Court of Appeal Decision of the Week

Victori Spolia: Cost Awards at the (British Columbia) Court of Appeal

Case: Urban Communications Inc. v. BCNET Networking Society, 2015 BCCA 412

Keywords: Cost awards; Change in the Law; Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII); ‘cause of the trouble’; Yang v. Ging, 2003 BCCA 473

Synopsis:

Earlier this year, BCNET Networking Society (BCNET) successfully appeals an order granting leave to appeal an arbitrator’s award and varying the award. At the Court of Appeal, these orders are set aside and the original arbitrator’s award reinstated.

BCNET then applies to obtain the costs of proceedings in both the Supreme Court of British Columbia and in the Court of Appeal.

The respondent Urban Communications Inc. (Urban) opposes the application of BCNET for the following reasons:

  1. a) BCNET was the “cause of the trouble” in authoring the July 18, 2011 option exercise letter;
  2. b) Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII) effected a change in the law following the lower court decisions and therefore the Court should exercise its discretion to not award costs; and
  3. c) the arbitrator’s interpretation contained a provision that each party would bear its own costs in the arbitration proceeding.

The Court of Appeal rejects Urban’s submissions; grants BCNET’s application for costs.

Importance:

Section 23 of the Court of Appeal Act, R.S.B.C. 1996, c. 77 provides that, unless the Court orders otherwise, the successful party is entitled to its costs of the appeal. The Court of Appeal has found this section of the Act presumes a successful party is entitled to costs (even if the Court does not refer to costs in its reasons).

Cause of the Trouble

Urban advanced the argument that a particular July 18, 2011 letter represented the underlying ‘cause of the trouble’ in the matter and that, accordingly, the Court of Appeal should apply the appropriate principle from Yang v. Ging, 2003 BCCA 473 and deny the successful party its costs.

The Court of Appeal disagreed. Yang was decided under Rule 67(2) of the Court of Appeal Rules and involved ‘very unusual circumstances’ in a divorce action. The case arose when the wife of a ‘bigamous’ husband sued both him and his second ‘wife’. On appeal, the Court held that since the husband was ‘the cause of all the trouble’, the second ‘wife’ should recover her costs of both the appeal and cross appeal (note: in circumstances where she had been successful in both the appeal and cross appeal).

The Court of Appeal was not persuaded to apply the reasoning in Yang to issues of contractual interpretation. For the Court, it would be an exceptional order to deny the successful party its costs – against the express language of Rule 23 of the Court of Appeal Act.

Sattva and the Effect of Changes in Law

Urban argued that since Sattva Captial Corp. v. Creston Moly Corp., 2014 SCC 53 effectively changed the law, the Court should exercise its discretion to not award costs to BCNET. Again, the Court disagreed.

The Court sided with BCNET’s position (on the underlying appeal) and stated that it did so based on principles enunciated in Sattva (a Supreme Court of Canada decision which was rendered after the lower court decision in this matter but before the hearing of the subsequent appeal).

That being said, the Court was careful to note its decision was also based on some important pre-Sattva jurisprudence from the Court of Appeal and so the change in the law ‘did not affect the outcome’ but ‘merely reinforced its decision’.

Costs Provisions in the Arbitration Agreement

Article 17.4 of the agreement provided as follows: “[e]ach party shall be responsible for its own legal expenses and for an equal share of the fees and expenses of the arbitrator and any other expenses relating to the arbitration.” [Emphasis added]

The Court interpreted this provision to expressly limit any prohibition on costs awards to the arbitration proceeding. In other words, the agreement (in this matter) did not preclude costs in the Supreme Court of British Columbia or the Court of Appeal. The Court could find no merit to the submission that the agreement acted as a barrier to prevent BCNET’s request for costs.

Counsel for the Appellant: David Church Q.C. and Andrew Pearson (Church & Company, Vancouver)

Counsel for the Respondent: M. Smith

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Posted: Wednesday, October 14, 2015