were the contemplated fees as set out in the CFA reasonable? [At para. 232.]

After summarizing her key findings regarding reasonableness, she restated the question and answered it this way:

Considering all of these matters, I must ask myself (see Commonwealth Investors Syndicate Ltd. v. Laxton, (1994), 94 B.C.L.R. (2d) 177 (C.A.), perMcEachern C.J.B.C, at para. 47):

... as a matter of judgment, whether the fee fixed by the agreement is reasonable and maintains the integrity of the profession? In other words, I think the amount payable under the contract is the starting point for the application of the court's judgment.

There is no doubt that a fee of $20 million is significant. I do not believe that anyone could say otherwise. But was it “unreasonable”? I think not considering all of the circumstances of the Action and the specifics of the retainer between HTLN and Ms. Mide-Wilson on December 8. [At paras. 234-35; emphasis added.]

[34] In the result, she found that the CFA was neither unfair nor unreasonable for purposes of s. 68(5).

. . .


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Reasonableness of the Fee under Sections 70−71

[36] The Registrar turned next to the final question before her – “whether the ultimate fee is in fact reasonable.” (Sawchuk, at para. 56.) This question required her to address the (non-exhaustive) list of “circumstances”enumerated in s. 71(4), quoted at para. 3 above. Applying them to this case, the Registrar found that:

• The matter taken on by the Firm for the Client was “of some complexity and difficulty”, with “some novel aspects”.

• The Firm had not done a “large” amount of work when the matter settled but had put “maximum pressure” on Home and Gibson from the outset.

• The members of the Firm employed on the file had brought a“degree of skill and specialized knowledge” to the matter and the Client had not expressed any complaints with their legal work.

• Although Mr. Rennie, who had precipitated the settlement, was an integral part of the “team”, he alone could not have achieved the settlement without the work of the Firm.

• The Firm had spent approximately 2,500 hours reaching the settlement and post-settlement matters. If one used an average hourly rate of $500 per hour the fees generated on the file would be some $1,250,000 or if the time of an outside lawyer retained by the Firm was included, some $1,325,000.

• The matter had been “of the greatest of importance” to the Client, whose sole objective in retaining the Firm was to “get the company back.”

• The result achieved had been excellent.

• The Firm had risked all of their time and effort and at the time their retainer terminated had over $1.25 million “worth” of time invested. However, the Registrar continued:

In an unusual case such as this, with such a large amount of money at stake, the temptation to deviate from sound principles in the face of what appears to be a “large fee for a little work” should be resisted. Contingent fee arrangements were introduced in this province for a reason: so that parties with limited means could have access to justice without having to risk all of their assets on legal fees. The expectations of such bargains need to be protected so that contingent fee arrangements are still beneficial to both parties entering into them, and so they remain as a viable option in our legal system.

When comparing the Solicitors’ claim to the calculated hourly wage equivalent of work actually done, the discrepancy is obvious. However, this cannot be the focus of this analysis. If the Action had not settled as and when it did and had it instead proceeded to trial, if Ms. Mide-Wilson been unsuccessful in the result, the Solicitors would have been found to have gambled and lost. The possibility of this exact scenario was one of the reasons the Client elected a contingent fee arrangement. It could be argued that, in this scenario, it would bring the legal system “into disrepute” for the Solicitors to try and go back and demand an hourly rate for their efforts after the fact.

The Client had sufficient assets to pay the Solicitors through a number of arrangements; a contingent fee arrangement was not the only way for [her] to obtain legal representation as is often the case with people of limited means. The CFA was a business decision based on risk and made by sophisticated parties. The Client cannot demand one form of retainer, and then retroactively change to another form of payment simply because she finds the fees to be simply too high and not (perhaps) what she anticipated they might be. [At paras. 495-97; emphasis added.]

• The Client was, if not difficult, single-minded in her instructions and adamant that no quarter be given to her opponents.


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• The Client had the ability to pay fees on an hourly basis but preferred a contingency arrangement.

• The Client’s suggestion that if she were required to pay the Firm the amount requested she would have to sell some of the trust assets was found not to be a sufficient reason to set aside the CFA. In addition, it would not have been impossible for the Client to pay that amount to the Firm.

• The Firm had not misconducted itself in its dealings with Mr. Rennie.

(At paras. 473-513.)

[37] Finally in determining the “fair fee” in this case, the Registrar stated:

Mr. Hunter suggested that, in deciding the “fair fee” I should also be mindful of the fact that HTLN is seeking a substantial recovery (some 15 to 18 times the amount their fees would be had this file been billed on an hourly rate basis). Mr. Hunter says that both the provisions of the Actand the Law Society Rules relating to contingent fee arrangements and fee arrangements in general suggest that there is a “cap” on legal fees in the sense that legal fees must be “reasonable” in all of the circumstances, and that I should not award HTLN fees at such a level as to bring the legal profession into some disrepute.

Registrar Cameron recently considered this matter in McQuarrie Hunter v. Parpatt, 2011 BCSC 800 (CanLII). In that case, the learned Registrar reduced the fee to the law firm to “maintain the integrity of the profession and to arrive at a fee that is reasonable” (at para. 73). In that case, the learned Registrar felt that a 100% premium on the time spent by the law firm to the date of settlement was reasonable. In my view, that decision must be read in its particular context and circumstances. In general, in my view, it is imperative that parties be held to the bargain they made. Solicitors who enter into contingency fee arrangements should be able to do so with confidence; knowing that, if their bargain is fair and reasonable, it will, for the most part, be upheld. This applies equally to clients who, in entering into agreements with their counsel, must be able to move forward in their matter knowing exactly how the fees are to be calculated and thus make reasoned decisions regarding settlement of their matter knowing they cannot be charged any more than a set percentage of recovery.

In my view, taking into account all of the factors set out in the Act, including all those “essential to justice and fair play”, the amount of the fees reasonably necessary and proper to conduct the Action is $9,000,000. [At paras. 515-17; emphasis added.]

. . .

The Chambers Judge’s Reasons (2013 BCSC 374)

. . .

Fairness When Agreement Entered Into

. . .

[44] Accordingly, the judge upheld the Registrar’s findings that the Client had not lacked capacity; that the Firm had not exercised any undue influence or taken any unfair advantage of her; that there had been no mistake or flaw in the Agreement; and that the Client “had understood and appreciated” its contents. The requirements of fairness, in other words, had been met. This holding is not challenged on the Client’s cross appeal, which is limited to the“reasonableness” branch of s. 68.

Reasonableness When Agreement Entered Into

. . .

[50] In the result, the chambers judge agreed with the Registrar’s conclusion that the CFA had not been unreasonable at the time it was entered into. (Para. 115.)

. . .


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‘Fair Fee’ underSections 70−71

[52] The final task before the chambers judge was to decide whether the Registrar had erred in concluding that a proper fee in this case would be $9 million. He noted that although a contingent fee agreement might be both fair and reasonable when entered into, the fee ultimately charged by the lawyer might not be recoverable under ss. 70-71 (citing Doig v. Davidson Muir(1998), 48 B.C.L.R. (3d) 53 (C.A.), at para. 19). As well, he said, the analyses under ss. 68 and 70-71 are “not mutually exclusive, but work in concert to ensure that both the initial fee agreement and what is subsequently billed … are appropriate.” (At para. 153, citing Coad v. Rizk (1999), 68 B.C.L.R. (3d) 340 (S.C.).)

[53] In undertaking the ss. 70-71 analysis, the chambers judge referred first to Commonwealth Investors Syndicate Ltd. v. Laxton (1994), 94 B.C.L.R. (2d) 177 (C.A.) (“Commonwealth No. 2”). There, Chief Justice McEachern for the Court had described the Court’s task under the statutory test that governed the agreement in that case, s. 99(2) of the Barristers and Solicitors Act, R.S.B.C. 1979, c. 26. It provided that a court could modify or cancel an agreement not found to be fair and reasonable. He reasoned as follows:

Instead of making such an assessment, I believe this Court, particularly, must remember its task. This is not to fix a fee either by a reconsideration of all the evidence and the application of judgment or arbitrarily, however one characterizes such a process, but rather to decide whether the agreement operates reasonably in the context. All the circumstances must be considered, including the Yulefactors, the risks and expectations, and the terms of the bargain which is the subject matter of the inquiry. With all this in mind, the court must then ask, as a matter of judgment, whether the fee fixed by the agreement is reasonable and maintains the integrity of the profession? In other words, I think the amount payable under the contract is the starting point for the application of the court's judgment. [At para. 47; emphasis added.]

. . .

[55] The judge briefly reviewed Mr. Hunter’s opinion, which was supported by a registrar’s decision in McQuarrie Hunter v. Parpatt 2011 BCSC 800 (CanLII). At issue in that case was a contingency agreement under which the fee claimed was more than double what it would have been on an hourly basis. In reducing the fee to approximately double the hourly rate total, the registrar had stated:

To ensure integrity it is clearly not always necessary or appropriate to factor out any premium payment to a law firm resulting from a comparison between the CFA and a notional hourly rate bill but there is a point when the differential requires an adjustment to maintain integrity. I consider this case to be one for such an adjustment. [At para. 74; emphasis added.]

[56] Against this, there was the opinion of Mr. Roberts, who disagreed that there was or should be any “cap” on the Firm’s recovery – particularly, he said, where the Client had the financial ability to pay “ongoing” fees but had chosen to finance the litigation on the basis of a contingent fee agreement. Indeed, Mr. Roberts wrote that the fee should not have been reduced even by $1 million. Otherwise, he said, the Court would be encouraging litigants to“freely abandon their honourably made agreements”, a result not intended by the Act. (Para. 162.)

[57] The chambers judge reviewed various findings of the Registrar, and expressed his agreement with all of them – except for her endorsement of Mr. Roberts’ ‘philosophy’ regarding contingency agreements. The judge took issue in particular with paras. 495-97 of the Registrar’s reasons (quoted above at para. 36), and observed:

With greatest respect to the registrar, in my opinion, she erred in principle in the emphasis she placed on the terms of the CFA in determining the amount of the fee. While such an approach may well have been appropriate under the legislation that governed at the time of Commonwealth No. 2, it does not reflect the present legislation. The present legislation requires the registrar to determine the proper fee. It specifically directs in s. 71(5) of the LPA that the discretion of the registrar is not limited by the terms of the agreement between the lawyer and the lawyer’s client.

As noted by Hall J.A. in Abel, contracts between solicitors and their client constitute a special and unique class of contracts that are subject to broad equitable principles in which the objective


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theory of contract is attenuated by statute. The legislature has mandated that a client has the right to have the proper fees determined by the registrar, regardless of the terms of the agreement.

A client need only pay a proper fee. I agree with Registrar Cameron’s comment in Parpatt that there is a point when the differential between the work done and the fees payable under the contingency agreement must be adjusted to maintain the integrity of the profession. In such circumstances the terms of the contract must be sacrificed to insure that the client pays no more than a proper fee.

An error in quantum can be so gross as to indicate an error in principle. I find that has occurred in this case. There must be a relationship between the legal services actually provided and the ultimate fee. In Re Stuart [Ex parte Cathcart [1893] 2 Q.B. 201], which I note was decided in 1893, the court opined that “it is impossible to say that work which according to information given by the taxing master to the divisional court could be properly remunerated by the sum of 20£can be reasonably charged at nearly 100£.” [At paras. 171-74; emphasis added.]

[58] As for what an appropriate fee would be, he suggested again that a legal account must have “some relationship” to the “actual work carried out”, and that to allow the fee of $9,000,000 awarded by the Registrar would, given the work done by the Firm, “call into question the integrity of the profession.” (Para. 178.) The terms of a contingent fee agreement were said to “set the maximumfee” (my emphasis) chargeable by the Firm. Again in the judge’s words:

Regardless of the terms of a contingency fee agreement, [the factors set out in s. 71(4)] and considerations cap the amount that lawyers can charge. A lawyer is never entitled to more than a proper fee.

The [Firm] provided a most valuable service to the Client. They deserve to be handsomely paid for their efforts. That payment, however, must reflect the services they actually provided and cannot be for an amount that does not maintain the integrity of the profession. [At paras. 183-84; emphasis added.]

[59] On the other hand, the chambers judge said, the figure of $4 million suggested by Mr. McIntosh on behalf of the Client adequately recognized the expectation that “a lawyer acting on a contingency fee based upon results is generally entitled to a larger fee than would be appropriate in non-contingency cases”but did not take into account the risk assumed by the Firm, or the success achieved. Considering all the relevant factors, the judge concluded that a fee of $5 million should be substituted for that certified by the Registrar. (Para. 187.)

[60] His order allowing the appeal and setting the fee at $5 million was filed on June 24, 2013, by which time the Firm had filed its notice of appeal to this court and the Client had filed her notice of cross appeal.

Appeal and Cross Appeal

. . .

Commonwealth No. 2 and the Role of the Agreement under Sections 70–71

. . .

[69] While it is true that the Court in Commonwealth No. 2 was dealing with legislation that has since been amended, the Court’s comments, in my opinion, continue to provide important guidance, given the two main types of review that are now mandated by ss. 68 and 70-71 respectively. Once an agreement has been found not to be unfair or unreasonable under the circumstances existing when it was entered into, the inquiry under ss. 70-71must involve a wider group of factors relevant to the entire period of the retainer. As noted by the Chief Justice at para. 47, “All the circumstances must be considered, including the Yule factors, the risks and expectations, and the terms of the bargain which is the subject matter of the inquiry.” In Commonwealth No. 2, this analysis took place under the rubric of the predecessor of s. 68, because it contemplated the review of the overall reasonableness of the agreement not only at the time it was entered into, but also at the time of its application. As such, it effectively required a review of the fee − a process now conducted specifically under ss. 70-71.


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. . .

[73] In addition to Commonwealth No. 2, counsel for the Firm referred us to Orion Trucking Centre Ltd. (Trustee of) v. CIT Financial Ltd. 2006 BCCA 418 (CanLII). It concerned an application by a trustee in bankruptcy unders. 197(7) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, but is instructive in this case. The registrar in Orion had taken the view that regardless of the fee agreement between the trustee and its solicitors, she was required to review the solicitor’s account on a quantum meruit basis, treating the contingency agreement as “no more than a factor”to be considered in fixing a reasonable fee. The Court found that the registrar had erred in principle in approaching her task in this way. Lowry J.A.’s reasoning also resonates in the case at bar:

Having accepted that the solicitors’ fee might be more that 10% of the estate, she was required to determine if the fee they had rendered for their services was reasonable. That meant that, contrary to what she said (para. 37), she had to determine whether the fee rendered pursuant to the [contingent fee agreement] was a reasonable fee or whether there was something that rendered it unreasonable. Was the fee, being a contingent fee, a reasonable fee in the circumstances? … I see no sound basis upon which it can be said the Registrar was required to effectively put the [contingent fee agreement] to one side and proceed to tax the account on the basis of quantum meruit while, in some way, treating the existence of the trustee’s agreement with the solicitors as simply a factor to be recognized in determining what was a reasonable fee for the services rendered, however that might be done. I do not see how a reasonable fee could be determined without consideration of the terms of the agreement between the solicitors and client under which the services were performed …

… The registrar did not say that the contingent fee is not a reasonable fee, nor did she explain why it could be said to be unreasonable. She simply determined what she considered to be reasonable for the services rendered on a quantum meruit basis while recognizing that the trustee and the solicitors had entered into the [contingent fee agreement] meaning the solicitors were at risk of not being paid when they undertook the work.

…

To hold that in bankruptcy proceedings solicitors’ accounts can only be taxed on a quantum meruit basis would impair, if not largely defeat, the ability of trustees to enter into contingent fee agreements with solicitors in circumstances where there may be no alternative prospect of advancing the interests of the creditors that a trustee is duty-bound to serve. [At paras. 8, 9 and 11; emphasis added.]

. . .

[76] The Client did not take issue, at least directly, with the relevance of the terms of a contingent fee agreement under ss. 70-71, nor with the“starting-point” approach suggested by McEachern, C.J.B.C. Indeed, the Client in her factum suggested the following method of analysis, which is consistent with Commonwealth No. 2:

The proper approach to the application of section 71(4) and 71(5) where there is a contingency fee agreement is firstly to determine whether the amount of the bill can be justified as reasonable having regard to the factors enumerated in section 71(4) and all other factors required by justice and fair play to be considered, including the risk of non-payment taken on by the Solicitors. If it can be, that is the end of the inquiry. If it cannot be, as both the Registrar and Chambers Judge concluded in this case, then the Court ought to determine a fee as close as it reasonably can to the result mandated by the CFA, having regard to those same factors.

I am in general agreement with this description.

. . .

[77] . . . The task for the chambers judge, from whom thisappeal is taken, was to decide whether the Registrar had erred in failing to consider or to give sufficient weight to all relevant factors. I turn to examine the reasoning of the chambers judge from that perspective.


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Policy Arguments

[78] The Firm submitted that the chambers judge’s errors regarding the continued relevance of Commonwealth No. 2 led him to err further − in particular, that he wrongly “seized upon” the time spent by the Firm as the principal factor to be considered under s. 71, rather than the terms of the Agreement, the result achieved and the parties’ expectations. This submission and related ones advanced in this court on the Firm’s behalf require us to examine the weight to be given to the broader policy concerns that must animate the court’s task in a review under ss. 70-71 −on the one hand the integrity of the profession (which the Firm suggested in passing may be threatened only by conduct that is fraudulent or unconscionable) and on the other hand, the enhancement of access to justice. The Firm contends that the latter requires predictability as opposed to “arbitrary compensation rules” that measure justice according to the “length of the Chancellor’s foot.” In its submission, the chambers judge’s “serial repetition” that there must be some relationship between the fee and the work carried out or the services provided “leaves members of the Bar none the wiser. [The chambers judge] could just as easily have chosen $3 million or $7 million as the proper fee and nothing in his reasoning would enable one to determine why one figure should be preferred over the other.”

[79] This brings us as well to what the Client described in her factum as the“central issue” in this case – whether a fee agreement (here, a contingent fee agreement) is as the Registrar appeared to find, essentially a contract like any other that should be enforced in all but exceptional cases, or whether there is an “overarching requirement, grounded in the solicitor’s fiduciary duty to the client and the profession’s duty to the public, to ensure that the solicitor’s remuneration under the agreement and the final bill are reasonable in amount, reflecting the work put in and the actual risk assumed by the solicitors”. These policy considerations are apparent in the following critical portions of the chambers judge’s reasoning which I repeat here for convenience:

A client need only pay a proper fee. I agree with Registrar Cameron’s comment in Parpatt that there is a point when the differential between the work done and the fees payable under the contingency agreement must be adjusted to maintain the integrity of the profession. In such circumstances the terms of the contract must be sacrificed to insure that the client pays no more than a proper fee.

An error in quantum can be so gross as to indicate an error in principle. I find that has occurred in this case. There must be a relationship between the legal services actually provided and the ultimate fee. In Re Stuart, which I note was decided in 1893, the court opined that “it is impossible to say that work which according to information given by the taxing master to the divisional court could be properly remunerated by the sum of 20£ can be reasonably charged at nearly 100£.”

…

In order to maintain the integrity of the legal profession, a legal account must have some relationship to the actual work carried out. To allow the fees awarded in this case given the work the Solicitors actually did would call into question the integrity of the profession.

…

A contingency fee agreement is not a lottery ticket. Success in the action does not guarantee a fee in the amount set out in the agreement. Even if the agreement was neither unfair nor unreasonable at the time it was entered into, the final account must be reasonable and proper given the services provided and the risk undertaken.

…

In Inmet, Bauman J.A., as he then was, for the majority on this issue, directed that in determining the proper fee the registrar should take a holistic approach rather than performing a mathematical calculation on the basis of time spent. While time spent may be an important factor, it cannot be overemphasized to the exclusion of other proper considerations. Recovery under a contingency agreement is not limited to some predetermined multiple of time spent.

While the terms of the contract set the maximum fee, the proper fee is ultimately determined by a consideration of the factors set out in s. 71(4) augmented as noted in Commonwealth No. 2 by


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those further considerations that apply only to contingency fees including the risk of no recovery and the expectation of a larger fee based upon results than would be appropriate in non-contingency cases. Regardless of the terms of a contingency fee agreement, those factors and considerations cap the amount that lawyers can charge. A lawyer is never entitled to more than a proper fee.

…

In the circumstances of this case, I find that $9 million is not a proper fee for the work actually done and does threaten the integrity of the profession. While the Solicitors took on a case in which there was great risk, the case and the risk ended within months of the commencement of the retainer. [At paras. 173-74, 178, 180, 182-83 and 185; emphasis added.]

Integrity of the Profession

[80] This court’s reference in Commonwealth No. 2 to the integrity of the profession in the context of lawyers’ fee agreements has very deep roots. It has informed the matter of lawyers’ fees for centuries. In the dim mists of the common law, a barrister could not sue for payment of his fees and indeed could not make an express contract with a client for the payment of future fees. Thus Blackstone’s Commentaries (19th ed., 1783) stated at 28 that “It is established … that a counsel can maintain no action for his fees, which are given … not as a salary or hire, but as a mere gratuity, which a counsellor cannot demand without doing wrong to his reputation.” (See also McDougall v. Campbell reflex, [1877] O.J. No. 100 (Ont. Q.B.) at para. 86.)

[81] That rule, of course, has long since been abolished in British Columbia, both by statute and judicial decision: see Legal Profession Act, R.S.B.C. 1911, c. 136, s. 97; British Columbia Land and Investment Agency, Ltd. v. Wilson (1903) 9 B.C.R. 412 (S.C.) and generally, Mark Orkin, Legal Ethics (1957) at 145. Agreements regarding fees first became lawful in 1901, with the caveat that “such remuneration for services of Solicitor or Barrister shall in no case exceed in value the amount of fees that would be fixed for such services by the schedule of fees at the time being in force in this province.” (Legal Profession Act Amendment Act, S.B.C. 1901, c. 4, s. 1.) The same section provided that a client could apply to the Supreme Court, and that where the judge did not consider the contract“fair and reasonable”, he could either modify the contract or set it aside and substitute costs that would otherwise be payable on a taxation.

[82] Historically, contingent fee agreements in particular were considered inherently incompatible with the integrity and honour of the legal profession. A court would not countenance a solicitor’s making “gain to himself at the expense of his client, beyond the amount of the just and fair professional remuneration to which he is entitled”. (Tyrrell v. Bank of London (1862), reflex, 10 H.L. Cas. 26 at 44, 11 E.R. 934 at 941,per Lord Westbury.) Lord Esher observed in Pittman v. Prudential Deposit Bank Ltd. (1896) reflex, 13 T.L.R. 110 (C.A.) that:

In order to preserve the honour and honesty of the profession it was a rule of law which the court had laid down and would always insist upon that a solicitor could not make an arrangement of any kind with his client during the litigation which he was conducting so as to give him any advantage in respect of the result of that litigation. [At 111; emphasis added.]

. . .

[86] A variety of objectives that are now subsumed in the phrase “integrity of the profession” have animated courts’ attitude to lawyers’ fee agreements generally and contingent fee agreements in particular. Early common law courts were concerned to forestall abuses of the legal system that could be perpetrated by lawyers on clients and on the court system in which lawyers held (and continue to hold) a special place of trust. Sharing in the proceeds of litigation could tempt lawyers to exaggerate their clients’claims, to suppress evidence, to modify advice given to clients, or otherwise to depart from the professional attitudes and conduct expected of them.

[87] These concerns have not abated in recent years. To the contrary, in the modern Canadian context, as the profession grows more and more ‘business-like’, it seems more important than ever that lawyers be, and be seen as,


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trustworthy, independent and free from conflicts. Although written some time ago, this passage from Minish, supra, captures the types of difficulties that may arise from contingency arrangements in the modern setting:

… This conflict begins at the very outset, when the contract is being negotiated between lawyer and client. As a partner in this venture into justice the lawyer is subject to his own temptations to obtain the best deal for himself. The conflict is particularly evident at the time for settlement. The advice given the client is crucial and should be motivated by desires to benefit the client only. Once the fee contract is signed the lawyer has a strongly protected financial interest in the claim; as he invests time and money in it, his stake in the outcome increases. He gets paid only if the outcome favours his client. The recovery determines both the client’s compensation and the lawyer’s remuneration. For these reasons, decisions as to when to settle and for how much assume a greater significance for the lawyer under the contingency fee arrangement. Theoretically control rests with the client but practically it is the lawyer who handles the settlement. Usually, the common interest in a larger recovery assures that the settlement is favourable to the client. On the other hand, it may be financially more profitable for the lawyer to handle a mass of small claims, with a minimum of time expenditure on each and the possibility of quick settlements, than to treat each as a unique case and fight for the maximum possible recovery for the client.

The other conflict which can be breached as an indirect result of contingency contracts is the lawyer’s duty to the court and to the administration of justice generally. The successful operation of the adversary system depends on a certain degree of self-restraint by the lawyer in the presentation and argument of his client’s case. It has frequently been claimed that, due to the speculative investment in the proceedings, the lawyer may exert unprofessional efforts in order to capitalize on his contingent interest. Alleged abuses include: “building a case” by the construction of evidence, improper coaching of witnesses, use of professionally partisan expert witnesses (at times themselves appearing for a contingent fee), demonstrative evidence designed solely to elicit the emotions and sympathies of the jury, improper examinations and cross-examinations, and inflammation of damages. As one judge put it: “How … can the courts put full faith in the sincerity of our labours as aids to them in the administration of justice if they have reason to suspect us having bargained for a share of the result?”

… [It] is a fact that the contingency fee arrangement places a pressure on the barrister which is absent when the fee is payable regardless of the outcome; the extent to which this pressure is manifested is unknown but hotly debated.

Another major complaint of those opposed is that the use of contingent contracts results in excessive fees; the contingent fee means that no real thought has been given to the value set for the services rendered and the case is undertaken as a joint venture. [At 72-3; emphasis added.]

[88] On a more general level, it also seems to me that the public cynicism resulting from recent events in the United States involving“professionals” who have manipulated or exploited, if not abused, regulatory systems in order to reap personal rewards in the millions of dollars, should give lawyers pause. One must question whether members of the Bar, who occupy positions of special trust and confidence, should chafe too strongly against rules designed to ensure that the line between lawyers and others trading on their own account does not become blurred. In saying this, I do not intend to criticize any conduct on the part of the Firm in this case −only to suggest that there are profound reasons why the sanctity of contact cannot be determinative and why court supervision of lawyers’ fee arrangements continues to be justified in today’s society.

Access to Justice

[89] Nevertheless, the practical demands of “access to justice” have led courts and legislatures to recognize that the old rules and assumptions must give way, at least in part. Contingency agreements are obviously an important means by which not only “the poor” (see Minish, at 71) but the middle class may be enabled to bring their causes, public or private, to courts of law. (See Pascoe Pleasence and Nigel J. Balmer,“Caught in the Middle: Justiciable Problems and the Use of Lawyers” in Trebilcock, Duggan and Sossin, eds., Middle Income Access to Justice (2012)


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at 50-1.) As stated by O’Connor, A.C.J.O. in McIntyre Estate v. Ontario (Attorney General) (2002), 61 O.R. (3d) 257 (Ont. C.A.):

There can be no doubt that from a public policy standpoint, the attitude towards permitting the use of contingency fee agreements has undergone enormous change over the last century. The reason for the change in attitude is directly tied to concerns about access to justice. Over time, the costs of litigation have risen significantly and the unfortunate result is that many individuals with meritorious claims are simply not able to pay for legal representation unless they are successful in the litigation.

…

… the advantages to the administration of justice from permitting properly regulated contingency fee agreements in the form of increased access to justice are compelling. Indeed, there is a strong case to be made that the continuation of a per se prohibition against contingency fee agreements actually tends to defeat the fundamental purpose underlying the law of champerty −the protection of the administration of justice and, in particular, the protection of vulnerable litigants … [At paras. 55, 72.]

(See also O’Brien v. Tyrone Enterprises 2012 MBCA 3 (CanLII) at paras. 47-51.)

[90] Counsel for the Firm did not take issue directly with the notion that the integrity of the profession should inform a review under ss. 70-71, but submitted that if the chambers judge’s decision was allowed to stand, lawyers would be significantly deterred from taking cases on contingency that are “large, complex and risky”. As stated in the Firm’s factum:

… In the words of Sigurdson J., [in Anderson v. Elliott, supra] under a CFA, “the lawyer and the client enter a type of joint venture where they will either share in the fruits of the action or suffer the defeat together.” However, the relationship that the chambers judge has imposed on the parties is nothing like a joint venture. The chambers judge’s decision deprives the parties of their equal bargaining position and their opportunity to make an agreement that suits them.

As the registrar recognized at para. 495, in circumstances where the CFA is fair and reasonable“[t]he expectations of such bargains need to be protected so that contingent fee arrangements are still beneficial to both parties entering into them, and so they remain as a viable option in our legal system.” [Emphasis added.]

As I see it, this argument is essentially one that challenges the weight given by the chambers judge to the integrity of the legal profession – as compared to the primacy given by the Registrar to access to justice.

[91] (I note parenthetically that in the case at bar, the importance of access to justice is attenuated, given that Ms. Mide-Wilson was able to afford legal fees calculated in the usual way. She simply preferred a contingency arrangement under which the Firm assumed all the risks of non-recovery. It is interesting to note that at least in 1980, the Code of Professional Ethics of the American Bar Association stated that contingency fee contracts should be entered into “only in those instances where the arrangement will be beneficial to the client.” Minish suggests that that rule could be interpreted to mean that a contingency arrangement will “benefit” a client only where he or she is financially unable to institute litigation on the usual basis. Where the client is able to pay a regular fee, she writes, “all the evils of the contingent fee contract exist without the great justification for its use; no indigent person is being helped to press a cause of action whose merits would not otherwise be tested.” [At 72.])

[92] Setting Ms. Mide-Wilson’s personal circumstances aside, however, the “joint venture” analogy asserted by the Firm will, with respect, seldom be apt: while both parties to such an arrangement share a financial interest in the outcome of the litigation, the essential relationship is not one between two equal parties: the lawyer owes a fiduciary duty to the client and professional duties to the court; he or she has expertise the client lacks; the lawyer takes on most, or all, of the financial risk; the client is entitled to discharge the lawyer at any time regardless of the terms of the agreement (see McQuarrie, Hunter v. Foote (1982), 41 B.C.L.R. 123 (C.A.) at 126-27); and the public interest is served by ensuring that the lawyer retains the appropriate degree of independence. As long as these conditions


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remain extant, it seems to me that the statutory and judicial constraints on lawyers’ fees that I have described must remain in place and be meaningfully enforced by courts of law − allowing, however, for access to justice to be considered as well.

Arbitrariness

[93] Finally, the Firm submitted that the chambers judge’s reduction of its fee on the basis of the integrity of the profession introduces an element of arbitrariness to the determination under ss. 70-71. On this point, counsel cited the remarks of Mr. Justice K. Smith in a class action case, Endean v. Canadian Red Cross Society 2000 BCSC 971 (CanLII), who observed:

In my opinion, to say that the fee is “simply too much” invites a completely arbitrary assessment, one that depends upon the subjective opinions and whims of the particular judge hearing the application. If the proposed fees are to be reduced on the ground that they impair the integrity of the profession, some principled basis must be suggested for doing so. None has been suggested and I cannot agree that the proposed fee should be reduced by an arbitrary amount ostensibly to protect the integrity of the profession. [At para. 85; emphasis added.]

[94] At the same time, Smith J. cited with approval the statement in Commonwealth No. 2 that the question for the court was “whether the fee fixed by the agreement is reasonable and maintains the integrity of the profession?”. He continued:

Esson C.J. (as he then was) commented on this concept in Richardson (Guardian ad litem of) v. Low(1996), 23 B.C.L.R. (3d) 268 (S.C.) at paras. 29-30. I think that what he envisaged in using the phrase "integrity of the profession" was the decency, honour, and high-mindedness of the profession, both in substance and in public perception. He referred, for example, to the willingness of lawyers to readily reduce the amount payable under a contingent fee agreement when circumstances are such that the agreed fee would be disproportionate to the amount of effort, risk, and cost involved; that the lawyer will be able to fill with other remunerative work the time set aside to try a case that was settled; and that the client needs the funds and cannot really afford to pay them to the lawyer despite the agreement. [At para. 73; emphasis added.]

As well, Smith J. noted Chief Justice Esson’s observation in Richardson v. Low to the effect that “The question,“What is the reasonable fee?” must be answered not as a percentage, but in dollars.” (Para. 35 of Richardson; my emphasis.)

[95] Esson C.J.’s remark does remind us that although fees based on percentages may be the norm in contingency arrangements, the amountof the fee ultimately charged to the client must be the focus of the court’s inquiry under ss. 70-71. The case at bar is unusual in that the amount recovered by the Client was, in one sense, not a function of the work done by the Firm. Nor were there any natural limits on recovery as there are in personal injury cases, for example, where damage awards and settlements represent an estimate of what is necessary to compensate a plaintiff for a specific loss or injury. Here, it was “all or nothing”. Ms. Mide-Wilson told the Firm her grandfather’s estate was probably worth $100,000,000; but if the estate had turned out to be worth $200,000,000, the Firm would have claimed $40,000,000 as its fee. Conversely, had the estate been worth $10,000,000, the Firm could have claimed only $2,000,000.

[96] In my view, this is the ‘arbitrary’ aspect of the case, not the consideration of “all the circumstances” required bys. 71. Courts must regularly consider a wide variety of factors and competing principles: that is the nature of the judicial function and in this instance, is required by the statute. I do not agree that the chambers judge’s analysis boils down to determining the length of the Chancellor’s foot, or that the chambers judge was not entitled to take the view that the fee should bear some relationship to the services actually provided by the Firm. That indeed is one of the “circumstances” listed in s. 71(4), and some of the other factors, including those described in paras. (a), (b) and (c) thereof, were fairly neutral in this instance – in contrast to the situation in Commonwealth No. 2, where the “skill in research, skill in tactical approach and skill in execution” of the lawyer were found to have given rise to an “immense achievement.” (Para. 43.)


