Special Costs

In this article we discuss the key aspects of special costs awards, including what they are, when they are awarded, and how they are assessed. The threat of special costs can be an important tool in deterring litigants from advancing and continuing meritless claims at the outset, and can also assist with facilitating resolution. Of course, special costs are also a means of recovering costs incurred in the defence of a claim.

A connecting thread throughout this paper is Whitelaw Twining’s recent string of cases: Li v Owners, Strata Plan EPS1069, 2021 BCSC 2158; Li v Owners, Strata Plan EPS1069, 2021 BCSC 2158; Li v The Owner, Strata Plan EPS1069, 2023 BCSC 1096, where special costs were awarded against a self-represented litigant in favour of our client, culminating in a costs assessment hearing before Registrar Gaily, with approximately 97% of our legal fees and disbursements being awarded.

What Are Special Costs?

It is well known that costs awards transfer some of the successful party’s litigation expenses to the unsuccessful party rather than leaving each party’s expenses as incurred.[1] Rule 14-1 of the Supreme Court Civil Rules[2] provides two categories of costs: party and party costs and special costs; the former being the default option, and the latter, the exception.[3]

Party and party costs provide partial indemnity to the successful party to a proceeding with the intention of allocating the high costs of litigation fairly between the parties. A party and party costs award aims to balance indemnification of the successful party whilst not discouraging the public from pursuing their rights by way of litigation.[4]

In contrast, special costs provide a greater degree of indemnity to the successful party to a proceeding. Special costs are intended to condemn and deter litigation misconduct, not to compensate. Special costs awards address the conduct of the parties in the course of litigation and are generally awarded where there has been some form of reprehensible conduct. The successful party is entitled only to fees and disbursements that were proper and reasonably necessary to conduct the proceeding. This is in fairness to the losing party who must pay the special costs.[5]

In addition to being awarded in matters before the Supreme Court of British Columbia, special costs can be awarded in matters before the British Columbia Court of Appeal, the Federal Court, and in certain circumstances, the Civil Resolution Tribunal.[6]

When Are Special Costs Awarded?

Special costs awards are within the court’s inherent jurisdiction, but are also found within the Rules.[7] For example, Rule 9-5(1) of the Rules provides the court may order the costs of an application to be paid as special costs at any stage of a proceeding on the ground that a proceeding: discloses no reasonable claim or defence; is unnecessary, scandalous, frivolous, or vexatious; may prejudice, embarrass, or delay the fair trial or hearing of the proceeding; or is otherwise an abuse of process of the court.[8] However, special costs awards are exceptional and the party seeking special costs must demonstrate exceptional circumstances that justify special costs.[9]

As stated by the Honourable Mr. Justice Lambert for the Court of Appeal in one of the leading authorities for special costs in British Columbia, Garcia v Crestbrook Forest Industries Ltd,[10] the threshold for an award of special costs is “reprehensible conduct”. Reprehensible conduct has a broad meaning, encompassing scandalous and outrageous conduct as well as milder forms of misconduct that are deserving of rebuke. Reprehensibility is likely to be found in circumstances where there is evidence of improper motive for bringing a proceeding, abuse of the court’s process, misleading the court, and persistent breaches of the rules of professional conduct and the rules of court.

Lambert J.A. provided further guidance in Garcia: “the fact that an action or an appeal ‘has little merit’ is not in itself a reason for awarding special costs. […] Something more is required, such as improper allegations of fraud, or an improper motive for bringing the proceedings, or improper conduct of the proceedings themselves, before the conduct becomes sufficiently reprehensible to require an award of special costs”.[11]

Authorities pertaining to special costs demonstrate that an abuse of process or a collateral attack can justify an award of special costs.[12] A collateral attack, in which a new proceeding is filed to challenge some aspect of an earlier and separate case, is considered an abuse of process. Conduct that constitutes an abuse of process is reprehensible by its nature.[13] Furthermore, special costs may be ordered against a party who fails to narrow issues and who fails to abandon claims that are not supported by evidence.[14]

Case Study: Li v Owners, Strata Plan EPS1069

In 2015, Mr. Ming Li stopped paying strata fees for his retail and office units in Strata Plan EPS 1069, accumulating strata fee arrears as a result. In May and June 2017, the strata owners filed certificates of lien against Mr. Li’s units. In October 2017, the strata owners filed two petitions seeking declaratory relief against Mr. Li, as well as an order that the strata owners recover judgment from Mr. Li for the amounts adjudged to be due and owing for the arrears, late fines, and the strata owners’ legal costs. In February 2018, Justice Duncan granted all relief sought by the strata owners with two exceptions, one being that quantification of the strata owners’ legal costs was referred to the registrar. Those costs were not assessed or paid despite the passage of about two years.[15]

In April 2020, Mr. Li applied to the Civil Resolution Tribunal for dispute resolution regarding strata governance and the liens registered by the strata owners. At that time, the strata owners retained Whitelaw Twining for legal representation.

