



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:



Cottrill v. Utopia Day Spas and Salons Ltd.,









2019 BCCA 26




Date: 20190124

Docket:
CA44471

Between:

Jennifer Cottrill

Respondent

And

Utopia Day Spas
and Salons Ltd.

Appellant




Before:



The Honourable Mr. Justice Goepel

The Honourable Mr. Justice Savage

The Honourable Madam Justice Fisher




Supplementary Reasons
to
Cottrill v. Utopia Day Spas and Salons Ltd.,

2018 BCCA 383.




Counsel for the Appellant:



R. Mahil





Counsel for the Respondent:



R.B. Johnson





Place and Date of Hearing:



Vancouver, British
  Columbia

September 27, 2018





Place and Date of Judgment:



Vancouver, British
  Columbia

October
  17, 2018





Written Submissions Received:



November 30, December
  7

and
  12, 2018





Date of Supplementary Judgment:



January 24, 2019




Supplementary Reasons of the
Court





Summary:

At trial, the respondent succeeded
in obtaining damages for wrongful dismissal, aggravated damages and costs. The
appellant challenged the respondents entitlement to trial costs on the basis
that the respondent ought to have brought her claim in the Provincial Court,
which the Chief Justice dismissed in reasons indexed at 2017 BCSC 1925. The
appellant successfully appealed the aggravated damages award, which this Court set
aside in reasons indexed at 2018 BCCA 383. The appellant now seeks costs of the
appeal, and asks this Court to set aside the order awarding trial costs to the
respondent. Held: application allowed in part. As the appellant was successful
on the appeal, it is entitled to the costs of the appeal. The application to
set aside the costs award in the court below is denied. Having not appealed the
costs order of the Chief Justice in its appeal proper, the appellant cannot now
challenge that order. Further, the respondent was successful in her cause of
action at trial, and it was not unreasonable for her to refuse the appellants offer
to settle.

Supplementary Reasons for
Judgment of the Court:

INTRODUCTION

[1]

The respondent, Jennifer Cottrill, sought damages for wrongful dismissal
against her employer, the appellant, Utopia Day Spas and Salons Ltd. (the Company).
The trial judge, in reasons indexed at 2017 BCSC 704, found that Ms. Cottrill
had been wrongfully dismissed and awarded her eight weeks severance pay and because
of the manner of dismissal, a further $15,000 in aggravated damages. She also
awarded costs to the respondent.

[2]

Following the trial, the appellant challenged the costs award in further
written submissions. As the trial judge had retired, the Chief Justice, in
reasons indexed at 2017 BCSC 1925, upheld the trial judges costs award to the
respondent.

[3]

On the appeal, the Company challenged only the award of aggravated
damages. In reasons indexed at 2018 BCCA 383, we allowed the appeal and set
aside the aggravated damage award.

[4]

The parties have now filed written submissions on the question of costs
of the appeal and the trial.

POSITION OF THE PARTIES

[5]

The Company seeks the following orders respecting costs as a result of
the outcome on appeal:

1.       costs of the appeal;
and

2.       with
respect to the costs of trial, an order setting aside the award of costs to Ms. Cottrill
and ordering that:

(a)      each
of the parties shall bear its own costs up to the date of the Companys offer
to settle, and the Company be awarded its costs after the date of the offer
through to the end of trial; or

(b)      in
the alternative, each party shall bear its own costs throughout.

[6]

Ms. Cottrill does not seriously challenge the Companys entitlement
to the costs of the appeal. She submits, however, that the Company having not
specifically appealed the costs order, cannot at this time ask the court to
revisit the matter of trial costs. Alternatively, she submits that she was the
successful party at trial and the trial costs award should not be disturbed
notwithstanding the Companys offer to settle.

BACKGROUND

[7]

To put the parties costs submissions in context, it is first necessary
to review the proceedings in the trial court. Ms. Cottrill claimed for wrongful
dismissal. At trial she sought common law damages of $28,280, representing 12
months of salary in lieu of notice, aggravated and punitive damages of $20,000
and costs.

[8]

The Companys position at trial was that the plaintiff was terminated
for cause. In the alternative, the Company submitted that the plaintiffs
damages were limited by the terms of her employment contract to eight weeks
severance pay.

[9]

The trial judge described the issues before her as: whether the
defendant had cause to terminate Ms. Cottrill; if not, what was the period
of notice to which she was entitled; and, whether she was entitled to
aggravated or punitive damages.

[10]

The trial judge found that Ms. Cottrill had been wrongfully
dismissed, but that the employment contract was binding and limited her damages
to eight weeks salary in lieu of notice. In addition, she awarded Ms. Cottrill
$15,000 in aggravated damages. The trial judge awarded costs to the plaintiff.
In doing so, she stated:

[146]    Costs are awarded to the
plaintiff unless there are circumstances which bear o[n] this issue of which I
am not aware. In that eventuality, the parties may make arrangements for
submission through Supreme Court Scheduling.

[11]

The parties were unable to agree on the question of costs. The trial
judge having retired, the costs issue was heard and determined by the Chief
Justice. At the costs hearing, the Company, relying on R. 14-1(10) of the
Supreme
Court Civil Rules
argued that Ms. Cottrill was not entitled to costs,
other than disbursements, because she had recovered a sum within the
jurisdiction of the Provincial Court. The Chief Justice rejected this
submission and concluded that in this case there was sufficient reason for
bringing the proceeding in the Supreme Court. He awarded Ms. Cottrill her
reasonable and taxable costs and disbursements of the action.

DISCUSSION

A.       Costs of the Appeal

[12]

The Company was successful on the appeal. It is entitled to the costs of
the appeal. Ms. Cottrill does not suggest otherwise.

