The general rule upon completion of litigation is that the successful party is entitled to its costs: Rule 14-1(9). Typically the costs recovered by a successful litigant represent only a small fraction of the actual legal costs incurred by that party. In some circumstances, increased costs are available. Historically, where a party engaged in reprehensible conduct, special costs could be awarded by the courts as a punitive measure, to express the court's rebuke and disapproval of the misconduct.
Over time, the courts did not consistently treat the issue of whether special costs could be awarded as a result of conduct that took place prior to the commencement of legal proceedings. To address the inconsistency, in Smithies Holdings Inc. v. RCV Holding Ltd., 2017 BCCA 177, ("Smithies"), the BC Court of Appeal established a new "bright line rule" that pre-litigation conduct should not be considered in determining whether an award of special costs is appropriate, because:
(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).
The application of Smithies in the specific context of bylaw enforcement proceedings was in issue in Kent (District) v. WeeMedical Dispensary Society, 2018 BCSC 92 ("Kent"). In that case the District brought a petition to obtain a statutory injunction in order to shut down an illegal marihuana dispensary. The Respondents had already been the subject of enforcement proceedings in respect of their operations in eight separate jurisdictions, and had twice been found in contempt of court. Special costs had also already been awarded against the Respondents (prior to the Smithies ruling).
In Kent, the Supreme Court was asked to distinguish the ruling in Smithies. The District argued that the policy rationale expressed in Smithies does not apply to petition proceedings brought to enforce local government bylaws: damages are not in issue; the objectionable conduct does not give rise to causes of action that are compensable by damage awards, nor are punitive damages available to punish high-handed conduct that offends the court's sense of decency. The remedy in issue is court ordered compliance with the bylaw, not a financial award to compensate one private party for the conduct of another. In short, there is no other available or appropriate relief or remedy to sanction pre-litigation conduct arising in the lead up to statutory injunction proceedings.
Unfortunately these submissions were not accepted. The Court held that Smithies is a complete bar to special costs based on pre-litigation conduct, even in the context of local government bylaw enforcement proceedings. That said, the rulings in Smithies and Kent do not curtail the availability of special costs to punish reprehensible conduct that occurs in the course of litigation.
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