Edwards v. BMO Nesbitt Burns Inc.

2012 BCSC 1973 Edwards v. BMO Nesbitt Burns Inc.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Edwards v. BMO Nesbitt Burns Inc., 2012 BCSC 1973 Date: 20121228 Docket: S101683 Registry: New Westminster Between: Craig Edwards and Carmen Edwards Plaintiffs And BMO Nesbitt Burns Inc. Defendant Before: The Honourable Mr. Justice Truscott Reasons for Judgment re Costs Plaintiff Craig Edwards: In Person Plaintiff Carmen Edwards: In Person Counsel for law firm of Edwards, Edwards & Edwards: Brock A. Edwards Counsel for the Defendant: Owen J. James Place and Date of Hearing: New Westminster, B.C. January 4, May 4 and November 13, 2012 Place and Date of Judgment: New Westminster, B.C. December 28, 2012 [1] In Reasons for Judgment of August 6, 2010 [2010 BCSC 1108], I dismissed the claims of the plaintiffs after trial and granted the defendant the opportunity to speak to the issue of costs. [2] The hearing on the issue of costs was held over three days on January 4, 2012, May 4, 2012 and November 13, 2012. [3] The defendant seeks an award of special costs of the entire proceedings against the plaintiffs, jointly and severally, or alternatively double costs against the plaintiffs jointly and severally under the former Rule 37(B) of the Supreme Court Rules, following the making of an offer to settle on December 8, 2009, or further alternatively special or double costs against the plaintiffs jointly and severally up to December 8,

2009 and special costs or double costs thereafter against the plaintiffs as well as against their law firm and counsel jointly and severally. [4] Special costs are authorized against a party by Rule 14-1(b) which authorizes the Court to order costs of the proceeding be assessed as special costs. [5] In my Reasons for Judgment I indicated in para. 1 that the plaintiffs had sued the defendant for breaches of duty of care and breach of fiduciary duty as their investments advisors, for failing to inform them in a timely fashion of a margin call made in April 2001, and then selling a number of their bonds at less than market value without allowing them the ability to transfer their accounts to another dealer (RBC Dominion Securities), or allowing them to satisfy the margin call with a cash deposit. [6] In dismissing the claims I principally applied the provisions of the Client Account Agreement that the plaintiffs executed with the defendant on August 9, 2000, which both plaintiffs said in their evidence that they had read and understood before executing it. [7] Two of the provisions of the agreement stated as follows: 8. ELIMINATION OR REDUCTION OF INDEBTEDNESS BY NESBITT BURNS If: ... (b) Nesbitt Burns deems the margin held by it to be insufficient for its protection; ... (d) there is any unsecured or potentially unsecured indebtedness in the Client's Account; ... ... In addition to any other right or remedy to which Nesbitt Burns is entitled, Nesbitt Burns may, at any time and from time to time without notice or demand to the Client: ... (ii) take the Securities in payment or sell, contract to sell or otherwise dispose of any or all of the Securities held by Nesbitt Burns for the Client and apply the net proceeds therefrom to eliminate or reduce indebtedness; ...

25. JOINT ACCOUNT If this Agreement is signed by more than one Client, the liabilities and obligations hereunder shall be joint and several (in Quebec, solidary) and each of the Clients agrees that each has full power and authority to direct Nesbitt Burns to take any action whatsoever with respect to the Account and Nesbitt Burns is hereby authorized and directed to act upon the instructions of any one of the Clients with respect to the Account. Any notice relating to the Account, including contracts of purchase and sale, may be sent to any one of the Clients and shall be binding upon each of the Clients. Any Client acting alone shall have the full power and authority to consent to amendments to, or modify or waive any of the terms or provisions relating to the Account. [8] This agreement was pleaded by the plaintiffs in their Statement of Claim but in that pleading they also sought to imply terms in addition requiring the defendant to give them a reasonable opportunity to satisfy any margin account, or a reasonable opportunity to transfer their account to another investment advisor if it would eliminate the excess margin debt, or in the event that the defendant sold securities to cover the margin call, an obligation to sell the securities in the order requested by the plaintiffs at their fair market values. [9] The Statement of Defence pleaded the Client Account Agreement as