B.       Costs of Trial

Sufficient Reason for Bringing Claim in the Supreme Court (R. 14-1(10))

[13]

We agree with Ms. Cottrill that it is too late for the Company to
now challenge the Chief Justices costs award on the basis that
the case is one that should have been
brought in Provincial Court.
The point in time for a
consideration of whether a plaintiff had sufficient reason for bringing a
proceeding in the Supreme Court rather than the Provincial Court is the time of
the initiation of the action
:
Reimann v. Aziz
, 2007 BCCA 448 at paras. 3843.
In this case, the Chief Justice decided there was sufficient reason. Our
decision allowing the appeal on the question of
aggravated damages does
not change the analysis or impact on that decision. If the Company wanted to
challenge the decision that there was sufficient reason to bring the matter in
Supreme Court, it had to do so in the appeal proper. We will not at this late
stage re-open the appeal to allow the Company to raise this issue.

Success at Trial (R. 14-1(9))

[14]

The Company submits that the result of the appeal substantially impacts
the trial judgment and the relevant success of the parties in the underlying
proceeding. Given that the trial result was modified on appeal, this Court has
jurisdiction to set aside and vary the award of trials costs:
Reid v. Reid
,
2017 BCCA 191 at paras. 1315;
The Owners, Strata Plan K855 v. Big
White Mountain Mart Ltd
., 2017 BCCA 438 at para. 84.

[15]

The Company notes that as a result of the appeal having been allowed:

(a)      the
trial judgment was reduced from $19,795.78 to $4,795.78, a reduction of more
than 75%; and

(b)      The
award of $4,795.78 obtained by Ms. Cottrill at trial is less than 10% of
the quantum of $48,280 that she sought at trial.

[16]

It submits that in terms of issues in dispute at trial, Ms. Cottrills
success was limited to a finding that she was wrongfully dismissed. She was
unsuccessful at trial on the issue of whether the termination provision in her
employment contract was unenforceable for lack of consideration such that she
was entitled to common law damages, and, as a result of the appeal, was
ultimately unsuccessful on the issue of whether aggravated and/or punitive
damages should be awarded. The Company submits that on those issues it was the
successful party. In the result, it submits that it can no longer be said that Ms. Cottrill
was substantially successful at trial.

[17]

With respect, we do not agree. The question is not whether Ms. Cottrill
was substantially successful at trial. The substantial success test applies
when the litigation concerns multiple causes of actions:
Strata Plan LMS
3259 v. Sze Hang Holdings Inc
., 2017 BCCA 346 at paras. 9192. This is
not such a case.

[18]

Pursuant to R. 14-1(9), costs in a proceeding must be awarded to the
successful party unless the court otherwise orders. In cases involving a single
cause of action the successful party is the plaintiff who establishes liability
under that cause of action and obtains a remedy, or a defendant who obtains a
dismissal of the plaintiffs case:
Loft v. Nat
, 2014 BCCA 108 at para. 46.
The fact that Ms. Cottrill obtained a judgment in an amount less than
sought, is not, by itself, a proper reason to deprive her of costs:
3464920
Canada Inc. v. Strother
, 2010 BCCA 328 at para. 43.

[19]

In this case Ms. Cottrill sued for damages for breach of her
employment contract. She succeeded in her claim and unless the court otherwise
orders, she is entitled to the costs of the action notwithstanding that she
recovered an amount less than that sought.

The Offer to Settle (R. 9-1)

[20]

One circumstance in which the court may otherwise order is where a party
fails to accept a formal offer to settle made under R. 9-1.
Rule 9-1(5) sets out the
options that are open to a court in circumstances in which an offer to settle
has been made
:

(a) deprive a party of any or
all of the costs, including any or all of the disbursements, to which the party
would otherwise be entitled in respect of all or some of the steps taken in the
proceeding after the date of delivery or service of the offer to settle;

(b) award double costs of all
or some of the steps taken in the proceeding after the date of delivery or
service of the offer to settle;

(c) award to a party, in
respect of all or some of the steps taken in the proceeding after the date of
delivery or service of the offer to settle, costs to which the party would have
been entitled had the offer not been made;

(d) if the offer was made by a defendant and the judgment
awarded to the plaintiff was no greater than the amount of the offer to settle,
award to the defendant the defendants costs in respect of all or some of the
steps taken in the proceeding after the date of delivery or service of the
offer to settle.

[21]

In
C.P. v. RBC
Royal Life Insurance
, 2015 BCCA 30 at paras. 9092, this Court held
that double costs cannot be awarded to a defendant if the plaintiff has
obtained a judgement in its favour. The options therefore available on this application
are to decline to award Ms. Cottrill costs
in
connection with steps taken in the proceeding after service of the offer, award
the Company its costs in respect to steps taken in the proceeding after
delivery of the offer or award Ms. Cottrill her costs as though the offer
had not been made.

[22]

When making an order under R. 9-1(5) the court may consider the factors
set out in R. 9-1(6):

(a) whether the offer to settle was one that
ought reasonably to have been accepted, either on the date that the offer to
settle was delivered or served or on any later date;

(b) the relationship between the terms of
settlement offered and the final judgment of the court;

(c) the relative financial circumstances of the
parties;

(d) any other factor the court
considers appropriate.

[23]

In this case the Company on May 12, 2016, made a formal offer to settle on
the following terms:

1.       the defendant will pay the
plaintiff equivalent eight weeks salary as severance; and

2.       both parties bear their
own costs.

[24]

The offer was transmitted in an email on Thursday, May 12 at 5:52 p.m.
It was open for acceptance until 12:00 p.m. