Eisler Estate v. GWR Resources Inc.

2020 BCSC 562 Eisler Estate v. GWR Resources Inc.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Eisler Estate v. GWR Resources Inc., 2020 BCSC 562 Date: 20200409 Docket: S52943 Registry: Vernon Between: Brenda Dolores Liggett, Executor of the Will of Irvin Eisler and Eisler Holdings Ltd. Plaintiffs And GWR Resources Inc. and William Rogers Defendants And Eisler Construction Ltd. and Olga Eisler, a person under disability, by her litigation guardian, Kenneth Eisler Defendants by Counterclaim Before: The Honourable Madam Justice Donegan Reasons for Judgment on Costs Counsel for the Plaintiffs and Defendants by Counterclaim, Eisler Construction Ltd.: A.D. Mardiros U. Radoja Counsel for the Defendants: J.R. Shewfelt E. Ito Counsel for the Defendant by Counterclaim, Olga Eisler N.A. Vlahos Written Submissions Received: January 24, February 7 and 14, 2020 Place and Date of Judgment: Kamloops, B.C. April 9, 2020

INTRODUCTION [1] This is a costs ruling following a trial in which I concluded that the plaintiffs are entitled to damages in the amount of $72,500.00, plus interest, for wrongful dismissal. My Reasons for Judgment are indexed at 2019 BCSC 1990 (the "Reasons"). I invited submissions from counsel on the issue of costs. [2] The plaintiffs seek an order for full indemnity costs on the basis of a provision in the parties' contract. Alternatively, they seek special costs for what they say has been the defendant's reprehensible conduct throughout the litigation. GWR Resources Inc. ("GWR") resists any notion that special costs are appropriate and seeks to have the plaintiffs' full indemnity costs award limited to the costs incurred by the plaintiffs in relation to their wrongful dismissal claim only, with ordinary costs awarded in relation to the counterclaim and no costs awarded in respect of certain other steps. [3] For the reasons that follow, I am satisfied the plaintiffs are entitled to contractual or full indemnity costs of the proceeding, with two exceptions.

BACKGROUND [4] I outlined the facts of this case in detail in the Reasons. This decision on costs should be read in conjunction with the Reasons. [5] In brief, Irvin Eisler founded a mining exploration company, GWR, in 1987. On January 1, 1997, Mr. Eisler and his company, Eisler Holdings Ltd. ("EHL") and GWR entered into a written contract, drafted by GWR's counsel, pursuant to which Mr. Eisler and EHL were to provide services to GWR for a fee (the "Consulting Agreement"). The Consulting Agreement was renewed several times and continued in force until GWR terminated Mr. Eisler's employment. Through a letter written by its counsel, GWR made a number of serious allegations of cause and terminated Mr. Eisler's employment, without notice or pay in lieu of notice, on May 23, 2011. [6] These serious allegations were never discussed with Mr. Eisler prior to his termination. He was never given an opportunity to address them. He was 79 years old at the time of his termination. [7] On May 30, 2011, Mr. Eisler's counsel replied to GWR's counsel, denying all the allegations. His counsel demanded that GWR pay him severance pursuant to the provisions of the Consulting Agreement, failing which they would commence an action for damages. Mr. Eisler's counsel put GWR on notice that he would be relying on the Consulting Agreement provisions and would be seeking full indemnity for the plaintiffs'

legal expenses and interest. [8] The indemnity provision in the Consulting Agreement is found at section 6.03. It reads: 6.03 The Company shall pay all legal fees and expenses incurred by Eisler in contesting or disputing any termination or in seeking to obtain or enforce any right or benefit provided by this Agreement, provided that Eisler is successful in any such action. [9] On August 17, 2015, Mr. Eisler and EHL commenced this action against GWR for wrongful dismissal and against William Rogers, a stock broker, for inducing GWR to breach his employment contract. [10] On September 23, 2015, GWR filed its response and counterclaim, adding another of Mr. Eisler's companies, Eisler Construction Ltd. ("ECL") as a defendant by counterclaim. GWR defended the claim on the basis of cause, alleging a host of financial impropriety, including misappropriation of GWR's funds and other fraudulent behaviour. In its counterclaim, GWR sought significant damages for the same alleged misconduct. [11] On July 6, 2017, GWR amended its counterclaim to add Mr. Eisler's wife, Olga Eisler, as another defendant by counterclaim. The amended counterclaim added an allegation that Mr. Eisler used GWR funds improperly to purchase or improve the Eislers' family home. GWR filed a Certificate of Pending Litigation ("CPL") against title to that property. [12] In early 2018, having had their first trial date

