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McDermott v Rebuck, 2009 BCSC 5262009-04-20
IN THE SUPREME COURT OF BRITISH COLUMBIA
Kevin McDermott and Robin McDermott
Steve Rebuck and Colleen Rebuck
Before: A.F. WILSON
Supplementary Reasons for Judgment regarding Costs and Other Matters
I Adjustments to Reasons for Judgment
 By letter of February 10, last, counsel for the plaintiffs submitted that there were a number of computational errors in the Reasons for Judgment, and requested revisions of them. Those submissions were responded to by letter from counsel for the defendants dated February 11, 2009. By letter of March 10th, 2009, I responded to those submissions declining to make any of the revisions requested.
 In his Argument regarding costs filed March 24, 2009, counsel for the plaintiffs has again raised the matter of how the Reasons for Judgment dealt with $25,000 paid by the plaintiffs to Mr. Rebuck as a fee for financing the construction of the First House. I agree with the submissions of the counsel for the defendants in reply that the submissions with respect to adjustments in the Reasons for Judgment are not appropriate, as they were raised in the letter of February 10, and dealt with in my letter of March 10. Notwithstanding that, I will deal with the issue of the payment of the $25,000.
 It is not in issue that the plaintiffs did pay Mr. Rebuck the sum of $25,000 as his fee for financing the construction of the First House before they moved into that house. In paragraph 100 of the Reasons for Judgment, I set out the costs of construction and refinancing paid by the defendants. In paragraph 101, I noted that Mr. Rebuck is entitled to payment of the fee of $25,000 in addition to the costs incurred by the Rebucks. I considered that to be a term of the original agreement. Paragraph 102 , the paragraph questioned by counsel for the plaintiffs, then sets out how the net proceeds of sale are to be applied. If, as submitted by counsel for the McDermotts, the $25,000 paid to Mr. Rebuck as the fee for financing the construction cost was not included in those amounts, the effect would be to increase the amount payable to the McDermotts by that amount, in effect paying the $25,000 back to them. As I have held that Mr. Rebuck was entitled to that fee, that would not be appropriate. In those circumstances, I again decline to make the variation sought by counsel for the plaintiffs.
A. Nature of claims and counterclaims
 As noted in paragraphs 1 to 3 of the Reasons for Judgment, the claims and counterclaims in this action relate to the construction of two houses in Langley. In the Statement of Claim, the McDermotts claimed damages for breach of contract relating to the construction and sale of the First House. Alternatively, they claimed damages on the basis of unjust enrichment, or quantum meruit. They also sought an accounting of the monies spent on the First House, and the amounts received by Mr. Rebuck on its sale. The amount of those claims are not specified in the Statement of Claim. The prayer for relief includes claims for general damages, special damages, punitive damages, aggravated damages, and an accounting for various monies spent. The amount sought as damages was not specified in the plaintiff’s opening, as the quantum was dependent on such issues as whether the First House had been sold for its fair market value, and the accounting for the amount expended by each of the parties. However, in final submissions, counsel for the plaintiffs submitted that $83,244 should be paid to Mr. McDermott under the contract for construction of the First House, plus the amount of a loan to Mr. Rebuck for $10,500, plus an amount with respect to the framing of the Second House of $13,500. He submitted that amount should be increased if I was satisfied that the house had been sold for less than the fair market value, by an amount of $20,000. That would give a total claim of $127,244. Alternatively, he submitted that if the claim in contract was not successful, Mr. McDermott should recover, in quantum meruit, a management fee of $15,000; additional work of $14,475; a net amount paid for labour and materials of $87,156; the $25,000 paid to Mr. Rebuck to finance the construction; the $10,500 loan; and the $13,500 for work done on the Second House, totalling $165,631 (although stated to be $136,156 according to my notes).
 In the result, I held that the plaintiffs did have a valid claim in contract in the amount of $61,632.75, but only to the extent that that amount was recoverable, together with the other costs of construction, from the net proceeds of sale of the First House (Reasons for Judgment para 98). I did not accept that the house had been sold for less than the fair market value (para 99). I thus found that, after deducting the amounts to which the Rebucks were entitled (including the $25,000 fee for financing the construction costs), the amount available for payment to the McDermotts is $16,877.44 (paras 102 and 103). The plaintiffs have thus been successful in part in their claim, but to the extent of less than 20%.