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[97] I believe most members of the public would think it sensible for “services actually provided” to be accorded importance in any fee review. At issue here, after all, is a fee for service − not, as Mr. Macintosh observed, a winning lottery ticket. The Client was led to believe she would be treated fairly if her claim against Mr. Cewe’s estate settled quickly. Counsel seem to have agreed it did not settle “quickly”, but it did settle within eight months and with much less effort than anyone could have expected. No discoveries were held; no document exchanges took place; and any trial was far in the future when Home and Gibson “caved” on the second day of the mediation.

[98] The chambers judge found that the Registrar had given too much weight to the terms of the CFA and, at least implicitly, that she had failed to give sufficient weight to the integrity of the profession. Again, I am not persuaded he erred in so holding (and I would add that she overemphasized the importance of holding parties to their bargains in this context) or in finding that a fee of $9,000,000 did not strike the right balance between an amount that handsomely rewarded the Firm and one that grossly over-rewarded it. The chambers judge’s choice of $5,000,000 does in my view strike a reasonable balance, and I would not disturb it.

. . .

Conclusions

[102] At the end of what I fear is too long and tedious a discourse, and applying the standard of review enunciated in Old Man River, I conclude that:

a. if and to the extent the chambers judge intended to suggest that the existence and terms of a contingent fee agreement are not an important focus (or the “starting point”) in the determination of whether a lawyer’s account should be confirmed under ss. 70-71 of the Legal Profession Act, he was in error;

b. the chambers judge did not err in finding that the integrity of the profession should inform the process, or in finding that the Registrar had failed to give sufficient weight to that factor;

c. the chambers judge did not err in holding that in general, some relationship should exist between the “work done” by the lawyer, and the amount of the fee; nor did he err in over-emphasizing that factor in this case;

d. the chambers judge did not err in finding that a fee of $9,000,000 was excessive. Rather than bearing some relationship to the work done (or to the difficulty of the file, the skill required or the Firm’s standing), the fee was simply a percentage of the value of the assets of Mr. Cewe’s estate. Where a lawyer charges a fee that is a percentage of a“settlement” of this kind, he or she must realize that the fee as a dollar amount might well turn out to be unreasonable when judged in the context of theLegal Profession Act and the professional relationship between lawyer and client.

e. The chambers judge did not err in affirming the Registrar’s holding under s. 68(5) that the Agreement was not unreasonable when it was entered into.

I would not interfere with the chambers judge’s determination that a fair fee in this case was $5,000,000 because in my view, it ‘operates reasonably in the context’, rewarding the Firm handsomely and recognizing the risks it assumed. On the other hand, it is not an exorbitant or grossly excessive amount that would reflect negatively on the integrity of the profession.

. . .


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[104] I would dismiss the appeal and cross appeal, with thanks to all counsel for their able submissions.

“The Honourable Madam Justice Newbury”

I Agree:

“The Honourable Madam Justice Neilson”

I Agree:

“The Honourable Mr. Justice Willcock”

WEEK 11: Little Sisters

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Little Sisters Book and Art Emporium v. Canada

2007 SCC 2 McLachlin C.J.

1. Introduction 1 The appellant, Little Sisters Book and Art Emporium, is a corporation that operates a bookstore serving the gay and lesbian community in Vancouver. The issue in this appeal is whether it is proper for the appellant to have the costs of its court battle against the respondents (collectively referred to as “Customs”) funded by the public purse by means of the exceptional advance (or interim) costs order contemplated in British Columbia (Minister of Forests) v. Okanagan Indian Band, [2003] 3 S.C.R. 371, 2003 SCC 71. In our view, the appellant cannot succeed. 2 The situation in Okanagan was clearly out of the ordinary. The bands had been thrust into complex litigation against the government that they could not pay for, and the case raised issues vital both to their survival and to the government’s approach to aboriginal rights. The issue before the Court in that case was whether the bands’ inability to pay should have the effect of leaving constitutional rights unenforceable and public interest issues unresolved. Mindful of the serious consequences to the bands and of the contours of the anticipated litigation, this Court decided that a real injustice would result if the courts refused to exercise their equitable jurisdiction in respect of costs and if, as a consequence, the bands’ impecuniosity prevented the trial from proceeding. 3 The situation in the present case differs from that in Okanagan. A small business corporation is in particular engaging in litigation to gain the release of merchandise that was stopped at the border. On its face, this dispute is no different from any other one that could be initiated by the many Canadians whose shipments may be detained and scrutinized by Customs before they are allowed to receive them. But the history of this case reveals more. Understandably frustrated after years of court battles with Customs over similar issues, this corporation has chosen to enlarge the scope of the litigation and to pursue a broad inquiry into Customs’ practices. The appellant wants its present interests, as well as its (and other importers’) future interests, settled for good, and it wants to stop Customs from prohibiting any more imports until its complaints are resolved. 4 The question in this appeal is not whether the appellant has a good cause of action, but whether the cost of the corporation’s attempt to get Customs to release its merchandise, or the costs of its broad inquiry into Customs’ practices, should be borne by the Canadian taxpayer. An exceptional order such as this can be made only in special circumstances, like those in Okanagan, subject to stringent conditions and to the appropriate procedural controls. In our opinion, the appellant’s application meets none of the requirements developed by the Court in that decision. 5 The fact that the appellant’s claim would not be summarily dismissed does not suffice to establish that interim costs should be granted to allow it to proceed. That is not the proper test. Quite unfortunately, financial constraints put potentially meritorious claims at risk every day. Faced with this dilemma, legislatures have offered some responses, although these may not address every situation. Legal aid programs remain underfunded and overwhelmed. Self-representation in courts is a growing phenomenon. Okanagan was not intended to resolve all these difficulties. The Court did not seek to create a parallel system of legal aid or a court-managed comprehensive program to supplement any of the other programs designed to assist various groups in taking legal action, and its decision should not be used to do so. The decision did not introduce a new financing method for self-appointed representatives of the public interest. This Court’s ratio in Okanagan applies only to those few situations where a court would be participating in an injustice — against the litigant personally and against the public generally — if it did not order advance costs to allow the litigant to proceed. 2. Facts 6 The appellant is a business corporation that operates the Little Sisters Book and Art Emporium, an establishment that caters to the lesbian and gay community of Vancouver. Book sales represent 30 to 40 percent of the


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appellant’s business. Although the appellant’s asset value has grown significantly in recent years, from $218,446 in 2000 to $324,618 in 2003, it still struggles to make a profit. It has never netted more than $25,000 in one year, and in 2003 it lost almost $60,000. Recent losses are at least partly attributable to an embezzlement of $85,000. 7 The appellant’s claim for advance costs must be considered in the context of the history of litigation between these two parties. When the present litigation began, the appellant had already fought a protracted legal battle against Customs, which culminated in this Court’s decision in Little Sisters Book and Art Emporium v. Canada (Minister of Justice), [2000] 2 S.C.R. 1120, 2000 SCC 69 (“Little Sisters No. 1”). In that case, the appellant, along with its shareholders, James Eaton Deva and Guy Bruce Smyth, challenged the constitutionality of Customs’ procedures for detaining obscene material and of the legislative foundation for those procedures. Writing for the majority of this Court, Binnie J. agreed that Customs’ practices at the time infringed ss. 2(b) and 15(1) of the Canadian Charter of Rights and Freedoms. He also determined that the burden of proving obscenity rested with the person alleging it. However, Binnie J. held that the provisions of the Customs Act themselves were constitutional. 8 The remedy sought by the appellant and its shareholders in Little Sisters No. 1 was an injunction whose terms were generally the same as those of the injunction requested by the appellant in the case at bar. Binnie J. felt that a remedy of this nature was not warranted. He wrote the following, at para. 157:

I conclude, with some hesitation, that it is not practicable to [offer a structured s. 24(1) remedy]. The trial concluded on December 20, 1994. We are told that in the past six years, Customs has addressed the institutional and administrative problems encountered by the appellants. In the absence of more detailed information as to what precisely has been done, and the extent to which (if at all) it has remedied the situation, I am not prepared to endorse my colleague’s conclusion that these measures are “not sufficient” (para. 262) and have offered “little comfort” (para. 265). Equally, however, we have not been informed by the appellants of the specific measures (short of declaring the legislation invalid or inoperative) that in the appellants’ view would remedy any continuing problems.

He added that the “findings [in that case] should provide the appellants with a solid platform from which to launch any further action in the Supreme Court of British Columbia should they consider that further action is necessary” (para. 158). Costs were awarded to the appellant and its shareholders on a party-and-party basis. 9 The present litigation, the appellant suggests, is the “further action” that Binnie J. anticipated. Counsel for the appellant drew a direct line tracing his client’s current legal battle to this Court’s refusal to offer injunctive relief back in 2000. Still arguing that it was denied the appropriate remedy nearly six years ago, the appellant seeks to have Customs bear the financial burden of its fresh complaint on these new facts. 10 This dispute over costs is related to litigation spawned by Customs’ July 5, 2001 detention of books destined for the appellant. On that date, eight titles — comprising 34 books — were detained by Customs on the basis that they were obscene. The appellant was able to obtain the release of four of these titles within a month. With four titles still being detained, the appellant chose to request a redetermination for only two: Meatmen, vol. 18, Special S&M Comics Edition and Meatmen, vol. 24, Special SM Comics Edition (the “Meatmen comics”). Customs again determined that these two titles were obscene. Arguing that they were incorrectly classified, on February 14, 2002, the appellant appealed the redetermination to the British Columbia Supreme Court, as it was entitled to do pursuant to ss. 67 and 71 of the Customs Act, R.S.C. 1985, c. 1 (2nd Supp.). 11 While the litigation with respect to the Meatmen comics proceeded, Customs detained another shipment of books destined for the appellant. Once again, some of the titles detained by Customs were released without the need for a redetermination. But after a redetermination, Customs still found two titles to be obscene: Of Men, Ropes & Remembrance — The Stories from Bound & Gagged Magazine and Of Slaves & Ropes & Lovers (the “Townsend books”). On September 26, 2003, the appellant appealed this decision to the British Columbia Supreme Court, seeking the same relief it was seeking with respect to the Meatmen comics. 12 The parties have agreed to have the appeals relating to the Meatmen comics and the Townsend books heard together. The prohibition of these four titles provides the factual basis for the appellant’s claim on the merits.


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13 In its appeals, the appellant asks for a reversal of the Customs’ obscenity determinations, as well as a declaration that Customs has been construing and applying the relevant legislation in an unconstitutional manner. As a remedy, it seeks an injunction restraining Customs from applying certain sections of the Customs Tariff, S.C. 1997, c. 36, and the Customs Act to its goods. The appellant also requests damages and “[s]pecial or increased costs”. 14 On August 14, 2002, the appellant also filed a Notice of Constitutional Question. Alleging a breach of s. 2(b) of the Charter, it is seeking the same remedies as specified above, but is using the constitutional question to broaden the scope of the injunction it seeks. In its Notice of Constitutional Question, the appellant states that it wants an order preventing Customs from applying the relevant sections of the Customs Tariff and the Customs Act to “anyone or, in the alternative, to the Appellant, until such time as the Court is satisfied that the unconstitutional administration will cease”. 15 Bennett J. of the British Columbia Supreme Court, who is both the presiding judge in this case and the case management judge, defined the scope of the litigation in her ruling of February 6, 2003 ((2003), 105 C.R.R. (2d) 119, 2003 BCSC 148). Specifically, she approved the appellant’s constitutional question and found that the appeal of Customs’ decision to prohibit the appellant’s books “gives a factual context to the issues raised by Little Sisters” (para. 24). That decision was not appealed. 16 On January 22, 2004, about a month after this Court released its decision in Okanagan, the appellant applied for advance costs, claiming, in the words of Bennett J., that it had “run out of money to pursue the litigation” (para. 6). As James Eaton Deva, a shareholder in the appellant, stated in his affidavit:

After hearing [the testimony of Anne Kline, the official of Canada Customs who is responsible for making the final determination of obscenity], we were convinced that if her testimony reflected the way Canada Customs approached this issue, then it still had deep systemic problems. If true, then our ten-year battle, and partial victory in the Supreme Court of Canada, had failed to effect any significant change. In that case, a court determination that the Meatmen comics were not obscene would not be sufficient. Instead, we became convinced that the only way to rectify the problems in Canada Customs was a systemic remedy, not simply a ruling on individual books. We decided that we had an obligation to seek that remedy.

3. Judicial History 3.1 British Columbia Supreme Court (2004), 31 B.C.L.R. (4th) 330, 2004 BCSC 823 17 On the application for advance costs in the British Columbia Supreme Court, Bennett J. ruled in favour of the appellant. She identified three “discrete, yet linked, arguments” being advanced by the appellant (para. 15). The first issue for which the appellant sought an advance costs award was whether Customs had properly prohibited four titles that the appellant wanted to import (the “Four Books Appeal”). The second issue was whether Customs had addressed the systemic problems identified in Little Sisters No. 1 (the “Systemic Review”). The third issue was whether the definition of obscenity established by this Court in R. v. Butler, [1992] 1 S.C.R. 452, is unconstitutional (the “Constitutional Question”). 18 Focussing first on the question of financial capacity, Bennett J. linked the “prohibitive” cost of appealing prohibition decisions to the fact that so few of them are brought to court (para. 19). In her brief analysis on this point, she applied a test of whether the litigant “genuinely cannot afford to pay for the litigation” and concluded that the appellant could not (paras. 21-22). Bennett J. also found that replacing the appellant’s current counsel was not a “realistic option” (para. 24). 19 Bennett J. then turned to apply this Court’s analysis from Okanagan separately to each of the three issues raised by the appellant. On the prima facie merit requirement, Bennett J. found that there was prima facie evidence that Customs was not applying the obscenity test from Butler correctly (para. 29). She also gave some credence to the argument that Customs’ procedures, under which the decision maker in the internal appeal did not look at the materials presented to the adjudicators at first instance, were flawed (para. 30). This convinced her that the Four Books Appeal satisfied the prima facie merit prong of the Okanagan test. Bennett J. then disposed of this requirement in respect of


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the Systemic Review and the Constitutional Question, referring, on the former, to her holding on public importance and, on the latter, to changes in the decade since Butler (paras. 32-33).

20 Bennett J. turned next to the question of whether the issues raised “[go] beyond individual interests, are of public importance and have not been decided in other cases” (para. 34). For the Four Books Appeal, she concentrated on the detentions that continue to affect the appellant, the “dearth of case law in this area” and the importance of freedom of expression in a democracy (paras. 35-43). She concluded that, if Customs is indeed applying the legal test for obscenity incorrectly, the issue affects all book importers and is therefore of public importance. 21 On the public importance of the Systemic Review, Bennett J. began her analysis by noting the “large magnitude of detentions” by Customs (para. 48). She found that there was “some evidence” of continual targeting of gay and lesbian material, noted that the time requirements for review were not being met, and expressed her concern about some alleged inconsistencies in Customs’ detention practices (paras. 49-52). Based on the past litigation between the parties, Bennett J. was sceptical of Customs’ claim that it had recently changed its practices (paras. 53-58). In fact, she stated that there was a prima facie case that the problems in Little Sisters No. 1 had not been “sufficiently addressed” (para. 59). Moving from this finding, Bennett J. held that the third requirement of Okanagan was satisfied, based on the constitutional issues at stake and the public’s interest in knowing whether the government had failed to comply with a court order (para. 61). 22 However, Bennett J. did not find that the public importance requirement had been met with respect to the Constitutional Question. Referring to this Court’s decisions in Butler, R. v. Sharpe, [2001] 1 S.C.R. 45, 2001 SCC 2, and Little Sisters No. 1, she held that the Constitutional Question did not raise an issue of public importance that had not been resolved in a previous case, as required by Okanagan (paras. 75-87). This holding has not been appealed. 23 Having determined that the three requirements in Okanagan were satisfied in respect of the Four Books Appeal and the Systemic Review, Bennett J. exercised her discretion in favour of ordering advance costs (paras. 44 and 63). She left the determination of the structure of the advance costs order and the quantum of the award to a later date (para. 94). 3.2 British Columbia Court of Appeal (2005), 38 B.C.L.R. (4th) 288, 2005 BCCA 94 24 Leave to appeal Bennett J.’s advance costs decision to the British Columbia Court of Appeal was initially denied by Prowse J.A., in chambers. Two months later, a three-member panel of the Court of Appeal varied Prowse J.A.’s order and granted leave. 25 Writing for a unanimous court, Thackray J.A. allowed Customs’ appeal. He began by commenting upon what he considered to be an “incompleteness” in the process (para. 25). Specifically, he felt that Bennett J.’s failure to consider the structure of the advance costs order and the quantum of the award undermined her order. After Bennett J.’s original order, the parties themselves had reached an agreement on structure and quantum. 26 Turning to the Okanagan criteria, Thackray J.A. focussed his attention on the impecuniosity and public importance requirements. On the prima facie merit requirement, he simply held that it was satisfied because the “case has attained a status above that of being merely frivolous” (para. 28). 27 Considering the appellant’s impecuniosity, Thackray J.A. asked whether it might be possible for the court to hear the Four Books Appeal before the Systemic Review. The effect of doing so would be potentially large cost savings for the public purse, insofar as the result on the Four Books Appeal might shed light on whether the Systemic Review needed to be heard at all and, if so, whether it should be publicly funded (paras. 29 and 45). To the Court of Appeal, the inclusion of the Systemic Review in the litigation represented “an enormous escalation from [the case’s] original purpose”, making it proper to consider whether an advance costs award — if necessary — could be confined to the Four Books Appeal, at least at first (paras. 36-39 and 44). The Court of Appeal was also reticent to extend this Court’s decision in Okanagan to a for-profit corporation (para. 41). 28 Thackray J.A. then turned to the public importance requirement. He noted that the Four Books Appeal was a narrow matter that was confined to four specific titles (para. 49). It did not involve broad issues that would affect all book importers.


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29 On the Systemic Review, Thackray J.A. canvassed Bennett J.’s reasons in detail. He took issue with the latter’s conclusions based on the fact that Customs continues to detain a large number of books, noting that this fact does not indicate that Customs’ practices are in any way improper (para. 55). He also observed that the appellant was relying on evidence collected before Customs had purportedly changed its system; at most, such evidence could be relied upon to show how quickly Customs had reacted to Little Sisters No. 1, but it could not serve to determine whether all the problems in Little Sisters No. 1 had eventually been addressed. This “efficiency” question was significantly less important to the public than the question of whether the problems were addressed at all (para. 57). 30 Finally, Thackray J.A. pointed out that Bennett J. had not considered whether the present litigation could be defined as “special” enough to merit advance costs, as opposed to simply being important (para. 60). Freedom of expression, he stated, is always of public interest, but not every freedom of expression case can satisfy the public importance requirement. In the present case, it was worth considering the fact that the communities on which the appellant’s claim would have the greatest impact did not view this case as sufficiently important to undertake funding it (para. 63). What is more, Thackray J.A. was hesitant about spending public funds on litigation that could result in a significant award for the applicant (para. 62). 31 In all, the Court of Appeal concluded that the appellant’s claim was not of sufficient significance that the public purse should be obligated to help it move forward. Thackray J.A. concluded that “the public has not appointed Little Sisters to this role” as a watchdog, and he was “not satisfied that it is necessary for Little Sisters to be the instrument of reform of Customs” (paras. 72 and 74). Although recognizing the deference owed to Bennett J., the court nonetheless felt that this was an appropriate circumstance to find that the trial judge had erred (para. 66). Accordingly, it set aside her order for advance costs. 4. Analysis 4.1 Rule in Okanagan 32 Okanagan concerned logging rights of four Indian bands on Crown land in British Columbia. These bands had begun logging in order to raise funds for housing and desperately needed social services. Contending that they had no right to do so, the Minister of Forests served them with stop-work orders and then commenced proceedings to enforce the orders. The bands tried to prevent the matter from going to trial, seeking to have it determined summarily by arguing that it would be impossible for them to finance a full trial. 33 An exceptional convergence of factors occurred in Okanagan. At the individual level, the case was of the utmost importance to the bands. They were caught in a grave predicament: the costs of the litigation were more than they could afford, especially given pressing needs like housing; yet a failure to assert their logging rights would seriously compromise those same needs. On a broader level, the case raised aboriginal rights issues of great public importance. There was evidence that the land claim advanced by the bands had prima facie merit, but the courts had yet to decide on the precise mechanism for advancing such claims — the fundamental issue of general importance had not been resolved by the courts in other litigation. However the case was ultimately decided, it was in the public interest to have the matter resolved. For both the bands themselves and the public at large, the litigation could not, therefore, simply be abandoned. In these exceptional circumstances, this Court held that the public’s interest in the litigation justified a structured advance costs order insofar as it was necessary to have the case move forward. 34 In essence, Okanagan was an evolutionary step, but not a revolution, in the exercise of the courts’ discretion regarding costs. As was explained in that case, the idea that costs awards can be used as a powerful tool for ensuring that the justice system functions fairly and efficiently was not a novel one. Policy goals, like discouraging — and thus sanctioning — misconduct by a litigant, are often reflected in costs awards: see M. M. Orkin, The Law of Costs (2nd ed. (loose-leaf)), vol. I, at § 205.2(2). Nevertheless, the general rule based on principles of indemnity, i.e., that costs follow the cause, has not been displaced. This suggests that policy and indemnity rationales can co-exist as principles underlying appropriate costs awards, even if “[t]he principle that a successful party is entitled to his or her costs is of long standing, and should not be departed from except for very good reasons”: Orkin, at p. 2-39. This framework has been adopted in the law of British Columbia by establishing the “costs follow the cause” rule as a default proposition, while leaving judges room to exercise their discretion by ordering otherwise: see r. 57(9) of the Supreme Court of British Columbia Rules of Court, B.C. Reg. 221/90.


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35 Okanagan did not establish the access to justice rationale as the paramount consideration in awarding costs. Concerns about access to justice must be considered with and weighed against other important factors. Bringing an issue of public importance to the courts will not automatically entitle a litigant to preferential treatment with respect to costs: Odhavji Estate v. Woodhouse, [2003] 3 S.C.R. 263, 2003 SCC 69; Office and Professional Employees’ International Union, Local 378 v. British Columbia (Hydro and Power Authority), [2005] B.C.J. No. 9 (QL), 2005 BCSC 8; MacDonald v. University of British Columbia (2004), 26 B.C.L.R. (4th) 190, 2004 BCSC 412. By the same token, however, a losing party that raises a serious legal issue of public importance will not necessarily bear the other party’s costs: see, e.g., Canadian Foundation for Children, Youth and the Law v. Canada (Attorney General), [2004] 1 S.C.R. 76, 2004 SCC 4, at para. 69; Valhalla Wilderness Society v. British Columbia (Ministry of Forests) (1997), 4 Admin. L.R. (3d) 120 (B.C.S.C.). Each case must be considered on its merits, and the consequences of an award for each party must be weighed seriously: see Sierra Club of Western Canada v. British Columbia (Chief Forester) (1994), 117 D.L.R. (4th) 395 (B.C.S.C.), at pp. 406-7, aff’d (1995), 126 D.L.R. (4th) 437 (B.C.C.A.). 36 Okanagan was a step forward in the jurisprudence on advance costs — restricted until then to family, corporate and trust matters — as it made it possible, in a public law case, to secure an advance costs order in special circumstances related to the public importance of the issues of the case (Okanagan, at para. 38). In other words, though now permissible, public interest advance costs orders are to remain special and, as a result, exceptional. These orders must be granted with caution, as a last resort, in circumstances where the need for them is clearly established. The foregoing principles could not yield any other result. If litigants raising public interest issues will not always avoid adverse costs awards at the conclusion of their trials, it can only be rarer still that they could benefit from advance costs awards. An application for advance costs may be entertained only if a litigant establishes that it is impossible to proceed with the trial and await its conclusion, and if the court is in a position to allocate the financial burden of the litigation fairly between the parties. 37 The nature of the Okanagan approach should be apparent from the analysis it prescribes for advance costs in public interest cases. A litigant must convince the court that three absolute requirements are met (at para. 40):

1. The party seeking interim costs genuinely cannot afford to pay for the litigation, and no other

realistic option exists for bringing the issues to trial — in short, the litigation would be unable to proceed if the order were not made.

2. The claim to be adjudicated is prima facie meritorious; that is, the claim is at least of sufficient merit that it is contrary to the interests of justice for the opportunity to pursue the case to be forfeited just because the litigant lacks financial means.

3. The issues raised transcend the individual interests of the particular litigant, are of public importance, and have not been resolved in previous cases.

In analysing these requirements, the court must decide, with a view to all the circumstances, whether the case is sufficiently special that it would be contrary to the interests of justice to deny the advance costs application, or whether it should consider other methods to facilitate the hearing of the case. The discretion enjoyed by the court affords it an opportunity to consider all relevant factors that arise on the facts. 38 It is only a “rare and exceptional” case that is special enough to warrant an advance costs award: Okanagan, at para. 1. The standard was indeed intended to be a high one, and although no rigid test can be applied systematically to determine whether a case is “special enough”, some observations can be made. As Thackray J.A. pointed out, it was in failing to verify whether the circumstances of this case were “exceptional” enough that the trial judge committed an error in law.

39 First, the injustice that would arise if the application is not granted must relate both to the individual applicant and to the public at large. This means that a litigant whose case, however compelling it may be, is of interest only to the litigant will be denied an advance costs award. It does not mean, however, that every case of interest to the public will satisfy the test. The justice system must not become a proxy for the public inquiry process, swamped with actions launched by test plaintiffs and public interest groups. As compelling as access to justice concerns may be, they cannot justify this Court unilaterally authorizing a revolution in how litigation is conceived and conducted.


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40 Second, the advance costs award must be an exceptional measure; it must be in the interests of justice that it be awarded. Therefore, the applicant must explore all other possible funding options. These include, but are not limited to, public funding options like legal aid and other programs designed to assist various groups in taking legal action. An advance costs award is neither a substitute for, nor a supplement to, these programs. An applicant must also be able to demonstrate that an attempt, albeit unsuccessful, has been made to obtain private funding through fundraising campaigns, loan applications, contingency fee agreements and any other available options. If the applicant cannot afford all costs of the litigation, but is not impecunious, the applicant must commit to making a contribution to the litigation. Finally, different kinds of costs mechanisms, like adverse costs immunity, should also be considered. In doing so, courts must be careful not to assume that a creative costs award is merited in every case; such an award is an exceptional one, to be granted in special circumstances. Courts should remain mindful of all options when they are called upon to craft appropriate orders in such circumstances. Also, they should not assume that the litigants who qualify for these awards must benefit from them absolutely. In the United Kingdom, where costs immunity (or “protective orders”) can be ordered in specified circumstances, the order may be given with the caveat that the successful applicant cannot collect anything more than modest costs from the other party at the end of the trial: see R. (Corner House Research) v. Secretary of State for Trade and Industry, [2005] 1 W.L.R. 2600, [2005] EWCA Civ 192, at para. 76. We agree with this nuanced approach. 41 Third, no injustice can arise if the matter at issue could be settled, or the public interest could be satisfied, without an advance costs award. Again, we must stress that advance costs orders are appropriate only as a last resort. In Okanagan, the bands tried, before seeking an advance costs order, to resolve their disputes by avoiding a trial altogether. Likewise, courts should consider whether other litigation is pending and may be conducted for the same purpose, without requiring an interim order of costs. Courts should also be mindful to avoid using these orders in such a way that they encourage purely artificial litigation contrary to the public interest. 42 Finally, the granting of an advance costs order does not mean that the litigant has free rein. On the contrary, when the public purse — or another private party — takes on the burden of an advance costs award, the litigant must relinquish some manner of control over how the litigation proceeds. The litigant cannot spend the opposing party’s money without scrutiny. The benefit of such funding does not imply that a party can, at will, multiply hours of preparation, add expert witnesses, engage in every available proceeding, or lodge every conceivable argument. A definite structure must be imposed or approved by the court itself, as it alone bears the responsibility for ensuring that the award is workable. 43 For example, the court should set limits on the chargeable rates and hours of legal work, closely monitor the parties’ adherence to its dictates, and cap the advance costs award at an appropriate global amount. It should also be sensitive to the reality that work often expands to fit the available resources and that the “maximum” amounts contemplated by a court will almost certainly be reached. As well, the possibility of setting the advance costs award off against damages actually collected at the end of the trial should be contemplated. In determining the quantum of the award, the court should remain aware that the purpose of these orders is to restore some balance between litigants, not to create perfect equality between the parties. Legislated schemes like legal aid and other programs designed to assist various groups in taking legal action do not purport to create equality among litigants, and there is no justification for advance costs awards placing successful applicants in a more favourable position. An advance costs award is meant to provide a basic level of assistance necessary for the case to proceed.

44 A court awarding advance costs must be guided by the condition of necessity. For parties with unequal financial resources to face each other in court is a regular occurrence. People with limited means all too often find themselves discouraged from pursuing litigation because of the cost involved. Problems like this are troubling, but they do not normally trigger advance costs awards. We do not mean to minimize their unfairness. On the contrary, we believe they are sufficiently serious that this Court cannot purport to solve them all through the mechanism of advance costs awards. Courts should not seek on their own to bring an alternative and extensive legal aid system into being. That would amount to imprudent and inappropriate judicial overreach. 4.2 Applying the Rule in Okanagan to the Facts of This Appeal 45 The appellant has asked this Court to award it advance costs with respect to two separate issues it raises in its litigation against Customs. The Four Books Appeal concerns Customs’ prohibition of four books imported by the


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appellant for sale in its store. The Systemic Review, on the other hand, involves a broad investigation of Customs’ practices relating to obscenity prohibitions. 46 We will first consider the merit of these claims, and will then discuss their public importance. We want to emphasize that the impecuniosity requirement, though listed first in Okanagan, cannot be used to give impecunious litigants a prima facie right to advance costs, as some interveners before this Court have suggested. Accordingly, we will consider it last. The question of impecuniosity will not even arise where a case is not otherwise special enough to merit this exceptional award. 4.2.1 Standard of Review 47 A trial judge enjoys considerable discretion in fashioning a costs award. This discretion has two corollaries.

48 First, a plethora of options are available to a judge when rendering a decision on costs. While the general rule is that costs follow the cause, as we have seen, this need not always be the case. 49 Second, a judge’s decision on costs will generally be insulated from appellate review. In the past, this Court has established that costs awards should not be interfered with lightly: see Odhavji Estate, at para. 77. But this does not mean that no decision on costs should ever be interfered with. For instance, in Okanagan, advance costs were granted on appeal after having been denied by the trial judge. A costs award can be set aside if it is based on an error in principle or is plainly wrong: Hamilton v. Open Window Bakery Ltd., [2004] 1 S.C.R. 303, 2004 SCC 9, at para. 27. In exercising their discretion regarding costs, trial judges must, especially in making an order as exceptional as one awarding advance costs, be careful to stay within recognized boundaries. 50 Despite the deference owed to the exercise of a discretion by a trial judge, we conclude that, in the present case, Bennett J. went beyond the boundaries this Court set in Okanagan. 4.2.2 Prima Facie Merit and Public Importance 51 As was explained in Okanagan, the merit requirement involves the following consideration:

2. The claim to be adjudicated [must be] prima facie meritorious; that is, the claim is at least of

sufficient merit that it is contrary to the interests of justice for the opportunity to pursue the case to be forfeited just because the litigant lacks financial means. [Emphasis added; para. 40.]

The explicit reference in this passage to the interests of justice suggests that the test requires something more than mere proof that one’s case has sufficient merit not to be dismissed summarily. Rather, an applicant must prove that the interests of justice would not be served if a lack of resources made it necessary to abort the litigation. The very wording of the requirement confirms that the interests of justice will not be jeopardized every time a litigant is forced to withdraw from litigation for financial reasons. The reason for this is that the context in which merit is considered is conditioned by the need to show that the case is exceptional. This does not mean that the case must be shown to have exceptional merit; rather, it must be shown to have sufficient merit to satisfy the court that proceeding with it is in the interests of justice. In the case at bar, as found by Bennett J., there is obviously a serious issue justifying a decision to have the matter proceed to trial. The question is whether a claim such as the one made by the appellant is sufficient to support a finding that the requirement of special circumstances is met. It is difficult to dissociate one from the other. We think there is no need to do so and will proceed accordingly.

52 Operating a business with some dependence on imports, the appellant is right to be concerned about what it alleges to be a discriminatory attitude by Customs towards its merchandise. Yet, the Four Books Appeal is extremely limited in scope. The appellant has advanced no evidence suggesting that these four books are integral, or even important, to its operations; furthermore, as mentioned above, book sales represent only 30 to 40 percent of its operations. In this context, we find it impossible to conclude that the appellant is in the extraordinary position that would justify an award of advance costs in the Four Books Appeal. 53 The same can be said of the Systemic Review. What the appellant is essentially attempting to achieve with the Systemic Review is to expand the scope of the litigation in the hope of bolstering its legal rights in individual cases;


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as a frequent importer, it will ultimately benefit more from a general investigation now than it would if it were left to challenge each and every detention and prohibition when it happened. This is an efficient and commendable approach, and one that Bennett J. approved. However, it is not one that would bring the case within the scope of the advance costs remedy. Specifically, the Systemic Review is not necessarily based on the prohibition, detention, or even delay of any books belonging to the appellant. 54 We do not wish to understate the appellant’s constitutional rights or the history of its relations with Customs. In fact, we agree that the appellant’s history of litigation against Customs provides important context for the present dispute. From the appellant’s perspective, this history represents the height of frustration with the government: the appellant already took Customs to court years ago, argued all the way to this Court that it was the victim of unconstitutional practices, and succeeded in securing an important victory that stopped just shy of providing it with the remedy it sought. The appellant says that any institutional changes made since then are insufficient, and that Customs may still be victimizing it in the exact same way. It wants this investigated. Why, it demands to know, must it now abandon its quest of so many years simply because it lacks the funds to do so? 55 The answer, we submit, is not as frustrating as the appellant implies. First of all, the appellant has not provided prima facie evidence that it continues to be targeted. On the contrary, when probed on this issue, counsel for the appellant simply suggested that Customs was cunning enough to stop its targeting once litigation had commenced. The appellant relies mainly on the fact that Customs continues to detain large quantities of imported material generally, including high proportions of gay and lesbian material; it then concludes that a significant percentage of these detentions must be improper. With respect, we cannot agree that this is prima facie evidence of targeting. Customs’ own decisions, on which the appellant relies, to overturn a high percentage of its detentions only lend credence to Customs’ argument that it has tried to scrutinize fairly those titles — like the appellant’s — that remain detained. The fact that Customs continues to detain a number of titles is not, in itself, prima facie evidence of anything. There is no prima facie evidence that Customs is performing its task improperly, much less unconstitutionally. 56 Since there is insufficient prima facie evidence to conclude that the appellant remains the victim of unfair targeting, the Court’s focus for the Systemic Review must turn to the more general question of the efficacy of Customs’ changes to its practices in the wake of Little Sisters No. 1, and how the effect of those changes on the appellant may still be such as to make individual challenges pointless. In fact, if one accepts that the Systemic Review is merely about the speed with which Customs reacted to Little Sisters No. 1 in the past, it must be concluded that the appellant is at present enjoying the very outcome it sought in that first series of court battles. Customs’ changes cannot be determined to be insufficient on the basis of the number of decisions that have been unfavourable to the appellant.