In September 2020, the Civil Resolution Tribunal issued a preliminary decision refusing to resolve a number of Mr. Li’s claims about the liens and associated losses as they were linked to the liens that were the subject of Supreme Court of British Columbia proceedings and would be more appropriately resolved before the court.[16]

In May 2021, Mr. Li filed a petition pursuant to which he sought a declaration discharging the liens as well as judicial review of the Civil Resolution Tribunal decision. The strata owners retained Whitelaw Twining for representation to defend the petition.[17] The Honourable Madam Justice Douglas dismissed Mr. Li’s petition in full. She found that Mr. Li’s lien claim disclosed no reasonable claim with merit, was based on a fundamental misapprehension of the previously granted orders, and constituted an impermissible collateral attack.[18]

As to the issue of costs, the strata owners sought lump sum costs, fixed in the amount of $5,000 and provided a draft bill of costs, indicating they incurred taxable costs of $8,190.51.[19] Douglas J. cited Gichuru v Smith[20] for the authority that, when fixing costs, a judge’s ultimate award must be consistent with that a registrar would make in similar circumstances. Douglas J. declined to fix costs as she was not persuaded she was able to assess the reasonableness of the strata owners’ costs based solely on a draft bill of costs. She invited the parties to file supplementary written submissions on the issue.[21]

Following submissions, Douglas J. held that the strata owners were entitled to special costs of the petition. In doing so, she observed that the petition constituted an abuse of process as it was devoid of merit, brought for an improper purpose, and comprised a collateral attack. Douglas J. noted Mr. Li’s conduct throughout the proceedings was reprehensible and she inferred Mr. Li commenced the petition for an improper motive, namely, to gain leverage in the liens proceedings between the parties.[22]

Douglas J. noted litigants, whether represented by counsel or self-represented, are required to make careful assessments of the strength of their case (or lack thereof) at the outset and throughout litigation. In the words of Douglas J., “Mr. Li’s failure to reconcile the manifest deficiencies in his petition at any stage of [the] proceedings [represented] the kind of reckless indifference to the legitimate interests of the Respondents envisioned by the authorities which cite reprehensible conduct as a basis for awarding special costs”.[23] The strata owners were entitled to special costs of the petition, as agreed upon by the parties, or as assessed.[24]

How Are Special Costs Assessed?

Special costs are not assessed mathematically[25] but rather objectively according to a standard of reasonableness.[26] Pursuant to Rule 14-1(4) of the Rules, special costs are assessed by a registrar.[27] Pursuant to Rule 14-1(3)(a), on an assessment of special costs, a registrar must allow fees that were properly or reasonably necessary to the conduct of the proceeding and, pursuant to Rule 14-1(3)(b), a registrar must have regard to the following factors:

The complexity of the proceeding and the difficulty/novelty of the issues involved;
the skill, specialized knowledge and responsibility required of the lawyer;
the amount involved in the proceeding;
the time reasonably spent in conducting the proceeding;
conduct that tended to shorten or unnecessarily lengthen the proceeding;
the importance of the proceeding to the party whose bill is being assessed, and the result obtained;
the benefit to the party whose bill is being assessed of the services rendered by the lawyer; and
Rule 1-4 (i.e., proportionality) and any case plan order.

Rule 14-1(5) directs, when assessing costs under Rule 14-1(3), a registrar must determine which disbursements have been necessarily or properly incurred in the conduct of the proceeding and allow a reasonable amount for those disbursements.[28] Work for which fees are claimed will be deemed to be “necessary” if that work was essential to the conduct of the proceeding and “proper” if, while not necessary, it is nevertheless reasonably incurred for the purposes of the proceeding.[29] Whether the work for which fees are claimed was “proper or reasonably necessary to the conduct of the proceeding” is assessed on an objective basis. Ultimately, special costs are intended to substantially indemnify the successful litigant by capturing “the fees that a reasonable client would pay a reasonably competent solicitor for performing the work described in the bill”.[30] The amount allowed ranges, with registrars typically allowing 70-90% of the proposed bills.

Returning to our case study, Li v Owners, Strata Plan EPS1069, after Douglas J. released her reasons, the strata owners filed an appointment scheduling the special costs assessment. Costs were assessed by Registrar Gaily in May of 2023.[31]

The special costs sought totaled $45,361.91. The strata owners submitted these fees were properly or reasonably necessary to respond to Mr. Li’s petition and to succeed in having the petition dismissed as an abuse of process. The strata owners maintained Mr. Li’s conduct was responsible for unnecessarily lengthening the proceedings despite their repeated communication to him that the petition represented a collateral attack, which would be unsuccessful, and urging him to seek legal advice. The strata owners’ position was that Mr. Li purposely pursued the petition as leverage in resolving the other proceedings between the parties. Mr. Li objected to the bill of special costs on the basis he could not verify the expenses but did not articulate specific objections to the bill as he was ordered to do. He maintained the fees claimed were inflated and unreasonable.[32]

