Kent (District) v. WeeMedical Dispensary Society

2018 BCSC 92 Kent (District) v. WeeMedical Dispensary Society

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Kent (District) v. WeeMedical Dispensary Society, 2018 BCSC 92 Date: 20180122 Docket: S175481 Registry: Vancouver Between: The District of Kent Petitioner And: WeeMedical Dispensary Society and May Joan Liu Respondents Before: The Honourable Mr. Justice Punnett Reasons for Judgment (On Costs) Counsel for the Petitioner: S. Dubinsky Counsel for the Respondents: H. Patey Place and Date of Trial/Hearing: Vancouver, B.C. December 1, 2017 Place and Date of Written Submissions of Petitioner and Respondents: Vancouver, B.C. January 3, 2018 Place and Date of Judgment: Vancouver, B.C. January 22, 2018 Introduction [1] The District of Kent seeks special costs arising from its petition to prevent the respondents, in contravention of the District's bylaws, from selling cannabis or cannabis products in the District of Kent. Background [2] On or about March 3, 2017 the respondent Society began operation of a marihuana dispensary in the District of Kent without a business licence and in breach of various bylaws. Ms. May Joan Liu was the directing mind and controls the Society. She had previously operated marihuana dispensaries through multiple corporate entities in Chilliwack, Delta, Campbell River, and Richmond. Various legal proceedings have been taken against the Society or Ms. Liu and they have previously been found in contempt of

court. [3] The petition was filed on June 9, 2017. The respondents filed a Response to Petition on July 10, 2017. On July 18, 2017 the respondents consented to an order granting the relief sought in the Petition. For the purposes of this application the relevant portion of the Consent Order is found at paragraph 9 which states: BY CONSENT, the Respondents are jointly and severally liable to pay costs of the Petition in an amount to be determined on assessment if the parties are unable to otherwise reach an agreement as to costs. [4] Notwithstanding the brief history of this litigation and its resolution in short order by consent, the petitioner seeks special costs on the basis of the respondents' pre-litigation conduct. Specifically, that the respondents have engaged in a pattern of habitual, persistent flouting of the law, and of this Court by knowingly setting up and operating marihuana dispensaries in contravention of various city bylaws and the criminal law. [5] The matter came before me on December 1, 2017. It proceeded on the basis of the claim for special costs. During the course of submissions I raised with counsel the application of a relatively recent decision of the Court of Appeal, Smithies Holdings Inc. v. RCV Holdings Ltd., 2017 BCCA 177, as it was not referred to by them. As there was insufficient time to address its application I invited written submissions on

the application of that decision. Those submissions have now been filed. [6] The petitioner in its written submissions has expanded on its filed application for special costs based on pre-litigation conduct to seek such costs on the basis of alleged abuse of process by the respondents and in the alternative for special costs thrown away. The respondents object to the latter two grounds being raised as they were not sought in either the Petition or the Notice of Application. [7] As a result the issues now before the Court are: 1. Does the term of the Consent Order addressing costs preclude a claim for special costs?

2. If not, can special costs be ordered for alleged pre-litigation conduct because of the nature of the petition application?

3. Is the petitioner entitled to special costs because the conduct of the respondents was an abuse of process?

4. In the alternative should the petitioner receive special costs thrown away? Law [8] The British Columbia Court of Appeal in Smithies addressed the issue of whether pre-litigation conduct can be the basis for an award of special damages. After a thorough review of appellate and trial jurisprudence the Court determined that a "bright line" should be established, reasoning as follows: [128] Considering this question requires a return to basic principles. The purpose of special costs, unlike party and party costs, is not to indemnify but to deter and punish reprehensible conduct. The authorities make clear that special costs are usually reserved for misconduct during the course of the litigation. The question for determination is whether pre-litigation conduct should be considered in awarding special costs, and if so, in what circumstances. [129] RCV argues that there is no sound judicial policy argument to support an inflexible rule precluding a special costs award on the basis of pre-litigation misconduct. With respect, that submission misses the mark. The real question is whether there is any sound judicial policy argument to support considering pre-litigation conduct in awarding special costs. [130] In my view, there is not. Absent any policy reason to depart from the general rule, judges must exercise their discretion in accordance with the principles of judicial comity,

which call for judges to treat like cases alike. [131] As has been set out in many authorities reviewed here, pre-litigation conduct that gives rise to a cause of action will already be the subject of a damage award flowing from the objectionable conduct. Where a party's misconduct is so malicious, oppressive and high-handed that it offends the court's sense of decency, an award of punitive damages may also follow. Whiten provides a principled structured framework for such awards. [132] Special costs are an inherently unsatisfactory mechanism to punish pre-litigation conduct. Special costs are intended to punish reprehensible conduct which as per Garcia includes scandalous or outrageous conduct as well as milder forms of misconduct deserving of reproof or rebuke. The case law has considered a range of pre-litigation conduct, including breach of contract, negligence, breach of fiduciary duty, fraud, misappropriation, deceit, sexual assault, failure to follow a constitutionally mandated process and murder. All such conduct could be said to be deserving of rebuke. Indeed, as noted in Kongrecki, almost every unsuccessful litigant is deserving of reproof or rebuke. [133] Attempting to draw the line on a principled basis as to what pre-litigation conduct should be sanctioned by special costs and which should not is, as amply demonstrated by the case law, a near impossible task. It is