57 The appellant is wrong to suggest that the history of its relations with Customs justifies its advance costs application. Binnie J.’s anticipation, at the conclusion of his majority reasons in Little Sisters No. 1, of subsequent litigation between the parties did not give the appellant the right to proceed by drawing on the public purse or even suggest that this was a possibility. Nor can this history be used to establish that an injustice will result if insufficient funds preclude the appellant from arguing the Systemic Review. In making the comment in question, Binnie J. merely recognized that the appellant, like any other importer, could rely on this Court’s decision should any further disputes with Customs arise. What is more, his comments were clearly premised on the expectation that Customs would change — and was already changing — its practices to accord with the Court’s ruling. None of the evidence that has been presented has convinced us that this premise should now be rejected. 58 But even if the appellant had provided more convincing evidence on this point, and even if the Systemic Review had been framed with more pressing concerns in mind, we still believe that the requirement of exceptional circumstances has not been met. The reason for this is that the battle the appellant seeks to fight through the Systemic Review is, strictly speaking, unnecessary. It is the Four Books Appeal that lies at the heart of the appellant’s claim against Customs; the Systemic Review is simply an attempt by the appellant to investigate Customs’ practices independently of this context. This observation is underscored by the fact that the appellant initially did not even intend to pursue the Systemic Review, but changed its strategy once it began to believe that systemic problems remained after Little Sisters No. 1. Simply put, the appellant’s direct interest in this litigation disappears if its books are released — something that it seeks to achieve uniquely through the Four Books Appeal.

59 The nature of the injustice at stake in the case at bar can be contrasted with the one that was at stake in Okanagan. In that case, the bands, having been thrust into a situation requiring litigation, could not afford to pay for


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the litigation themselves, but could not afford the costs of forfeiting it either. The appellant in the instant case, on the other hand, has taken the Systemic Review upon itself even though it characterizes the fight as one that “makes no business sense”. 60 The requirement that the issues raised transcend the litigant’s individual interests and that it be profoundly important that they be resolved in the interests of justice (Okanagan, at para. 46) can be disposed of with little difficulty where the Four Books Appeal is concerned. Because the appellant has chosen to investigate Customs’ general operations under the Systemic Review, it is clear that the Four Books Appeal concerns no interest beyond that of the appellant itself and, as a consequence, is not special enough to justify an award of advance costs. This is especially so given that all the legal issues the appellant has canvassed in that appeal were already considered, and ruled upon, by this Court in Little Sisters No. 1. As the appellant itself observes at para. 10 of its factum, Binnie J. left the door open to further actions by the appellant with the words, “[t]hese findings should provide the appellants with a solid platform from which to launch any further action in the Supreme Court of British Columbia should they consider that further action is necessary” (Little Sisters No. 1, at para. 158). At most, the Four Books Appeal deals with the application of Little Sisters No. 1 to a specific set of facts. 61 Bennett J. held that the public importance of the constitutional issues underlying the appellant’s claim and the broad impact of Customs’ procedures sufficed to satisfy the public importance criterion. As mentioned above, she failed to address the special circumstances criterion. Yet, the Four Books Appeal does not address the issue of whether Customs is, in general, correctly applying the legal test for obscenity (para. 43). It is limited to the question of whether Customs reached the right result in prohibiting four specific titles. While evidence about Customs’ general practices may arise incidentally in the course of the Four Books Appeal, and while some of those concerns may have been addressed in the course of the discovery of one witness for Customs, the broader issues raised by the appellant are being considered separately, as part of the Systemic Review. The appellant has defined the Four Books Appeal in a narrow, fact-specific manner such that this appeal cannot meet the requirements for public importance set out above that would have brought it within the category of special cases discussed by the Court in Okanagan. 62 Following the same reasoning, the Systemic Review offers greater promise on the public importance prong, however. To the extent that the narrowness of the Four Books Appeal discounts any potential for public importance, the breadth of the Systemic Review should satisfy this prong of the test. Because the review was framed so expansively, the appellant argues that a court’s decision on this point will be of great interest both to importers and to Canada’s lesbian, gay, bisexual and trans-identified communities. 63 The appellant has sought to demonstrate the far-reaching importance of this litigation by arguing that proof that Customs has disobeyed a court order would have great ramifications. To the appellant, it seems, the integrity of Customs, if not of the entire government, is at stake in this appeal. And indeed, we would surmise that a finding that Customs had deliberately misled the court would be shocking to most Canadians. This country boasts a proud history of compliance by the executive with orders of the judiciary, and we should be loath to take it for granted. However, short of imputing bad faith to Customs, a finding that its present practices do not meet this Court’s dictates would not impugn the integrity of the government at large. This would merely indicate that Customs has not met its specific obligations as defined by this Court. The appropriate remedy in such a situation could range from an award of damages to injunctive relief. But a finding such as this, even if supported by the kind of evidence this Court found lacking in Little Sisters No. 1, does not rise to the level of general public importance simply because it concerns a public body. If it did, the same logic would seem to imply that it is an exceptional matter every time a public actor is alleged to be acting illegally — from a Crown corporation involved in a labour dispute to an administrative agency acting beyond its jurisdiction.

64 The appellant also argues that this dispute is unique because of the constitutional rights involved, which engage the critical value of freedom of expression. It portrays itself as a champion of Charter values. But not all Charter litigation is of exceptional public importance, even if it involves allegations of infringements of freedom of expression. It is not enough to contend that the Charter breach, if proven, would have implications beyond the individual litigant. What must be proved is that the alleged Charter breach begs to be resolved in the public interest. In the context of Okanagan, this meant proving that there were issues that had to be resolved one way or the other. The exceptional circumstances in that public interest case were related not so much to obtaining a certain result as to ensuring that the state’s and bands’ rights and obligations were defined properly — and definitively — in a context where it seemed important that the court develop a proper method for adjudicating land claims. Thus, not every case


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that could, once decided, be seen as being of public importance should be viewed as a special case within the meaning of Okanagan. Recognizing a case as special cannot be justified solely by reference to one particular desired or apprehended outcome of the litigation. It must be based on the nature of the litigation itself. 65 In the present appeal, the argument is that the litigation is of exceptional public importance because Customs might be shown to be acting unconstitutionally. The corollary to this statement is that the litigation would not be of exceptional public importance if Customs were shown to be acting in accordance with its constitutional duties. Thus, a valid claim that a case is of public importance would depend on the outcome of the case. But if, in a case like the one at bar, the exceptional importance criterion, as properly defined, is found to be met, there is a danger that this would amount to prejudging the case on its merits. If the appellant succeeds on the merits, one might then conclude, based on the Charter breach it has proved, that the case is at the appropriate level of public importance. But if the appellant does not succeed, the court endorses Customs’ current system and no finding of unconstitutionality is made, nothing in this case will have implications beyond the appellant. For a court to hold, in this situation, that the exceptional public importance criterion is met could therefore imply that the court has already decided what its holding on the merits will be. 66 Bennett J. was very sensitive to concerns about prejudging issues and approached her advance costs analysis with great caution. However, we respectfully believe that it was an error, in a case like this, to hold that the public importance requirement was satisfied. Where only one of the possible results on the merits could render the case publicly important, the court should not conclude that the public importance requirement is met. It is in general only when the public importance of a case can be established regardless of the ultimate holding on the merits, that a court should consider this requirement from Okanagan satisfied. 4.2.3 Impecuniosity 67 In a case like the present one, it is not even necessary for a court to consider the applicant’s impecuniosity. The access to justice purpose of advance costs cannot be triggered absent the kind of exceptional circumstances that the Court discussed in Okanagan. 68 We agree that corporations are not barred from receiving advance costs awards. However, the judge should ask in every case whether the applicant has made the effort that is required to satisfy a court that all other funding options have been exhausted. In Okanagan, this requirement was described as follows:

1. The party seeking interim costs genuinely cannot afford to pay for the litigation, and no other

realistic option exists for bringing the issues to trial — in short, the litigation would be unable to proceed if the order were not made. [para. 40]

69 In evaluating whether the impecuniosity requirement is met, a court should also consider the potential cost of the litigation. In the present appeal, the cost estimate for the trial is well over $1 million. The Four Books Appeal alone is somewhat more affordable according to the appellant’s estimate: approximately $300,000. Such cost estimates form an integral part of the evidence; the court should subject them to scrutiny, and then use them to consider whether the litigant is impecunious to the extent that an advance costs order is the only viable option. 70 A court should generally consider whether the applicant has tried to obtain a loan. In the criminal law context, financing litigation through credit is something that courts will look for before deciding that an accused’s failure to obtain counsel merits a constitutional remedy: R. v. Keating (1997), 159 N.S.R. (2d) 357 (C.A.). An application for advance costs should demand no less. 71 The impecuniosity requirement from Okanagan means that it must be proven to be impossible to proceed otherwise before advance costs will be ordered. Advance costs should not be used as a smart litigation strategy; they are the last resort before an injustice results for a litigant, and for the public at large. 5. Conclusion

72 Once the three-part test from Okanagan has been met, the court must exercise its discretion to decide whether advance costs ought to be awarded or whether another type of order is justified. In exercising its discretion, the court


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must remain sensitive to any concerns that did not arise in its analysis of the test. Although the appellant in the case at bar has failed to meet the Okanagan test, we believe that this case also raises issues that should in any event have prompted Bennett J. to exercise her discretion against an advance costs award in respect of the Systemic Review even if the Okanagan test had been satisfied. 73 As we have stressed, the Okanagan test requires that an advance costs award be used only as a last resort in order to protect the public interest. The test prevents an applicant from succeeding in an advance costs application where legal action is unnecessary (the merit requirement) or where private funding has not been diligently sought (the impecuniosity requirement). But there will sometimes be other options that are not contemplated by the Okanagan analysis. 74 Before the appellant raised the advance costs issue, Bennett J. had decided that it could proceed with three issues before the British Columbia Supreme Court: the Four Books Appeal, the Systemic Review, and the Constitutional Question. In her ruling on advance costs, Bennett J. dealt with each of these issues separately. This was a proper approach to take. However, after finding that the three steps of the Okanagan test had been satisfied, Bennett J. should still have addressed the question of whether there was any way to prevent the injustice she had identified other than through an advance costs award. 75 There was in fact another possibility: to consider the Four Books Appeal before hearing the Systemic Review. Resolving — or at least hearing evidence on — the Four Books Appeal offered the hope of avoiding an advance costs award for the Systemic Review. Bennett J. should therefore have considered this approach as an alternative to her award. In these circumstances, it would be premature to award advance costs for the Systemic Review. Though her subsequent decision on advance costs in respect of the Systemic Review would still need to stop short of prejudging the issues raised therein, it is possible that the evidence and argument presented in the Four Books Appeal would be helpful in scrutinizing the Systemic Review for merit and exceptional public importance — and perhaps for determining whether it was even necessary. 76 On the other hand, we recognize that the possible advantages of pursuing the Four Books Appeal first could be outweighed by the disadvantages of doing so. When issues are segregated, the potential for inefficiency abounds. Witnesses examined on the first issue may need to be recalled to address the second. Redundant expert reports may be sought. The length of the trial itself may grow exponentially. If it were eventually determined that advance costs in respect of the Systemic Review were warranted, these additional costs would be borne by the public purse; this result should definitely be avoided. 77 To proceed in this way is consistent with the principle stated above that an applicant must be willing to relinquish some control over the litigation to benefit from an advance costs award. Since a litigant who has been awarded advance costs is proceeding with the aid of funds received from another party, the litigant must accept certain limitations. These may be strictly financial — e.g., caps on spending — but they may also go more directly to the litigant’s litigation strategy. For instance, spending limits will mean that litigants proceeding with the aid of advance costs awards may be limited in their choice and in the number of counsel and experts. Also, the court awarding advance costs must consider whether the litigant’s chosen method of proceeding at trial is compatible with the notion of advance costs being a last resort and may thus need to establish a framework for the conduct of the planned litigation. In the present appeal, while the appellant understandably wants to resolve the issues in the Systemic Review as quickly as possible, it may be preferable to proceed first with the Four Books Appeal before deciding the issues arising out of the Systemic Review. In response to an argument of this sort, an applicant must be able to prove either that modifying its litigation strategy would not be more efficient and would not lead to demonstrable savings, or that retaining its original litigation strategy is necessary to ensure that justice is done.

78 The rule in Okanagan arose on a very specific and compelling set of facts that created a situation that should hardly ever reoccur. As this Court held in Okanagan, an advance costs award should remain a last resort. The costs award in the instant case did not meet the required standards. 6. Disposition 79 The appeal is dismissed, with the parties to bear their own costs.


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The reasons of Charron J. (concurring in the result) and Binnie and Fish JJ. (dissenting) have been omitted.

WEEK 11: Da Vinci Code

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“Da Vinci Code Appeal is Dismissed”

Da Vinci Code appeal is dismissed The Court of Appeal in London has ruled that Dan Brown, author of The Da Vinci Code, did not reproduce ideas from an earlier work in his best-selling novel.

Michael Baigent and Richard Leigh, who claimed that themes from The Holy Blood and the Holy Grail were plagiarised by Brown, now face a legal bill of £3m.

Dan Brown said authors should be free to draw from historical sources

The High Court in London ruled in April 2006 that US writer Brown had not copied the work of the two authors.

The Da Vinci Code, published in 2003, has sold more than 40m copies.

Disappointed

Baigent and Leigh's book, which was published in 1982, has sold some two million copies around the world, and was a best-seller when it was first released.

In a statement issued after the appeal's rejection, the co-authors said they were disappointed by the ruling.

"We believed, and still do, that non-fiction authors would suffer and be discouraged from extensive research if it was found that any author could take another's ideas, 'morph' and repackage them, then sell them on," they said.

Both books explore the idea that Jesus and Mary Magdalene had a child together, and their bloodline still exists.

Despite the High Court ruling last year that Brown had not committed copyright infringement, the two authors decided to press on with an appeal, maintaining their claim that Brown had lifted central themes from their book.

Random House, the publisher of both books, was awarded the costs of the appeal, estimated at £300,000. Brown was not in court.

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Gail Rebuck, the head of Random House, said: "Misguided claims like the one that we have faced, and the appeal, are not good for authors, and not good for publishers.

"But we are glad that the Court of Appeal has upheld the original judgment and that, once again, common sense and justice have prevailed, helping to ensure the future of creative writing in the UK," she added.

Following the case's dismissal last year, Brown said the verdict showed that Baigent and Leigh's claim was "utterly without merit".

The outcome cleared the way for a film based on The Da Vinci Code, starring Tom Hanks and Audrey Tautou, which premiered at the Cannes Film Festival last year.

Story from BBC NEWS: http://news.bbc.co.uk/go/pr/fr/-/2/hi/entertainment/6502293.stm Published: 2007/03/28 10:14:27 GMT

WEEK 11: Bystedt

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Bystedt (Guardian ad litem of) v. Hay

2005 BCCA 520

¶ 1 FINCH C.J.B.C. (orally):— This appeal set for hearing this morning cannot proceed because counsel for the respondent is not ready - has not served the factum. The appellant served its factum on the respondent on 26 August 2004. A certificate of readiness was filed on 28 October 2004 indicating that the appeal was ready for a date to be fixed. On that day, counsel for the respondent was served with a letter giving notice.

¶ 2 Hearing dates for this month, September 2005, were fixed in January of this year. Those dates were fixed by an accommodation from counsel for the appellant, who had to alter other commitments in his schedule in order to have this appeal heard on September 21 and 22.

¶ 3 Counsel for the respondent has not, to this date, filed a factum. That is despite many requests and reminders from counsel for the appellant. The result is that this appeal must be adjourned.

¶ 4 An application for an adjournment should have been made in a timely way by counsel for the respondent to a single judge in chambers. Counsel's failure to do that resulted in counsel for the appellant having to prepare for the appeal which was set to commence this morning.

¶ 5 In his submissions to us this morning, counsel for the respondent has recounted some of the pressures he has been under in both his practice and in his personal life. None of the information provided is an adequate explanation for Mr. Harding's utter failure to observe the Rules of Court, or for the complete absence of courtesy that he has shown both to counsel opposite and to the Court. Mr. Harding's attitude towards his delay fails to show any adequate recognition for his lack of professional responsibility.

¶ 6 The appeal will be adjourned. It will be adjourned to a date to be fixed at the earliest available date from the registry that is convenient to Mr. Hinkson. The date that is set will be peremptory on counsel for the respondent. The respondent will file his factum by Tuesday, October 25. The appellant may file a reply factum on or before 15 December 2005.

¶ 7 The appellant is entitled to the costs thrown away be this unnecessary adjournment. I would fix those costs in the sum of $5,000.00. I would order that those costs be paid personally by Mr. Harding.

¶ 8 Levine J.A.:— I agree.

¶ 9 Kirkpatrick J.A.:— I agree.

WEEK 11: Jayetileke

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Jayetileke v. Blake 2010 BCSC 1478 The Honourable Mr. Justice Dley

[1] The plaintiff was awarded damages less than the defendant's offer to settle. Nonetheless, the plaintiff seeks costs because the defendant called an expert witness who had been branded as an advocate in prior cases, and whose conduct in this trial was deserving of rebuke.

[2] In the ordinary course of events, a defendant who had offered to settle the claim for more than the final judgment would be entitled to costs incurred after the plaintiff had been provided a reasonable period of time to consider the tender. The unique factor in this case is the expert evidence presented on behalf of the defence.

[3] At the centre of the controversy is Dr. Davis, who began his testimony with the following commentary:

THE CLERK: Thank you. Please state your full name and spell the last name for the record.

A First name is Hymie, H-y-m-i-e, and my surname is Davis, D-a-v-i-s.

THE CLERK: Thank you. Please sit down.

A Thank you.

MR. HERMAN: Thank you. My Lord, Dr. Davis’ report appears in Exhibit 11, and my friend has kindly acknowledged Dr. Davis’ qualification to conduct an independent psychiatric evaluation, and I therefore tender him for the purposes of providing expert opinion on an independent psychiatric evaluation.

A Do you have any scotch in there or is it plain?

THE CLERK: Just water.

A Thank you. I’m not used to water without scotch.

Background Facts

[4] The plaintiff was the victim of a rear end collision. In addition to soft tissue injuries, she began to suffer from vertigo.

[5] The plaintiff claimed damages for pain and suffering, past and future income loss, special expenses and costs of future care.

[6] The defence admitted liability. This trial was restricted to the assessment of the plaintiff's losses.

[7] The question of whether the symptoms of vertigo were related to the collision was a central theme of the trial. This was a particularly contentious issue because the plaintiff had a history of treatment for dizziness and motion sickness that predated the accident

[8] The Insurance Corporation of British Columbia (“ICBC”) had the plaintiff examined by Dr. Longridge, reputed to be a leading authority in evaluating dizziness. Dr. Longridge was asked for his opinion as to whether the plaintiff had suffered an injury, and if so, whether it was related to the motor vehicle accident. Dr. Longridge was told that the plaintiff had struggled with motion sickness and vertigo since she was a child.

[9] Notwithstanding the plaintiff's previous symptoms, Dr. Longridge opined that the vertigo was probably caused by the collision.

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[10] During the trial, plaintiff's counsel uncovered the fact that the defence had twice sought to have Dr. Longridge change his opinion.

[11] The plaintiff had been examined by a psychiatrist who concluded that the motor vehicle accident was a significant factor leading to the onset of depression. The psychiatrist recommended that the plaintiff be provided with cognitive behavior therapy, which would manage her depressive symptoms, and might in turn assist in reducing the soft tissue pain and vertigo. Plaintiff's counsel sent the report containing the recommendations to ICBC and asked for funding assistance. He received no reply.

[12] On February 3, 2010, the defence made a formal offer to settle for $122,500. The offer was in accordance with the provisions of the former Rule 37B, which is now Rule 9-1, Offers to Settle: Supreme Court Civil Rules, Court Rules Act, B.C. Reg. 168/2009.

[13] At the time the offer was made, all of the medical reports and expert opinions had been exchanged.

[14] The trial commenced on April 19, 2010 and lasted eight days. On May 13, 2010, judgment was granted for $113,095. The award was $9,405 less than the offer to settle.

Position of the Parties

[15] The plaintiff argues that the provisions under Rule 9 -1 exist not only to indemnify a party pursuant to a successful offer to settle, but also to deal with conduct at trial. It is the plaintiff's position that the defendant's action in calling Dr. Davis is conduct that should be addressed under the provisions of Rule 9–1.

[16] The plaintiff also argues that it was reasonable for her to reject the offer and proceed to trial.

[17] The defence argues that Rule 9 -1 is designed to encourage settlement and discourage parties from pursuing protracted litigation. The defence states that the plaintiff had ample time to consider the offer and should now suffer the consequences for being awarded lesser damages.

[18] In the alternative, the defence argues that if Dr. Davis required rebuke, then the plaintiff's costs should cease as of the date of the settlement offer.

The Law

[19] Costs provisions are intended to encourage the reduction of litigation expense, and to discourage conduct that has the opposite effect. Costs awards are designed to encourage settlement by penalizing the party that declines an offer to settle which was better than the trial result: Bailey v. Jang, 2008 BCSC 1372, 90 B.C.L.R. (4th) 125 at paras. 15-17.

[20] Rule 9-1 provides the Court with a broad discretion. Costs should penalize an unreasonable litigant without automatically punishing a party whose view of the case is not shared by the trial judge. Parties should not be afraid to litigate a meritorious claim , simply because they fear a punishing costs award. Nonetheless, an offer to settle must always be given consideration so as to ensure that this Rule retains its purpose: Fan (Guardian ad litem of) v. Chana, 2009 BCSC 1497, [2009] B.C.J. No. 2181 at paras. 18-21.

[21] The costs consequences require parties to carefully analyze their cases throughout the litigation process. The “costs rules should be utilized to have a winnowing function in the litigation process”: Catalyst Paper Corp. v. Companhia de Navegacao Norsul, 2009 BCCA 16, 307 D.L.R. (4th) 285 at paras. 13-16.

[22] In deciding the issue of costs, Rule 9-1 (6) provides that the following factors may be considered:



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[23] Special costs may be awarded where, in the proceedings, a party misbehaves in a manner that deserves reproof or rebuke. Special costs cover a broad range of misconduct categorized as reprehensible, from which the court disassociates itself: Heppner v. Schmand, 117 B.C.A.C. 314, [1998] B.C.J. No. 2843 at paras. 9-17.

Discussion

[24] The plaintiff had a difficult case to prosecute, as the vertigo that formed the basis of her claim was a hotly contested issue at trial. The defence expressed serious reservations as to the causation of the vertigo. Had the plaintiff been unsuccessful in proving that causation, her award would have been rather modest.

[25] While the damages awarded for income loss and cost of care were significantly less than claimed, that does not mean that they were advanced without any prospect of success or merit.

[26] However, it would be unjust to ignore the reality that the defendant’s offer to settle was better than the trial result.

[27] Rule 9–1 (5) gives the court discretion to award double costs to the defendant in circumstances where its offer to settle exceeded the judgment.

[28] Taking into account:

a) the imbalance in the financial positions between the plaintiff (earning approximately $70,000 per year) and the enormous resources of the ICBC defence;

b) the closeness of the offer and the award; and

c) the strength of the plaintiff’s claim,

I would not award double costs to the defendant.

[29] Rule 9-1(6) gives the court discretion to consider any other appropriate factor in assessing the award of costs.

[29] I take into account the fact that the defence secured the evidence which linked the plaintiff’s vertigo to the accident – yet tried to have the expert change his opinion.

[30] I am mindful, that this is a tort claim which is not to be confused with the plaintiff's rights as an insured. However, the reality is that the defence was conducted by ICBC and it would be unjust to the plaintiff to ignore that fact.

[31] The plaintiff's recovery could have been assisted if ICBC had participated in the provision of cognitive behavior therapy. Her condition could have improved to a level where the assessment of her future loss was more positive, had the therapy being addressed in a timely fashion. Instead, ICBC did not even give the plaintiff the courtesy of a reply to her psychiatrist's recommendations.

[32] The threat of a punishing costs award may have a chilling effect on litigants who, like the plaintiff, have meritorious claims. Costs are meant to assist the courts in controlling the litigation process. They are not designed to thwart parties seeking redress through the courts.

[33] If these were the only factors to consider, I would have awarded the plaintiff her costs up to the halfway point of the trial; particularly since the central issue of vertigo causation was decided in her favour. In recognition of the defendant's offer to settle, I would have awarded the defendant the second half of the trial costs.

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[34] However, after consideration of the role and conduct of Dr. Davis, I decline to award the defendant any costs.

[35] Dr. Davis had a history before the courts where his evidence was rejected and his objectivity called into question: Grewal v. Brar et al, 2004 BCSC 1157, [2004] B.C.J. No. 1819; Gosal v. Singh, 2009 BCSC 1471, [2009] B.C.J. No. 2131; Kelly v. Sanmugathas, 2009 BCSC 958, [2009] B.C.J. No. 1413; and Smusz v. Wolfe Chevrolet, 2010 BCSC 82, [2010] B.C.J. No. 114.

[36] A witness may have a poor day in court – that does not mean the witness was dishonest or forever unreliable. However, Dr. Davis had displayed an alarming inability to appreciate his role as an expert and the accompanying privilege to provide opinion evidence.

[37] The defence was alive to his propensity to abuse the role of an expert. His reputation would have been known from the cited decisions. Plaintiff’s counsel succinctly set out the concerns about Dr. Davis in a letter dated January 29, 2010, which stated:

1. Although he may have once been a qualified expert in psychiatry and able to give opinion evidence in court, we suggest he no longer is properly qualified to give opinion evidence. We will suggest that he is no longer aware of his duty to assist the court and in reality he is an advocate for ICBC. Additionally, we will submit that he has been so consistently discredited by the courts of this Province that he is incapable of being qualified as an expert;

2. His report is replete with advocacy. The report is an attempt [to] neutralize any material/opinions which support the plaintiff’s claim rather than providing an objective medical opinion;

3. His report contains many opinions and arguments that are beyond his expertise; and

4. The information apparently gleaned from the plaintiff is inaccurate and incomplete and coloured to advance his position.

[38] In spite of the concerns that the Courts have expressed, the defence nonetheless proffered Dr. Davis as an expert in opposition to the plaintiff’s complaints of depression and anxiety. My assessment of Dr. Davis was as follows (oral reasons May 13, 2010):

[43] Dr. Hymie Davis, a psychiatrist, examined Ms. Jayetileke on January 12, 2010 at the request of the defence. I find his evidence to be unreliable. I give it no weight for the following reasons.

[44] Dr. Davis was an advocate. He was argumentative, defensive, non-responsive, and prone to rambling discourses that were not relevant to the questions posed in cross-examination.

[45] Dr. Davis was asked to leave the courtroom so that counsel could argue about questions to be put to him. Dr. Davis was seen peeking into the courtroom and listening to the discussion. He was again asked to leave. In spite of these instructions given to him, Dr. Davis hovered within hearing distance and, on four occasions, stuck his head into the courtroom to hear what was occurring.

[46] Dr. Davis conceded that without his notes, he would not be able to recall the discussion with Ms. Jayetileke. He relied on his notes to prepare his report.

[47] Dr. Davis had noted that Ms. Jayetileke awakened once or twice a week and that this was in some measure related to the accident-related symptoms. He was adamant Ms. Jayetileke had not said that she awakened once or twice a night. He said that his notes would reflect what Ms. Jayetileke had told him.

[48] His notes referred to Ms. Jayetileke awakening once or twice but did not specify whether that was nightly or weekly. Nonetheless, Dr. Davis tried to point out other references in his notes that meant a weekly occurrence. Those references did not strengthen his evidence. They simply confirmed the unreliability of his testimony.

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[49] Dr. Smith had commented about how important it was for the history-taking to be done in a setting where the patient was comfortable and at ease with the interviewer. Dr. Davis's demeanour would not lend itself to Ms. Jayetileke being at ease in his presence so that an effective and accurate history could have been taken. Ms. Jayetileke was under the impression that Dr. Davis did not take things seriously. I accept her view of the interview and prefer her evidence to that of Dr. Davis.

[39] For a trial to be fair, the Court must allow each party to put its best case forward. Where a party seeks to advance its position with reckless abandon seeking only the ultimate goal of victory and using questionable evidence along the way, that party risks sanctions in the form of costs penalties. Where the conduct is reprehensible and deserving of reproof and rebuke, the penalty is special costs. “Costs considerations are meant to guide counsel and litigants in the choices and strategies they pursue in litigation”: Karpodinis v. Kantas, 2006 BCCA 400, [2006] B.C.J. No. 2074 at para. 4.

[40] In this case and against the backdrop of previous judicial comment, the defence tendered Dr. Davis. He was nothing more than an advocate thinly disguised in the cloak of an expert. That is conduct deserving of rebuke and from which the Court disassociates itself.

[41] Dr. Davis attempted to inject levity to the proceedings when he was introduced to the Court - his reference to scotch can only be taken as an attempt to be humorous. However, these are serious and solemn proceedings and should be treated as such. His opening comments were unnecessary and unhelpful.

[42] Dr. Davis’ refusal to remove himself from earshot of the Court proceedings despite repeated requests was reprehensible. His conduct simply confirmed a lack of respect for Court proceedings.

[43] Under these circumstances, special costs are to be awarded against the defendant.

[44] The special costs will be the equivalent of the costs of the entire trial. The defendant will be deprived of any costs that it might otherwise have been entitled to as result of the offer to settle.

Summary

[45] The plaintiff is awarded costs as if there had been no offer to settle made. The defendant shall receive no costs.

[46] The plaintiff shall receive costs of this application.

WEEK 12: Skillings #1

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Skillings v. Seasons Development Corporation #1

DRAKE J: - On 1 June 1992 I gave judgment for the plaintiffs in this matter, on deemed admissions under R. 31(6)(b). Mr. Hinkson now moves that the formal order -- not yet entered -- be set aside on the ground that the defendants’ reply to the plaintiffs’ notice to admit, which I held not to comply with the requirements of the Rule, was an irregularity only: and in the alternative, for leave to the defendants to withdraw the deemed admissions under R. 31(5). He also asks that the defendants’ original application for the cross-examination of the plaintiff Stewart Balfour Skillings and also Ronald G. Doyle on their affidavits filed on a concurrent motion of the plaintiffs under R. 18A be reheard. This latter motion was not heard originally, as it was unnecessary to hear it in the circumstances.

As to the irregularity question, it is governed by R. 2(1), which states:

“Unless the court otherwise orders, a failure to comply with these rules shall be treated as an irregularity and does not nullify a proceeding, a step taken or any document or order made in the proceeding.”

The argument on this point was not pressed, Mr. Hinkson concentrating on his submission that this is a case for the withdrawal of the admissions which I held were deemed to have been made. I agree with his emphasizing this aspect of the matter. While in these circumstances I need not decide whether or not the failure of the defendants to comply with R. 31 is simply an irregularity, I am of the opinion that for me to say so would be to stretch discretion too far, and impart to the Rules an undue elasticity.

Whether or not I should set aside my unentered order of 1 June 1992 and allow the defendants to withdraw their admissions is the question. In my view of the authorities, the basic test to be applied is to measure the advantage obtained already by the plaintiffs against the interests of justice generally. Such interests require, if it is at all possible, a trial on the merits.

In Robertson v. Batchelor (1935), 49 B.C.R. 559 Murphy J. allowed the defendant to amend a badly drafted statement of defence which contained admissions, following the principle laid down by the Full Court in Halpin v. Fowler (1907), 12 B.C.R. 441; there Hunter C.J. said:

“In the next place, I cannot understand why a solicitor should be held to a pleading which he at once notifies the other side was filed without full consideration, and in a hurry to get the pleading in time for the next sitting of the Court when it is not pretended that there was any mala fides, or that any legal prejudice had been occasioned to the plaintiff which could not be compensated for by costs.”

In Abacus Cities Ltd. v. Port Moody (1981), 26 B.C.L.R. 381, Nemetz C.J.B.C. considered this passage and said:

“It seems to me that what the learned Chief Justice was saying was that a judicial admission should be allowed to be withdrawn if, in the circumstances, the court is satisfied that it is in the interest of justice to withdraw same.”

Whether or not the defendants were negligent or otherwise at fault is a triable issue in this case, and it would be unjust for them to be denied their opportunity to defend the matter on its merits. It is accordingly in the interests of justice that the defendants should be allowed to withdraw their deemed admissions.

Accordingly, my order of 1 June 1992 is set aside; and the defendants’ motion to cross-examine Messrs. Skillings and Doyle on their affidavits filed in the summary trial under R. 18A is granted. As to terms (as suggested by Hunter C.J. in Halpin v. Fowler, op. cit.) I can do no better than quote Murphy J. in Robertson v. Batchelor, op. cit.:


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“All costs thrown away as a result of this order are to be plaintiff’s in any event of the cause”.


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Skillings v. Seasons Development Corporation #2

(1992) 70 BCLR (2d) 14 British Columbia Supreme Court

DRAKE J.: - Mr. Skillings’s motion, essentially for judgment under Rule 31(6), with damages to be assessed, I reserved for further consideration.

The plaintiffs allege they suffered damage as a result of the withdrawal of lateral support to their land following excavation on an adjoining parcel owned by the defendant Seasons Development Corporation (“Seasons”). The defendants Granite Engineering Corporation and T. Lynn Trott (“Granite” and “Trott”) were engineers advising Seasons in respect of its works.

The plaintiffs issued their writ on 14 May 1991. Appearances were entered by the defendants, and in due course defences were filed and served. The pleadings were closed in July 1991.