well and relied on its provisions to entitle it to sell the plaintiffs' securities, including bonds, in order to reduce the plaintiffs' indebtedness in their accounts. [10] The defendant also pleaded that the plaintiffs never provided it with any necessary information for the transfer of the plaintiffs' securities to RBC Dominion Securities, including any approval from RBC Dominion Securities itself. [11] The failure of the plaintiffs to mitigate their damages was also pleaded by their failure to re-purchase any securities that had been sold by the defendant. [12] The defendant sought dismissal of the claim and it maintained that position in the litigation through trial. [13] In my Reasons I upheld the provisions of the Client Account Agreement and determined that its provisions entitled the defendant to take the actions it did when it did to protect its own monies at risk. [14] I also held that Craig Edwards was aware of the condition of the margin account almost daily and was aware when he was under his margin and what was required of the plaintiffs on the margin requirements. [15] I also held that while it may not have been necessary for the account to be under margin before the defendant exercised its rights under the Client Account Agreement in order to recoup some or all of its loan amounts, I was satisfied it only did so in the circumstances after giving plenty of notice

to Mr. Edwards through the months when the market was rapidly deteriorating. [16] In response to the evidence of Carmen Edwards that she did not personally receive any notice of the margin call, I concluded that she had only her husband, the co-plaintiff, to blame for this. [17] The evidence of the possible transfer of the plaintiffs' accounts to RBC Dominion Securities clearly indicated that there was no agreement by RBC Dominion Securities to receive the transfer. [18] Finally I said that the plaintiffs had provided no evidence of why Mr. Edwards did not deliver a cheque to meet the margin requirement or otherwise meet the requirement and I accepted if the plaintiffs believed the bonds that were sold were so valuable to them they had not indicated why they did not go into the market themselves to re-purchase the bonds. I concluded that they had failed to mitigate any damages they may have sustained. [19] Special costs may be awarded to chastise a party who is guilty of reprehensible conduct in the course of litigation, or to compensate a party for any misbehaviour by that other party. [20] Special costs may also be awarded where a claim is so weak that it is bound to fail (Solex Developments Co. v. Taylor (District) (1998), 60 B.C.L.R. (3d) 53) and the claimant is guilty of reckless indifference in not realizing at an early stage that its claim is so deficient. In that case

it was said that together with material non-disclosure to the chambers' judge this amounted to misconduct in the litigation. [21] An earlier and often-cited case on special costs is the case of Garcia v. Crestbrook Forest Industries Ltd. (1995), 9 B.C.L.R. (3d) 242, where Mr. Justice Lambert delivering judgment of the Court considered the cases of Stiles v. B.C. (Workers' Compensation Board) (1989), 38 B.C.L.R. (2d) 307; Young v. Young, (1993), 84 B.C.L.R. (2d) 1; Leung v. Leung (1993), 77 B.C.L.R. (2d) 314; and Fullerton v. Matsqui (District) (1993), 74 B.C.L.R. (2d) 311, where special costs (at that time those costs were referred to as solicitor and client costs) were held to be appropriate in circumstances of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, as a form of chastisement, or in the presence of scandalous or outrageous conduct, misbehaviour, or milder forms of misconduct deserving of reproof or rebuke. [22] In that case, Mr. Justice Lambert went on to say that the fact an action has little merit is not in itself a reason for awarding special costs. [23] In my view there was no scandalous or outrageous conduct of the plaintiffs in these proceedings and no misbehaviour nor any other conduct deserving of reproof or rebuke. [24] While I recognize that some cases may appear to say that a claim that is bound