also an unnecessary task as the law already provides appropriate relief and remedies for such conduct. In my respectful opinion, special costs should only be awarded to punish reprehensible conduct in the litigation. [134] In the result, I am of the view that a bright line can and should be drawn so that judges will be able to exercise their discretion in like cases in a like manner. Special costs should be reserved to punish and deter reprehensible conduct in the course of litigation. Pre-litigation conduct should not be considered in determining whether such an award is appropriate. There are other suitable mechanisms to censure pre-litigation conduct. Discussion The Consent Order [9] For convenience I repeat the consented to order for costs: BY CONSENT, the Respondents are jointly and severally liable to pay costs of the Petition in an amount to be determined on assessment if the parties are unable to otherwise reach an agreement as to costs. [10] The Consent Order states that the respondents are liable to pay costs "in an amount to be determined on assessment" if they cannot agree on such costs. This does not state or imply that the scale of costs remains in issue, it simply states that if the parties cannot agree on the amount of costs then the Registrar is to assess them. The Registrar does not set the scale of costs, the Court does: see Phiensinh v. Sran, 2008 BCSC 1497 at para.

12. A plain reading then is that the scale of costs was not in issue and the assessment by the Registrar was to determine the amount as a matter of ordinary difficulty at Scale B, per Appendix B of the Supreme Court Civil Rules, B.C. Reg. 168/2009. Given the brief history of the litigation such a reading also makes perfect sense. As a result the petitioner's costs shall be assessed accordingly. [11] While this disposes of the matter given the submissions of the parties and in the event I am incorrect in my interpretation of the Consent Order I turn to the remaining issues. Special Costs for Pre-Litigation Conduct [12] The petitioner seeks special costs because of the conduct of the respondents in opening a marihuana dispensary in the District of Kent after having done so in numerous additional jurisdictions resulting in demand letters, bylaw notices, tickets, police raids, injunctions and contempt proceedings in multiple jurisdictions. It notes as well the respondents' failure to pay fines in other jurisdictions. [13] The petitioner submits in its Notice of Application that: The Respondents have deliberately, persistently, [and] flagrantly flouted the bylaws of municipalities throughout British Columbia, despite being the subject of numerous injunctions and special costs awards and being held in contempt of court on two separate occasions. The Respondents' pattern of repeated

disregard for the law is reprehensible and deserving of rebuke. [14] The petitioner submits that the "bright line" established by the Court of Appeal in Smithies does not, in certain circumstances, prevent an award for pre-litigation conduct. In its supplementary submissions, the petitioner argues: 3. Although Smithies establishes a general principle that pre-litigation conduct should not be considered in determining whether an award of special costs is appropriate, the principled basis for the ruling is: (a) Pre-litigation conduct that gives rise to a cause of action will already be the subject of a damage award flowing from the objectionable conduct (para. 131); (b) Where a party's misconduct is so malicious, oppressive and high-handed that it offends the court's sense of decency, an award of punitive damages is available (para. 131); and (c) It is not necessary to resort to special costs to sanction pre-litigation conduct where the law already provides appropriate relief and remedies for such conduct (paras. 133 and 134).

4. None of these principles apply in the case at bar, or to any petition proceeding brought by a municipality to obtain a statutory injunction to attain compliance with its bylaws. [15] The petitioner argues that the underlying petition was necessary to stop the respondents' flouting of the petitioner's bylaws and that such a proceeding is not a typical civil action because it is authorized by a specific statutory provision (s. 274 of the Community Charter, S.B.C. 2003, c. 26), is brought to enforce a public not private right, and is brought in the public interest that the law be obeyed. [16] As a result it says that since damages are not in issue and punitive damages are not available the two principled basis for Smithies are not met. Nor it says is the third criterion satisfied because other relief does not exist beyond the injunctive relief. [17] As a result the petitioner submits that since there is no other available or appropriate relief or remedy to sanction pre-litigation conduct arising in the lead up to the statutory injunction proceedings, Smithies is distinguishable. It argues as well that the Court of Appeal expressly left the door open to depart from the general rule against special costs based on pre-litigation conduct where there is a sound judicial policy argument to support doing so, referring to paras. 129 and 130. [18] In my view Smithies does not support