On 8 October 1991, the plaintiffs sent notices to admit to the defendants: that directed to Granite and Trott is the only notice I am concerned with here. That notice requested admissions of the following facts and documents:

“1. Granite Engineering Corporation (“Granite”) and T. Lynn Trott (“Trott”) were employed or retained by the Defendant, Seasons Development Corporation (“Seasons”) to supervise an excavation at property owned by Seasons immediately adjacent to the Plaintiffs’ property in the City of Vancouver.

2. Granite and Trott undertook to assure the adequacy of excavation and shoring on Seasons’ property so as to prevent damage to adjoining property.

3. Granite and Trott gave written assurances to the City of Vancouver concerning procedures to be used with respect to any excavation at Seasons’ property.

4. The excavation at Seasons’ property which was to be supervised by Granite and Trott commenced late in the month of July, 1990, and continued in the month of August, 1990.

5. During the course of the excavation portions of the Plaintiffs’ lands fell into the excavation at the Seasons’ property.

6. The excavation at Seasons’ property was not adequately backfilled so as to prevent portions of the Plaintiffs’ lands falling into it.

7. Shoring at the excavation on Seasons’ property was not adequate so as to prevent portions of the Plaintiffs’ lands from falling into the excavation on Seasons’ property.

8. Portions of the Plaintiffs’ lands fell into the excavation on Seasons’ property during the first week of August, 1990.

9. The excavation conducted on Seasons’ property removed lateral support from the Plaintiffs’ property and improvements.

10. The excavation conducted at Seasons’ property removed vertical support from the Plaintiff’s property and improvements.


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11. By reason of the loss of vertical or lateral support to the Plaintiffs’ improvements or by reason of the loss of both vertical and lateral support to the Plaintiffs’ improvements, damage to the Plaintiffs and the Plaintiffs’ improvements resulted.

12. Part of the Plaintiffs’ damages included the shifting of the Plaintiffs’ chimney and brick work situate near the excavation site at Seasons’ Property.

13. The depth of the excavation near the boundary between Seasons’ property and the Plaintiffs’ property was nine feet.

14. The depth of the excavation near the boundary between Seasons’ property and the Plaintiffs’ property was ten feet.

15. The depth of the excavation near the boundary between Seasons’ property and the Plaintiffs’ property was eleven feet.

16. The depth of the excavation at Seasons’ property at the closest point to the Plaintiffs’ improvements was such that lateral support for the Plaintiffs’ lands and improvements was lost.

17. The depth of the excavation at Seasons’ property at the closest point to the Plaintiffs’ improvements was such that vertical support for the Plaintiffs’ lands and improvements was lost.

18. Excavations will not cause damage or influence footings or foundations adjacent to such excavation as long as the horizontal distance between the edge of the excavation and the bottom of such footings or foundations is at least one and one-half times the distance between the natural ground level and the bottom of the excavation.

19. The Plaintiffs’ house foundation was not more than .75 horizontal to 1 vertical with respect to the deepest open excavation on Seasons’ property.

20. The Plaintiffs’ chimney foundation was not more than .55 horizontal to 1 vertical with respect to the deepest open excavation on Seasons’ property.

21. Neither Granite nor Trott ensured that a specialist engineer experienced in excavations was present during the excavation at Seasons’ property.

22. Neither Trott nor Granite investigated the soils at the excavation site at Seasons’ property to ascertain its consistency or to otherwise ascertain the appropriate distance between the excavation at Seasons’ property and the edge of the improvements situate on the Plaintiffs’ property.

23. The excavation on Seasons’ property adjacent to the Plaintiffs’ property was deeper than the approved Plans for improvements on Seasons’ property which required the excavation.

24. Granite and Trott permitted excavations to a vertical depth on Seasons’ property adjacent to the Plaintiffs’ property which caused settlement or movement of the foundations of the Plaintiffs’ property.”

The documents, the authenticity of which admission is requested, are:

1. A telecopier transmission form dated July 13, 1990, from Seasons to Granite and Trott.


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2. A written authority from Seasons to Granite and Trott authorizing Granite and Trott to supervise an excavation at Seasons’ property dated July 13, 1990.

3. Written instructions from Seasons to Trott and Granite to complete “Assurance of Adequacy of Excavation’ and ‘Shoring’ of Adjacent ‘Private Property”‘ sent by facsimile transmission to Trott and Granite on July 13, 1990, together with a three page form headed “RE: 368 West 62nd Ave., Vancouver, B.C.” with document No. 2 completed and appended thereto.

4. A Land Title Act Form A Freehold Transfer dated July 18, 1990, transferring Lot C of Lot 1, Block C, District Lot 323, Plan 9366 (City of Vancouver) to Seasons.

5. A letter dated November 19, 1990, from Seasons to Superintendent of Services, City of Vancouver, together with a City of Vancouver invoice No. 53531 appended thereto.”

On 10 October 1991, the solicitors for the defendants responded to the notice to admit in these words:

“We write in response to your Notice to Admit, in the above-noted action, received by us on October 8, 1991. We advise that our client is unable to admit the requested facts at this time. We will be reviewing that position as the trial of this matter approaches and will immediately advise of any change in that position.”

This letter elicited the following reply from the plaintiffs’ solicitor:

“You should know that we take the position that your letter of October 10, 1991, is not a specific denial pursuant to Rule 31(2) nor will it delay any action on our part to bring a Motion for Judgment pursuant to Rule 18 or 18A. The documents, at least, ought to be admitted at once. We shall seek costs on any Motions hereafter pertaining to reasonable admissions.”

No further reply to the plaintiffs’ notice was received within the 14 days specified in Rule 31(2): or at all, apparently.

The Rule provides that the truth of a fact or authenticity of a document specified in a notice to admit:

“shall be deemed to be admitted .......... unless, within 14 days, the party receiving the notice delivers to the party giving the notice a written statement that

(a) specifically denies the truth of that fact .......... or,

(b) sets forth in detail the reasons why the party cannot make the admission, or

(c) (not applicable).”

The response above quoted does not, in my opinion, comply with the rule. It does not deny the truth of any fact sought to be admitted, nor does it “set forth in detail the reasons” why the defendants to whom it was directed cannot make the admissions. It simply temporizes and suggests that possibly a detailed response might be made “as the trial of this matter approaches”. That, in my view, is not a proper response to a notice to admit. Mr. Skillings seems to have regarded it in that light and he very properly warned the defendants that he would be taking appropriate action.

He now applies for judgment under (6)(b) of the rule, on the ground that the facts stated in his notice to admit are now deemed to be admitted.

The facts set out in the notice to admit, if admitted or deemed to be so, would constitute proof of the claim in negligence alleged against Granite and Trott. The response of these defendants to the notice, being improper under the Rule and inadequate in fact, leaves me with no alternative but to deem those facts to be admitted: for the Rule, employing as it does the word “shall”, makes such deeming mandatory.


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Granite and Trott must accordingly be held to have been negligent in their work on behalf of Seasons, and the plaintiffs are entitled to judgment against them.

Judgement against Granite and Trott will go in favour of the plaintiffs, with costs to be assessed under Scale 3. Damages are to be assessed by the Registrar, who will report his findings to the court.

At the hearing I dealt with two motions of the defendants:

the first was to cross-examine Messrs. S. B. Skillings and R. G. Doyle on their affidavits filed herein. This I dismissed. The other was to transfer the action to the Vancouver Registry, which I granted, on the bound of convenience. The costs of these two motions will go to the successful parties, and be set off.

WEEK 12: Vancouver Community College

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Vancouver Community College v. Phillips Barratt

26 BCLR (2d) 296, 29 CLR 268 British Columbia Supreme Court Vancouver, British Columbia Judgment: May 6, 1988

FINCH J.:

I. Introduction:

Vancouver Community College (VCC) claims damages exceeding $9 million from Phillips Barratt and others (PB), architects and engineers, for negligence and breach of contract in the performance by PB of professional services. The claim arises from work PB did in the design and cost estimating of a substantial renovation and construction project at the Vancouver Vocational Institute (VVI) campus of VCC, in downtown Vancouver. VCC claims that PB is liable for a cost overrun in the project of approximately $1.7 million, for a shortfall of 30,000 sq. ft. of new and renovated space below VCC's requirements, and for other deficiencies in the completed project, all of which VCC claims were due to PB's failures to discharge its duties as architects and engineers in the design and estimating of the project.

PB denies all liability for any of the claims advanced by VCC. PB asserts that the project was completed within budget, that all of VCC's space requirements were met, and that there are no "deficiencies" for which it is liable. PB claims that VCC got all that could be obtained for the money it was prepared to spend, and that while some compromises were required, and agreed to by VCC as the project progressed, the completed project substantially provides all that VCC could reasonably expect for the available funds. PB brings its own claim against VCC for unpaid fees of some $400,000.

VCC and PB entered into a written contract on May 29, 1980 setting out the terms and conditions of their agreement as "client" and "architect". In addition, VCC claims that PB made pre-contractual representations which created duties upon it additional to those spelled out in the contract. VCC says that PB owed duties of care in respect of cost control and estimating in addition to its contractual obligations in that regard, and that PB's breach of those duties creates a liability in tort, in addition to, and of greater scope, than PB's liability for breach of contract.

In these reasons I propose to consider first the legal question as to what duties, if any, were owed by PB in addition to those identified in the written contract of May 29, 1980. Then I will describe in a general way the nature and extent of the renovation and expansion program upon which VCC embarked, the design which PB created to accommodate VCC's program, and the need to construct the design in phases so as to permit the uninterrupted operation of the VVI campus during construction.

Since VCC's claims depend very much upon the opinion evidence of four "expert" witnesses whom it called, and since that evidence is contradicted by opinion evidence led by PB, I will next address that subject, those witnesses' credibility, and the extent to which I find their evidence of assistance.

Then I will turn to the substantive issues of VCC's claim, namely, cost overrun, space shortfall, and other deficiencies.

…..

V. The Opinion Evidence:

In this case VCC adduced the evidence of four expert witnesses by filing their reports and calling them to testify orally. VCC's claims as to cost overrun, space shortage, and other deficiencies depend very much upon this


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evidence, and in particular the evidence of Robert Atkins, a quantity surveyor. The other experts VCC called were two architects, James D. Cowan of Seattle, Washington, and John G. Young, and an engineer, Brian T. Nethery. Their evidence is in large part premised upon conclusions or assumptions of Mr. Atkins. His evidence therefore is critical to the success or failure of VCC's claims.

PB filed the reports of, and called, two experts, John Walker, a quantity surveyor, and Ronald K. Nelson, an architect. Their evidence contradicts the opinions of the plaintiff's experts, and supports the assertions advanced on PB's behalf.

In oral reasons which I delivered on December 2, 1987, I refused the plaintiff's application to adduce further documentary evidence which had been prepared by Mr. Atkins, or to recall him to testify orally, in order to adduce evidence of his revised opinions. In refusing the plaintiff's application, I expressed the preliminary and tentative views that Mr. Atkins was partisan, argumentative and not objective. I said I had formed a poor opinion of his credibility. Having now heard all of the evidence, and counsel's submissions, and having reflected upon all of the evidence both lay and expert, I find my earlier and preliminary views fully supported.

A principal problem with Mr. Atkins' evidence stems from the way in which his report, Exhibit 12, was prepared. Following his retainer in July 1986, his report was substantially revised on about ten different occasions. The re-writing of this report was done with considerable advice and commentary from counsel for VCC - Derril T. Warren, Q.C., Hugh G. Ladner, Q.C., Stephen Gill and Susan Fraser. Frequently the amendments to Atkins' draft reports were made at, or following, what he called "round table discussions" with counsel, and later on, at or following similar discussions with both counsel and the other experts retained by VCC.

I in no way wish to condemn the practice of an expert's editing or rewriting his own reports prepared for submission in evidence, or for that matter, prepared solely for the advice of counsel or litigants. Nor do I wish to condemn the practice of counsel consulting with his experts in the pre-trial process while "reports" are in the course of preparation. It is, however, of the utmost importance in both the re-writing and consultation processes referred to that the expert's independence, objectivity and integrity not be compromised. I have no doubt that in many cases these ends are achieved, and counsel and experts alike respect the essential boundaries concerning the extent to which a lawyer may properly discuss the expert's work product as it develops towards its final form.

Regrettably, in this case, the boundaries were not observed. I will refer to some particular examples presently, but I cannot avoid saying that generally counsel participated far too much, and inappropriately, in the preparation of Atkins' reports. Atkins willingly permitted such participation by counsel and seriously compromised the objectivity of his opinions. Counsel suggested, and Atkins agreed to, many additions and deletions to his report. These suggestions went far beyond statements concerning factual hypotheses, their evidentiary foundation, the definition of issues, or other matters on which counsel might properly have advised or commented. Rather, the suggestions went to the substance of Atkins' opinions and the way in which they were expressed. The suggested changes were all one way. Any critical reference in Atkins' drafts to VCC, to its staff, to the MOE, or to its staff, were removed. Criticisms of or complaints against PB were elaborated and multiplied. The result has been Exhibit 12, and subsequent documents prepared by Atkins, that are hopelessly partisan and unfair. The reports and other documents he prepared have none of the objectivity or independence that the Court looks for in reliable opinion evidence. They really amount to nothing more, nor less, than arguments advanced on VCC's behalf through the mouth of "an expert". Unlike convincing arguments, these are not based upon any honest, objective assessment of all of the evidence, nor upon factual hypotheses that are supported by other reliable evidence.

I do not propose an exhaustive survey of the many points in Atkins' reports, or in his oral testimony, that rob his opinions of any evidentiary value. I will, however, refer to some of these matters to illustrate my general criticism of Atkins' reports and evidence.

At counsel's suggestion, Atkins deleted from the first full draft of his report, Exhibit 61, the following:

1. Reference to counsel's letter of July 18, 1986 setting out Atkins' original terms of reference. I infer that counsel saw this as necessary because this draft contained many statements critical of VCC and of the MOE and, as a result, Atkins' original "terms of reference", as contained in the letter, were varied;


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2. Reference to 11 documents which Atkins had shown in the draft as ones which he had reviewed, and which he had in fact reviewed;

3. Reference to VCC's and to MOE's responsibility for difficulties or problems encountered in the course of the project;

4. His opinion that it is inadvisable for a designer to be contractually responsible for cost planning and estimating, even though he continued to hold such an opinion at the time of trial;

5. His statement that neither VCC nor PB ever really knew, before bids were received, how much money in real dollars MOE would make available for the project, rendering cost planning extremely difficult, although again he continued to hold that opinion at the time of trial;

6. The entire section of the draft from pages 28-30 dealing with failure of VCC, the MOE and TB, to accept responsibility for cost control. These criticisms of VCC and the two arms of government were deleted because counsel told Atkins they were beyond his "terms of reference";

7. Atkins' statement that PB believed at the design stage that they had the entire budget "to spend" in executing the VVI project, and his further statement that PB did have such authority;

8. His statement that another community college project, Douglas College, was no better controlled as to cost than VCC, and that PB and VCC were "shown the garden path" by MOE, an opinion which he continued to hold at the time of trial;

9. His criticism of the "funding authority" (MOE) for its unwillingness to reflect the full impact of cost escalation in funding the VVI project, which "condemned" the project either to cutbacks in scope or a cost overrun.

These examples can give only a flavour of the extent to which Atkins, opinion was substantially re-written by counsel. It emerged in Atkins' evidence that all criticisms in the draft, Exhibit 61, of VCC's role in the VVI project were deleted on advice of counsel, who told him such criticisms were beyond his terms of reference. He told the lawyers instructing him that if he were asked the right questions by defence counsel in cross-examination, he would have to give his honest opinion to the Court. He said that if counsel did not ask the right questions, the Court would not receive his opinions which were damaging to VCC's case, because they would be deleted from his report.

On the important issue of which cost index to use for calculating the escalation or inflation of the project budget, Atkins chose the Statistics Canada index in his report, and attempted to justify this choice in his oral testimony. He had to concede, however, that the Stats. Can. index was not published during the course of the project. The Construction Data Systems index (CDS), which Atkins himself authored, would have been his preferred choice for this purpose, but he used the Stats. Can. index instead. The result was to increase VCC's claim by $800,000. Atkins agreed with the defence expert, Mr. Walker, that the CDS index gives a more accurate measure of the effects of escalation on construction prices in Vancouver in the relevant period than does the Stats. Can. index. He also agreed that if he had been given the task of estimating the project's costs, he would have used his own CDS index for forecasting, and urged its use for budgeting purposes.

Atkins' evidence and his reports are equally unsatisfactory on the issue of "space". The deficiencies of his opinions on this subject became evident in the course of his cross-examination. Originally he had said that there was a shortage of 18,000 square feet in the completed project. He later revised this opinion to a space shortage of 21,000 square feet, and subsequently to a shortage of 30,000 square feet. When counsel for VCC applied to re-open his case on November 30, 1987, he told me that Atkins' opinion had changed again and he then held the opinion that there was a space shortage of 37,000 square feet.

Atkins attempted analysis of the space shortage in Appendix 23 to Exhibit 12, and in his "Space Reconciliation Matrix", Exhibit 53, is confused and misleading. He incorporates into his "analysis" of the space provided in the project, the concept of "assignable" space or area. These terms were not used by the parties in their


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negotiations and are not used in the contract. The terms do not appear in any of the preliminary work done for the project, including the Howard and Brawn reports. The terms have no generally accepted meaning in the architectural profession, nor in the construction industry in general. This language was adopted by Atkins as a means of arguing that the level of finish provided in any space could be used to determine whether the space in fact existed, and whether it could be used for instructional purposes. This concept forms no part of the agreement between the parties, who always discussed area or space requirements in terms of "net square feet", unmodified by the word "assignable".

VCC called no factual evidence to support Atkins' claims that certain areas were not finished, or were not finished to the required level; nor to support his claims that certain areas were not used, or were not useable. Atkins carried his misguided opinions concerning "assignable" space or area into his statement of opinion concerning the measure of VCC's loss, set out in Exhibit 24, which is titled "Pricing of the Statement of Claim". This document purports to support VCC's claim that the completed project lacked 30,000 square feet of assignable space, having a value of more than $2.5 million.

It became apparent in Atkins' cross-examination, as well as from other evidence, that this space was in fact constructed, and that at most one could argue only that it had not been finished to the level of VCC's expectations. To say, as Atkins did, that the space was "missing" or "omitted" and that it would cost either $90 per square foot or $40 per square foot to make good the loss is simply dishonest.

Having decided, in consultation with VCC's lawyers, to use the term "assignable space", and having decided to ignore his own CDS index for initiation of the project budget expressed in the contract as mid-1979 dollars, Atkins then attempted to impose his choice of language on other witnesses in the case. He said he felt the witnesses should get the "terms correct" so that "they were all talking about the same thing".

This is very far removed from any role an expert might properly play, and shows the partisan and argumentative position he adopted both in his written and oral testimony. He regarded himself, as a result of his discussions and meetings with counsel, as part of VCC's "team". He met often with the other experts whom VCC retained, helped to vet and to revise their reports, and advised them on the appropriate use of terminology.

In the end, I find Atkins' evidence both written and oral to be of no value whatever. It is so warped by the process of its creation, so one-sided and partisan, as to be completely devoid of any credibility. I have no confidence in anything that Atkins told me, either in writing or orally. Even if his evidence were not contradicted by other credible evidence, I would feel bound to reject it entirely and to decide the case without reference to it.

I regret to say that I found the evidence of the plaintiff's other expert witnesses to be equally unsatisfactory. All of their evidence is tainted by the influence of Mr. Atkins, or from reliance upon some aspect of his report, Exhibit 12. In addition, the other expert reports generally suffer from similar unacceptable participation by counsel for VCC in their preparation.

James Cowan, the architect from Seattle, received his initial instructions from Derril Warren, Q.C., of solicitors for VCC. Mr. Warren told Cowan at the outset that the project was completed over budget, that a reduced scope of work had been achieved, and that the project's results were extremely poor. To provide any expert with such ready-made conclusions in advance, poses a serious threat to the expert's subsequent objectivity and independence. Early in his retainer Cowan received a draft of Atkins' report from which he concluded that something had gone dreadfully wrong in the project. After Cowan's first draft of his own report, Mr. Gill suggested that certain additions and deletions be made, and in due course he received further suggestions for changes from Mr. Ladner and Mr. Gill, as well as from Mr. Atkins. Virtually all of these changes made the report more favourable to VCC, and more damaging to PB.

For example, Cowan's draft report contained this paragraph:

"Both the AIBC information booklet describing architectural services, paragraph 2.3, and the subject client-architect agreement paragraph 4.1, do not require architects to guarantee the accuracy of their estimates, either unit costs or detailed estimates. In the former document, however, the architects of British Columbia assert to the public that 'perhaps the most important single item in establishing a


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good client-architect relationship is in the making of accurate estimates of costs. The estimates should be under continual review up to the time bids are obtained'. It is this statement which, in my opinion, succinctly defines the standard of performance in regard to responsible cost estimating."

That paragraph, which is factual, objective and not open to any real dispute, was deleted at the suggestion of counsel for VCC. On the other hand, at the suggestion of Mr. Gill, Cowan included statements that no increased funding was available for the project, and that PB had been told on numerous occasions "to be within budget" or to have alternatives. These statements are not only not factual, but are contradicted by the weight of credible evidence.

I am unable to attach any weight to Cowan's opinions. He was given inaccurate information when he was first instructed which was calculated to, and which did, prejudice his opinion. He relied to a considerable extent upon Atkins' opinions, which are unfounded and wrong. He permitted substantial revision of his report on the suggestion of counsel or Mr. Atkins, the effect of which was to destroy his independence and objectivity. The result is a report, Exhibit 13, and oral evidence, both of which were partisan, argumentative and unreliable.

John Young is an architect practising in Vancouver. His opinions are summarized in a report, Exhibit 15, and he gave oral evidence as well. The report, again, is based to a large extent upon what Mr. Atkins had to say in his report, Exhibit 12. Young's opinions are premised on the idea that there was a "fixed budget" for the VVI expansion project. This information was given to him by Mr. Ladner but, as will appear, this was not the case, and in fact the budget was to be adjusted not only for inflation but as well by supplementary funds which VCC intended to make available in addition to the budget amount approved by MOE.

Young met with Atkins about six times before his report was completed, and about a further five times thereafter. His adverse evaluation of PB's performance is premised on Atkins' calculations of cost overrun and space shortage.

I am unable to attribute any weight to Mr. Young's opinions. The premises of his opinions are not established by the evidence. He relied upon conclusions of Atkins which I find to be unproven and unreliable.

VCC's fourth expert was an engineer, Brian Nethery. I admitted his evidence over the objection of counsel for PB, who challenged his qualifications to express opinions on the matters in issue. Having now heard and read all of the evidence, including his, and with the benefit of cross-examination, I find that counsel's objection was well founded. Nethery is a metallurgical engineer by training. He has virtually no experience in the design or estimating of institutions or educational projects such as VVI, and almost no experience in Vancouver or British Columbia in the time period from 1980-83. Nethery conceded that he was not expert in architectural matters, nor in those engineering disciplines relevant to the VVI project. The projects on which he had worked are mostly ones of a value of over $100 million, which require and utilize sophisticated cost control techniques.

Nethery, like Messrs. Cowan and Young, also relied upon Mr. Atkins' analysis of the project's space requirements, and his conclusions concerning the project's budget overrun and space shortfall are clearly based on Atkins' report. Nethery participated in the meetings with VCC counsel and other experts in preparing to testify. I do not find Nethery's report to be of any assistance in deciding the matters in issue in this case.

The expert evidence tendered on behalf of PB suffers from none of the defects or weaknesses which I find throughout the plaintiff's experts' reports and testimony. The defendants' experts, John Walker, a quantity surveyor, and Ronald K. Nelson, an architect, were both subjected to taxing cross-examinations (although counsel for VCC did not challenge all aspects of their evidence). Neither Mr. Walker nor Mr. Nelson was forced to change any of his evidence during cross-examination. They did not contradict themselves. Their opinions are fully supported by credible factual evidence on all major premises. I accept their opinions, and I prefer their evidence in every respect to that tendered on behalf of VCC.

…..

WEEK 12: Surrey Credit Union

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Surrey Credit Union v. Willson

British Columbia Supreme Court Vancouver, British Columbia April 2, 1990

McCOLL J.:-- This is a ruling on the admissibility of an expert report tendered through the witness Lawrence S. Rosen, C.A., during the course of trial.

In this action the Plaintiff (“SCU”) seeks to recover judgment against two chartered accounting firms charged with the audit of the financial statements of Northland Bank (“Northland”) in the Fall of 1984. Northland was a chartered bank operating in Western Canada principally out of the City of Calgary in Alberta. In the spring of 1985 SCU purchased, under a private placement, debentures in Northland for the price of $7,500,000. It is alleged that in purchasing the debentures SCU relied upon the financial statements of Northland audited by the Defendant accounting firms, confirming the financial viability of Northland. In fact Northland “collapsed” on September 1, 1985.

The Plaintiff alleges that the audit performed by the Defendants was negligent in that it failed to adhere to generally accepted auditing standards within the profession.

Dr. Rosen has been tendered as a witness on behalf of the Plaintiff to give expert evidence of the standards which the profession, of which he is a member, deems appropriate in the performance of an audit. Rosen has already testified as to his qualifications. In a ruling already made at trial I held that he was capable of giving the evidence for which he has been tendered as a witness.

Counsel for the Defendants now objects to the written report of Rosen tendered in these proceedings pursuant to Section 10 of the Evidence Act.

The objections to the report are many and substantial. They fall into five principle categories:

1. The report contains opinion evidence outside of the expertise or qualifications of the witness;

2. The report is essentially argument rather than opinion and not within the confines of the territory in respect of which an expert is entitled to opine;

3. The report contains conclusions of fact upon evidence in respect of which it is the function of the trial judge alone to determine;

4. The report contains large passages which are irrelevant, superfluous, or simply of no assistance to the trial judge and touch upon areas referred to in paragraph 3 above; and

5. The report contains many passages which in fact are neither comments nor opinions on the standard of care, the area in respect of which the author is tendered as an expert.

Finally, counsel for the Defendants argues, in any event, the report contains opinions of the author concerning the negligence of the Defendants which is the very issue before the trial judge and is therefore not admissible in these proceedings.

The report exceeds 200 pages in length. Dr. Rosen, from the outset, stipulates the sources which he used both as to his opinion as to standards of the profession and his assumptions of facts upon which he opined as to the failure of the Defendants to meet those standards in the performance of the audit or audits in question.

Much of what the Defendants say is objectionable about the report is well founded. During the course of argument on the issue I was at some pains to point out the considerable difficulties I had with the report myself having, at the urging of counsel, read the report prior to hearing counsel’s submissions on the issue. On the whole it must be said that the report is so defective in respect to the many issues raised by counsel for the defence that it cannot be admitted in its present form.


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I reach this conclusion without in any way intending to impeach the intentions of Dr. Rosen or counsel, upon whose request the report was prepared. Nor do I intend at this stage to comment on those matters upon which Dr. Rosen has given an opinion in those areas in accordance with the purpose for which he is tendered.

I think it useful to restate, in simplistic terms, the legal reasoning behind the court’s view of the limitations of its reception of expert opinion. I start off by stating that while I initially had serious reservations concerning the giving of expert opinion at all in this case I am quite satisfied that the nature of the case makes it appropriate that I should hear from an expert or experts in the profession of accounting and in particular with respect to the sub discipline of that profession, auditing. That is the purpose for which Dr. Rosen is being called. It is right and proper that in examining the conduct of the Defendants in this action I should have the assistance of an eminent and well respected member of the profession who can tell me what the standards of that profession are. Here I find it helpful to adopt what Oliver J. said on the subject in Midland Bank Trust Co. v. Hett Stubbs & Kemp [1979] Ch. 384, [1978] 3 All E.R. 571; (at p. 582):

“Clearly if there is some practice in a particular profession, some accepted standard of conduct which is laid down by a professional institute or sanctioned by common usage, evidence of that can and ought to be received.”

The evidence which Dr. Rosen is capable of giving and to which he ought to be confined is not really technical in nature. Rather, as a member of a particular discipline or profession, he is able to tell the court something of the nature of the standards imposed upon all members of that profession in the performance of their duties; and in this particular instance, something of the special additional duties imposed upon those members in the performance of an audit. Those are matters peculiar to that profession which non members are not qualified to give.

In the present case the Plaintiff alleges that the Defendants failed to meet the generally accepted auditing standards acknowledged, it says, universally by that profession in Canada. The Plaintiff is entitled to lead evidence as to those standards. Dr. Rosen has the qualifications to do so.

Secondly, having established the standards, Dr. Rosen is also entitled to give an opinion, based upon facts or assumptions communicated to him as to whether or not certain acts or omissions occurring in the performance of an audit would be regarded within the profession as breaches of those standards.

He is not however entitled to give an opinion as to the legal duty imposed by those standards or whether or not the breach of a standards is actionable at law. Those are matters beyond his competence as an expert. (Midland Bank, supra).

This type of evidence can take two forms: a statement of opinion based upon hypothetical facts or a statement of opinion regarding facts or assumptions of facts concerning the case which have been communicated to him. In either case he is bound to communicate to the Defendants the sources of those facts or assumptions of fact. They need not be (indeed in my view are not required to be) part of the opinion itself. What he cannot do is to make findings of fact himself. That is the exclusive role of the trial judge. (See Quintette Coal Limited v. Bow Valley Resources (1988), 29 B.C.L.R. (2d) 127 (B.C.S.C.); Emil Anderson Const. Co. v. B.C. Ry. Co.,15 B.C.L.R. (2d) 28, [1987] 5 W.W.R. 523; and Hennessey v. Rothman (1988) 26 B.C.L.R. (2d) 322.

Further he cannot make findings of law. That also is within the exclusive jurisdiction of the trial judge. In that respect while he may be able to give his opinion that an act or omission constitutes a failure to comply with a standard in the profession he cannot go that one step further and conclude that such a failure constitutes negligence. It is for the trial judge upon his or her conclusion as to the facts to determine whether or not negligence has been proven. (Hennessey v. Rothman, supra; Emil Anderson Const. v. B.C. Ry. Co., supra).

Finally every expert should avoid arguing the case, a matter which is more properly left in the hands of counsel. (Sengbusch v. Priest (1987) 14 B.C.L.R. (2d) 26; Vancouver Community College v. Phillips Barratt et al., (1988) 26 B.C.L.R. (2d) 296; and Quintette Coal Limited v. Bow Valley, supra.)

The purpose of eliciting expert opinion in the first place is to enable the trial judge to understand evidence within the peculiar field in which an issue arises. if the field is one of general knowledge or within ordinary human experience no


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expert testimony would be necessary at all. (Mazur v. Moody (1987) 14 B.C.L.R. (2d) 240.) Where expert testimony is tendered it should be tendered in an objective and impartial manner so that the court can place some reliance upon it.

All of the foregoing seems to have caused confusion in the minds of some experts as to the purpose of giving evidence, the nature of the opinion, its contents and how little or how much ought to be said. The reason for this is that the experts, usually having been retained by one of the disputants, are often mislead or misinformed as to the true purpose and limitations of expert opinion. To add to this difficulty is the perception, that because the law requires a person rendering an opinion to disclose the sources of his information or facts upon which the opinion is based, that the opinion itself should contain in minute detail those sources and assumptions. I do not understand that to be the case at all. what is required is that the expert must disclose those sources so that those who do not agree with the opinion will have the opportunity to test the reliability of the opinion itself or indeed to put to the expert facts or assumptions not previously known to the person offering the opinion which may alter, change or amend the opinion itself.

Expert opinions will be rendered inadmissible when they are nothing more than the reworking of the argument of counsel participating in the case. Where an argument clothed in the guise of an expert’s opinion is tendered it will be rejected for what it is. That is precisely what happened in Vancouver Community College v. Phillips Barratt et al., supra. In that case the evidence demonstrated that the expert had revised his report several times at the suggestion of and in consultation with counsel. Finch J. held that the revisions went beyond mere clarification and rejected the opinion. In the present case counsel for the Plaintiff, acknowledging some of the difficulties with the Rosen report, stated he did not want Dr. Rosen to run afoul of the objections raised in the Vancouver College case. Quite frankly I think that is taking the observations of Finch J. well beyond what he intended. There can be no criticism of counsel assisting an expert witness in the preparation of giving evidence. Where the assistance goes to form as opposed to the substance of the opinion itself no objection can be raised. It would be quite unusual in a case of this complexity if counsel did not spend some time in the preparation of witnesses before they were called to give evidence. It is no less objectionable to engage in the same process where the witness to be called is an expert. Indeed had the process been followed here much of the objectionable material might have been avoided.

In my view where it is intended that an expert be called for the purposes of expressing an opinion the limits of that opinion should be explained to the witness so that there is a full understanding of the role that witness is about to embark upon in the proceedings.

There is a dichotomy in the trial of a technical or highly complex case where expert opinion is expected to be a significant part of the evidence. Inevitably the expert is called precisely because he or she has a deeper or more profound understanding of the circumstances in which the non technical evidence is to be read. To the casual observer, if not the participants in the trial itself, the expert, being the most knowledgeable person on the subject, might well be regarded as the very person who is best able to decide the issues in dispute. But that is not the case.

It is open to parties in a dispute to agree to have the dispute heard and tried by experts. Where, as here, they choose not to do so the dispute is heard by a trial judge who alone is charged with deciding issues of fact and law. This process may in the long run be slower and indeed more tedious. However as Spencer J. said in the Quintette Coal case (supra) (at p. 128):

“A judge may not permit an expert to assume those functions nor to argue the case as if he were counsel .......... they are beyond his [the expert’s] role.”

The present case will, of necessity, require a detailed tracing of the events which lead to this action. That will require both viva voce evidence and a close scrutiny of the many many documents exhibited during the trial and on examinations for discovery. That however is the role of counsel throughout the trial. Once an expert treads into this territory the opinion of that expert will lose precisely the objectivity it is intended to have in order to assist the trial judge.

I now turn to the report itself. To begin with, it is far too long and too filled with objectionable material of the nature I have described. A trial judge will of necessity regard with some scepticism a report of this length. One of the purposes of expert opinion is to illuminate, as simply as possible, the point the expert wishes to drive home. The more prolix the opinion the more likely it is to defeat the purpose for which it is tendered.