adjourned, the plaintiffs applied to have the counterclaim determined by way of summary trial and to remove the CPL to allow a sale Mr. Eisler had contractually committed to prior to registration of the CPL. Justice Weatherill determined that it was unsuitable for summary determination, but ordered the CPL be removed on the plaintiffs' posting of $400,000.00 in security. The security was paid. [13] Upon release of the Reasons in November 2019, the plaintiffs asked GWR to agree to release the security to the plaintiffs, but GWR refused. In addition to the costs order it seeks today, the plaintiffs also seek an order that the security be immediately released to the plaintiffs. GWR takes no position on this application. [14] GWR's allegations of cause morphed throughout the litigation. Many of the allegations set out in the May 2011 termination letter were not pursued, but GWR maintained the most serious allegations of fraud and financial misconduct throughout the litigation and trial. [15] Mr. Eisler passed away a few months before the trial. The executor of his estate continued the litigation. Part way through the trial, the plaintiffs' claim against Mr. Rogers was dismissed by consent. At its conclusion, the defendant's counterclaim against Mrs. Eisler was also dismissed by consent. [16] As detailed in the Reasons, I concluded that the Consulting Agreement governed the parties' relationship at the time of Mr. Eisler's dismissal. I concluded GWR had failed to establish just cause for his termination and awarded contractual damages as per the provisions of the Consulting Agreement. As the same allegations relied upon for cause were raised in the counterclaim, I dismissed the counterclaim in its entirety.

POSITIONS OF THE PARTIES [17] The plaintiffs seek an order that GWR pay full indemnity costs - all of the legal fees and expenses actually incurred by the plaintiffs from May 23, 2011 (the date of Mr. Eisler's dismissal) until the date of my reasons on costs. They argue that in section 6.03 of the Consulting Agreement, the parties contracted, using clear language, for Mr. Eisler to be reimbursed for legal fees and expenses on a full indemnity basis and the circumstances of this proceeding fall squarely within that provisions. [18] Mr. Eisler sought to obtain a benefit provided to him under the Consulting Agreement (severance pay under section 4.02) and when GWR denied this benefit was payable on the basis of cause, he commenced this action to obtain that benefit. [19] The plaintiffs submit that a plain reading of section 6.03 entitles them to recover full indemnity costs of the proceeding. The plaintiffs' claim and GWR's counterclaim were inextricably linked, as the bases for GWR's defence of the claim and its counterclaim were identical. A plain reading of section 6.03 entitles the plaintiffs to recover full indemnity costs of the proceeding. [20] In the alternative, the plaintiffs seek special costs. [21] GWR submits that section 6.03 of the Consulting Agreement does not provide the plaintiffs with the right to reimbursement of all costs incurred in relation to this

proceeding. It argues that section 6.03 only recognizes two narrow purposes for which reimbursement may be claimed: a) in order to contest or dispute any termination; or b) in seeking to enforce any right or benefit provided by the Consulting Agreement. [22] With these exhaustive and narrow purposes in mind, GWR submits that the plaintiffs are entitled to actual legal fees and expenses (to be assessed) in relation to their wrongful dismissal claim, but not with respect to any steps taken in relation to the counterclaim, the claim against Mr. Rogers or the abandoned claim relating to a separate stock option agreement. [23] GWR submits that these claims were not a contest of Mr. Eisler's termination, or an enforcement of any right under the Consulting Agreement and fall outside the scope of the indemnity clause. [24] GWR argues that if the parties had wished to contractually provide for full indemnity costs incurred for all related claims, they could have done so by using clear language. Apart from finding no basis in section 6.03 itself, GWR also submits there is no reasonable basis to infer that the parties intended for the plaintiffs to receive reimbursement for all costs incurred in these proceedings on a full indemnity basis. It points to the intention of the parties being most clearly observable in the recitals to the Consulting Agreement, which read, in part: B. it is of