to fail is enough to grant special costs, each decision must be based on its own special circumstances. [25] In the circumstances here I decline to order special costs against the plaintiffs as I am unable to say that they had no chance of success as the result depended at least in part on how the evidence came out from the witnesses at trial and what evidence I accepted. [26] I also reject the submission of the defendant that because it was sued for breach of fiduciary duties including duties of good faith and fair dealing, that special costs are justified for that reason. [27] The defendant is an investment dealer and must expect these kinds of claims anytime it is sued for its investment advice or lack thereof. The relationship between a client and investment dealer is almost always going to be a fiduciary relationship because of the nature of the business relationship and the claims are almost always going to involve claims of breach of fiduciary duty. [28] I do not consider these claims against the defendant to be enough to warrant an order for special costs. [29] I do however conclude that the plaintiffs should be responsible for double costs, jointly and severally, under the former Rule 37(B) that was in effect at the time, following the defendant's offer to settle on December 8, 2009. [30] Rule 37(B) provided that an offer to settle made after July 1, 2008 was one made

in writing by a party and delivered to all parties of record and contained the words "reserves the right to bring this offer to the attention of the court for consideration in relation to costs after the court has rendered judgment on all other issues in this proceeding." [31] The offer to settle of the defendant in this case satisfied these requirements. [32] Rule 37(B) provided the court with a number of options for costs, one of those being to award double costs for all or some of the steps taken in the proceeding after the date of delivery of the offer to settle. [33] The defendant's offer to settle was to enter into a consent dismissal order in the enclosed form and waive its costs of the action. [34] An offer to settle for a consent dismissal order with a waiver of costs qualified as an offer to settle within Rule 37(B) (Riley v. Riley, 2010 BCSC 822). [35] There was no requirement under the Rule that the offer be for any monetary amount in order to constitute a compromise of the claim. [36] In any event the defendant agreed to waive costs in its offer instead of asking for costs in addition, and a waiver of costs is an offer of something of value monetarily. [37] There was also no requirement under Rule 37(B) that the offer must be kept open until commencement of trial. [38] Rule 37(B) also authorized the court to consider whether the offer was one that ought reasonably

to have been accepted, the relationship between the terms of settlement offered and the final judgment of the court, the relative financial circumstances of the parties and any other factor the court considered appropriate. [39] The offer to settle here was one that ought reasonably to have been accepted by the plaintiffs and the relationship between the terms of settlement offered and the final judgment of the Court confirmed that. [40] In dealing with the relative financial circumstances of the parties Craig Edwards says he earns around $35,000 per year but no more than $40,000, but also believes he will earn more next year. [41] He also says his bond portfolio has gone up considerably this year and is now worth about $80,000. [42] He also says he has RRSPs of about $38,000. [43] He lists debts at more than $35,000 and says he owes his father $15,000 while putting his annual expenses at $49,000. [44] Carmen Edwards says she makes $47,000 per year but has yearly expenses of over $71,000. [45] She lists a vehicle at a value of $25,000 with a personal loan for it of an equal amount, a joint account with Craig Edwards of $50,000 and joint pension and RRSPs of $32,830. [46] She lists debts of almost $60,000 consisting for the most part of the loan on her motor vehicle and Visa and line of credit amounts of $30,000. [47] I do not consider that either qualifies for relief on the

basis of their financial circumstances. [48] The plaintiff Carmen Edwards says that she never instructed counsel during the proceedings and was not aware of what was happening until she was called to testify. [49] She goes on to say in her affidavit that she attempted to convince her husband, the co-plaintiff, to abandon the case, which he rejected, and counsel Brock Edwards never told her she could unilaterally withdraw. [50] Her husband Craig Edwards replies in his affidavit that he and his wife instructed counsel, that she was aware of what was happening in the litigation, and both were united to have the matter proceed to trial and she was determined to proceed. [51] The plaintiffs are separated. As their allegations against each other totally conflict and it is impossible to determine the truth between the two of them, I proceed on the basis that both plaintiffs signed the Client Account Agreement after reading it, both were plaintiffs in the action, both their claims were advanced through their joint counsel, and both gave evidence at trial seeking to advance their claims. [52] It is my judgment that the costs be awarded against the plaintiffs jointly and severally for the entire proceedings. [53] Special costs may also be awarded against lawyers under Rule 14-1(33) of the Supreme Court Rules. [54] The evidence of Mr. Goult of the defendant's law firm is that he contacted