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I have read with some attention the decision of Spencer J. in the Quintette Coal case (supra). He seems to have been facing almost identical objections upon the tendering of an expert report having previously held that the expert was qualified to give an opinion. I propose to follow in this instance what he did on that occasion - that is to reject the tendered report and require Rosen to restate his opinion in an acceptable form.

In reaching this conclusion I must observe, on the whole, that in spite of the many objectionable flaws I do not find that the report is without merit. Its problem appears to be that it has gone beyond the realms of mere expert opinion and has frequently intruded into areas beyond the author’s expertise and into matters reserved for counsel and the trial judge.

I have gone on at some length in the hope that Dr. Rosen, understanding the purpose, is now in a position to re-write his opinion in such a way as to make it an acceptable piece of evidence.

It is not the function of either the court (nor indeed of counsel) to re-write the report and I do not propose to do so.

Aside from what I have already said I would add the following comments in an attempt to assist:

1. He may give evidence of the standards of his profession which relate to the issues in dispute;

2. When he has been provided with facts, assumptions or hypothetical facts, he may offer an opinion as to whether they conform to the standards of which he has given evidence;

3. Where he has given an opinion upon facts made known to him he is bound to disclose those facts and how they came to his attention;

4. Where he has made assumptions he is bound to explain the basis upon which those assumptions have been made;

5. In the event that contrary expert opinions are put to him he may explain why, in his view, his opinion should be accepted over others;

6. He may not make conclusive findings of fact on issues in dispute and may not offer an opinion as to how the law should apply to any of those facts;

7. He may not give an opinion on the merits of the Plaintiff’s claim.

I have not dealt specifically with the many objections raised in the course of argument. They are too many. Aside from that, counsel had the opportunity of my direct comments on specific issues in the course of argument. I will say this however: that the first part of Rosen’s report which deals specifically with auditing standards is not objectionable. The report becomes objectionable when he begins to opine upon facts and the relationship between those facts and his opinion of standards. If Dr. Rosen can re-write his report so that the first part provides an opinion as to standards and the second part provides an opinion as to what kind of conduct might be regarded as a departure from those standards both as to specific knowledge which he has and assumptions he has made the report should meet the objections raised in these proceedings.

WEEK 12: Yewdale

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Yewdale v. Insurance Corporation of British Columbia

British Columbia Supreme Court Vancouver, British Columbia Judgment: filed January 18, 1995

[1] NEWBURY J.:-- I am asked to rule on the admissibility of all or part of certain experts’ reports at the trial of this action, which is scheduled to begin next month.

[2] Mrs. Yewdale was the defendant in a personal injury claim brought by Mr. Darren Gervais, who was riding his motorcycle when it was struck by Mrs. Yewdale’s car on June 5, 1990. Liability was contested, but the trial judge found Mrs. Yewdale 100 percent liable, a result confirmed some time later by the Court of Appeal. As a result of negotiations conducted during the week of trial, counsel for I.C.B.C. agreed with Mr. Gervais’ counsel on quantum at $3.43 million plus prejudgment interest and “gross-up”, a settlement concurred in at the time by Mrs. Yewdale. According to the statement of facts provided to the experts in this proceeding, gross-up was subsequently “agreed to” at $950,000, although Mrs. Yewdale’s instructions were not sought or obtained with respect to that amount. Ultimately, judgment was granted for an amount exceeding $4.3 million. Since Mrs. Yewdale’s insurance coverage was limited to $1 million, she has been forced to sell her assets have had to be sold to pay the judgment, and she is now bankrupt. I understand there still remains a substantial debt to Mr. Gervais.

[3] Mrs. Yewdale now makes various claims of negligence, breach of duty of good faith and breach of contract against her insurance agents, her insurer I.C.B.C., its counsel and her own counsel, in respect of which she seeks general and special damages, a full indemnity for the portion of Mr. Gervais’ award that exceeded her insurance coverage, and punitive, exemplary and aggravated damages except as against her insurance agents. The trial is expected to take between three and six weeks.

Experts’ Reports

[4] The plaintiff has produced five experts’ reports, to which all or some of the defendants take objection. Before dealing with each of them individually, it may be worthwhile to set forth my understanding of the applicable law concerning such reports in our courts. The following are not absolute rules, since their applicability will often depend on the particular nature and accessibility of the issues before the court, the extent to which industry or professional standards and practices can be formulated for the court’s assistance, and even the manner in which the relevant questions have been posed for the expert. In general terms, however, I proceed on the basis that:

1. Opinion evidence is admissible only where it would be of assistance to the court in deciding a question requiring long study or experience. Conversely, such evidence is not admissible with respect to matters that lie within the ordinary experience of the trier of fact;

2. If expert opinion is permitted, the expert must stay within his or her stated area of expertise;

3. The expert must not be permitted to displace the role of the trier of fact. Because of this, courts in the past resisted expert testimony going to the “ultimate issue”. That clear rule has long since fallen by the wayside, but it still remains essential for the expert to state the facts he or she has assumed in the course of reaching the opinion, and if possible, to avoid making findings of fact on issues in dispute. Thus if the court does not find such facts or finds different facts, the weight of the expert’s opinion can be assessed accordingly;

4. Given the special privilege accorded to experts to testify as to their opinions, they must not become advocates. They must express their opinions as opinions and must leave for the court the required conclusions of law. In theory at least, the court “knows the law” --- in practise it has the responsibility of finding and applying it. Thus the expert should express his or her opinion in an objective and impartial manner, and must not present argument in the guise of expert evidence.

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(See generally Surrey Credit Union v. Willson et al. (1990) 45 B.C.L.R. (2d) 310; Hennessy v. Rothman (1988) 26 B.C.L.R. (2d) 322; Sengbusch v. Priest et al. (1987) 14 B.C.L.R. (2d) 26; and Emil Anderson Construction Co. Ltd. et al. v. British Columbia Railway Co. (1987) 15 B.C.L.R. (2d) 28.)

Mr. Camp’s Report

[5] Applying these principles to Mr. Camp’s report, it is overwhelmingly clear to me that his report is wholly inadmissible. As Mr. Cowper points out, Mr. Camp does not purport to provide expert evidence on professional standards of conduct applicable to lawyers in handling personal injury claims in British Columbia; rather, he draws inferences of fact apparently relying in part on evidence taken from discovery transcripts and other documents outside the given statement of facts and conclusions of law in the same manner and on the same points as this court will be required to do. Mr. Camp starts out with a statement of what in his opinion is the appropriate standard of care, citing Shea v. Manitoba Public Insurance Corp. (1991) 55 B.C.L.R. (2d) 15 a case that counsel advise may or may not prove to be the standard adopted by this court. He then makes a series of judgments as to what defence counsel ought to have done and whether what they did do was “appropriate” in light of the standard he has formulated. One cannot help but be reminded of the comment of Meredith, J. in Hennessy v. Rothman, supra, where he said in connection with an expert opinion prepared by a doctor:

“The factual assumptions should be stated clearly to Dr. Rockerbie by counsel, and he asked to give his opinions on those facts. They are facts that counsel will then proceed to prove in evidence. Otherwise, the judge simply sits as a sort of Court of Appeal over Dr. Rockerbie’s opinion. And even though the opinion is based upon material unknown to the judge. This is to be distinguished from the evidence given by a medical doctor as to his opinion relating to the physical or mental condition of a patient.

So one main objection is that Dr. Rockerbie is invited to base his opinion upon his own findings of fact. Surely this is wrong. It is not his function to find facts.” [at 325]

Similarly here, were I to admit Mr. Camp’s report into evidence, I would be put in the position of sitting like a court of appeal over his opinion, all the more so because he has purported to advise the court as to what the applicable law is in this case the function of an advocate and then to decide whether what the Harper Grey defendants did was in fact “reasonable” and timely the function of the Court.

[6] In my view, the entire report must be excluded from evidence and cannot be saved by any rewriting or amendment.

Mr. Roberts’ Report

[7] I reach the same conclusion concerning Mr. Roberts’ report, although it at least refers to the “reasonably competent solicitor” in two or three places. Mr. Roberts begins by postulating the standard of care applicable to Mr. Schmitt as Mrs. Yewdale’s solicitor and reaches legal conclusions concerning whether he discharged those duties, in the same manner as this Court will be required to do. Again, these are conclusions that the Court will reach and can reach with the assistance of counsel. They are not properly the subject of expert testimony.

Mr. Coleman’s Report

[8] Mr. Coleman is a retired insurance adjuster and claims manager who has supplied an opinion as to I.C.B.C.’s conduct in the investigation and negotiation of Mr. Gervais’ claim. His report is a combination of self-evident statements, (e.g., “As I.C.B.C. has access to medical reports and wage loss information to deal with Part VII benefits, they would know within a few weeks that this [was] a catastrophic injury involving a young man.”), permissible statements of industry standards (e.g., most of the top two paragraphs on page 8 of his report), and legal conclusions that are the province of the Court (e.g., the final paragraph on page 8). In addition, although Mr. Coleman’s report purports to be divided into a recitation of the facts followed by his conclusions beginning at page 7, his narrative of the facts is replete with various inferences (some of which are incorrect), and legal conclusions. At page 3, for example, he notes that

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“Based on my view of the evidence and my experience adjusting these types of claims, it would have been my view following interviews of all the witnesses, that the insured, Mrs. Yewdale, was completely at fault for the motor vehicle accident.”

and at page 4 he says:

“Even preliminary assessments would place the damages well in excess of the insurance policy limit and given the Corporation’s view of liability it would have been obvious that coverage would likely be exhausted. In my experience, the insured would be notified clearly of her risk and of the fact that I.C.B.C. has a duty to defend any claim against her.”

He also suggests at the same page that Harper Grey’s letter of June 12th to Mrs. Yewdale

“.......... should have been very specific on the matter of liability and quantum so that Mrs. Yewdale could understand her risk and the need for independent legal advice.”

All of these, of course, are conclusions that this Court will be asked to draw and which in my view do not require the assistance of an expert. Overall, then, despite the fact that Mr. Coleman’s report does refer in a couple of spots to I.C.B.C.’s normal practice in situations such as this, those references are not sufficient to outweigh the clearly objectionable or unhelpful portions of the report. Accordingly, it will not be received in evidence.

Mr. Carson’s Report

[9] Mr. Carson’s report is unusual to say the least. He had evidently prepared four reports for the Gervais trial dealing with care costs, fund management, tax gross-up and income loss. He has now prepared yet another report in which he suggests points on which he “may have undergone” cross-examination had quantum been tried. He notes for example that “It would be useful to establish in the evidence that if the plaintiff’s life expectancy is less than normal, present values of costs will be reduced” hardly something unknown to this Court. With respect to fund management, he says that he is often asked (presumably in trials) about the need for a fund manager and whether such a manager increases the real rate of return of invested funds and provides what his answer normally would be. On the topic of gross-up, he notes the importance of one’s assumptions concerning long-term inflation rates, advising that although his report assumed 2 percent for five years and 4 percent or 5 percent thereafter, “in fact nobody can predict inflation rates in the long term future.” I agree with Mr. Truscott that these are statements of the obvious that are of no assistance to the Court. The same is true of his statement concerning the claiming of medical expenses for tax credits, concerning which he advises:

“In cross-examination you would want to clearly establish the expert’s assumptions in this regard. Ideally you might obtain a ruling from the court with regard to items which attract credits or deductions. You could then have the gross-up recalculated if the court’s ruling did not correspond to the expert’s assumptions.”

Finally, on the topic of income loss, he advises that although Mr. Gervais was employed and comparatively well paid at the time of the accident:

“In fact one year of earnings history can scarcely be considered to be statistical evidence at all. The conclusion that someone like Mr. Gervais would have continued in the same kind of work or that he would have continued to be a high earner relative to his age/education peers really cannot be supported on the basis of one year of work. If questioned about this, I would have to acknowledge that this is so.”

[10] Again, with respect, I am not sure how these self-evident statements assist the Court in the issues that will be before it - i.e. whether counsel were negligent or acted reasonably in relying upon Mr. Carson’s earlier reports in determining the issue of quantum, if in fact they did so rely. The areas of cross-examination noted by Mr. Carson are just that they are not admissions of mistakes or misassumptions contained in his earlier reports. Any trial judge is only too aware of the vagaries of inflation rates, investment mixes, income tax calculations, and future earnings projections. These are the bread and butter of personal injury trials and Mr. Carson’s reports are a frequent feature in cases such as Mr. Gervais’. I would reject the report, then, not so much because it is offensive to any of the principles listed above, but because it is of no assistance.

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Ms. Shulstad’s Report

[11] I turn finally to the report prepared by Ms. Shulstad concerning her calculation of the costs of future care that she would have recommended for Mr. Gervais at the time of trial. In preparation for the actual trial, Dr. van Rijn’s opinion had been sought and a Ms. Dodson had been asked to prepare a report for the defence on the likely costs of future care. The doctor had suggested that Mr. Gervais would require 20 hours of homecare (presumably per day) at a maximum and 6 - 8 hours at a minimum a recommendation Ms. Shulstad apparently agrees with; but she makes no mention of Ms. Dodson’s opinion that Mr. Gervais would require full-time care.

[12] At this stage I am not aware of what assumptions were made by the defendant solicitors when they settled the quantum question in January, 1993, but I assume Mrs. Yewdale may take the position that those lawyers acted unreasonably in relying on whichever report or reports they did. If it is contended that they were negligent in selecting and relying upon Ms. Dodson’s report, and that that resulted in damages to Mrs. Yewdale, Ms. Shulstad’s opinion may be of some assistance on the issue of quantum of the plaintiff’s loss. If the plaintiff takes the position that the defendant lawyers relied unreasonably on Dr. van Rijn, Ms. Shulstad’s opinion will be counter-productive to their cause.

[13] In either event, I am frankly unable to say at this point that Ms. Shulstad’s report will be totally irrelevant given the limited understanding I have at present of the case and of the plaintiff’s specific arguments concerning breach of duty and causation. I therefore will not exclude Ms. Shulstad’s report at this time but will leave the question of relevance open for argument at trial if need be.

Oral Testimony

[14] I confirm that the foregoing rulings will not affect the right of the plaintiffs to call the various experts as witnesses at the trial and at that time to question them on matters that are properly the subject of opinion evidence.

Costs

[15] Counsel did not speak to costs but may do so at a mutually convenient time.

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Pedersen v. Degelder

British Columbia Supreme Court New Westminster, British Columbia Oral judgment: April 11, 1985.

BOUCK J. (orally):—

Nature of motion

[1] At this stage in the trial the plaintiff proposes to call as a witness Dr. L.J. Brunton, a specialist in physical medicine. Two medical reports from Dr. Brunton dated March 15, 1984 and March 12, 1985 were previously introduced as exhibits pursuant to s. 10 of the Evidence Act, R.S.B.C. 1979, c. 116.

[2] Counsel for the defendant contests the right of the plaintiff to file the medical reports as exhibits and also call the doctor who wrote the report to give viva voce evidence.

Facts

[3] Mogens Pedersen claims damages for personal injury arising out of a motor vehicle accident which occurred at Smithers, British Columbia on July 9, 1981. Liability is admitted. A jury has been selected to determine the quantum of his damages.

[4] Counsel for the plaintiff says he proposes to elicit from the doctor when he takes the stand the following testimony:

(a) Additional evidence concerning the injury to the plaintiff not expressly contained in the two medical reports.

(b) A pictorial explanation of the injuries to the plaintiff’s back through the use of diagrams of the anatomy which were also filed as exhibits.

(c) A demonstrative explanation of the nature of the injury to the plaintiff’s back through the use of a model of the spinal column not yet introduced as an exhibit.

Issue

[5] The issue is whether or not the Evidence Act and Rules of Court preclude the plaintiff from pursuing this method of attack.

Law

(a) Medical Reports

[6] Sections 10 and 11 of the Evidence Act are not easy to interpret. Generally speaking, they have not been the subject of much judicial comment because any dispute about their meaning usually arises in the middle of a trial. At that time counsel are not fully prepared to make submissions on their proper interpretation. It is also impractical for the trial Judge to adjourn the trial so that he can do his own investigation and subsequently deliver a reasoned judgment.

[7] More often than not a rough compromise is reached and the trial proceeds.

[8] The relevant sections now read:

“10.(1) In this section and sections 11 and 12 ‘proceeding’ includes any judicial, quasi-judicial or administrative hearing or inquiry.

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(2) A statement in writing setting out the opinion of an expert is admissible in evidence in a proceeding without proof of the expert’s signature if a copy of the written statement is furnished to every party to the proceeding who is adverse in interest to the party tendering the statement at least 14 days before the statement is given in evidence.

(4) The assertion of qualifications as an expert in a written statement is proof of the qualifications.

(5) Where the written statement of an expert is given in evidence in a proceeding, any party to the proceeding may require the expert to be called as a witness.

(6) Where an expert has been required to give evidence under subsection (5), and the judge or other person presiding at the hearing is of the opinion that the evidence obtained does not materially add to the information in the statement furnished under subsection (2), he may order the party that required the attendance of the expert to pay, as costs, a sum the judge or other person presiding at the hearing considers appropriate.

11.(1) No person shall give, within the scope of his expertise, evidence of his opinion in a proceeding unless a statement in writing of his opinion and the facts on which the opinion is formed has been furnished, at least 14 days before the expert testifies to every party who is adverse in interest to the party tendering the evidence of the expert.

(1.1) Notwithstanding subsection (1) the judge or other person presiding in a proceeding may, on application of a party or on his own initiative

(a) where no statement has been furnished, order that the expert may testify,

(b) where the statement was furnished less than 14 days before the expert is to testify, order that he may testify,

(c) order that the expert shall be allowed to testify where the statement is furnished within a time less than 14 days before he is to testify, and specify the time, or

(d) where it appears that a party will tender the evidence of an expert in the proceeding, order that a statement be furnished at a time earlier than 14 days before the expert is to testify and specify the time by which the statement shall be furnished.

(2) For the purpose of proving that a copy of a written statement was furnished to any party to a proceeding, the judge or other person presiding at the hearing may accept an affidavit made by the person who furnished the statement.

12. Section 11 does not apply in proceedings to enforce a law in which punishment by fine, penalty or imprisonment may be imposed.”

[9] These sections became part of the statute law of this province in 1976. Amendments and additions were made in 1977 and 1981. Their purpose is twofold. First, they were enacted so as to allow doctors to practises medicine rather than spend their time in Court houses, either waiting to give evidence or giving evidence. Section 10 now allows a statement in writing of an expert such as a doctor be given in evidence without the necessity of calling the doctor himself to testify. This is contingent upon the relevant party providing the statement to the opposite party 14 days before its presentation into evidence.

[10] The second objective was to avoid the delay that sometimes occurred prior to 1976 when one side called an expert to testify and the opposing party was caught by surprise. Frequently an adjournment was granted so the opposite party could prepare himself for cross-examination of the unexpected expert witness.

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[11] Now, a party proposing to file a written statement of an expert as an exhibit under s. 10, or call an expert to give oral testimony under s. 11 must give 14 days notice of what the expert will say so the opposite party can prepare himself and thus avoid the possibility of an adjournment.

[12] A submission advanced by the plaintiff was to the effect that refusal to allow the oral testimony of the expert deprives the plaintiff of his common law right to put before the jury the witness himself. There is an answer to that complaint. It is found in s. 11.

[13] If a plaintiff so desires he can give the defendant 14 days notice of the written opinion of the expert pursuant to s. 11 of the Evidence Act and then call the expert himself to testify.

[14] A close reading of s. 10 indicates the statement filed by a party as an exhibit is the evidence itself. On the other hand, s. 11 seems to contemplate the presence of the expert to “testify” (subs. 1). A judge may also “allow the expert to testify” when the statement under s. 11 is not furnished 14 days ahead of time (s. 11(1.1)(c)). Confirming this concept a Court may order a party to provide a statement more than 14 days “before the expert is to testify” (s. 11(1.1)(d)). Generally speaking, the statement of the expert filed as an exhibit under s. 10 is the evidence of the expert, whereas under s. 11 the opinion of the expert who is called to testify is the evidence in that instance.

[15] One should not overlook the benefit a party receives by filing a written statement of an expert under s. 10. Unlike other witnesses the jury has the advantage of written evidence to take with it to the jury room. But if the expert gave evidence orally, much of it could be lost to the memory of the jury by the time it retires to deliberate. Not so when the jury has a copy of the statement to peruse at its leisure.

[16] The most persuasive submission which favours filing the statement and also calling the witness is s. 10(5). It says “any party to a proceeding may require the expert to be called as a witness”. Hence, the plaintiff contends that as a party he may file the written statement under s. 10(1) and produce the expert witness to give oral testimony.

[17] Generally speaking, subss. 10(5) and (6) have been interpreted to mean that where one party files a written statement as an exhibit, the opposite party may require the attendance of the expert for the purpose of cross-examination. If the cross-examination does not materially add to the information in the written statement, the party who asked the expert to attend and be cross-examined can be penalized in costs. Nonetheless, the section plainly allows the plaintiff to call Dr. Brunton in addition to filing his written statement. It does not say the only way he can give oral testimony is through cross-examination. In my view, a correct reading of the statute allows the plaintiff to call the expert to give evidence in chief where he files an expert’s statement as an exhibit. But this expert testimony must be confined to the following matters:

(a) Explaining any apparent ambiguity that may exists in his written statement, or

(b) Explaining any technical terms in the statement that may not be well understood by the average person.

[18] The expert cannot go further because to do so he would be adding to the material already in the written statement. The statute requires that 14 days notice be given to the opposite party of anything the expert might say. If he takes the stand at the trial and then proceeds to comment about additional findings or complaints which are not in the written statement, then he is contravening the 14 day notice requirement.

[19] Ontario authority was cited to me by the plaintiff in support of his contention. It is found in Thorogood v. Bowden (1978), 21 O.R. (2d) 385. In that case the Ontario Court of Appeal decided that where a doctor’s report made reference to the possibility of future complications, evidence from him at the trial as to the future possibility of arthritis and the need for a new artificial hip joint expanded upon what was latent in the medical report. The judgment concluded that as such evidence did not open a “new field”, the trial Judge properly decided there was no prejudicial surprise to the opposite party by the introduction of this testimony.

[20] But the Ontario Evidence Act which allows the introduction of medical evidence through a written statement is quite different from ours: Evidence Act, R.S.O. 1970, c. 151, s. 52. It reads:

“52.(1) Any medical report obtained by or prepared for a party to an action and signed by a legally qualified medical practitioner licensed to practise in any part of Canada is, with the leave of the court

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and after at least seven days notice has been given to all other parties, admissible in evidence in the action.

(2) Unless otherwise ordered by the court, a party to an action is entitled to obtain the production for inspection of any report of which notice has been given under subsection 1 within five days after giving notice to produce the report.

(3) Except by leave of the judge presiding at the trial, a legally qualified medical practitioner who has medically examined any party to the action shall not give evidence at the trial touching upon such examination unless a report thereof has been given to all other parties in accordance with subsection 1.

(4) Where a legally qualified medical practitioner has been required to give evidence viva voce in an action and the court is of opinion that the evidence could have been produced as effectively by way of a medical report, the court may order the party that required the attendance of the medical practitioner to pay as costs therefor such sum as it considers appropriate.”

[21] Unlike our Evidence Act, it does not divide the method of giving evidence into two sections. Nor was the attention of the Ontario Court of Appeal drawn to the difficulties which could occur at the trial level where a party files a report of an expert in a “skeleton” form and then substantially enlarges upon it through oral testimony of the expert. If that is allowed to happen, the 14 days notice provision in ss. 10 and 11 of the British Columbia Evidence Act could become meaningless.

[22] As I see it, the intent of ss. 10 and 11 of the British Columbia Evidence Act is to give 14 days notice to the opposite party of the expert testimony that will be presented at the trial. Where one party believes it advantageous to introduce the expert evidence though a written statement, he may use s. 10. But where he wants to call the expert witness to give oral testimony, he is then confined to s. 11. If he does not furnish the written report to the other side within the 14 day period he may have to call the expert himself because there is no provision in s. 10 for abridging the time for filing a written statement.

[23] Notice is an important ingredient in each section. An opposite party should not be taken by surprise at the trial. If a party elects to file the written statement under s. 10 he may still call the expert to explain any technical words or any ambiguity in the report. But I do not believe an expert can expand upon what is in the written statement in s. 10 because that statement is the evidence. Similarly under s. 11 the “statement in writing of the expert’s opinion and the facts on which the opinion is formed” establishes the framework within which an expert may testify where the statement is not filed. While provision is made in s. 11 giving a Court authority to allow the expert to “testify” as to new matters, no related subsection is contained in s. 10.

[24] On the other hand, a defendant may call oral testimony of an expert to reply to the written or oral evidence of an expert called by the plaintiff. Similarly, a plaintiff may call rebuttal expert testimony in suitable circumstances to rebut the written or oral testimony of expert evidence tendered by the defendant. This is because the Evidence Act does not contemplate the use of ss. 10 and 11 as a method of defending or rebutting expert evidence tendered by the opposite side.

[25] For example under s. 11, a party is required to “furnish” the opposite party with a statement of the opinion of the expert “14 days before the expert testifies”. If a defendant informs a plaintiff before trial that 14 days later he is calling an expert to testify, then the plaintiff may wish to wait until that expert is examined before deciding to call rebuttal evidence. If he makes this election, one interpretation of the statute would compel him to furnish the defendant with a statement of opinion of the rebuttal testimony 14 days before that expert testifies. Strict compliance with these statutory sections in this area could cause confusion and interminable delays in the trial process. Hence, they do not apply to expert evidence called by a defendant to reply to the expert evidence given by a plaintiff, nor do they apply to a plaintiff who calls an expert to rebut expert evidence given by an expert of the defendant.

(b) Demonstrative Evidence

[26] Rule 40(10) requires a party to give 7 days notice where he intends to introduce an object such as a spinal column as part of his case. That Rule reads:

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“(10) Unless the court otherwise orders or the parties agree, no plan, photograph or object shall be received in evidence at the trial of an action unless, at least 7 days before the commencement of the trial, the parties have been given an opportunity to inspect it.”

[27] The “object” mentioned in the rule as it applies to this action is the model of the spinal column. Counsel for the defendant objects to it being shown the jury because the 7 days notice contemplated by the rule was not given to him. No good reason was advanced to me as to why I should overrule this objection. Therefore, the model cannot become part of the evidence.

Summary

[28] (1) Where a statement of an expert is filed as an exhibit under s. 10 of the Evidence Act, he may be called to testify but he cannot enlarge upon what is in the statement because the opposite party must be given 14 days notice of this new material prior to the time it is given in evidence. At most, all the expert can do is explain any ambiguities in the statement or explain technical terms whose meaning may be unknown to most laymen.

[29] (2) Alternatively, a party may call an expert to give oral testimony under s. 11 of the Evidence Act providing he has given the opposite side a statement of the opinion of the expert and the facts on which the opinion is found 14 days before the expert is called to the witness stand.

[30] (3) Even when the expert testifies, he cannot go beyond the contents of the statement furnished to the opposite party under s. 11.

[31] (4) Relief from strict compliance with the provisions of s. 11 may be granted by the Court where the expert is called to testify.

[32] (5) Expert testimony may be given by way of viva voce evidence without delivering written notice of its content, where its purpose is to reply to or rebut the statement or testimony of an expert whose statement or testimony was introduced by the opposite party.

[33] (6) Unless 7 days notice of intention to lead demonstrative evidence is given to the opposite party, such as the model of a spinal column, its introduction into evidence may not be allowed.

Ruling

[34] From this analysis, the plaintiff cannot call Dr. Brunton to testify beyond the words of the written statements filed as an exhibit, because the plaintiff elected to file the written statements of the doctor pursuant to s. 10 of the Evidence Act. However, the doctor may explain to the jury any ambiguities that are in the report or any medical terms which may not be known to the average layman. There is no sense in him just reading the report to the jury because it can read the report as well as he can. Therefore his testimony in chief is redundant except for the explanatory purposes mentioned above.

[35] Nor can the plaintiff introduce into evidence the model of the spinal column because 7 days notice in writing was not given the defendant pursuant to R. 40(10).

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Delgamuukw v. British Columbia

British Columbia Supreme Court Vancouver, British Columbia Judgment: November 14, 1988

MCEACHERN C.J.B.C.:— Recent developments in practice relating to the disclosure required in connection with opinion evidence has caused counsel to make helpful submissions with a view to obtaining a comprehensive ruling which will govern the future management of such questions at this trial.

The Plaintiffs have called 3 expert witnesses and with respect to two of them, a paleobotanist and a morphologist, Plaintiffs’ counsel has disclosed all the documents contained in the files of these expert witnesses but has blacked out parts for which privilege is claimed. For the purpose of this argument, however, counsel for the Plaintiffs has furnished clear copies of all such documents except Item No. 12 to opposing counsel who have been able to illustrate their arguments usefully by reference to these documents. I understand the Plaintiffs propose to call about 20 more expert witnesses and the Defendants several more.

It may be helpful to comment that this recent practice change has been made necessary largely, if not entirely, because experience has demonstrated that some experts have been shown to be advocates rather than independent, impartial, objective professionals. For this reason it has been necessary for many judges to comment unfavourably upon the use of expert evidence and for other judges to prescribe relatively new procedures which will enhance the likelihood of a successful search for truth. It is no longer possible to assume that all expert witnesses, including many professionals, are impartial and independent. Some still qualify for that description, but others are fully participating members in the litigation team of a party to litigation and still others, as I have said, are advocates for the side which employs them. 3 There is no doubt that, by statute, counsel is now required to furnish adverse parties with at least a summary of the opinion evidence which is to be adduced and the facts upon which the opinion is based: Evidence Act, R.S.B.C. 1979, c. 116, s. 11(1). The law relating to this question has been discussed in a number of recent decisions including Thunderbird Tours & Charter Ltd. et al. v. Vancouver Axle and Frame Ltd. et al. (1981), 28 B.C.L.R. 140 (B.C.S.C.); S & K Processors Ltd. et al. v. Campbell Ave. Herring Producers Ltd. et al. (1983), 45 B.C.L.R. 218 (B.C.S.C.); and my own recent decision in this case delivered October 5, 1988.

Those cases dealt with the question of pre-trial disclosure. In the first two authorities just mentioned there are suggestions that disclosure requirements may be different at trial. This suggestion has become a reality: Vancouver Community College v. Phillips, Barratt et al. (1987), 20 B.C.L.R. (2d) 289 (B.C.S.C.).

The law has long recognized two distinct kinds of privilege in these matters. The first species is commonly called solicitor and client privilege and it usually protects confidential communications between a client and his solicitor for the purpose of giving or receiving legal advice. I am not concerned with that kind of privilege in this judgment. The second species of privilege is commonly called “solicitor’s privilege” or “solicitor’s brief privilege” and it protects from disclosure all documents and confidential communications where the dominant purpose for the creation of such documents was in connection with the preparation of a case for trial including minutes of evidence and briefs of law, etc., or for the conduct of the trial itself. Until recently there has been little difficulty with this kind of privilege in relation to opinion evidence and it has seldom been the subject of recent judicial attention although there are numerous references to it in older cases both in England, the United States and Canada.

The leading British Columbia authority on disclosure requirements at trial of documents relating to the evidence of expert witnesses is the judgment of Finch, J. in Vancouver Community College v. Phillips, Barratt et al., supra, together with the subsequent unreported judgment of that same learned judge in the same case dated December 15, 1987 (Vancouver Reg. C850765).

At p. 298 Finch, J. said:

“When an expert witness who is not a party is called to testify, or when his report is placed in evidence, he may be required to produce to counsel cross-examining all documents in his possession which are or may be relevant to matters of substance in his evidence or to his credibility, unless it would be unfair or inconsistent to require such production. Fairness and consistency must be judged in the circumstances of each case. If those requirements are met, the documents are producible

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because there is an implied intention in the party presenting the witness’s evidence, written or oral, to waive the lawyer’s brief privilege which previously protected the documents from disclosure.” (my underlining)

In an earlier passage Finch, J, at p 297, explained the rationale for his conclusion as follows:

“It is fair that expert witnesses should be thoroughly cross-examined on all matters touching the weight of the evidence they offer. In our system, that is the accepted method of getting at the trutb. It would not, however, be fair to require the witness to deliver up papers that are wholly irrelevant, either to the substance of his opinion or to his credibility. For example, papers concerning his personal affairs remain his own and are no one else’s business. Similarly, the expert may be doing work for other persons not party to the litigation. He should not be required to disclose their secrets. As well in the litigation in which the witness is called to testify, he may remain a confidential advisor to the party who retained him in, at least, one respect. He may be asked or may have been asked to give advice on how to cross-examine the other side’s witnesses. In putting forward his own opinion, he need not necessarily attack the opinions of experts opposite. Counsel may wish to save that sort of ammunition until after the adverse expert has been called. It would not be fair to require the witness to disclose documents relating only to the cross-examination of such adverse experts because it would give the other side an advantage not available to the party calling evidence on a subject matter first.”

In his subsequent judgment Finch, J. went further and required production from counsel’s file of the expert’s draft report (which the expert no longer had) upon which counsel had made notations.

Thus the present law requires an expert witness, who is called to testify at trial, to produce all documents which are or have been in his possession, including draft reports (even if they come from the file of the solicitor with annotations), and other communications which are or may be relevant to matters of substance in his evidence or to his credibility unless it would be unfair to require production. It is a presumption of law that solicitor’s privilege is waived in respect to such matters of substance, etc., when the witness is called to give evidence at trial.

The judgments of Finch, J. are judgments of this Court which I am bound to follow. Ms. Mandell does not suggest I should not do so, and she has produced the complete file of the two last expert witnesses I have mentioned and some additional documents relating to other experts. She suggests, however, that the judgments of Finch, J. should not be extended further than is absolutely necessary and that I should endeavour to recognize solicitor’s privilege wherever it is possible so to do. She particularly points out that Finch, J. at p. 296 refers to the “.......... opinions and their foundations” and further that oral or written communications with the solicitor should not be disclosed unless they affect the formation or terms of the opinion which is being expressed. She points out that in some of the examples disclosed in this case the solicitor has commented favourably to members of his litigation staff about reports of the expert witnesses and has made suggestions for further work by the witnesses and other proposed experts. In other words, litigation strategy and trial tactics are described. In another context, the remuneration to be paid to the experts is mentioned and in another memo, which was sent to the witness by a member of the litigation team, there are references to discussions about the use which is proposed to be made of the evidence of the witness at trial, i.e. to use the age of a landslide as determined by carbon dating, to corroborate the oral history of the Plaintiffs.