material value to [GWR] to settle the terms of future employment of Eisler and it is of value to Eisler that his responsibilities, remuneration and other benefits be determined as hereinafter provided. [25] GWR says that the most reasonable inference to be drawn from the context of the Consulting Agreement with respect to indemnity is that the parties intended to provide Mr. Eisler with the right to reimbursement where he is required to commence an action in order to enforce the Consulting Agreement, either by contesting his unlawful termination or enforcing other rights under it only. GWR argues that the types of disputes for which the plaintiffs seek reimbursement are separate and apart from the Consulting Agreement because they do not concern its enforcement. There is no support in the language of the Consulting Agreement which permits an inference that the parties intended Mr. Eisler to receive full indemnity of legal costs incurred for any other legal dispute simply because it may have arisen in the course of Mr. Eisler's employment. GWR submits that acceding to the interpretation proffered by the plaintiffs would impermissibly expand the scope of the indemnity to a level which the parties could not possibly have intended. [26] GWR vigorously opposes the plaintiffs' alternative position regarding special costs. [27] In the end, GWR seeks the following orders: a) The

plaintiffs are entitled to no costs for any steps taken in relation to the claim filed against William Rogers; b) The plaintiffs are entitled to no costs for any steps taken in relation to the unsuccessful or abandoned stock option claims pleaded at Part 1, paragraphs 22-24 of the Amended Notice of Civil Claim; c) The plaintiffs are entitled to party and party costs of the counterclaim, to be assessed by the registrar at Scale B; d) Subject to the above, the plaintiffs are entitled to costs incurred in relation to the wrongful dismissal claim against the defendant, GWR, to be assessed by the registrar on the basis of its actual legal fees and expenses; and e) The costs of the assessment of the plaintiffs' costs shall be in the discretion of the registrar.

ANALYSIS [28] Courts have recognized a distinction between costs and legal (and other) expenses. Costs are awarded pursuant to the Supreme Court Civil Rules, B.C. Reg. 168/2009 [Civil Rules], and a judge cannot impose costs sanctions that are not authorized by those rules: Tanious v. The Empire Life Insurance Company, 2019 BCCA 329 at para. 45, leave to appeal refused [2019] SCCA No.

417. Rule 14-1 allows two categories of costs - party and party costs and special costs. The Civil Rules do not provide for "full indemnity costs": Tanious at para. 45. [29] Party and party costs are the default option. As they are to be assessed on a tariff, party and party costs are recognized to only provide a partial indemnity to the successful party. In Tanious, the Court explained that the partial indemnity default option; that is, party and party costs, is intended to allocate the high cost of litigation fairly between the parties: Tanious at paras. 46-47. Special costs, however, serve a different function. They are not compensatory; they are punitive: Smithies Holdings Inc. v. RCV Holdings Ltd., 2017 BCCA 177 at para.

56. The purpose of special costs is to censure and deter litigation misconduct, not to compensate the successful party. Special costs are also not a substitute for damages or to be conflated with damages for mental distress, punitive damages or contractual costs: Tanious at para. 51. [30] Contractual costs are different. Courts have recognized that in entering into a contract, the parties may agree that one party will reimburse the other for actual legal fees and other expenses in certain circumstances. When those circumstances arise, entitlement to recovery of those actual legal fees and other expenses is derived from the terms of the contract and not from the statutory costs regime in the Civil Rules: Tanious at para. 52. [31] Where such a contract exists, the right to be indemnified for actual legal fees and expenses must be "clearly and unequivocally expressed." However, it is important to remember that no "magical incantation" is required in order for a party to be entitled to a specific order for costs: Bakshi v. Shan, 2013 BCSC 969 at para. 44. [32] Like all questions of a contractual interpretation, the reasonable intention of the parties falls to be determined on the basis of the language used: Bakshi at para. 44. [33] The plaintiffs seek, as their primary position, contractual costs on a full indemnity basis, but do not seek to have them assessed. Though the term

"full indemnity" is suggestive of complete recovery of legal fees, their recovery is subject to review to ensure their reasonableness: Wanson (Bristol) Development Ltd. v. Sahba, 2019 BCCA 459 (Registrar). They are to be assessed. [34] The indemnity clause appears in section 6 of the Consulting Agreement. In the Reasons, I discussed the creation and execution of the Consulting Agreement and detailed most of its provisions at paras. 29-33. In short, following the Recitals, the terms of Mr. Eisler's employment are set out in section 1, section 2 contains compensation terms and section 3 sets out Mr. Eisler's duties. Section 4 sets out terms in relation to his termination. Section 4.02 addressed termination without cause and section 4.03 addressed termination with cause. Section 6, where the indemnity clause is located, is entitled "Miscellaneous". Again, for reference, it provides: 6.03 The Company shall pay all legal fees and expenses incurred by Eisler in contesting or disputing any termination or in seeking to obtain or enforce any right or benefit provided by this Agreement, provided that Eisler is successful in any such action. [35] I am satisfied when the particular words of section 6.03 are considered in the context of the Consulting Agreement as a whole, that the parties intended that if Mr. Eisler was successful in any action he had to take to contest and dispute any

