The Supreme Court of British Columbia has awarded special costs of more than $90,000 following years of litigation in which the plaintiff, Lucky Eight Enterprises Ltd., was found to have persistently failed to comply with procedural rules and court orders, frustrating the administration of justice.
Background of the case
The dispute began in 2017 when Lucky Eight, a motor vehicle dealership, filed a civil claim against H.M., a former employee, and his then-partner, W.Y. The claim alleged breach of fiduciary duties, misappropriation of funds, and fraud, and included the registration of a certificate of pending litigation (CPL) against H.M.’s property.
Justice Sewell, who presided over key proceedings, noted that the allegations in the claim were serious, including assertions of dishonesty, theft, and fraudulent conduct.
However, Lucky Eight failed to provide particulars of the allegations or evidence to substantiate its claims. Justice Sewell dismissed Lucky Eight’s claim in 2019, struck its response to the defendants’ counterclaim, and ordered the return of $30,000 held as security by H.M. He also directed that Lucky Eight pay special costs for its conduct during the proceedings, which he characterized as “reprehensible.”
Assessment of special costs
The defendants sought special costs totalling $139,202.44, including fees incurred from the outset of the case in 2017 through the special costs assessment itself. The court’s assessment reviewed each stage of the litigation, applying the factors outlined in Rule 14-1(3) of the Supreme Court Civil Rules.
The ruling emphasized that special costs are punitive in nature, intended to censure and deter litigation misconduct rather than compensate the successful party. The court found that Lucky Eight’s conduct, including its failure to provide required documents, particulars, and responses, unnecessarily prolonged the proceedings and increased the defendants’ legal expenses.
Key findings
Complexity and novelty of issues: While the legal issues in the case were not deemed particularly complex, Lucky Eight’s failure to comply with procedural requirements and its inconsistent positions regarding H.M.’s employment status made the defence more time-consuming and difficult.
Litigation conduct: Lucky Eight’s non-compliance with court rules and orders was a central factor in the decision to award special costs. Justice Sewell had previously noted that Lucky Eight demonstrated no genuine intention to prosecute its claim and had frustrated the resolution of the case on its merits.
Proportionality: Registrar Gaily reduced the amount claimed for special costs related to the assessment itself, finding that the $65,000 sought was disproportionate. The registrar allowed $30,000 for this stage of the proceedings, emphasizing that special costs should indemnify the successful party without constituting a windfall.
Time spent and fees billed: The registrar reduced fees for certain tasks, including those related to a parallel regulatory complaint and internal conflict checks by the defendants’ counsel. Double-billing by multiple lawyers for the same task was also disallowed in some instances.
Defendants’ reputation: The registrar acknowledged the intrinsic value of the defendants’ reputation and professional standing, which had been harmed by the unsubstantiated allegations. This factor supported the significant award of special costs.
The court found that the special costs claimed for most stages of the litigation were reasonable and properly incurred, with some reductions for unnecessary or parallel work. The final award of $92,687.20 includes disbursements and applicable taxes.
For more information, see Lucky Eight Enterprises Ltd. v Ma, 2024 BCSC 2129 (CanLII).