In short, Ms. Mandell says, the strategy of the Plaintiffs is or may be disclosed by documents finding their way into the file of the witness, or which relate to the report of the witness but rest in the file of the lawyer. She says solicitor’s privilege will be seriously compromised if the dicta of Finch, J. are applied literally.

On the other hand it is not difficult to construct scenarios where a communication from a solicitor about the report and proposed evidence of the witness, or the use to be made of it, might raise a serious question about the credibility or objectivity of the witness and there is little reason in principle to differentiate between written and oral communications. Trials might be prolonged unnecessarily and counsel might be driven into the witness box to refute allegations that might be made against him in the guise of cross-examination on the credibility of the expert if these are all proper matters for investigation at trial.

I share Ms. Mandell’s concern about extending the area of disclosure unnecessarily and I also agree that every effort should be made to protect solicitor’s privilege, consistent of course with the preservation of the integrity of the trial process which has been endangered by the trend I have identified.

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What then are the principles upon which a judge should decide whether or not the privilege should be maintained? As Finch, J. has said, documents and communications which may relate to the substance of the evidence or to the credibility of the witness must be disclosed. Generally speaking, privilege which is properly claimed with a sufficient description of the document should be maintained unless the opposite party satisfies the Court that fairness requires its disclosure.

what I am about to say is designed for this unusual case where counsel have established some lines of communications and are working together, not always in complete harmony I am sure, but with a common understanding of the nature of this massive case and of the problems each of them are enduring. Everyone understands that this litigation is being conducted on each side by multi-discipline teams of lawyers and consultants and collaboration is common within each team in the preparation of expert evidence. It is for these reasons that I have designed what may appear to be an unwieldy procedure but which may nevertheless be suitable for this case. I leave it to others to say whether this procedure will be appropriate for less unusual kinds of litigation.

Generally speaking, I accept that documents and communications which may relate to the substance of the evidence or to the credibility of the witness must be disclosed when he enters the witness box. In this connection credibility must be given a limited or narrow construction because almost anything might relate to credibility and this aspect of the matter must not be an open door to free-roaming cross-examination. What the American cases call the “work product of counsel” should be protected, even if it has been conveyed to the witness, unless it appears that it is likely to affect the evidence or the credibility of the witness.

Very little turns on the question of onus because responsible counsel will not claim privilege without having a reason so to do and because disputes will be resolved by the trial judge looking at the document. As I have indicated, however, privilege will be maintained whenever that may fairly be done. It follows that the onus favours upholding properly advanced claims to privilege.

First, it is settled law that anything in the possession of the witness relating to the litigation must be produced for inspection unless a claim to continued privilege is properly made. This would include letters of instruction, fee agreements, written communications from the party or its agents or lawyers relating to the assignment, memos and drafts, suggestions from others, and any other written material which has or might have been considered by the witness preparing his report or opinion or evidence.

If counsel wishes to maintain a claim to solicitor’s privilege, I think it must be done by furnishing a reasonable description of the document or an edited copy and by making a specific oral or written claim to privilege which in rare cases might have to be supported by affidavit, but I would expect most such questions can be decided on the statements of counsel.

If cross-examining counsel does not accept the claim to privilege then I see no alternative to the judge examining the document pursuant to Rule 26(12) and deciding the question that way. As I have said, I think the privilege should be maintained wherever possible.

Secondly, counsel must produce on demand, which should usually be made before the witness enters the box, any similar documents in the possession or control of the party or counsel which the witness has seen. A claim for continuing privilege may be made or determined on the same basis mentioned above. I do not think it is necessary for counsel to produce privileged writings in his possession or control concerning the evidence of the witness unless the witness has seen the document. It was under this head that Finch, J. ordered the production of a draft of the report of the witness which had been in the possession of the witness but was then only in the possession of counsel.

Thirdly, with regard to oral communications, the witness may first be asked whether there were any oral communications concerning his evidence without requesting disclosure of the contents. If there were such communications and if there is no claim to privilege then details may be given if they appear to relate to the substance of the evidence or to the credibility of the witness. If there is a claim to continuing privilege then the judge must conduct a voir dire for the purpose of determining the substance of the communications either on the statements of counsel or on affidavits or viva voce. Again, the communications should not be given in evidence unless the tests I have stated are satisfied.

Perhaps it will be useful to illustrate the foregoing by discussing the specific questions which have arisen in connection with the expert evidence in this case.

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First, I should say that the Plaintiffs’ lay witnesses, in giving the oral history of their people (sometimes called an Adaawk), have described an important event said to have occurred hundreds or thousands of years ago when a supernatural grizzly bear (Mediik) emerged from Seeley Lake or its environs and crashed through the woods towards the Skeena River, along what is now the watercourse of Chicago Creek. The Plaintiffs seek through scientific evidence to establish the date of a landslide in the Chicago Creek area which in general terms may be compared to the description included in the history. By scientifically fixing the date of the landslide, the Plaintiffs ask the Court to infer that Gitksan people with the history mentioned above were living in the area at that time. Drs. Mathewes and Gottesfeld have given evidence from which it might be inferred that this landslide occurred about 3,500 years ago.

For convenience, I will describe and quote from the documents which Plaintiffs’ counsel have produced in connection with the evidence of these two scientists and other proposed experts but edited by blacking out certain passages for which privilege is claimed. I should also say that for this purpose the Gitksan Wet’suwet’en Tribal Council and its researcher, Mr. Overstall, are being treated by all counsel and by me as agents for both the Plaintiffs and for Plaintiffs’ counsel. The numbers I will use refer to the tabs in the collection of these documents furnished by Ms. Mandell. The lettered subparagraphs refer to different passages in such documents for which privilege has been claimed. I must, unfortunately, quote some of the passages for which privilege has been claimed but counsel agree to this for the purposes of this judgment.

(1) (a) In a letter from Mr. Overstall to Dr. Gottesfeld arranging for the latter to prepare a report, it was stated:

“This letter is intended to reflect the meeting Susan Marsden and I had with you on June 28, 1985 when we discussed a short program of geological field work in the Seeley Lake area.”

This paragraph was blacked out as counsel did not think it necessary to inform the Defendants of a meeting with Susan Marsden, who is another expert the Plaintiffs propose to call as a witness. The defence says meetings with other experts may colour the report of a witness.

The Plaintiffs do not dispute that the circumstances of a retainer are a proper subject of disclosure but not the fact or any details of the meeting.

I think the exposure of an expert witness to the possible influence of an expert in a different discipline may be relevant to the substance of his evidence and must be disclosed.

(b) In the same letter it was stated:

“We agreed that the work would be done during the week of July 8-12 and a draft of the report would be available by the end of the following week (July 19). The Tribal Council will pay you $1000.00 for this work including field time, expenses and report writing. Payments will be made on receipt of the draft of the report. Because the report, or the information contained in it, may be used as evidence in the title action, you should maintain strict confidentiality in its preparation.

I hope this letter covers all the points we discussed and is sufficient for you to proceed with the work. We look forward to seeing what results you are able to find.”

Ms. Mandell agreed the privilege attached to these passages must be regarded as waived when the witness went into the witness box. I agree. I wish to add that I think the terms of engagement including compensation are proper matters for disclosure and cross-examination.

(2) In a letter from Mr. Overstall to Dr. Gottesfeld, before any report was prepared, it was stated:

“The Agreement uses a standard format developed by Tribal Council to satisfy its funding sources and to safeguard the interests of its members, particularly with respect to the confidentiality of the work. The work described in Section 2 and the payment scheduled in Section 4 should reflect our previous correspondence and telephone conversations. This letter will also authorise the $2,900.00 in expenses you anticipate spending under Paragraph 4.4 of the Agreement.”

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Again, Ms. Mandell now agrees that this paragraph should be disclosed. I agree.

(3) (a) In a memo written by Plaintiffs’ counsel to five members of his litigation team, including co-counsel, a copy of which was sent by one of the team to Dr. Gottesfeld, counsel blacked out all the names of the recipients of the memo except for Mr. Overstall.

This memo was written after a draft report had been received from Dr. Gottesfeld.

I do not understand how the identity of the recipients of the memo affects either the substance or the credibility of the witness. This information need not be disclosed.

(b) After mentioning receipt of Dr. Gottesfeld’s report, counsel said to his litigation team:

“To your covering letter, I agree that John Clague should review Allen’s [Gottesfeld] report and give us his informal critique of it. So long as John will maintain a high level of confidentiality to this report I think his contribution would be most useful.

So far as Allen’s and Leslie’s report goes, I have very few comments. I think it is excellent and stands as a model of the type of reports that we want prepared for use in trial. It is presented well, it makes its argument convincingly, it backed-up by supporting background references and direct physical data. There are some minor typos and at least one figure number omitted, which should be cleaned up. Also, in my copy did not receive Figure 11.

As a minor point some of the terms should be explained when first used. The conclusions drawn about dating on Page 14 are fantastic, but we should explain either on Page 14 or in the references who Beta Analytic Inc. is.”

The underlined portion was not blacked out.

In my view none of these instructions of counsel, or his musings about the report after a draft has been received, affect either the substance or credibility of the witness. This sort of information should remain privileged but the instruction in the last clause about Beta Analytic Inc. must be disclosed.

(c) Later in the same memo, counsel said:

“This report is very helpful in corroborating and authenticating the Adaawk. I trust that it is clear to Allen that we would like him to give evidence in respect of his report at the time of trial.”

Again, I think this comment of counsel to his client’s representatives and to the other members of his litigation team should remain privileged as it does not affect either the substance of the report of Dr. Gottesfeld nor does it relate to his credibility in any way.

(4) The Tribal Council gave a copy of Dr. Gottesfeld’s draft report to a research scientist who wrote a brief critique. Dr. Gottesfeld saw this critique before he revised his report. Ms. Mandell agrees that this critique must be disclosed. I agree.

(5) Dr. Gottesfeld made a brief written report to the Tribal Council about some field work in the early stages of his retainer. This brief report was disclosed except for the last paragraph which stated:

“I am enclosing an invoice for one day’s field work as per your letter of 23 April.”

As I have said, I think compensation paid or agreed to be paid to an expert is relevant and this paragraph, innocuous as it is, should not have been blacked out and must be disclosed.

(6) (a) In a memo from Mr. Overstall to Dr. Gottesfeld dated July 11, 1986 headed, “Re: Comments on Stekyooden Landslides Report, December 14, 1985,” Mr. Overstall responded to certain comments about Dr. Gottesfeld’s report. Counsel blacked out a passage which stated:

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“In general, I can only echo Stuart’s [Rush] remark that the report (and the extensive field work behind it) is excellent and produced exactly the evidence we hoped to find when we initiated the research.”

As I indicated earlier, I do not think counsel’s favourable comments about a report, even when communicated to the witness, relates to either the substance of the report or to his credibility and I would maintain this claim to privilege.

(b) In the same memo it is stated:

“There still exists a question in my mind as to whether you should be the witness who says that what the oral histories describe as a bear could, through western eyes, be a landslide. This is how the report stands now, given your statement in the second to last paragraph on page 18 of the report, which I believe is the key statement in the report.

This account of the coming of the Medeek [bear] sounds remarkably like an account of a debris flow and a debris torrent that occurred on what is now known as the Chicago Creek drainage, with the damming and rise of Seeley Lake.

In scientific terms, the account does not sound like a landslide because landslides do not have giant grizzly bears at their core. It is my belief that your evidence should deal only with the scientific aspects of the event and that others should explain how the Gitksan and western views of the same event could differ.”

This item is a difficult one because the author of the memo is questioning the wisdom of having a scientist comment upon the connection between a landslide and a supernatural event, which might be regarded as suggesting what should be in the report. I accordingly find these passages must be disclosed because they relate to the substance of the report although certainly not to the credibility of the witness.

(c) Then, after suggesting that the witness expand the introduction of his report to explain that his terms of reference included furnishing scientific evidence to explain a supernatural event which was a part of an oral history, and was not blacked out, the memo continues with the following which was blacked out:

“In that case we will have to provide evidence elsewhere that will:

a) Exhaustively review all the extant Medeek adaawk with respect to events related to landslides and lake level changes.

b) Tie the place names reported in the adaawk to the places you examined on the ground.

c) Explain how two cultures can see the same event and provide two different but equally valid descriptions of what took place.” (my underlining)

In my view these are clear statements of trial strategy which by its terms is not intended to relate to the substance of the report of the witness nor does it affect his credibility. This is historically a subject which should be protected by solicitor’s privilege and it need not be disclosed.

(d) Counsel also blacked out the identity of those to whom copies of the memo were sent. I see no reason why this should be disclosed.

(7) In a brief report to the Tribal Council Dr. Gottesfeld enclosed his revised report. Blacked out are two passages:

(a) “Sometime when the trial approaches we will have to decide about additional copies of the photographs for extra report copies.”

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(b) “I discussed this with you and Susan recently.”

These subparagraphs relate entirely to trial housekeeping and are innocuous and need not be disclosed.

(8) (a) This a letter from Mr. Overstall to Dr. Mathewes which properly discloses revisions to his report with the following passage blacked out:

“Since you submitted your report last April we have done further work on describing the biogeoclimatic zones of the region as well as some detailed examinations of the Gitksan and Wet’suwet’en oral history which we can partially date using archaeological methods as well as the geological methods that you contributed to.”

The letter then continued with the following not blacked out:

“As a result of this work, some more precise questions can be asked of you with respect to the palaeoenvironmental data. If you have time to respond to them in the next two or three weeks, it would help strengthen the evidence in a number of areas. The questions are as follows ..........”

In my view the blacked out portion is confidential information which counsel or his agent should be able to pass to a proposed expert witness without affecting either the substance of the report or his credibility and it should be protected.

(b) Later in the same letter Mr. Overstall said:

“I am giving a copy of your report and this letter to Jim Pojar in the event that his knowledge of the local biogeoclimatic zones will be of assistance to us. I also enclose a copy of an additional report that Sybille Haeussler did on biogeoclimatic zones for the case. That too may help. In any event, please phone me when you receive this and we can discuss how much time you have to add to your report in the next few weeks.”

From the above counsel blacked out the first sentence. Jim Pojar is a scientific person, not a witness, who acted as a consultant to the Plaintiffs. Ms. Mandell agrees this might affect the substance of the evidence of the witness and it must be disclosed, but I would not have thought it necessary to disclose that the report of a witness has been given to a consultant.

(9) (a) This is a letter from Dr. Mathewes enclosing his draft report. After the first sentence which encloses the report, Dr. Mathewes said:

“I have spent all of my recent weekends and many evenings finalizing my data, drafting figures, and writing this report so I could get it to you before I leave for England tomorrow. I hope you feel that the time and money have been worth it. I am personally quite pleased, especially about the outcomes of the Seeley Lake studies, which I think will bolster your upcoming legal case significantly.

My invoice for the equivalent of 23 working days is attached. By my calculation, I have about 460 dollars left on my original contract, which I expect to use in making revisions to the report after you have had a chance to review it. Please let me know if your bookkeeping is at odds with this interpretation.”

In my view it is not necessary for the Defendants to know that Dr. Mathewes is pleased about his report or that he thinks it will bolster the Plaintiffs’ case. I think it is relevant for the Defendants to know the financial information contained in the second paragraph.

(b) At the end of his letter counsel blacked out the statement:

“I will be back home on April 16, so you could write to me or call anytime after that date.”

This is innocuous and need not be disclosed.

(10) This is a memo from Dr. Pojar (consultant) to Mr. Overstall. It is referenced, “Review of approach to using biophysical evidence in the aboriginal title case of the Gitksan-Wet’suwet’en.” Counsel described this as the

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by-product of a team meeting at an early stage of trial preparation where the theory of the Plaintiffs’ case was discussed. Except for a passage which comments on the quality of the report of another identified expert, the entire memo is blacked out.

I have read the memo, which was not given to opposing counsel, and I find it contains much sensitive comment about various aspects of the Plaintiffs’ claim. I do not think it relates to either the substance of the evidence of any of the witnesses or to their credibility. On page 2 Dr. Pojar comments upon the reports of some scientific witnesses which is useful information for counsel to have but, on balance, I do not think the blacked out portions should be disclosed because it does not affect the evidence or credibility of these witnesses. In fact, it tends to be flattering of their work but that is just as irrelevant as any critical comments might have been because it doesn’t really matter what Dr. Pojar thinks of these reports.

(11) (a) This is a letter from Mr. Overstall to an expert witness referenced, “Comments on Food Plant Distribution Study (October, 1985).” It starts with the words, “These comments should be taken as preliminary,” and there is blacked out the following, “.......... and will be circulated along with your report to other Tribal Council staff and lawyers.”

I see no reason why that information should be disclosed to the Defendants.

(b) The letter states further:

“In general, I would like to commend you on a thorough and well-written piece of work. The lay out of the report, the maps and photographs and the clear English made it a pleasure to read and easy to understand.”

For the reasons stated above, I do not think it is necessary for the Plaintiffs to disclose Mr. Overstall’s compliment about the report.

(c) On p. 4 under a heading suggesting additional research, there is a passage which refers to an issue in the case in tentative terms which does not seem to me to relate to the substance of the expert’s report or to the credibility of the witness.

Items No. 12, No. 13 and No. 14 are unedited letters for which no privilege is claimed.

(15) Item No. 15 is an unedited letter except for one brief paragraph which is said to include financial arrangements with the consultant for which no privilege is claimed.

I hope the foregoing will assist counsel to manage these difficulties. They may, of course, speak to any problems they may have with the above or in connection with any other claims for solicitor’s privilege.

TAB A

404

NO. VANCOUVER REGISTRY

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN

KURRI LUMME OY PETITIONER

AND

RUUTU INDUSTRIES LTD. RESPONDENT

PETITION TO THE COURT

This proceeding has been started by the petitioner for the relief set out in Part 1 below.

If you intend to respond to this petition, you or your lawyer must

(a) file a response to petition in Form 67 in the above-named registry of this court within the time for response to petition described below, and

(b) serve on the petitioner(s)

(i) 2 copies of the filed response to petition, and

(ii) 2 copies of each filed affidavit on which you intend to rely at the hearing.

Orders, including orders granting the relief claimed, may be made against you, without any further notice to you, if you fail to file the response to petition within the time for response.

Time for response to petition

A response to petition must be filed and served on the petitioner,

(a) if you reside anywhere within Canada, within 21 days after the date on which a copy of the filed petition was served on you,

(b) if you reside in the United States of America, within 35 days after the date on which a copy of the filed petition was served on you,

(c) if you reside elsewhere, within 49 days after the date on which a copy of the filed petition was served on you, or

(d) if the time for response has been set by order of the court, within that time.

TAB A

405

CLAIM OF THE PETITIONER

Part 1: ORDERS SOUGHT

1. an Order recognizing and enforcing the arbitral award (the “Arbitral Award”) made on November 1, 2005 in Helsinki, Finland, by a panel of the Finnish Court of Arbitration, as between Kurri Lumme Oy Oy and Ruutu Industries Ltd., pursuant to section 35 of the International Commercial Arbitration Act, R.S.B.C. 1996, c. 233 and section 2 of the Foreign Arbitral Awards Act, R.S.B.C. 1996, c. 154 , by:

(a) granting judgment to Kurri in the terms of the Award;

(b) further and in the alternative, declaring that the Award is enforceable in the same manner as a judgment or order of this Court; or

(c) further and in the alternative, ordering Ruutu to pay to Kurri:

(i) the amount in Canadian currency necessary to purchase 73,662.82 in Euros, plus an amount reflecting interest accruing upon the Award at the rate stipulated in the Award from and after December 1, 2005, at a chartered bank located in British Columbia at the close of business on the conversion date as defined in the Foreign Money Claims Act, R.S.B.C. 1996, c. 155; or

(ii) in the alternative:

(1) the amount in Canadian currency necessary to purchase 73,662.82 in euros, plus an amount reflecting interest accruing upon the Award at the rate stipulated in the Award from and after

(1) The address of the registry is: 800 Smithe Street Vancouver, BC V6Z 2E1

(2) The ADDRESS FOR DELIVERY of the Petitioner is:

LANCE & BUT LLP 123 Main Street, PO Box 9200 Vancouver, BC V6A 1B2 Attention: Jacques Demers , QC Fax number address for service (if any) of the Petitioner: None Email address for service (if any) of the Petitioner: None

(3) The name and office address of the Petitioner’s solicitor is:

LANCE & BUT LLP 123 Main Street, PO Box 9200 Vancouver, BC V6A 1B2

TAB A

406

December 1, 2005 to the date of judgment, at a chartered bank located in British Columbia at the close of business on the conversion date as defined in the Foreign Money Claims Act, R.S.B.C. 1996, c. 155; and

(2) interest in accordance with the Court Order Interest Act, R.S.B.C. 1996, c. 79 and the Foreign Money Claims Regulation, B.C. Reg. 165/96, from the date of judgment to the conversion date as defined in the Foreign Money Claims Act, R.S.B.C. 1996, c. 155, and

2. Costs; and

3. Such further and other Orders as this Court may deem just.

Part 2: FACTUAL BASIS

1. On or about October 13, 1998, Kurri Lumme Oy (“Kurri”) and Ruutu Industries Ltd. (“Ruutu”) entered into an agreement in writing (the “Distributor Agreement”).

2. Article 21 of the Distributor Agreement provides as follows:

The parties agree to attempt to resolve all disputes between them in a prompt and amicable manner. However, any such disputes or controversies arising out of or in connection with this Contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration. The Finnish Act on Arbitration (1992/967) shall apply. The place of arbitration shall be Helsinki. The language of arbitration shall be Finnish (i.e. the minutes of the meeting are kept in Finnish) but the parties are entitled to submit material and written and oral testimony also in English. The costs and expenses of arbitration shall be borne by the unsuccessful party.

3. In or about January 2003, a dispute between Kurri and Ruutu arose in connection with the Distributor Agreement.

4. In or about January 2004, Kurri demanded arbitration in accordance with the Distributor Agreement.

5. Pursuant to the Distributor Agreement and the Finnish Act on Arbitration (1992/967), a panel of the Finnish Court of Arbitration, comprising Jouko Huhtala, Helena Haapio and Ari Kantor (the “Court of Arbitration”) was appointed in or about January 2004.

6. Kurrri deposited with the Court of Arbitration as security for the fees of the Court of Arbitration (the “Arbitral Fees”) the sum of EUR 28,000.

7. Ruutu deposited with the Court of Arbitration as security for the Arbitral Fees the sum of EUR 28,000.

TAB A

407

8. An arbitration hearing was convened by the Court of Arbitration on various dates between June, 2004 and March, 2005 in Helsinki, Finland.

9. The arbitration between Kurri and Ruutu was an international commercial arbitration in accordance with sections 1(3), (4), (5) and (6) of the International Commercial Arbitration Act, R.S.B.C. 1996, c. 233.

10. On November 1, 2005, the Court of Arbitration made an award (the “Arbitral Award”) in Helsinki, Finland. In and by the Arbitral Award, the Court of Arbitration:

(a) ordered Ruutu to pay to Kurri as compensation for its legal costs the sum of EUR 40,995.51, with interest according to the Finnish Interest Rates Act accruing from and after December 1, 2005 (the “Costs Award”);

(b) ordered Ruutu and Kurri to pay to the Court of Arbitration, jointly and severally, the Arbitral Fees in the aggregate amount of EUR 91,000, plus applicable taxes, less the deposits paid by Ruutu and Kurri as security for the Arbitral Fees, on or before December 1, 2005, with interest according to the Finnish Interest Rates Act accruing from and after December 1, 2005; and

(c) ordered that, as between Ruutu and Kurri:

(i) Ruutu was primarily responsible for paying 2/3 of the Arbitral Fees;

(ii) Kurri was primarily responsible for paying 1/3 of the Arbitral Fees; and

(iii) if either party showed that it has paid more than its share of the Arbitral Fees and related payments, that party was entitled to recover the part in excess of its own share from the adverse party.

11. Ruutu has not paid the Costs Award, or any part of it to Kurri.

12. In or about November 2005, in accordance with the Arbitral Award, the members of the Court of Arbitration presented to Kurri invoices on account of the Arbitral Fees in the aggregate amount, inclusive of applicable income taxes but exclusive of the Finnish Value-Added Tax, of EUR 30,332.66.

13. On or about November 17, 2005, Kurri paid to members of the Court of Arbitration the amounts set forth in the invoices, namely the aggregate sum, less the Finnish Value-Added Tax, of EUR 30,332.66.

14. As of December 1, 2005, Ruutu has not paid its share of the Arbitral Fees, namely the sum of EUR 60,666.67, plus applicable taxes, or any part of it to the Court of Arbitration.

15. On or about December 31, 2005, in accordance with the Arbitral Award, and after deducting the sum of EUR 56,000 deposited by Kurri and Ruutu as security for the Arbitral Fees, the Court of Arbitration demanded that Kurri pay to the Court of Arbitration the outstanding amount of EUR 4,667.82 (the “Outstanding Amount”)

TAB A

408

16. On or about January 13, 2006, Kurri paid the Outstanding Amount to the Court of Arbitration.

17. Ruutu has not reimbursed Kurri on account of Kurri’s payment of the Outstanding Amount.

18. Ruutu has not paid to Kurri the deposit Kurri paid on account of the Arbitral Fees, which deposit was applied by the Court of Arbitration to pay a portion of Ruutu’s share of those Arbitral Fees.

Part 3: LEGAL BASIS

1. International Commercial Arbitration Act, R.S.B.C. 1996, c. 233, s.35; 2. Foreign Arbitral Awards Act, R.S.B.C. 1996, c. 154, s. 2 3. Foreign Money Claims Act, R.S.B.C. 1996, c. 155, ss. 1 and 2; 4. Foreign Money Claims Regulation, B.C. Reg. 165/96, ss. 1, 2 and 3; 5. Court Order Interest Act, R.S.B.C. 1996, c. 79, ss. 7, 8 and 9; 6. Rules 1(5), 10, 44, and 51A of the Rules of Court; and 7. the inherent jurisdiction of this Court.

Part 4: MATERIAL TO BE RELIED ON

1. Affidavit #1 of Anneli Arkko made 20 January 2010; 2. Affidavit #1 of Petri Taivalkoski made 22 December 2009; and 3. Affidavit #2 of Petri Taivalkoski #2 made 20 January 2010

The Petitioner estimates that the hearing of the petition will take 90 minutes.

Dated: January 26, 2010 Jacques Demers, QC (LANCE & BUT LLP) Solicitor for the Petitioner, Kurri Lumme Oy

To be completed by the court only: Order made [ ] in the terms requested in paragraphs .................. of Part 1 of this petition. [ ] with the following variations and additional terms: ..................................................................................................................................................... ..................................................................................................................................................... ..................................................................................................................................................... Date: ................................................... .......................................................................... Signature of [ ] Judge [ ] Master

TAB A

409

No. Vancouver Registry

In the Supreme Court of British Columbia

Between

Kurri Lumme Oy Petitioner

and

Ruutu Industries Ltd. Respondent

PETITION TO THE COURT

LANCE &BUT LLP 123 Main Street, PO Box 9200

Vancouver, BC V6A 1B2 Telephone: (604) 668-2244 Attn: Jacques Demers, QC

TAB B

410

NO. ___________ VANCOUVER REGISTRY


BETWEEN

LARGE STORE CANADA LTD.

PLAINTIFF

AND

ELECTRONICS SHOP INC.

DEFENDANT

NOTICE OF CIVIL CLAIM

This action has been started by the plaintiff for the relief set out in Part 2 below.

If you intend to respond to this action, you or your lawyer must

(a) file a response to civil claim in Form 2 in the above-named registry of this court within the time for response to civil claim described below, and

(b) serve a copy of the filed response to civil claim on the plaintiff.

If you intend to make a counterclaim, you or your lawyer must

(a) file a response to civil claim in Form 2 and a counterclaim in Form 3 in the above-named registry of this court within the time for response to civil claim described below, and

(b) serve a copy of the filed response to civil claim and counterclaim on the plaintiff and on any new parties named in the counterclaim.

JUDGEMENT MAY BE PRONOUNCED AGAINST YOU IF YOU FAIL to file the response to civil claim within the time for response to civil claim described below.

Time for response to civil claim

A response to civil claim must be filed and served on the plaintiff(s),

(a) if you reside anywhere in Canada, within 21 days after the date on which a copy of the filed notice of civil claim was served on you,

(b) if you reside in the United States of America, within 35 days after the date on which a copy of the filed notice of civil claim was served on you,

(c) if you reside elsewhere, within 49 days after the date on which a copy of the filed notice of civil claim was served on you, or

(d) if the time for response to civil claim has been set by order of the court, within that time.

TAB B

411

CLAIM OF THE PLAINTIFF

Part 1: STATEMENT OF FACTS

1. The plaintiff Large Store Canada Ltd. (“Large Store”) is a company duly incorporated

pursuant to the laws of British Columbia, with an address within British Columbia of 123

Main Street, Vancouver, British Columbia.

2. Large Store is a well-known retailer of computers and related goods and other consumer

products throughout Canada, including in British Columbia, under the trade names Grand

Store and Titanic Store.

3. The defendant Electronics Shop Inc. (“Electronics”) is a federal company extra-provincially

registered in Québec, Alberta and Ontario, with an address at 123 Champs-Élysées, Montreal,

Québec. Electronics asserts that it has regional sales offices within British Columbia,

including in Delta, British Columbia and in Burnaby, British Columbia.

4. Electronics distributes memory and digital media products for use in computers, servers,

printers, MP3 players, digital cameras, and cell phones throughout Canada, including through

Large Store in British Columbia and elsewhere.

5. On or about September 20, 2004, Large Store entered into an agreement in writing with

Electronics (the “Master Vendor Agreement”).

6. The terms of the Master Vendor Agreement included the following:

(a) from time to time, Large Store would order from electronics specified quantities of memory and digital media products (the “Electronics Media”) and Electronics would supply such Electronics Media to Large Store, including in British Columbia;

(b) Large Store and Electronics could agree, from time to time, on terms concerning the pricing of the Electronics Media, market development and cooperative advertising funds, volume rebates, new store allowances, and related matters;

(c) all Electronics Media returned to Electronics by Large Store would be credited to Large Store’s account with Electronics at its full cost, plus any other adjustments set forth in the Master Vendor Agreement or as agreed by the parties from time to time;

(d) Electronics would indemnify Large Store from and against all costs, expenses (including legal fees), damages, actions, causes of action, suits, claims, liabilities and judgments incurred by Large Store relating to Electronics’s breach of the Master Vendor Agreement;

TAB B

412

(e) Large Store could set off and deduct against any sums owing or payable to Electronics all present and future amounts owing to Large Store by Electronics, whether arising under the Master Vendor Agreement or otherwise. In particular, and without limitation, Large Store could set off and deduct against any sums owing or payable to Electronics all invoice discrepancies, returns, promotional funds, cooperative advertising and volume discounts otherwise payable to Large Store by Electronics;

(f) if, at any time, Electronics’s account with Large Store was in a debit balance position, Large Store would be entitled to deduct the net amount owing to Large Store from Electronics’s next invoice or, within 30 days of a request being made by Large Store, Electronics would deliver a cheque to Large Store for the full amount of the claimed debit balance;

(g) interest on outstanding amounts owing by Electronics to Large Store would accrue at the rate of 2% per month (24% per annum), calculated monthly and not in advance until Electronics paid the amounts owing to Large Store in full, including, without limitation, interest on any expenses, costs, legal fees or disbursements incurred by Large Store as a result of or in connection with any such default by Electronics; and

(h) any disputes arising from, connected with or relating to the Master Vendor Agreement or any related matters must be resolved before the Courts of British Columbia sitting in the City of Vancouver, and the parties irrevocably submitted to the original and exclusive jurisdiction of such courts in respect of any such dispute or matter.

7. The terms of the Master Vendor Agreement are known to Electronics and will be relied upon

at the trial of this action for their full and precise meaning and effect.

8. Large Store faithfully and diligently discharged its obligations to Electronics, pursuant to and

in accordance with the terms of the Master Vendor Agreement, and Electronics enjoyed and

took the benefit of Large Store’s performance of those obligations.

9. On or about September 20, 2004, contemporaneously with the making of the Master Vendor

Agreement and as contemplated by the Master Vendor Agreement, Large Store entered into a

related marketing program agreement in writing with Electronics, which agreement was

subsequently amended in writing (the “Marketing Program Agreement”).

10. The terms of the Marketing Program Agreement, which was attached as Appendix “A” to the

Master Vendor Agreement, included the following:

(a) Electronics would provide to Large Store a 6% discount on certain Electronics Media, together with other price adjustments as agreed from time to time, which sums would be accrued and paid to Large Store by Electronics on a quarterly basis; and

(b) amounts owing as between Large Store and Electronics would be addressed in accordance with the Master Vendor Agreement.

TAB B

413

11. In or about April 2007, Large Store and Electronics agreed in writing to amend the Marketing

Program Agreement with effect from on or about January 1, 2007 to on or about December

31, 2007 (the “2007 Marketing Program Agreement Amendment”). In and by the 2007

Marketing Program Agreement Amendment, Electronics agreed to pay to Large Store a 6%

discount on certain Electronics Media, but the parties agreed to accrue such discounts

monthly, rather than quarterly.

12. In or about February 2008, Large Store and Electronics agreed in writing to further amend the

Marketing Program Agreement with effect from on or about January 1, 2008 to on or about

December 31, 2008 (the “2008 Marketing Program Agreement Amendment”). In and by the

2008 Marketing Program Agreement Amendment, as with the 2007 Marketing Program

Agreement Amendment, Electronics agreed to pay to Large Store a 6% discount on certain

Electronics Media, but the parties agreed to accrue such discounts monthly, rather than

quarterly.

13. In this Statement of Claim, the term “Marketing Program Agreement” includes the 2007

Marketing Program Agreement Amendment or the 2008 Marketing Program Agreement

Amendment, as the case may be.

14. The terms of the Marketing Program Agreement are known to Electronics and will be relied

upon at the trial of this action for their full and precise meaning and effect.