 In the Counterclaim, the defendants also claimed general damages and an order for an accounting. However, they also claimed special damages relating to the First House in the amount of $14,747.25, and relating to the Second House in the amount of $45,684.21. In their opening, the defendants claimed they had incurred expenses, or were entitled to payments, relating to the First House, in the amount of $435,218.55. They claimed $61,282.53 with respect to the Second House. By the time of closing arguments, those amounts were changed to $443,418.55 and $61,456.53 respectively. I found that it had been established that the cost of construction paid by the Rebucks with respect to the First House, together with interest charges to which they were entitled, amounted to $417,293.04. I also found Mr. Rebuck was entitled to retain the fee of $25,000 paid to him for financing the construction costs (para 101). I also found that he was entitled to the sum of $41,388.41 with respect to the Second House (para 145). The defendants, while not totally successful in their claims, were thus substantially successful in both defending the plaintiffs’ claims and pursuing their own.
B. Applicable Principles
 A decision with respect to costs is a discretionary one, although that discretion must be exercised judicially, on grounds connected with the litigation: British Columbia v. Worthington (Canada) Inc. et al 1988 175 (BC CA), (1988), 29 B.C.L.R. (2d) 145 (C.A.), adopted in Sutherland v. Canada (Attorney General) 2008 BCCA 27 , (2008), 77 B.C.L.R. (4th) 142 at para 30. As stated in Sutherland at paras 26 and 27:
 The general rule of costs stipulates that absent special considerations, a successful litigant has a reasonable expectation of obtaining an order for the payment of his costs: see Currie v. Thomas 1985 769 (BC CA), (1985), 19 D.L.R. (4th) 594 (B.C.C.A.) at 608. This rule has been codified in Rule 57(9) of the Rules of Court, which provides that:
Subject to subrule (12), costs of and incidental to a proceeding shall follow the event unless the court otherwise orders.
 In the case at bar, the defendants were ultimately successful in defeating the plaintiffs’ claim in its entirety. Thus, unless special circumstances can be established that would warrant depriving the defendants of an award of costs following trial, the defendants should receive their costs.
 In this case, the plaintiffs have been partially successful in their claims, while the defendants have been substantially successful on the counterclaim, resulting in a net award in favour of the defendants.
 Fotheringham v. Fotheringham,  B.C.S.C. 1321, although a family case, dealt with the issue of costs when there was divided success in the action. At paras 9 to 12, Bouck J. stated:
 Costs should normally follow the event unless a court otherwise orders: Rule 57(9). That rule reads:
57(9) Subject to subrule 12, costs of and incidental to a proceeding shall follow the event unless the court otherwise orders.
 What is the meaning of the word "event" in Rule 57(9)? Stroud's Judicial Dictionary, 4th Ed. Vol. 2, p. 948 quotes several definitions from reported cases:
1. The event is the outcome or result of the trial and although there may be one verdict and one judgment, there still may be more than one event.
2. "Event" in this phrase (the costs shall follow the event) was therefore to be read distributively as "events."
3. The result of each distinct issue, in an action or an inquiry, was its "event": the costs of which went to the party who succeeded on it.
 Early British Columbia case law adopted Stroud's interpretations of the word "event" in Victoria Saanich Co. v. Wood Motor Co. Ltd. (1915), 23 D.L.R. 79 at 81 (B.C.C.A.) where the court said:
By statute costs are to follow the event except in certain cases not in point here, and subject to a power in the court to deprive a successful party of them for good cause. Where that power is not exercised the costs are not in reality awarded by the Court but by the statute. Now, it has been decided that "event" must be read distributively so as to include where necessary one or more events, as there can be more than one in the result of a law suit. [emphasis of Bouck J.]
 This may mean that a plaintiff could succeed on one issue, e.g. liability in negligence, division of family assets, etc., while the defendant could succeed on another issue, e.g. lower damages, custody of children, etc. Hence, the "issue" on which a plaintiff succeeded was an "event" allowing the plaintiff to recover costs from the defendant for proving that issue. Similarly, the "issue" in which a defendant succeeded was an "event" allowing the defendant to recover the costs from the plaintiff for proving that "issue."