Registrar Gaily considered all the factors set out in Rule 14-1(3)[33] in the circumstances and found the bulk of the fees claimed were properly and reasonably necessary to the conduct of the proceeding. She allowed the strata owners $44,236.91, which included fees, disbursements, and applicable taxes. She also allowed the costs of $5,000 which the strata owners claimed as the costs of the assessment hearing.[34]

In coming to this result, Registrar Gaily first considered the factor set out in Rule 14-1(3)(b)(i), “the complexity of the proceeding and the difficulty/novelty of the issues involved”.[35] Registrar Gaily accepted that more work was involved at the outset in assessing the merits of Mr. Li’s claims than might otherwise have been required if the petition had more clearly articulated the claims and the basis for them.[36]

Registrar Gaily next considered the factor set out in Rule 14-1(3)(b)(ii), “the skill, specialized knowledge, and responsibility required of the lawyer”.[37] A modest deduction was made to the bill of special costs for research conducted by students, as the Civil Resolution Tribunal was a party to the proceeding.[38]

As for the factor set out in Rule 14-1(3)(b)(iii), “the amount involved in the proceeding”,[39] the amount potentially at risk for the strata owners was significant. Mr. Li sought damages of approximately $1.6 million in his claim before the Civil Resolution Tribunal. Mr. Li was seeking to have the liens removed and, if he had successfully established the liens were improperly imposed, counsel for the strata owners knew he would sue the strata owners for a significant amount of money.[40]

Registrar Gaily went on to consider the factor set out in Rule 14-1(3)(b)(iv), “the time reasonably spent in conducting the proceeding”.[41] She concluded the time spent was reasonable in light of Mr. Li’s conduct and the steps required to defend the claim.[42]

As for the factor set out in Rule 14-1(3)(b)(v), “conduct that tended to shorten or unnecessarily lengthen the proceeding”,[43] Registrar Gaily observed that the way Mr. Li pursued the petition and articulated his claims was relevant. His conduct displayed reckless indifference to legitimate interests of the strata owners, unnecessarily lengthened the proceedings, and contributed to the amount of the special costs sought.[44]

Finally, Registrar Gaily considered the factor set out in Rule 14-1(3)(vii), “Rule 1-3 [i.e., proportionality] and any case plan order”.[45] Mr. Li argued the fees claimed as special costs were inflated and should be reduced in the interest of proportionality. He also stated it would be difficult for him to pay the special costs. Registrar Gaily noted the objective of proportionality reflected a sentiment that applied in this case – a litigant does not have the right to demand that unlimited time and resources be devoted to a particular case, no matter how important it is. Counsel for the strata owners repeatedly advised Mr. Li to seek independent legal advice to understand how the petition could amount to an abuse of process. Mr. Li chose to represent himself. He was uncooperative throughout the petition process and continued to maintain the liens were improperly registered.[46]

Registrar Gaily concluded, “[t]he WT bills upon which the claim for special costs is based are detailed and clear, identifying the timekeepers, the amount of time spent, the tasks conducted, and the rates charged. I have reviewed the bills and other than as noted above, I find the fees were both proper and reasonably necessary for the Strata Corporation’s response to Mr. Li’s Petition”.[47]

Conclusion

While special costs are reserved for exceptional circumstances, they may still be awarded, even against self-represented litigants. The threat of special costs may appropriately be used to end litigation at the outset, where it is clear that the claims advanced have little merit and may constitute an abuse of process. If these efforts are unsuccessful, special costs are a means of recovering a large portion of the expenses incurred by a client in defending a claim.

To increase the likelihood of recovery at a registrar’s hearing, it is prudent to prepare detailed bills describing steps taken and why. In corresponding with self-represented litigants, always ensure you recommend that they seek independent advice, and set out in clear language why it is you think their claim will fail and why your client will be entitled to special costs. Lawyers have a professional obligation to take this step, and doing so may result in early resolution.

To learn more about special costs, please feel free to contact the authors of this article, Bronwen Black, Nabeel Moallem, and articling student Emma Bozoian.

[1] British Columbia (Minister of Forests) v Okanagan Indian Band, 2003 SCC 71 at para 26.

[2] BC, Supreme Court Civil Rules, BC Reg 168/2009 [Rules].

[3] Ibid, r 14-1.

[4] Tanious v The Empire Life Insurance Company, 2019 BCCA 329 at para 46—47.

[5] Ibid at paras 49—53.

[6] Court of Appeal Rules, BC Reg 120/2022, s 7; Federal Courts Rules, SOR/98-106, s 400(6); Civil Resolution Tribunal Act, SBC 2012, c 25, s 49.

[7] Westsea Construction Ltd v 0759553 BC Ltd, 2013 BCSC 1352 [Westsea] at para 25.

[8] Rules, supra note 2, r 9-5(1).

[9] Westsea, supra note 7 at para 73.

[10] Garcia v Crestbrook Forest Industries Ltd, [1994] BCJ No 2486, 119 DLR (4th) 740 (CA) [Garcia] at para 17.

[11] Ibid at para 23.

[12] Krist v British Columbia, 2017 BCCA 78 at paras 50—52, 56—58.