15. Large Store faithfully and diligently discharged its obligations to Electronics pursuant to and

in accordance with the terms of the Marketing Program Agreement, and Electronics enjoyed

and took the benefit of Large Store’s performance of those obligations.

16. At various dates from and after September 2004, and as contemplated by the Master Vendor

Agreement, Large Store and Electronics entered into other agreements in writing, by which

Electronics agreed to pay to Large Store, in consideration for Large Store’s targeted

marketing and sale of specific Electronics Media, certain marketing funds to assist in the

targeted marketing and sale of specific Electronics Media during specific periods (the

“Vendor Funding Agreements”).

17. The substantive terms of each Vendor Funding Agreement are set forth in a marketing funds

authorization form (each, a “Log” and collectively the “Logs”), which was signed on behalf

of each of Large Store and Electronics on or about the date each Vendor Funding Agreement

was made.

TAB B

414

18. The terms of each Vendor Funding Agreement are known to Electronics and will be relied

upon at the trial of this action for their full and precise meaning and effect.

19. Large Store faithfully and diligently discharged its obligations to Electronics pursuant to and

in accordance with the terms of each Vendor Funding Agreement, and Electronics enjoyed

and took the benefit of Large Store’s performance of those obligations.

20. Between in or about 2004 and 2009, Large Store delivered Logs and other statements to

Electronics showing payments, discounts or other price or quantity adjustments due to Large

Store from time to time in connection with the Master Vendor Agreement, the Marketing

Program Agreement and the Vendor Funding Agreements. Electronics accepted and agreed

to each of these Logs and other statements, either as-delivered, or as modified after

discussions or exchanges with Large Store.

21. As of on or about May 21, 2009, Electronics’s debit balance with Large Store under the

Master Vendor Agreement, the Marketing Agreement and the Vendor Funding Agreements,

including but not limited to the value of defective Electronics Media held by Large Store, was

at least $3,944,156.93 (the “Debt”).

22. In breach of the Master Vendor Agreement, the Marketing Program Agreement and the

Vendor Funding Agreements, Electronics has failed or refused to discharge the Debt, or any

portion of it, and remains indebted to Large Store in the amount of $5,944,156.93, or

alternatively part of the Debt, plus interest accruing in accordance with the Master Vendor

Agreement.

23. On several occasions in 2009, culminating in a letter dated May 25, 2009, Large Store

demanded that Electronics discharge the Debt, or alternatively portions of the Debt.

Electronics has refused or failed to discharge the Debt.

Part 2: RELIEF SOUGHT

1. Large Store claims as follows against Electronics:

(a) judgment in debt for the sum of $3,944,156.93, or alternatively part thereof;

(b) further and alternatively, declarations that:

(i) Electronics has breached the Master Vendor Agreement;

(ii) Electronics has breached the Marketing Program Agreement; and

(iii) Electronics has breached the Vendor Funding Agreements.

TAB B

415

(c) further and alternatively, general, special, exemplary and punitive damages;

(d) further and alternatively, restitutionary relief, including equitable damages and compensation;

(e) a declaration that Large Store is entitled to set off against any amounts owing by Large Store to Electronics the amounts owing by Electronics to Large Store;

(f) costs, including special costs;

(g) contractual interest at the rate of 24% per annum, pursuant to the Master Vendor Agreement;

(h) alternatively, interest pursuant to the Court Order Interest Act, R.S.B.C. 1996, c. 79; and

(i) such further and other relief as to this Honourable Court may seem just.

Part 3: LEGAL BASIS

1. The plaintiff pleads breach of contract and debt.

2. By virtue of Electronics’s wrongful conduct alleged herein, Large Store has suffered, and will

continue to suffer, loss, damage, and expense, all of which were and remain reasonably

foreseeable.

3. Further and in the alternative, by virtue of Electronics’s wrongful conduct alleged herein,

Electronic has profited and been unjustly enriched and Large Store has suffered, and will

continue to suffer, a corresponding loss and deprivation, all without any juridical reason.

Plaintiff’s address for service: Justice & Virtue LLP 123 Main Street Vancouver, BC V1B 2C3

Fax number address for service (if any): (604) 123-4567

E-mail address for service (if any): [email protected]

Place of trial: Vancouver, British Columbia

The address of the registry is: 800 Smithe Street Vancouver, BC V6Z 2E1

Date: 15 JAN 2010 Signature of [ ] Plaintiff [x] Lawyer for Plaintiff John A. Doe JUSTICE & VIRTUE LLP

TAB B

416

ENDORSEMENT ON ORIGINATING PLEADING OR PETITION FOR SERVICE OUTSIDE BRITISH COLUMBIA

The Plaintiff Large Store Canada Ltd., claims the right to serve this pleading on the Defendant, Electronics Shop Inc., outside British Columbia on the grounds that:

a. the claim concerns a business carried on in British Columbia (s. 10(h) of the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c.28 (the “Act”); and

b. the claim concerns contractual obligations and the contractual obligations, to a

substantial extent, were to be performed in British Columbia (s. 10(c)(i) of the Act).

Rule 7-1 (1) of the Supreme Court Civil Rules states:

(1) Unless all parties of record consent or the court otherwise orders, each party of record

to an action must, within 35 days after the end of the pleading period,


(i) all documents that are or have been in the party’s possession or

control and that could, if available, be used by any party at trial or

prove or disprove a material fact, and



_____________

APPENDIX

Part 1: CONCISE SUMMARY NATURE OF CLAIM:

1 Breach of multiple contracts arising out of the defendant’s refusal to discharge the plaintiff’s debt pursuant to the contracts entered into by the parties.

Part 2: THIS CLAIM ARISES FROM THE FOLLOWING:

[ ] a motor vehicle accident [ ] personal injury, other than one arising from a motor vehicle accident [ ] a dispute about real property (real estate) [ ] a dispute about personal property [ ] the lending of money [x] the provision of goods or services or other general commercial matters [ ] an employment relationship [ ] a dispute about a will or other issues concerning the probate of an estate [ ] a matter not listed here

Part 3: n/a

TAB C

417

No. ............................... VANCOUVER REGISTRY

IN THE SUPREME COURT OF BRITISH COLUMBIA BETWEEN

JOEL ROWDEN SETH HANNA

PLAINTIFF

AND

YAMAHA MOTOR CO., LTD. AND YAMAHA MOTOR CANADA LTD. – YAMAHA MOTEUR DU CANADA LTÉE

DEFENDANTS

NOTICE OF CIVIL CLAIM Brought pursuant to the Class Proceedings Act, R.S.B.C. 1996, c.50

This action has been started by the plaintiff for the relief set out in Part 2 below.

If you intend to respond to this action, you or your lawyer must

(a) file a response to civil claim in Form 2 in the above-named registry of this court within the time for response to civil claim described below, and

(b) serve a copy of the filed response to civil claim on the plaintiff.

If you intend to make a counterclaim, you or your lawyer must

(a) file a response to civil claim in Form 2 and a counterclaim in Form 3 in the above-named registry of this court within the time for response to civil claim described below, and

(b) serve a copy of the filed response to civil claim and counterclaim on the plaintiff and on any new parties named in the counterclaim.

JUDGMENT MAY BE PRONOUNCED AGAINST YOU IF YOU FAIL to file the response to civil claim within the time for response to civil claim described below.

Time for response to civil claim

A response to civil claim must be filed and served on the plaintiff(s),

(a) if you reside anywhere in Canada, within 21 days after the date on which a copy of the filed notice of civil claim was served on you,

(b) if you reside in the United States of America, within 35 days after the date on which a copy of the filed notice of civil claim was served on you,

(c) if you reside elsewhere, within 49 days after the date on which a copy of the filed notice of civil claim was served on you, or

TAB C

418

(d) if the time for response to civil claim has been set by order of the court, within that time.

CLAIM OF THE PLAINTIFF

PART 1: STATEMENT OF FACTS

The Parties

1. The Plaintiff, Joel Rowan Seth Hanna, born June 21, 1964, is a firefighter with an address for service at 123 Main Street, Vancouver, British Columbia, V6A 2S4.

2. The Defendant Yamaha Motor Co., Ltd. (“Yamaha”) is a company incorporated under the laws of Japan with a head office at 2500 Shingai Iwata, Shizuoka, Japan.

3. The Defendant Yamaha Motor Canada Ltd. – Yamaha Moteur du Canada Ltée (“Yamaha Canada”) is the Canadian subsidiary of Yamaha. It is incorporated under the laws of the Canada and extraprovincially registered in British Columbia, with a head office at Suite 1200 – 200 Burrard Street, Vancouver, V7X 1T2.

4. The Defendant Yahama designs and manufactures or distributes a number of products, including motorcycles and motorcycle components, for promotion, marketing, distribution and sale throughout Canada by the Defendant Yamaha Canada.

The Plaintiff’s Motorcycle

5. On April 26, 2000, the Plaintiff purchased a 2000 YZ250 model motorcycle, serial no. JYACG08C9YA011197 (the “Motorcycle”) from Western Motorcycles Ltd. in Langley, British Columbia. The Motorcycle was manufactured by Yamaha and distributed by Yamaha Canada.

6. Between April 26, 2000 and July 10, 2000, and prior to the incident as hereinafter described, the Plaintiff operated the Motorcycle for approximately 30 hours.

The Incident

7. On July 10, 2000, the Plaintiff, while lawfully operating the Motorcycle at a motocross practice track in Tsawwassen, British Columbia, rode the Motorcycle without incident for approximately 45 minutes, then entered a portion of the track comprised of three double jumps. At the time the Plaintiff was approaching the third double jump, the Motorcycle’s throttle suddenly and without warning stuck in an open position, preventing the Plaintiff from slowing in consequence of which, the Plaintiff entered the jump at a dangerous rate of speed, lost control, and violently struck the ground. Thereafter, the engine of the Motorcycle continued to race with the throttle stuck in the full open position.

The Plaintiff’s Injuries

8. In consequence on the matters aforesaid, the Plaintiff has sustained severe personal injury, damage, loss and expense, particulars of which are as follows:

(a) trauma to the connective tissues of the cervical, thoracic and lumbar spine, including a compression fracture of a thoracic vertebrae;

(b) pain and suffering; and

TAB C

419

(c) such other and further particulars as counsel may advise.

The Recall

9. On September 21, 2001, Yamaha Motor Corporation, U.S.A., the U.S. subsidiary of Yamaha, published a Recall Notice (the “American Notice”) pertaining to the following Yamaha products: 1996, 1997, 1998, 1999 and 2000 and 2001 model YZ125 and YZ250 motorcycles, and 1997 model WR250 motorcycles (the “Motorcycles”). The American Notice provided in part as follows:

It has been determined that a possible condition which relates to safety may exist in 1996, 1997, 1998, 1999 and 2000 and 2001 model YZ125 and YZ250 motorcycles, and in 1997 model WR250 motorcycles. Our records show that you purchased one of these motorcycles.

The reason for this recall:

In affected motorcycles, a loose or bent inner wire of the throttle cable might derail off the rotor in the throttle housing on the handlebar. If this occurs, the throttle cable could be pinched between the rotor and the housing, causing the throttle to stick. This could result in an accident/crash and personal injury or death.

What Yamaha and your dealer will do:

To correct this defect, your authorized Yamaha dealer will replace the rotor with one of a new design that is shaped differently to prevent cable derailing and pinching.

* * * *

You are requested to avoid riding your YZ or WR motorcycle until this modification is performed. [emphasis in original]

10. On September 24, 2001, Yamaha Canada published a recall notice (the “Canadian Notice”) pertaining to the Motorcycles. The Canadian Notice provided in part as follows:

This Notice is sent in accordance with the requirements of the Canada Motor Vehicle Safety Act. Yamaha Motor Co., Ltd. has determined that a defect, which relates to motor vehicle safety exists in 1996, 1997, 1998, 1999 and 2000 and 2001 model YZ125 and YZ250 motorcycles, and 1997 and 1998 model WR250 motorcycles. Our records show that you own one of these motorcycles.

In affected motorcycles, an improperly maintained throttle cable (loose or bent inner wire) might derail off the rotor in the throttle housing on the handlebar. If this occurs, the throttle cable could be pinched between the rotor and the housing, causing the throttle to stick. This could result in an accident/crash and personal injury or death.

To correct this possible condition, Yamaha is initiating a Factory Modification Campaign. All affected motorcycles must have the rotor replaced with one of a new design that is shaped differently to prevent cable derailing and pinching.

You are requested to avoid riding your motorcycle until this modification is performed. [emphasis in original]

TAB C

420

11. Subsequent to the incident, and on or about September 24, 2001, the Plaintiff received a copy of the Canadian Notice.

12. The defect described in the American Notice and the Canadian Notice – including, but not limited to, the Motorcycles’ unsuitability for their intended use – is latent and self-concealing. The Plaintiff and the Class Members, as hereinafter described, could not have determined through the exercise of reasonable care that such defect existed or that the Defendants were responsible for causing it.

Class Definition

13. The Plaintiffs bring this action individually and on behalf of the Class Members defined as follows:

All persons within Canada who own, owned and/or operated one of more of the Motorcycles, including the 1996, 1997, 1998, 1999 and 2000 and 2001 model YZ125 and YZ250 motorcycles, and the 1997 model WR250 motorcycles, manufactured or distributed by the Defendants.

14. Excluded form the class are the Defendants, any parent, subsidiary, or controlled person of the Defendants, the officers, directors, agents, servants, or employees of any of the same, and the members of the immediate families of any such person.

Causation and Damages

15. As a result of the negligence of the Defendants [as set out in Part 3], the Plaintiff and the Class Members have suffered and continue to suffer damage, loss and expense, all of which was foreseeable by the Defendants.

16. Particulars of the damage, loss and expense caused by or contributed to by the Defendants’ acts, omissions, representations and other practices include:

(a) general damages for:

(i) pain and suffering;

(ii) loss of enjoyment life;

(iii) permanent physical disability;

(iv) loss earnings, past and perspective;

(v) loss of earning capacity and loss of opportunity to earn; and

(vi) loss of housekeeping capacity

resulting from accidents caused by defects in the Motorcycles;

(b) special damages for medical and other health-care treatment;

(c) damages to the Motorcycles resulting from the accidents caused by defects in the Motorcycles;

TAB C

421

(d) the cost of repairs and maintenance to the Motorcycles occasioned by defects in the Motorcycles, including repairs necessary to avoid a foreseeable risk of substantial danger to the health and safety of the owners and users of the Motorcycles;

(e) damages for loss of use and the Motorcycles during repairs and maintenance occasioned by accidents caused by the defects or occasioned by the defects themselves;

(f) resultant damage to other property occasioned by accidents caused by the defects or occasioned by the defects themselves.

PART 2: RELIEF SOUGHT

1. The right to serve this Notice of Civil Claim on the Defendant Yamaha Motor Co., Ltd. outside British Columbia;

2. An order certifying this action as a class proceeding;

3. General damages;

4. Special damages;

5. The cost of maintenance, repair and/or replacement of the Motorcycles and/or other damaged property;

6. Damages for the loss of use of the Motorcycles;

7. Costs pursuant to s.37(2) of the Class Proceedings Act, R.S.B.C. 1996, c.79;

8. Interest pursuant to the Court Order Interest Act, R.S.B.C. 1996, C. 79; and

9. Such further and other relief as to this Honourable Court may seem just.

PART 3: LEGAL BASIS

Negligence

1. The Motorcycles designed, sold, manufactured and supplied by the Defendants were defective in design or manufacture or both, and were unfit for their intended purposes.

2. The Defendants owed the Plaintiff and the Class [Members] a duty to exercise reasonable care in designing, selecting materials, researching, testing, manufacturing, compounding, assembling, developing, analysing, recommending, merchandising, advertising, promoting, supplying and selling the Motorcycles. The Defendants have breached this duty of care.

3. Further particulars of the negligence of the Defendants include, but are not limited to, the following:

(a) failing to ensure that the Motorcycles were free of defects;

(b) failing to perform proper and sufficient pre-marketing tests on the Motorcycles;

TAB C

422

(c) designing and/or manufacturing the Motorcycles of substandard or inappropriate materials which were inadequate to protect against failure or malfunction during ordinary usage;

(d) negligently designing and/or manufacturing the Motorcycles, and in particular, the Motorcycles’:

(i) throttle cable,

(ii) throttle rotor,

(iii) throttle housing,

(iv) other parts operating in or associated with the throttle assembly and/or

(v) the configuration and operation of the parts in the throttle assembly, when the Defendants knew or ought to have known that the Motorcycles were defective, were likely to malfunction in a manner likely to cause an accident resulting in personal injury or death, and were not suitable for their intended use, including their use by the Plaintiff and the Class Members;

(e) failing to ensure that the Motorcycles were fit for their intended purpose, including use in motocross, racing and off-road riding;

(f) negligently selecting, manufacturing and assembling the component parts of the Motorcycles, thus producing a final product incapable of standing the stress of ordinary and foreseeable usage;

(g) failing to employ advanced yet available design and manufacturing techniques which would have reduced the likelihood of failure of the Motorcycles;

(h) failing to test the Motorcycles in a manner that would fully disclose the magnitude of the defect and resulting risks;

(i) failing to ensure that the Motorcycles did not deviate in a material way from their design and release specifications;

(j) failing to recall the Motorcycles in a timely manner when they knew or should have known that the Motorcycles were defective, and therefore, posed a risk of malfunction in a manner likely to cause an accident resulting in personal injury or death;

(k) failing to cease manufacture and distribution of the Motorcycles when they knew, or should have known, that the Motorcycles were defective and that a significant number of injuries had been or could be caused by the Motorcycles; and

(l) failing to provide adequate warnings as to the risks of operating the Motorcycles and failing to inform adequately and sufficiently the dealers, motorcycle mechanics, and all other intermediaries, as well as Class Members, of the potential risks and hazards associated with the use of the Motorcycles when they knew or should have know of said risks.

Plaintiff’s address for service: c/o ABC Law Firm 123 Main Street Vancouver, BC V6A 2S4

Fax number address for service (if any): (604) 654-1234

TAB C

423

Email address for service (if any): None

Place of trial: Vancouver, British Columbia

The address of the registry is: 800 Smithe Street Vancouver, BC V6Z 2E2 Canada

Date: 15 JAN 2010 Signature of [ ] Plaintiff [X] Co-Lawyer for Plaintiff

Signature of [ ] Plaintiff [X] Co-Lawyer for Plaintiff

ENDORSEMENT ON ORIGINATING PLEADING OR PETITION FOR SERVICE OUTSIDE BRITISH COLUMBIA

The Plaintiff claims the right to serve this pleading on the Defendants, Yamaha Motor Co. Ltd. and Yamaha Motor Canada Ltd. – Yamaha Moteur du Canada Ltée, outside British Columbia on the grounds that:

a. the proceeding is founded on a tort committed in British Columbia (s. 10(g) of the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c. 28 (the “Act”);

b. the claim concerns the business carried on in British Columbia (s. 10(h) of the Act); and

c. the claim concerns contractual obligations and the contractual obligations, to a substantial extent, were to be performed in British Columbia (s. 10(c)(i) of the Act).




(i) all documents that are or have been in the party’s possession or control and that could, if available, be used by any party at trial to prove or disprove a material fact, and



TAB C

424

____________

APPENDIX

[The following information is provided for data collection purposes only and is of no legal effect.]

Part 1: CONCISE SUMMARY OF NATURE OF CLAIM:

The Plaintiff claims against the Defendants for pain and suffering, general damages, special damages, costs and interest arising out of an incident which occurred on or about July 10, 2000 due to a malfunction in the performance of a 2000 Yamaha YZ250 motorcycle during a routine execution of three double jumps.

The Plaintiff and the Class Members have suffered and continue to suffer damage, loss and expense, all of which was foreseeable by the Defendants, and expense caused by or contributed to by the Defendants’ acts, omissions, representations and other practices.

Part 2: THIS CLAIM ARISES FROM THE FOLLOWING:

[Check one box below for the case type that best describes this case.]

[X] a motor vehicle accident

[ ] personal injury, other than one arising from a motor vehicle accident

[ ] a dispute about real property (real estate)

[ ] a dispute about personal property

[ ] the lending of money

[ ] the provision of goods or services or other general commercial matters

[ ] an employment relationship

[ ] a dispute about a will or other issues concerning the probate of an estate

[ ] a matter not listed here

Part 3:

Class Proceedings Act, R.S.B.C. 1996, c.50

TAB D

425

NO. S133127 VANCOUVER REGISTRY


BETWEEN

SAVE-ON PHARMACIES INC. AND PILL ENTERPRISES LTD.

PLAINTIFFS

AND

DRUGGERS PHARMACY INC. AND MANDY DRUG STORE CO. LTD.

DEFENDANTS

RESPONSE TO CIVIL CLAIM

Filed by: Druggers Pharmacy Inc. and Drug Store Co. Ltd. (the "Defendants")

PART 1: RESPONSE TO NOTICE OF CIVIL CLAIM FACTS

Division 1 - Defendants’ Response to Facts

4. The facts alleged in paragraphs 5, 6, 8 and 11 to 16 of Part 1 of the Notice of Civil

Claim (the “Claim”) are admitted.

5. The facts alleged in paragraphs 10 and 17 to 20 of Part 1 of the Claim are denied.

6. The facts alleged in paragraphs 1 to 4 and 7 of Part 1 of the Claim are outside the

knowledge of the Defendants.

Division 2 - Defendants’ Version of Facts

7. Defined terms used in this Response to Civil Claim have the meanings used in the

Claim except as otherwise defined herein.

SHARE PURCHASE AGREEMENT

8. In response to the whole Claim, the Defendants admit that they entered into an

Agreement, dated 15 September 2010, to purchase from the Vendors all of the issued and outstanding

TAB D

426

shares in the capital of Druggers Pharmacy Inc. (the “Corporation”). The Parties to the Agreement

are the Purchaser, the Vendors, Norman Kerr (“Kerr”) and Ralph Malker (“Malker”).

9. Kerr is a director and officer of Save-On Pharmacies Inc.

10. The transaction closed on 2 July 2010 (the “Date of Closing”).

11. In response to paragraph 10 of the Claim the Defendants deny that the share holdings

of the Former Company were transferred and sold to the Purchaser pursuant to the terms of the

Agreement. In particular, the Defendants say that prior to the Date of Closing, the Vendors made

representations, included as express terms of the Agreement, which were false. The Defendants

suffered loss and damage in reliance on the false representations, for which the Defendants bring a

counterclaim.

12. In response to paragraph 11 of the Claim the Defendants admit that the purchase

price payable on the Date of Closing is subject to adjustments as defined in the Agreement. Pursuant

to subsections 8.3 and 6.3 of the Agreement, adjustments to the purchase price may arise through,

among other things, final determination of the NAV of the Former Company.

13. Prior to the Date of Closing, the Vendors provided to the Purchasers an estimate of

the NAV, based on statements and representations made by the Vendors to the Vendors’ accountants.

The estimated NAV at the Date of Closing was $100,000.

14. On the Date of Closing, the total purchase price was estimated as $4,099,104.41. The

estimated purchase price was based on the sum of $3,500,000, plus the estimated NAV of $100,000,

and the inventory value, determined on the Date of Closing as $499,104.41.

15. On the Date of Closing the Purchaser paid to the Vendors the sum of the estimated

purchase price, minus $100,000, the amount of the deposit paid on execution of the Agreement.

DETERMINATION OF THE NAV

16. In response to paragraph 17 and the whole of the Claim, the Defendants deny that the

stated amount, or any amount is due and owing under the NAV.

17. In response to paragraph 12 of the Claim, the Defendants admit the NAV is to be

determined through the exchange of closing financial statements between the accountants for the

Vendors and the Purchaser.

TAB D

427

18. Section 8.4 of the Agreement provides that if the parties are unable to reach

agreement in respect of the manner of preparation, or any item in the closing financial statements, the

issues in dispute shall be submitted to arbitration.

19. In further response to paragraph 17 of the Claim the Defendants admit that draft

closing financial statements were provided by the Plaintiffs to the Defendants on 13 October 2010, in

accordance with the Agreement.

20. On 28 October 2010, following review of the draft financial statements, the

Defendants requested further information and made specific inquiries of the Plaintiffs in respect of

items included or omitted from the draft financial statements, as well as in respect of the basis for the

calculations upon which the Plaintiffs determined the NAV. The Plaintiffs did not respond to the

Defendants’ inquiries or requests for information.

21. On 28 November 2010 the Plaintiffs provided revised draft closing financial

statements to the Defendants. The revised financial statements did not address the Defendants’

enquiries or provide the information requested by the Defendants on 28 October 2010.

22. On 3 December 2010, 9 December 2010, and 30 January 2010 the Defendants made

further requests for information and clarification from the Plaintiffs regarding the revised financial

statements.

23. To date, the Plaintiffs have failed to provide to the Defendants the requested

information and clarification regarding the revised financial statements. Further, the parties to the

Agreement have not reached agreement on all items in the closing financial statements. Nor has the

matter been submitted to arbitration.

24. In response to paragraph 18 of the Claim, the Defendants deny the allegation that

they have refused to pay the NAV amount demanded by the Plaintiffs. The NAV has not yet been

determined in accordance with the Agreement; accordingly the Plaintiffs’ demands for payment of the

NAV are premature.

ACTIVE CARE FACILITIES

25. In response to paragraph 19 of the Claim, the Defendants deny that they have

proceeded in a manner that interferes with or impedes the Vendors’ ability to increase the number of

active care beds serviced by the Purchaser. As set out below, the conduct of Kerr and Malker

TAB D

428

interfered and impeded the Vendors’ ability to increase the number of active care beds serviced by the

Purchaser.

26. Pursuant to Article 12 of the Agreement, Kerr and Malker each entered into Key

Employment and Consulting Agreements (the “Consulting Agreements”) with the Defendant Mandy

Drug Store, on 24 July 2010. The Consulting Agreements were for a term of two years with the

option to continue, on mutual agreement of the parties.

27. Pursuant to Article 1 of the Consulting Agreements, Kerr and Malker each agreed to

devote sufficient time and attention to the Corporation such as to allow proper performance of each of

their duties, including to increase the number of active care beds serviced by the Corporation.

28. The Consulting Agreement between the Defendant Mandy Drug Store and Kerr was

terminated on 23 July 2010, by default on the part of Kerr through actions and omissions constituting

fundamental breach of the Agreement and repudiation, which breach and repudiation were accepted

by the Defendant by letter dated 23 July 2010.

29. During the term of the Consulting Agreement Kerr failed to, among other things,

devote sufficient time and attention to the Corporation, and consequently failed to fulfill his duty to

increase the number of active care beds serviced by the Corporation.

30. During the term of the Consulting Agreement, Malker failed to devote sufficient time

and attention to the Corporation and to acquire any additional active care beds for service by the

Corporation. Further, Malker failed to adequately manage and fulfill his duties to existing client care

facilities, thereby interfering with the Corporation’s potential to increase the number of active care

beds serviced.

31. In response to paragraph 19 and the whole of the Claim, the Defendants deny that

Kerr and Malker made any attempts to increase business. The Defendants further deny that the

Plaintiffs, Kerr, or Malker had any opportunities or specific business leads that were lost.

32. In response to paragraph 20 of the Claim, if the Defendants have been invested with

any discretionary powers under the Agreement (which is expressly denied) the Defendants deny that

their conduct constitutes a lack of good faith in the exercise of those discretionary powers.

TAB D

429

DRUGGERS PHARMACY INC.

33. Druggers Pharmacy Inc. is not a party to the Agreement and not an appropriate

Defendant to this Claim.

Part 2: RESPONSE TO RELIEF SOUGHT

34. The Defendants oppose the relief sought in paragraphs 1 to 6 of Part 2 of the Claim.

35. The Defendants seek costs of this action from the Plaintiffs and the Defendant by

Counterclaim, Kerr, and each of them.

Part 3: LEGAL BASIS

36. In answer to the Plaintiffs’ claims for declaration and judgment in respect of the

NAV, the Plaintiffs’ claims are premature and accordingly should be dismissed.

37. In answer to the whole Claim, the Defendants acted in good faith at all times during

the term of the Consulting Agreements between Mandy Drug Store and Kerr and between Mandy

Drug Store and Malker, and the Defendants continue to act in good faith in the exercise of their duties

and obligations under the Agreement.

38. In answer to the whole Claim, the Defendants’ conduct during the term of the

Consulting Agreements in no way interfered or impeded the ability of the Vendors to acquire

additional active care beds. The Vendors’ failure to acquire additional active care beds is directly

attributable to the conduct of Kerr and Malker, and accordingly, the Plaintiffs are not entitled to any

damages for loss of opportunity.

39. In answer to the whole Claim, any lost opportunity of the Vendors to increase the

number of active care beds, which loss is specifically denied, is caused solely by the termination of

the Consulting Agreements by Malker and Kerr.

Defendants address for service: Oliphant & Gaton LLP 3773 Tyrone Street, Box 38 Vancouver, BC V6A 1R3

TAB D

430

Fax number address for service (if any): none

Email address for service (if any): none

Date: 01 MAR 2010 Signature of Larry Logan þ lawyer for the Defendants, Druggers Pharmacy Inc. and Mandy Drug Store Co. Ltd. (OLIPHANT & GATON LLP)




(i) all documents that are or have been in the party's possession or control and that could, if available, be used by any party at trial to prove or disprove a material fact, and



TAB E

431

Note: Old form provided for historic interest only. *** No. S339501 Vancouver Registry


Between

Windy Poplars Development Ltd., Plaintiff

and

David Christopher Rascal and Yasmina Knave Defendants

WRIT OF SUMMONS

(Name and address of each plaintiff)

Windy Poplars Development Ltd. c/o Borden Ladner Gervais LLP 1200–200 Burrard Street Vancouver, BC V7X 1T2 Attention: David A. Crerar

(Name and address of each defendant)

David Christopher Rascal 473 - 133 Avenue Surrey, BC V3P 3F5 Yasmina Knave 473 - 133 Avenue Surrey, BC V3P 3F5

ELIZABETH THE SECOND, by the Grace of God, of the United Kingdom, Canada and Her other Realms and Territories, Queen, Head of the Commonwealth, Defender of the Faith.

To the Defendants: David Christopher Rascal, and Yasmina Knave

TAKE NOTICE that this action has been commenced against you by the Plaintiff for the claims set out in this writ.

IF YOU INTEND TO DEFEND this action, or if you have a set off or counterclaim that you wish to have taken into account at the trial, YOU MUST

(a) GIVE NOTICE of your intention by filing a form entitled “Appearance” in the above registry of this court, at the address shown below, within the Time for Appearance provided for below and YOU MUST ALSO DELIVER a copy of the Appearance to the plaintiff’s address for delivery, which is set out in this writ, and

TAB E

432

(b) if a statement of claim is provided with this writ of summons or is later served on or delivered to you, FILE a Statement of Defence in the above registry of this court within the Time for Defence provided for below and DELIVER a copy of the Statement of Defence to the plaintiff’s address for delivery.

YOU OR YOUR SOLICITOR may file the Appearance and the Statement of Defence. You may obtain a form of Appearance at the registry.

JUDGMENT MAY BE TAKEN AGAINST YOU IF

(a) YOU FAIL to file the Appearance within the Time for Appearance provided for below, or

(b) YOU FAIL to file the Statement of Defence within the Time for Defence provided for below.

TIME FOR APPEARANCE

If this writ is served on a person in British Columbia, the time for appearance by that person is 7 days from the service (not including the day of service).

If this writ is served on a person outside British Columbia, the time for appearance by that person after service, is 21 days in the case of a person residing anywhere within Canada, 28 days in the case of a person residing in the United States of America, and 42 days in the case of a person residing elsewhere.

[or, if the time for appearance has been set by order of the court, within that time.]

TIME FOR DEFENCE

A Statement of Defence must be filed and delivered to the plaintiff within 14 days after the later of

(a) the time that the Statement of Claim is served on you (whether with this writ of summons or otherwise) or is delivered to you in accordance with the Rules of Court, and

(b) the end of the Time for Appearance provided for above.

[or, if the time for defence has been set by order of the court, within that time.]

TAB E

433

ENDORSEMENT FOR SERVICE EX JURIS

The Plaintiff claims the right to serve this writ on the Defendants outside British Columbia on the grounds that the whole subject matter of the proceeding is land in British Columbia [Rule 13(1)(a)]; the proceeding is in respect of a breach, committed in British Columbia, of a contract wherever made, even though the breach was preceded or accompanied by a breach, outside British Columbia, which rendered impossible the performance of the part of the contract that ought to have been performed in British Columbia [Rule 13(1)(g)]; and the proceeding is founded upon a contract, and the defendant has assets in British Columbia [Rule 13(1)(m)].

ENDORSEMENT

The Plaintiff claims against both of the Defendants for breach of contract and unjust enrichment. On or about May 7, 2003 the Plaintiff, at the request of the Defendants, advanced C$519,500 (the “Funds”) to the Defendants for the promotion of units in The Windy Poplars Golf & Country Club (the “Project”). On January 8, 2004 the Defendants advised that they would not participate in promoting the Project. The Plaintiff has demanded the return of the Funds. The Defendants have agreed to return the Funds, but have failed or refused to do so.

DATED April 26, 2005 David A. Crerar (BORDEN LADNER GERVAIS LLP) Solicitor for the Plaintiff

(1) The address of the registry is:

800 Smithe Street Vancouver, BC V6Z 2E1

(2) The plaintiff’s ADDRESS FOR DELIVERY is:

Borden Ladner Gervais LLP 1200 Waterfront Centre 200 Burrard Street, P.O. Box 48600 Vancouver, B.C. V7X 1T2 Attention: David A. Crerar Fax number for delivery: None

(3) The name and office address of the plaintiff’s solicitors is:

Borden Ladner Gervais LLP 1200 Waterfront Centre, 200 Burrard Street P.O. Box 48600 Vancouver, B.C. V7X 1T2

TAB E

434

No. Vancouver Registry


Between

Windy Poplars Development Ltd.