 In this case, the claim and defence relating to the First House may be considered to be one “event”, and the counterclaim relating to the Second House to be another “event”. At para 28, Bouck J. concluded that the costs of each event should not be awarded to the party who succeeded on that particular event, rather the costs should normally be awarded to the party who “substantially succeeds” in the litigation. At para 46 he set out a possible process to make that determination, as follows:
 Based on the above interpretation of Rules 57(9), 57(15) and Gold [Gold v. Gold 1993 286 (BC CA), (1993), 82 B.C.L.R. (2d) 180] a decision to award or not award costs after a trial might follow a four step inquiry.
1. First, by focusing on the "matters in dispute" at the trial. These may or may not include "issues" explicitly mentioned in the pleadings.
2. Second, by assessing the weight or importance of those "matters" to the parties.
3. Third, by doing a global determination with respect to all the matters in dispute and determining which party "substantially succeeded," overall and therefore won the event.
4. Fourth, where one party "substantially succeeded," a consideration of whether there are reasons to "otherwise order" that the winning party be deprived of his or her costs and each side then bear their own costs.
 Rule 57(15) does enable the court to award costs that relate to “some particular issue or part of the proceeding ...” In Sutherland, supra, at para 31, Finch, C.J.B.C. set out the test as to whether there should be apportionment of costs under Rule 57(15) as follows:
 . . .
(1) the party seeking apportionment must establish that there are separate and discrete issues upon which the ultimately unsuccessful party succeeded at trial;
(2) there must be a basis on which the trial judge can identify the time attributable to the trial of these separate issues;
(3) it must be shown that apportionment would effect a just result.
 At para 7, the court noted that applications to apportion costs should be confined to relatively rare cases.
 In Hranka v. Zeibak, 2007 B.C.S.C. 1361, Sigurdson J. considered an argument as to whether there should be apportionment of costs pursuant to Rule 57(15). After reviewing the law in paras 17 to 21, in para. 22 he stated that such apportionment “should only be used when issues can be clearly delineated and an objective observer could say who was successful on those issues”.
 In this case, I conclude that an attempt to determine such issues would not be productive. Rather it is more useful to consider costs in relation to the two “events”, the claims relating to the First House, and the counterclaims relating to the Second House.
 The issue then arises how to deal with costs where there has been partial success of each party on one of those events. In G.M. Pace Enterprises Inc. v. Tsai, 2004 B.C.S.C. 156, Taylor J. suggested three possible approaches to be taken where each party was partially successful:
1. Examine the results to see if it can be said that one party was substantially successful;
2. Consider what each party obtained, or retained from what was otherwise at risk, from the decision, and weigh the relative success of each;
3. Apportion costs under Rule 57(15).
 In G.M. Pace Enterprises Inc., Taylor J. concluded that the “substantially successful” approach should be applied rather than the divided success approach. He also concluded that apportionment under Rule 57(15) was not appropriate, given that the matters were inter-related and “one could not apply a stop watch to an individual issue” (para 19).
 A similar approach was taken by Gibbs J. in Derco Industries Ltd. v. A.R. Grimwood Ltd.,  B.C.J. No. 2487 (B.C.S.C.). He quoted from the decision of Orde J. in Ontario Foundation and Engineering Co. Limited v. Johnston (1923), O.W.N. 473 at 474:
When a set-off is equal to or exceeds the amount claimed by the plaintiff, the result is that the plaintiff ought not to have brought any action at all; so that, while credit for the amount found due to the plaintiff must necessarily be given upon the amount found due to the defendant, the effect is not the same as where a claim and counterclaim are both allowed. In cases of set-off, the mutual defendants really coalesce, so that the smaller is absorbed into and reduces, pro tanto, the larger, leaving in substance only one cause of action – the claim for the balance due.
C. Application of Principles
 I adopt the approach set out by Bouck J. at para 46 of the Fotheringham decision. The first issue is thus the “matters in dispute” at the trial. With respect to the First House, the primary issue was whether there was a continuing contract for construction of the First House, notwithstanding that the McDermotts did not purchase it, as anticipated. The other issue related to the First House, which took most of the time at trial, was the accounting for the monies spent by each of the parties in the construction of the home. With respect to the Second House, the matter was primarily an accounting, of the expenses incurred by Mr. McDermott and the costs to correct the deficiencies.
 The second aspect is the weight or importance of those “matters” to the parties. In terms of the lawsuit, it cannot be said that any one or more of those matters was of greater or lesser importance, as all had to be equally taken into account in determining the final outcome.