the petitioner's interpretation. [19] The Court in Smithies from the beginning of the decision makes it clear that "special costs should not be awarded for pre-litigation conduct" (para. 3). The issue before the Court of Appeal was framed at para. 47 as to whether the Court should adopt a bright line approach. The two paras. relied on by the petitioner must be read in the context of paras. 128-134. [20] In my opinion when the Court of Appeal states in para. 129 that "[t]he real question is whether there is any sound judicial policy argument to support considering pre-litigation conduct in awarding special costs" and in para. 130 "[a]bsent any policy reason to depart from the general rule " the Court is not leaving the door open for a court to consider such a policy reason. When the Court of Appeal stated that they were establishing a "bright line" they meant what they said. It is clear from the language used by the Court that pre-litigation conduct is not to be considered when addressing the issue of special costs. [21] In addition the assertion by the petitioner that the circumstances of this case justify considering pre-litigation conduct because there are no damages or punitive damages available, while correct in respect of the petition proceeding, ignores the fact that the petitioner can impose fines under the bylaw ticketing process which it has in fact done and that

criminal sanctions are also available and serve as a rebuke for pre-litigation conduct, making special costs inappropriate. [22] I note as well that the petitioner elected to pursue the matter by way of Petition for the advantage of an expeditious resolution knowing that in doing so awards for damages and punitive damages were as a result unavailable. As noted by the Court of Appeal in Smithies at para. 90, citing Vukelich v. Mission Institution, 2002 BCSC 495, "a party [cannot] bring themselves within the exceptions to the general rule in Nygard by their own decision to bring proceedings that [cannot] compensate them for the impugned behaviour". In Nygard International Ltd. v. Robinson (1990), 46 B.C.L.R. (2d) 103 (C.A.), the Court of Appeal stated at 106 that solicitor and client costs are only given where the misbehaviour arose in the conduct of the litigation. [23] As a result Smithies is a complete bar to the application for special costs based on pre-litigation conduct. Abuse of Process and Costs Thrown Away [24] Neither abuse of process nor special costs thrown away were sought in either the Petition or the Notice of Application nor were they raised or argued at the hearing of this application. The request for written submissions arose because counsel had not referred to the Smithies case and the Court therefor requested their submissions in order to give them the

opportunity to address it. It was not an invitation to raise new arguments or issues. [25] In any event, in my view neither of the additional arguments have merit. The abuse of process argument has no factual basis in this litigation given the respondents responded quickly to the Petition and consented to the relief sought. There has been, as between the parties, no misuse by the respondents of the court's processes or an attempt to re-litigate a previously determined issue or mount a collateral attack. [26] With respect to the alternative submission that the petitioner is entitled to special costs thrown away the petitioner relies on Kedia International Inc. v. Royal Bank of Canada, 2007 BCSC 1059, where the court at para. 18 stated: [18] Thus, to summarize, where the conduct of one party has caused the other party needlessly to take steps or incur legal expenses, the costs of the wasted steps may be recovered. Those costs may be awarded on a special costs basis where reprehensible conduct calls for rebuke from the Court. [27] The petitioner argues that the District of Kent should never have been required to file a Petition to stop the respondents from operating a marihuana dispensary given prior proceedings against the respondents in other jurisdictions. The petitioner also submits that given the respondents had no chance of successfully defending the Petition in light of

their litigation track record, the petitioner is entitled to special costs. It refers to Dick v. Coquitlam (City), 2017 BCSC 2158 at para. 55, in support of this argument, where the court, following Kedia, noted that in that case Mr. Dick "needlessly required the City to defend an application that had little or no chance of success at the same time he was pursuing an identical claim in the New Petition proceeding". [28] Both Kedia and Dick addressed conduct during the proceeding, not pre-litigation conduct, nor pre-litigation conduct not between the parties. They do not assist. Costs of this Application [29] The petitioner submits that even if it is unsuccessful in its special costs application that it should be awarded the costs of this application. It submits that as it was successful overall in the petition proceeding, it is in the normal course entitled to its costs arguing that it had a "legitimate" argument on special costs. [30] The respondents oppose the petitioner's request for costs of the costs application. They submit that special costs of this application should be awarded to the respondents given the petitioner had no prospect of success in light of Smithies and further because of its attempt to alter the nature of the application in its written submissions. [31] Rule 14-1(12) of the Supreme Court Civil Rules provides that the general rule is that costs on a costs

application go to the successful party in the case "unless the court hearing an application otherwise orders". [32] In my view this application lacked merit. I say this primarily because the Consent Order is clear and does not leave open the issue of the scale of costs. In addition, even if that were not the case, Smithies is dispositive of the matter. While neither counsel were aware of Smithies, once they were the petitioner continued with its application for special costs and also added additional grounds in its written submissions. [33] In my opinion in the circumstances of this application the respondents are entitled to their costs of this costs application at Scale B. They are not entitled to special costs as I do not find the conduct of the petitioner reprehensible or deserving of rebuke. [34] The application is dismissed with costs of this application at Scale B to the respondents. "R.D. Punnett, J." The Honourable Mr. Justice Punnett