Mr. Dudley Edwards, Q.C., a senior member of the plaintiffs' law firm, on or about January 4, 2010, to set up an examination for discovery of Carmen Edwards for one‑half day. He says that Mr. Edwards acknowledged that counsel had a right to examine her and said he would get back to Mr. Goult the next day with some potential dates. [55] By the end of the day on January 11, 2010, he had not been given any dates for the examination for discovery of Carmen Edwards and accordingly on January 12 he unilaterally set down an appointment for January 20, 2010. [56] On January 18, 2010, he received a letter from Brock Edwards informing him that under Rule 27(1) of the Rules of Court then in effect, the examination had to take place prior to 14 days before trial, without obtaining leave of the court, and the time set of January 20, 2010 was within the 14 days and Carmen Edwards would not be attending. [57] He deposes that at that point he contacted Dudley Edwards again to indicate that this was contrary to what they had previously discussed and Dudley Edwards indicated he fully agreed and would talk to Brock Edwards and the examination would proceed as scheduled on January 20, 2010. [58] He deposes that he contacted Brock Edwards directly on January 19, 2010 to confirm the examination was going ahead the next day but Brock Edwards informed him that Carmen Edwards would not be produced and

he would have to obtain a court order for the examination. [59] Mr. Goult wrote that same day to Dudley Edwards and Brock Edwards jointly setting out the above evidence and informing them that absent a reconsideration of their position that day he would be filing an application to court and would have no alternative but to seek special costs of the application against their clients and the law firm. [60] Dudley Edwards says in a reply affidavit that he never said he would make Carmen Edwards available for an examination but would only recommend it to the client subject to her instructions. [61] He says that when he contacted Carmen Edwards by telephone to Alberta on receiving the appointment for January 20, 2010, she indicated she did not want to attend as she had just started a new employment in Alberta and she instructed him to advise Mr. Goult she would not be available for examination. [62] Mr. Edwards goes on to say that the negative cost ramifications were explained to Carmen Edwards that she might be liable for special costs if she unreasonably refused to attend and the defendant was required to apply to compel her. [63] It is his evidence that she said she understood and confirmed her instructions to object to the examination. He says that the next day, January 13, he confirmed her instructions with her again. [64] Mr. Edwards does not respond in his affidavit directly

to Mr. Goult's statement in his letter of January 19, 2010, that after he received the letter of January 18, 2010 from Brock Edwards that Carmen Edwards would not be attending the scheduled examination on January 20, 2010, he had contacted Dudley Edwards by telephone to indicate that this was contrary to what they had discussed and at that time Dudley Edwards advised that he fully agreed with Mr. Goult, that he would speak to Brock Edwards, and the examination would be proceeding. [65] Carmen Edwards completely denies talking to Dudley Edwards at all about her examination for discovery. [66] Not surprisingly when the application for her examination came on for hearing it was granted with costs in the cause and the examination took place on January 31, 2010, the day before the trial commenced. [67] I consider it very unfortunate for two lawyers to be bickering on what was said to each other and for a lawyer to be fighting with his former client. [68] However distasteful it is I am unable to award special costs against Brock Edwards and the Edwards law firm in the face of this conflicting evidence, nor award special costs against Carmen Edwards for this issue. [69] There will be an order that the defendant is entitled to recover costs from the plaintiffs jointly and severally at the scale for matters of more than ordinary difficulty or importance up to and including December 8, 2009, and double costs thereafter for all matters including the trial and all subsequent applications before me. "The Honourable Mr. Justice Truscott"