 On a global basis, as the defendants recovered a net award in the amount of $24,510.97, they have been substantially successful overall.
 The fourth issue is a consideration of whether there are reasons to order that the defendants be deprived of their costs, and that each side bear their own costs, in whole or in part.
 Counsel for the plaintiffs has submitted a number of reasons why that is the case:
1. Late delivery of documents, such as the particulars of the cost to clean and repair the First House and particulars of the claim for interest charges, which the plaintiffs were thus unable to assess before trial;
2. Amounts claimed by the defendants on which they were not successful, or only partially successful, including the costs of refinancing, the rent and mortgage payments, and the C.M.H.C. premium;
3. The large amount of time taken at trial on cross-examination of Mr. McDermott as to costs incurred on the First House and on the defendants’ claims that the contracts entered into extinguished the plaintiff’s claims;
4. An application for production of documents, heard on June 13, 2008, in which the plaintiffs were successful;
5. Events leading up to the litigation, specifically the various documents which Mr. Rebuck prepared which the plaintiffs signed, and which Mr. Rebuck relied on to disentitle them to any claim with respect to the sale proceeds of the First House;
6. Waste of the plaintiffs’ time by requiring them to answer irrelevant Interrogatories, and other irrelevant requests;
7. The matter may have been more expeditiously handled through an accounting at a Registrar’s Hearing;
8. Special costs on the basis that the defendants had not disclosed material information, relying on Leung v. Leung reflex, (1993), 77 B.C.L.R. (2d) 314 at paras 6 and 9.
 I am not satisfied that any of those considerations are sufficient to deprive the defendants of their costs. To a large extent, the criticisms which can be made of the defendants apply also to the plaintiffs.
 With respect to the costs to clean and repair the First House, the defendants were not bound by the claims they had made in Small Claims Court. Although details of the claims may not have been provided until shortly before trial, I am not satisfied that that extended the length of the trial or affected the outcome.
 There is a valid complaint about the late production of the statement of how Mr. Rebuck arrived at the amount of the expenses he claimed had been put into the First House, including interest charges. That document, ultimately marked as Exhibit 6, was produced only at trial. I allowed it to be admitted to show how Mr. Rebuck had arrived at the amounts he was claiming. However, it is not an original document, but rather is a summary of other documents provided by him. Again, I am not satisfied that earlier production of it would have affected the length or outcome of the trial.
 With respect to various amounts claimed by the defendants, and either not allowed or allowed at a reduced amount, they are taken into account in the accounting with respect to each of the houses. They thus do not need to be considered separately.
 With respect to the time taken at trial on cross-examination, that is a valid complaint. However, both counsel took considerably longer in their examination of Mr McDermott than was shown on the List of Witnesses and Time Estimates. Thus, while counsel for the defendants took more than 9 hours, rather than the 6 hours estimated, counsel for the plaintiff took almost 6 hours, rather than the 3 hours estimated. The result was that his total examination took in excess of 17 hours, rather than the 9 hours estimated. The same applies to the examination of Mr. Rebuck: each counsel took longer than the time estimated, so that approximately 16 hours of court time were spent in his examinations, rather than the 11 hours estimated. With respect to both witnesses, that was due to the need to review items of the accounting one at a time, which was very time consuming. I cannot be more critical of one party than the other in that regard. Similar considerations apply to the comments that many of the matters could have been dealt with before trial on examinations for discovery, or by way of Notices to Admit. That applies to both parties.
 Medway Oil and Storage Ltd. v. Continental Contractors Ltd.,  A.C. 88 (H.L.) at pp 95 to 98 is cited as authority for the proposition that where a claim and counterclaim are both allowed, or both dismissed with costs, the claim should be treated as if it stood alone, and the costs to be borne by the counterclaimant should be only those costs which were incurred because of the counterclaim. I am not satisfied that is applicable in this case, where the claims were inter-related. In any event, I would not allow the plaintiffs the costs of the claim, even though they did recover part of their claim, in that the claim was to a large extent successfully defended.
 With respect to the order made on June 13, 2008, it provided that costs be in the cause. As the plaintiffs have not been successful in receiving costs in the proceeding, they would normally not be entitled to the costs of the interlocutory application: M.(S.G.) v. M.(M.R.), 2001 B.C.S.C. 149 at para 41. Although there is discretion to grant the plaintiffs the costs of that application in any event, I am not convinced that it should be done in this case.