Plaintiff

and

David Christopher Rascal and Yasmina Knave

Defendants

WRIT OF SUMMONS

BORDEN LADNER GERVAIS LLP 1200 Waterfront Centre

200 Burrard Street P.O. Box 48600

Vancouver, BC V7X 1T2 Telephone: (604) 687-5744

Attn: David A. Crerar

TAB F

435

No. S67010 New Westminster Registry


Between

Bob Barollo Plaintiff

and

Megaresidences Ltd. Defendant

LIST OF DOCUMENTS

Prepared by: The defendant Megaresidences Ltd. (the “listing party”)

Part 1. DOCUMENTS THAT ARE OR HAVE BEEN IN THE LISTING PARTY’S POSSESSION OR CONTROL AND THAT COULD BE USED BY ANY PARTY AT TRIAL TO PROVE OR DISPROVE A MATERIAL FACT

No. Date of

Document Description of document

Indicate by a check mark if the document is no

longer in the listing party’s possession or

control

Indicate, for each document listed in this Part by way of an

amendment to this List of Documents under Rule 7-1 (9), (12) or (14), the date on which

the document was listed

21 Jan 2005

Amended (Consolidated and Reformatted) Disclosure Statement for Megaresidences, developer Megaresidences LP (19 pages)

¨

17 Apr 2005

Limited Dual Agency Agreement between Slick Sales Realty and Bob Barollo and Megaresidences Ltd.

¨

21 Apr 2005

Megaresidences Contract of Purchase and Sale prepared by Slick Sales Realty (11 pages) with handwritten notation

¨

21 Apr 2005 Megaresidences Contract of Purchase and Sale Addendum with handwritten

¨

TAB F

436

No. Date of




control



the document was listed notation

21 Apr 2005

Megaresidences Contract of Purchase and Sale Addendum with handwritten notation

¨

21 Apr 2005

Megaresidences Contract of Purchase and Sale prepared by Slick Sales Realty (11 pages) with handwritten notation and attached: (a) 17 Apr 2005 –

Megaresidences Contract of Purchase and Sale Addendum

(b) 21 Apr 2005 – Megaresidences Contract of Purchase and Sale Addendum with handwritten notation

(c) 21 Apr 2005 – Megaresidences Contract of Purchase and Sale Addendum with handwritten notation

(d) 17 Apr 2005 – Limited Dual Agency Agreement between Slick Sales Realty and Bob Barollo and Megaresidences Ltd.

(e) 21 Jun 2005 – TX Report

¨

21 Apr 2005

Megaresidences Contract of Purchase and Sale prepared by Slick Sales Realty (11 pages) with handwritten notation and attached: (a) 17 Apr 2005 – Limited

Dual Agency Agreement between

¨

TAB F

437

No. Date of




control



the document was listed Slick Sales Realty and Bob Barollo and Megaresidences Ltd.

(b) undated – British Columbia Real Estate Association publication “Working with a Real Estate Agent”

(c) 0000 Apr 00 – Royal Bank of Canada Cheque no. 999 to Center – In Trust

(d) 27 Apr 2005 – Megaresidences Contract of Purchase and Sale Addendum

(e) 21 Apr 2005 – Megaresidences Contract of Purchase and Sale Addendum with handwritten notation

(f) 21 Apr 2005 – Megaresidences Contract of Purchase and Sale Addendum with handwritten notation

(g) 17 Apr 2005 – Your Relationship with a Realtor/Agency Acknowledgment

(h) 27 Apr 2005 – Megaresidences Contract of Purchase and Sale Addendum

(i) 21 Apr 2005 – Megaresidences Contract of Purchase and Sale Addendum with handwritten notation

TAB F

438

No. Date of




control



the document was listed (j) 21 Apr 2005 –

Megaresidences Contract of Purchase and Sale Addendum with handwritten notation

(k) 30 Apr 2005 – Megaresidences Contract of Purchase and Sale Addendum

(l) 3- Apr 2005 – Royal Bank of Canada Cheque no. 451 to Megaresidences LDP

27 Apr 2005 Megaresidences Contract of Purchase and Sale Addendum

¨

21 Jun 2005

Slick Sales Realty Conveyance Department Conveyancer’s Instruction Report with handwritten notation

¨

21 Jun 2005

Slick Sales Realty Conveyance Department Conveyancer’s Instruction Report with handwritten notation (original)

¨

21 Jun 2005 TX Report ¨

9 Jul 2005 The Vancouver Sun Article “Lofty living brings Gastown to New West”

¨

18 Jul 2005

Letter from Bob Barollo to Slick Sales Realty Attention: Luke Mason Megaresidences

¨

19 Jul 2005

Pluck & Feather LLC letter from Tim Duck to Hogg & Wild Attention: Tristan Swiner

¨

19 Jul 2005 Hogg & Wild letter from Tristan Swiner to Pluck &

¨

TAB F

439

No. Date of




control



the document was listed Feather LLC Attention: Michael Adonis, QC

19 Jul 2005

Pluck & Feather LLC lLetter from Tim Duck to Hogg & Wild Attention: Tristan Swiner with attached: (a) 19 Jul 2005 –

Unexecuted Termination & Release between Megaresidences Ltd. and Bob Barollo (2 pages)

¨

4 Aug 2005

Fax Transmission Report with attached: (a) 3 Aug 2005 – Pluck &

Feather LLC letter from Tim Duck to Hogg & Wild Attention: Tristan Swiner

¨

Undated Megaresidences Contract of Purchase and Sale (12 pages)

¨

Part 2. OTHER DOCUMENTS TO WHICH THE LISTING PARTY INTENDS TO REFER AT TRIAL

No. Date of


Indicate by a check mark if

the document is no longer in the listing party’s possession or

control

Indicate, for each document listed in this Part by way of an amendment to this List of Documents under Rule 7-1 (9), (12) or (14), the date on

which the document was listed

19 May 2007 Transcript of Testimony of Mr. Barrollo before the British Columbia Securities Commission

¨

2 Jun 2009 Printout of blog entry from Barrolloblog.com

TAB F

440

Part 3. DOCUMENTS THAT RELATE TO A MATTER IN QUESTIONS IN THE ACTION*

No. Date of

Document Description of

document

Indicate by a check mark if the document

is no longer in the listing party’s

possession or control



Nil ¨

Part 4. DOCUMENTS FOR WHICH PRIVILEGE FROM PRODUCTION IS CLAIMED

No. Date of

Document Description of

document Grounds on which

privilege is claimed



Various dates Two brown folders marked "E" B

Various dates Solicitor's file and work product C

Various dates

Without Prejudice and Settlement Communications between Counsel

D

* These are documents produced pursuant to a demand by the opposite party under Rule 7-1(11).

TAB F

441

Various Dates Three blue binders (Note: client conversations)

A, B

Various Dates

Four red binders (Note: Conversations between counsel, accountants and engineer with respect to legal advice)

A, B

Various Dates: Apr 2009 – Feb 2010

Printouts from various websites B, C

Grounds of Privilege

A. LEGAL ADVICE PRIVILEGE

Solicitor / client communications for the purpose of giving or obtaining legal advice.

B. LITIGATION PRIVILEGE

Communications made for the dominant purpose of litigation or anticipated litigation.

C. SOLICITOR'S WORK PRODUCT / BRIEF

Documents selected and arranged by counsel for use in the conduct of litigation and documents being the work product of counsel.

D. SETTLEMENT PRIVILEGE

Communications concerning settlement or compromise of anticipated or actual litigation.

E. COMMON INTEREST PRIVILEGE

Confidential communications in furtherance of a common litigation interest.

F. COMMON LAW CONFIDENTIALITY

Communications originating in confidence that they will not be disclosed.

The documents disclosed in this List of Document and pursuant to the Notice to Produce are governed by a rule of confidentiality such that disclosure is given only for the purposes of this action. Use of the List of Documents, copies of the documents or any of the information contained therein for any other purpose without the express written consent of this party is prohibited.

TAB F

442

TAKE NOTICE that the documents listed in Parts 1, 2 or 3 of this List of Documents that are not shown as no longer being in the listing party’s possession or control may be inspected and copied, during normal business hours, at 124 Main Street, Vancouver, British Columbia..

DATED: 12 JAN 2010 Signature of ¨ listing party þ lawyer for listing party Jim Hackett, QC (GORDON LADDY LLP) Solicitor for the defendant Megaresidences Ltd.

TAB G

443

In the Supreme Court of British Columbia No. Vancouver, BC Vancouver Registry April 21, 1998

BETWEEN:

AAA ENTERPRISES LTD.

PLAINTIFF

AND:

BRITISH COLUMBIA DEVELOPMENT CORPORATION And HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF BRITISH COLUMBIA

DEFENDANTS

EXAMINATION FOR DISCOVERY of John Smith

A representative of the Plaintiff

TAB G

444

1 April 21, 1998

2 (PROCEEDINGS COMMENCED AT 10:00 AM) 3 JOHN SMITH, Sworn;

4 EXAMINATION BY MR. DATTORNEY 5 1 Q Sir, you’ve just sworn to tell the truth at this

6 examination for discovery? 7 A That’s right.

8 2 Q Your name is John Herbert Smith? 9 A Correct.

10 3 Q You’re a director of the plaintiff, 11 AAA Enterprises Ltd.?

12 A Yes. 13 4 Q You are a shareholder of that company?

14 A Yes. 15 5 Q You are its secretary?

16 A Yes. 17 6 Q You are authorized by AAA Enterprises Ltd. to give

18 evidence on its behalf at this examination? 19 A Yes.

20 7 Q You’re 72 years old? 21 A Correct.

22 8 Q What is your education? 23 A High school education.

24 9 Q Where? 25 A In Grangeville.

. . .

1

TAB G

445

. . .

1 MR. DATTORNEY I think I've asked for tax returns and I 2 think I should put dates on that.

3 The dates would be the last three years 4 ending '97 and then from there until the present

5 time. 6 MS. PLAWYER I'll take that under advisement.

7 Certainly there will be no difficulty with a 8 portion of that period. I'll have to think

9 about the balance. 10 MR. DATTORNEY I wouldn't mind if you let me know what your

11 difficulty is because then I can ask him 12 questions to establish --

13 MS. PLAWYER I'm just wondering about the last three 14 years ending 1997, why do you need those?

15 MR. DATTORNEY They will tell me a fair bit about what the 16 witness' balance sheet looked like and for that

17 matter, what his personal income statement 18 looked like.

19 MS. PLAWYER I'll certainly think about it. 20 REQUEST: Provide income tax

21 returns for John Smith for the 22 last three years ending '97 and

23 then from there until the 24 present time

25 (***TAKEN UNDER ADVISEMENT)

122

TAB G

446

1 Q In investigating possible acquisitions,

2 did you have someone that played that role for you at 3 that time?

4 A I only had -- I had a broker. 5 That was it.

6 Q And who was that? 7 A I believe at that time it was Kevin Jersey.

8 Q And who was the broker? 9 A I'm not sure at that time, because it changed.

10 It went through two or three different 11 company name changes.

12 Q All right. 13 MR. DATTORNEY I leave that as a request, that you supply me with

14 Mr. Jersey's whereabouts, and if you could know that 15 or find it out.

16 MS. PLAWYER Well, do you know it? 17 THE WITNESS No.

18 MS. PLAWYER Then he's not obliged to go and look and hunt him 19 down. We don't know.

20 REQUEST: Provide Mr. Jersey's current whereabouts 21 (***OBJECTION TO REQUEST***)

22 MR. DATTORNEY All right. 23 THE WITNESS To the best of my knowledge, he's retired from the

24 business. 25 MR. DATTORNEY:

. . .

123

TAB G

447

. . .

1 for that property might be? 2 A Other than the original mention of the 26 but

3 we hadn't agreed one price, no. 4 802 Q In the Amended Statement of Claim in paragraph 12,

5 AAA Enterprises Ltd. alleges that on July 6,1978 AAA 6 Enterprises Ltd. accepted the lease of the land, and the

7 land is defined as the property which eventually became 8 District Lots 1288 and 1968, and that's the property

9 Property we have been discussing all along? 10 A Yes.

11 803 Q That's the Mile 292.5 application, right? 12 A Yeah, the large size, yeah.

13 804 Q AAA Enterprises Ltd. alleges in paragraph 15 of its 14 Amended Statement of Claim that on July 6, 1979 it

15 accepted the lease of the lands and commenced paying 16 rent and doing what the lease required?

17 A That’s correct. 18 805 Q And in paragraph 13, AAA Enterprises Ltd. alleges on

19 July 6, 1979 AAA Enterprises Ltd. accepted the offer of 20 the option to purchase the lands and commenced doing

21 all the things required relating to the option to purchase 22 including exercising the option?

23 A Yes. We were making our efforts to accept the 24 offer which was originally made.

25 806 Q Can you identify for me, in this binder or

149

TAB G

448

1 elsewhere, the documents by which AA Enterprises

2 Ltd. accepted the lease and the offer of the option 3 to purchase the lands? Is that this document that

4 we are looking at? 5 A This is the main one. There may be others that

6 we could look for and refresh our memory if there 7 is more but this is the --

8 807 Q So you say that Exhibit 27 is the main document 9 by which AAA Enterprises Ltd. accepted the lease and

10 accepted the offer of the option to purchase? 11 A That’s the – that’s the main one. There may be

12 others to bolster or to confirm it or – that I 13 don’t recall right now.

14 808 Q Well, you allege in your Statement of Claim that 15 on July 6, 1979 AAA Enterprises Ltd. accepted those

16 things, AAA Enterprises Ltd. did something? 17 A Yes, we accepted their original offer to us.

18 809 Q And you did that in this document? 19 A Yes.

20 810 Q Exhibit 27? 21 A Yes, it’s done in this document here.

22 811 Q And when you say “we accepted their original 23 offer,” that’s the March 1979 offer of the larger

24 property? 25 A I believe it is, yeah, the first letter we got.

150

TAB G

449

1 812 Q Well, that’s Exhibit 22, the first letter you got

2 from Mr. Borden? 3 A Yeah, 23, it is.

4 813 Q Exhibit 23, March 28, 1979. 5 A Well, I’ve lost 23 but --

6 814 Q Let me help you out. 7 A That’s 23 there.

8 815 Q That’s the offer that you say you accepted? 9 A Yeah, that’s the one we accepted. We didn’t see

10 any reason that it should be -- 11 MR. PLAWYER: OFF THE RECORD FOR A MINUTE.

12 [OFF-THE-RECORD DISCUSSION] 13 THE WITNESS That was the acceptance of the original offer.

14 MR. DATTORNEY 15 816 Q And the document you’re now referring to is

16 Exhibit 23? 17 A Yes.

18 817 Q Mr. Smith, you understood on July 6, 1979, 19 when you wrote Exhibit 27, that the offer in

20 Exhibit 23 that you’ve just looked at was off the 21 table?

22 A I couldn’t see why they would take it off the 23 table in Prince George.

24 818 Q I’m not asking you – go ahead. 25 A No, you rephrase the question, I guess.

151

TAB G

450

1 819 Q I'm not asking you whether you could understand 2 What they had done or why they had one it. I'm

3 asking you whether you understood what they had 4 done. And what you understood was that on April

5 24th, 1979 the Ministry of Lands had taken the 6 March 1979 offer off the table and they were no

7 longer prepared to lease or sell you the larger 8 property, for whatever reason, however hard that

9 may have been to understand. You understood 10 that's what they had done?

11 A That's what they had one, yes. 12 820 Q So when you wrote to them on July 26 and you say

13 in your Statement of Claim that you were 14 accepting an offer to lease and an offer to

15 purchase, you were accepting offers which had 16 been taken off the table, correct?

17 A Well, if that's – we just said in here we were 18 accepting their original offer.

19 821 Q And you understood that their original offer had 20 been taken off the table?

21 A Yes, that was -- 22 822 Q It was no longer on --

23 A That was understood from the one department, Fort 24 St. John, but the --

25 823 Q Well, you didn't understand anything different

152

TAB G

451

1 form any other department, did you? 2 A I can't recall just when all went on there.

3 There was a lot of negotiations went on there by 4 the phone, I think, but I can't recall.

5 824 Q All right. Tell me about those negotiations. 6 Who were you negotiating with?

7 A Well, with Mr. Badland and Beth Conner in -- 8 825 Q She was in Prince George?

9 A Prince George, yes. 10 826 Q So you had a number of discussions with them,

11 trying to, as you said in one of these documents, 12 clarify everything?

13 A Yes. 14 827 Q Trying to persuade them to offer you the larger

15 property again? 16 A Yes.

17 828 Q As of July 6, 1979, you hadn't succeeded in 18 persuading them to do that?

19 A No, but we felt we had justification and we felt 20 that it was reasonable

21 829 Q Did you ever have a verbal agreement with anybody 22 to sell you the larger property?

23 A It come in '79 that Mr. Badland said, "Yes, you 24 are approved on the larger parcel at the price

25 and the terms but -- " and that's what he said,

153

TAB G

452

1 "but we are turning it over to BCDC and we are 2 out of it," he said, but he did okay it by phone.

3 830 Q When in 1979 did he say that? 4 A Well, it would be after this here. It would be

5 probably October, November, in there somewhere, 6 probably when we got everything cleared and they

7 were accepting this letter. They accepted this 8 letter as what they were going to give us, award

9 us, but he said that now Royal Bank has taken over 10 the file and you'll be financing up the deal with

11 them. 12 831 Q That was in a telephone conversation?

13 A Telephone conversation. 14 832 Q Exhibit 27 says, you'll see in the fourth

15 paragraph, "We are enclosing the lease fee of 16 $2,112 for the first year."

17 A Yes. 18 833 Q That in fact was not done, was it.

19 A 2,000 was put in and the 5,000, I think I decided 20 to go down to Prince George and talk to Beth

21 Connor directly about it and that particular 22 date she said we have to settle the – "There's a

23 discrepancy in the size of the parcel and don't 24 put up the bond now until we get this settled,"

25 and that was settled later by Mr. Badland saying that

154

TAB G

453

1 it's all been approved and BCDC was taking over. 2 So this letter was consummated in my view.

3 834 Q All right. Let's turn over to the next document, 4 plaintiff's document 297.

5 A Yes. 6 835 Q It's a letter from you to Mr. Dattorney.

7 A Yeah. 8 836 Q -- July 9th, 1979?

9 A Yeah. 10 837 Q That's your signature?

11 A Yes. 12 838 Q Your wrote that?

13 A Right. 14 839 Q You sent it around July 9th, 1979?

15 A Yes. 16 MR. DATTORNEY: MARK THAT THE NEXT EXHIBIT, PLEASE.

17 [EXHIBIT 28 FOR IDENTIFICATION: Letter from AAA 18 Enterprises Ltd. to Regional Land Manager, July 9, 1979.]

19 MR. DATTORNEY: 20 840 Q Now, as I read this letter, Exhibit 28, you are

21 telling Mr. Dattorney that you had not sent the $2,112 22 lease fee with your letter of July 6th, which was

23 Exhibit 27, so you're sending it with this 24 letter?

25 A Yes. That must have been the --

155

TAB G

454

1 841 Q And that's what happened, isn't it; you didn't 2 send the lease fee with Exhibit 27, you went it

3 with Exhibit 28? 4 A Yes, that's what I evidently did.

5 842 Q You say in the last paragraph of Exhibit 28 that 6 "the bond will be mailed to you from the Bank of

7 Montreal"? 8 A Right.

9 843 Q And that in fact was not done? 10 A No.

11 844 Q As matters turned out, that was never done? 12 A No, because I went – like I said earlier, I went

13 to Prince George myself to clarify the deposit 14 and put it up but wasn't encouraged. She said

15 that the parcel size had got – there was some 16 argument and not to put it up.

17 845 Q I appreciate you have reasons for not paying the 18 $5,000 bond, Mr. Smith, but my question was:

19 The $5,000 bond was never paid? 20 A That's right. It never was paid.

21 846 Q Now, you say in paragraph 12 of the Amended 22 Statement of Claim that on July 6th, 1979 AAA Enterprises

23 Ltd. commenced paying rent and doing what the lease 24 required, and we've seen in Exhibit 28 how the rent

25 was paid. What else did AAA Enterprises Ltd. do that the

156

TAB G

455

1 lease required beginning on July 6, 1979?

2 Anything? 3 A I can't recall just what would have been the

4 first step. We started clearing, I think. We 5 started clearing the site. We got that okay from

6 Mr. Badland to start clearing the log storage area 7 and started developing that way. That's all I

8 can recall right at this time, what we did on it. 9 847 Q [REQUEST] I'll ask you to make some inquiries and let

10 me know if you recall anything further. 11 A Than what we – did you get that?

12 MR. PLAWYER: YES. 13 MR. DATTORNEY:

14 848 Q You also allege in paragraph 13 of the Amended 15 Statement of Claim that on July 6, 1979 AAA Enterprises

16 Ltd. commenced doing all the things required relating 17 to the option to purchase, including exercising

18 the option. What things were those? Was there 19 anything different from what you've just told me

20 about the lease? 21 A I don't believe there is. We just started

22 developing the land and getting prepared to 23 exercise our rights.

24 849 Q How did AAA Enterprises Ltd. exercise the option? 25 A To buy?

157

TAB G

456

EXAMINATION FOR DISCOVERY OF

JOHN SMITH APRIL 21, 1998

PROCEEDINGS

Description Page

Examination by Ms. Luxer Proceedings commence at 9:32 a.m. 1 Proceedings recessed at 11:01 a.m. 61 Proceedings reconvened at 11:12 a.m. 61 Proceedings recessed at 12:26 p.m. 112 Proceedings reconvened at 1:51 p.m. 112 Proceedings recessed at 3:13 p.m. 169 Proceedings reconvened at 3:29 p.m. 169 Proceedings adjourned at 4:55 p.m. 231

EXHIBITS

No. Description Page

1 Binder containing select documents for examination for discovery consisting of 40 tabs 4

TAB G

457

27 Letter from AAA Enterprises to Regional Land Manager

dated July 6, 1979 150 28 Letter from AAA Enterprises Ltd. to Regional Land Manager,

dated July 9, 1979 155

REQUESTS FOR ADDITIONAL INFORMATION

Reporter’s interpretation

No. Description Page

17 Provide income tax returns for John Smith for the last three years

ending '97 and then from there until the present time (***TAKEN UNDER ADVISEMENT***) 122

18 Provide Mr. Jersey's current whereabouts (***OBJECTION TO REQUEST***) 123 24 What else did AAA Enterprises Ltd. do that the lease required

beginning on July 6, 1979? 157 25 Provide any investment statements received from anyone with whom

Mr. Smith has invested funds since 1998 188

TAB H

458

No. S033170 Vancouver Registry


Between

Tobias Dwayne Smollett Plaintiff,

and

Hugeco Inc., and Hugeco (Ontario) Inc.,

Defendants.

___________________________________________________________________________

APPLICATION RECORD OF THE DEFENDANTS Re: Plaintiff’s Summary Trial (Rule 9-7) Application on October 30, 2014

___________________________________________________________________________ ANDREW J. PEARSON Counsel for the Plaintiff CHURCH & COMPANY 900 – 1040 West Georgia Street Vancouver, BC V6E 4H1 Phone: (604) 408-8277 P.D. (DON) MACDONALD Counsel for the Defendants BORDEN LADNER GERVAIS 1200 – 200 Burrard Street Vancouver, BC V7X 1T2 Phone: (604) 640-4119

TAB H

459

INDEX

I. Application Materials

1. Notice of Application dated April 27, 2013

2. Application Response dated May 10, 2013

II. Materials of the Plaintiff (Applicant)

3. Affidavit of Tobias Dwayne Smollett #3 sworn April 27, 2013

4. Affidavit of Peter Pomegranate #1 sworn March 12, 2013 attaching excerpts from the Discovery of Sheldon Trout

5. Notice to Admit dated January 10, 2013

6. Response to Notice to Admit dated January 10, 2013, dated February 12, 2013

III. Materials of the Defendants (Respondents)

7. Affidavit of Sheldon Trout #1 sworn March 9, 2013

8. Affidavit of Charles Horne #1 sworn March 4, 2013

9. Affidavit of Eva Sylvain #1 sworn March 2, 2013, attaching Excerpts from the Examination for Discovery of Tobias Dwayne Smollett

10. Demand for Interrogatories dated January 2, 2013

11. Affidavit of Tobias Dwayne Smollett #2 sworn February 3, 2013 in response to Demand for Interrogatories dated January 2, 2013

IV. Pleadings

12. Further Amended Notice of Civil Claim

13. Further Amended Response of Hugeco Inc.

14. Further Amended Response of Hugeco (Ontario) Inc.

15. Plaintiff’s Reply

TAB I

460

No. S106173 Vancouver Registry


Between

Seriously Aggrieved Plaintiff

and

Hulking Behemoth Ltd. Defendant

BILL OF COSTS

This is the bill of costs of: Hulking Behemoth

Tariff scale: B Unit value: $110.00

TARIFF ITEMS

Item Description # of Units Claimed

# of Units

Allowed

1 Correspondence, conferences, instructions, investigations or negotiations by a party until the start of the proceeding to the completion of the trial or hearing, for which provision is not made elsewhere in this tariff (1-10)

10

2 Correspondence, conferences, instructions, investigations or negotiations by a party after the start of the proceeding to the completion of the trial or hearing, for which provision is not made elsewhere in this tariff (1-30)

6

6 All process, for which provision is not made elsewhere in this tariff, for commencing and prosecuting a proceeding (1-10)

2

10 Process for obtaining discovery and inspection of documents: (a) 1 to 999 documents (1-10) (b) 1000 to 5000 documents (10-20) (c) over 5000 documents (10-30)

7

TAB I

461

11 Process for giving discovery and inspection of documents (a) 1 to 999 documents (1-10) (b) 1000 to 5000 documents (10-20) (c) over 5000 documents (10-30)

6

19 Preparation for examination of a person coming under Item 20 for each day of attendance (a) by party conducting examination (b) by party being examined

4 3

20 Attendance on examination of a person for discovery, on affidavit, on a subpoena to debtor, or in aid of execution, or of a person before trial under Rule 7-5 or 7-8, or any other analogous proceeding, for each day (a) by party conducting examination (b) by party being examined

8 5

27 Hearing of proceeding, including petition, special case, proceeding on a point of law, stated case, interpleader or any other analogous proceeding, and applications for judgment under Rule 7-7 (6), 9-6 or 9-7, for each day (a) if unopposed (b) if opposed

10

28 Preparation for a hearing referred to in Item 22 (b), 25 or 27 (b), which hearing was initially contested but for which no attendance was required as a result of an agreement reached as to the issues that would have been the subject of the hearing (a) for a hearing referred to in Item 22 (b) (b) for a hearing referred to in Item 25 (c) for a hearing referred to in Item 27 (b)

5

36 Written argument 6

41 Process relating to entry of an order 1

41 Process relating to entry of a certificate of costs 1

Total number of units: 76

Multiply by unit value: 110.00

Subtotal: $8,360.00

HST (Harmonized Sales Tax): 1003.20

Total: $9,363.20 $

TAB I

462

DISBURSEMENTS

Description Claimed Allowed

Agency fees $ 274.60 $

Computer searches 21.40

Courier charges 234.83

Court Registry fees 3000.00

Court Reporter fees 559.45

Fax charges 239.68

File preparation 194.55

Telephone charges 1.78

File retrieval expenses 16.05

BC Courthouse Library fees 14.00

Photocopy expenses 1709.64

Quicklaw searches 329.62

Stationary expense 29.05

Laser printing 33.30

BC Online searches 494.89

Subtotal: $4,178.58 $

HST (Harmonized Sales Tax): $ 465.43 $

Total: $4,644.01 $ $

TOTAL ALLOWED $

Date: 23 NOV 2014 Signature of assessing officer

LAW 469.003

CIVIL PROCEDURE CASEBOOK

2016

David Crerar, Borden Ladner Gervais LLP &

Andrew Nathanson, Fasken Martineau DuMoulin LLP

These materials are exclusively for the use of students enrolled in the Faculty of Law, University of British Columbia, and are not to be reproduced or otherwise distributed.

UBC 469.003 2016 CIVIL PROCEDURE CASEBOOK

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TABLE OF CONTENTS

Part A - Authorities

Complex litigation under BC's new Supreme Court Civil Rules ...................................................................................... 1 Murphy v. Dodd ................................................................................................................................................................ 21 Meek v. Fleming ............................................................................................................................................................... 25 British Columbia v. Imperial Tobacco Canada ................................................................................................................ 30 Cojocaru v. British Columbia Women’s Hospital and Health Centre ............................................................................. 42 Orazio v. Ciulla ................................................................................................................................................................. 57 Luu v. Wang ..................................................................................................................................................................... 60 Austin v. Rescon Construction (1984) Ltd. and Wightman Enterprises Ltd. ................................................................... 64 Leung v. 568263 BC Ltd. ................................................................................................................................................. 66 East Kootenay Realty Ltd. v. Gestas Inc. ......................................................................................................................... 70 Bea v. The Owners, Strata Plan LMS 2138 ...................................................................................................................... 71 Limitation Act, SBC 2012, c.13 ........................................................................................................................................ 74 Court Jurisdiction and Proceedings Transfer Act, SBC 2003, c.28 ................................................................................. 82 (former) Professional Conduct Handbook ........................................................................................................................ 86 (January 2013) Code of Professional Conduct ................................................................................................................. 87 Bank of Montreal v. Erickson ........................................................................................................................................... 88 Schmid v. Lacey ............................................................................................................................................................... 89 472900 B.C. Ltd. v. Thrifty Canada, Ltd. ......................................................................................................................... 90 Pan-Afric Holdings Ltd. v. Ernst & Young LLP .............................................................................................................. 98 Addressing Jurisdictional Complexity: The New Civil Rules and the CJPTA ............................................................... 106 Pleadings ......................................................................................................................................................................... 115 Jones v. Donaghey .......................................................................................................................................................... 119 Citizens for Foreign Aid Reform Inc. v. Canadian Jewish Congress ............................................................................ 124 G.W.L. Properties Ltd. v. W.R. Grace & Co. of Canada (1992 BCSC) (Particulars) .................................................... 134 Sahyoun v. Ho ................................................................................................................................................................. 139 Code of Professional Conduct ........................................................................................................................................ 147 Joly v. Pelletier ............................................................................................................................................................... 149 Murrell v. Simon Fraser University ................................................................................................................................ 151 National Leasing Group Inc. v. Top West Ventures Ltd. ............................................................................................... 157 Imperial Parking Corporation v. Anderson ..................................................................................................................... 160 International Brotherhood of Electrical Workers, Local 213 v. Hochstein .................................................................... 168 Hodgkinson v. Simms ..................................................................................................................................................... 174 Keefer Laundry Ltd. v. Pellerin Milnor Corp. et al. ....................................................................................................... 183 Dykeman v. Porohowski ................................................................................................................................................. 186 Kaladjian v. Jose ............................................................................................................................................................. 193 Tai v. Lam ....................................................................................................................................................................... 199 Pro-Sys Consultants Ltd. v. Infineon .............................................................................................................................. 200 B.C. Lightweight Aggregate Ltd. v. Canada Cement LaFarge Ltd. et al. ..................................................................... 203 Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd. .......................................................................................... 206 Sinclair v. March ............................................................................................................................................................. 209 Practice Direction 34: Masters' Jurisdiction .................................................................................................................. 214 Fraser v. Houston ............................................................................................................................................................ 216 Forliti (Guardian ad litem of) v. Woolley ....................................................................................................................... 220 Roitman v. Chan ............................................................................................................................................................. 224 R. v. Imperial Tobacco Canada Ltd. ............................................................................................................................... 227 British Columbia Ferry Corporation v. T&N plc et al .................................................................................................... 233 British Columbia (Attorney General) v. Wale ................................................................................................................ 237 Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd. .......................................................................................... 241 Insurance Corp. of British Columbia v. Patko ................................................................................................................ 254 Celanese Canada Inc. v. Murray Demolition Corp. ........................................................................................................ 256 Western Delta Lands Partnership v. 3557537 Canada Inc. #1 ....................................................................................... 268 Western Delta Lands Partnership v. 3557537 Canada Inc. #2 ....................................................................................... 275 Orangeville Raceway Ltd. v. Wood Gundy Inc. ............................................................................................................. 278 Chu v. Chen .................................................................................................................................................................... 284 Prevost (Committee of) v. Vetter .................................................................................................................................... 294

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Bank of Credit and Commerce International (Overseas) Ltd. (Liquidator of) v. Akbar ................................................ 300 Royal Bank of Canada v BMP Global Distribution Inc. ................................................................................................ 303 Nazmdeh v. Spraggs ....................................................................................................................................................... 312 Robson v. Chrysler ......................................................................................................................................................... 318 Ward v. Klaus ................................................................................................................................................................. 321 Mide-Wilson v. Hungerford Tomyn Lawrenson and Nichols ........................................................................................ 330 Little Sisters Book and Art Emporium v. Canada .......................................................................................................... 351 “Da Vinci Code Appeal is Dismissed” ........................................................................................................................... 364 Bystedt (Guardian ad litem of) v. Hay ............................................................................................................................ 366 Jayetileke v. Blake .......................................................................................................................................................... 367 Skillings v. Seasons Development Corporation #1 ........................................................................................................ 372 Skillings v. Seasons Development Corporation #2 ........................................................................................................ 374 Vancouver Community College v. Phillips Barratt ........................................................................................................ 378 Surrey Credit Union v. Willson ...................................................................................................................................... 383 Yewdale v. Insurance Corporation of British Columbia ................................................................................................ 387 Pedersen v. Degelder ...................................................................................................................................................... 391 Delgamuukw v. British Columbia .................................................................................................................................. 396

Part B - Pleadings & Precedents

Page Tab Petition to the Court – Kurri v. Ruutu ....................................................................................................... 399 A Notice of Civil Claim – Large Store Canada Ltd. v. Electronics Shop Inc. .............................................. 405 B Notice of Civil Claim – Hanna v. Yamaha ................................................................................................. 412 C Response to Civil Claim – Save-On Pharacies Inc. v. Druggers Pharmacy Inc. ...................................... 420 D (former) Writ of Summons (with endorsement) – Windy Poplars v. Rascal ........................................... 426 E List of Documents – Barollo v. Mega Residences ...................................................................................... 430 F Examination for Discovery excerpt– AAA Enterprises v. BC Development Corp. ................................... 438 G Application Materials: Rule 9-7 Summary Trial Application: Chambers Record Index – Smollett v. Hugeco Inc., and Hugeco (Ontario) Inc. ..................................................................... 453 H Bill of Costs – Seriously Aggrieved v. Hulking Behemoth ........................................................................... 455 I