termination, or in any action he had to take to seek to obtain or enforce any right or benefit provided by the Consulting Agreement, GWR would reimburse him for all legal fees and expenses. [36] Mr. Eisler clearly commenced this action against GWR seeking to obtain a benefit provided to him under section 4.02 of the Consulting Agreement - severance pay for dismissal without cause. GWR denied that benefit and relied on dismissal for cause pursuant to section 4.03, alleging that Mr. Eisler committed fraudulent acts, breached his fiduciary duties, improperly used company resources for his own benefit, issued false invoices and other things. [37] I concluded that the Consulting Agreement governed the parties' relationship at the time of Mr. Eisler's dismissal. I rejected all of the defendants' allegations of cause and awarded contractual damages in the lesser of the two amounts set out in section 4.02(ii) of the Consulting Agreement. I dismissed GWR's counterclaim, which alleged the same improprieties as had been alleged as the basis for cause. [38] As the plaintiffs submit, the issues in the counterclaim were identical to the main issue in the wrongful dismissal action - i.e. whether Mr. Eisler was guilty of the various alleged malfeasances and should, therefore, be denied the benefit of severance pay pursuant to the Consulting Agreement and be required to pay damages. The main

action and counterclaim were heard at the same time. They were inextricably linked. The same costs would have been incurred regardless of whether the counterclaim had been commenced or not, as the allegations of cause were identical to the allegations raised in the counterclaim. [39] I am satisfied that section 6.03 of the Consulting Agreement entitles the plaintiffs to recover full indemnity costs incurred in this proceeding, with two exceptions. Mr. Eisler was "contesting or disputing any termination" and he was also "seeking to obtain or enforce" a "right or benefit" provided in the Consulting Agreement. The plaintiffs were entirely successful and the right or benefit sought to be enforced was indeed enforced. [40] However, I do agree with the defendants' position regarding any steps taken in relation to the plaintiffs' claim against Mr. Rogers and in relation to the plaintiffs' abandoned stock option claim. I find there is no support in the language of the Consulting Agreement which permits any inference that the parties intended for Mr. Eisler to receive full indemnity costs for legal disputes outside of contesting or disputing his termination, or seeking to obtain or enforce a right or benefit provided in the Consulting Agreement, such as pursuing an economic tort claim against a third party (Mr. Rogers) and seeking to enforce a stock option claim under a separate stock

option agreement. To allow full indemnity costs for these two claims would expand the scope of the indemnity to a level which the parties did not intend. [41] The claim against Mr. Rogers was dismissed by consent with no costs. The plaintiffs are entitled to no costs for any steps taken in relation to the claim against Mr. Rogers. The plaintiffs are also not entitled to costs for any steps taken regarding their abandoned stock option claims pleaded at Part 1, paragraphs 22-24 of their Amended Notice of Civil Claim. Otherwise, the plaintiffs are entitled to full indemnity costs of this proceeding, including both the main action and the counterclaim, to be assessed by the registrar.

SUMMARY OF ORDERS [42] To summarize, I make the following orders in relation to costs: 1. The plaintiffs are entitled to no costs for any steps taken in relation to the claim filed against William Rogers; 2. The plaintiffs are entitled to no costs for any steps taken in relation to the abandoned stock option claims pleaded at Part 1, paragraphs 22-24 of the Amended Notice of Civil Claim; 3. Subject to orders 1 and 2, the defendant, GWR Resources Inc., pay to the plaintiffs full indemnity costs of this proceeding from the date of dismissal (May 23, 2011) to the date of these reasons, to be assessed by the registrar; 4. Costs of the assessment of the plaintiffs' costs shall be in the discretion of the registrar. [43] The plaintiffs seek two additional orders regarding interest and release of the security: 5. Judgment against the defendant, GWR Resources Inc., in the amount of $72,500.00, plus pre-judgment interest in the amount of $6,519.45; and 6. An order that the security in the sum of $400,000.00, posted pursuant to the order of Mr. Justice G.P. Weatherill, made February 13, 2018, be immediately released to the plaintiffs. [44] The defendant takes no position on the granting of these orders. They are granted. "S.A. Donegan J." DONEGAN J.