 With respect to events giving occasion to the litigation, counsel for the plaintiffs referred to the efforts made by Mr. Rebuck to have the defendants sign documents in order to deprive them of the proceeds of the sale of the First House. Mr. Rebuck was not successful in his attempts to disentitle the McDermotts to any interest in the property. However, the McDermotts were not without fault with respect to these “contracts”. For example, as noted in para 21 of the Reasons for Judgment, the McDermotts presented the Contract of Purchase and Sale dated December 1, 2004, to the Royal Bank of Canada, expecting the Bank to rely on it, although they considered that the final purchase price had not been determined, and Mr. McDermott inserted an amount of a deposit which had no basis in fact. Further, the basic problem with respect to the First House arose because the McDermotts failed to honour their agreement to purchase it. With respect to the Second House, I found that Mr. McDermott was involved in dealings intended to mislead Mr. Rebuck, and charged materials on his account at North Coast which were not used at the Second House (Reasons for Judgment, para 104). The plaintiffs thus have little to complain about with respect to conduct leading up to the litigation.
 With respect to the Interrogatories and inquiries, there is no indication of any application to strike out the Interrogatories, pursuant to Rule 29(7) (nor of any application to compel answers). Further, at least some of the questions would appear to be particularly relevant. For example, question 41, in the first set of Interrogatories dated May 5, 2008 is significant not only with respect to the ability of the McDermotts to complete the purchase of the First House, but also what funds they applied towards the costs of construction. On the second set of Interrogatories, questions such as what Mr. McDermott’s relationship with Chris Dallaire and Shawn McDermott were (question 38 and 44) were certainly relevant. I do not consider the fact that the defendants may have delivered Interrogatories or inquiries, some of which were irrelevant to the issues, to be a basis to deprive them of costs.
 I am also not satisfied that these claims might have been less expensively and more expeditiously handled through an accounting at a Registrar’s Hearing. There would have had to be a trial before a judge to determine if there were breaches of contract with respect each of the First House and the Second House, and what rights each parties had under those contracts. The issues of accounting with respect to each house were integral to a determination of those issues. To have had a judge rule on the contractual issues, then refer the matter to the Registrar for an accounting, would likely have resulted in more delay. I am not satisfied that it would have been any more economic, in the final analysis.
 With respect to non-production, or late production, of documents, both parties are subject to some criticism. I have already dealt with the summary of the claims prepared by Mr. Rebuck, marked as Exhibit 6, which was presented only at trial. However, as noted, that is a summary prepared by him, rather than an original document, such as an invoice or cheque, and was thus not a document the production of which could be compelled. There were documents produced by each party which were not included in their Books of Documents, marked Exhibits 1 and 19 respectively. A number of the documents referred to were ones which were tendered on behalf of the defendants (Exhibits 8, 9, 15 and 16), while others were tendered by the plaintiffs (Exhibits 10, 12, and 13). The one document which caused the greatest amount of controversy was the purported invoice to Mr. Rebuck from “Home Builer’s Management Consultant Ltd.” (sic) dated April 28, 2005. Although it was addressed to Mr. Rebuck, he denied possession of it. It was produced only when his counsel reviewed the file of Mr. Flaming brought with him for trial. However, another copy of it was subsequently produced by counsel for the plaintiffs, and marked Exhibit 17. Presumably it was in the possession of the plaintiffs before that time, and should have been produced. Further, as noted in para 122 of the Reasons for Judgment, unlike with respect to the First House, Mr. McDermott did not provide any sort of accounting with respect to the funds received for construction of the Second House. That required considerably more work by both counsel and the court, for example by cross-referencing the general ledger report obtained from Mr. Rebuck with respect to costs Mr. McDermott said he incurred, but did not document. I am thus not satisfied that there is any basis to deprive the defendants of their costs, much less grant the plaintiff special costs, on the basis of non-disclosure or late disclosure of documents.
 In summary, I conclude that I should approach costs with respect to this lawsuit on the basis that there were two “events”, those relating to the First House and those relating to the Second House, even through there is some inter-relationship. I find that, even though the plaintiffs recovered an award with respect to the First House, that the defendants were substantially successful in both events. In those circumstances, the defendants will be entitled to their costs of the action, both the claim and the counterclaim, on Scale B.
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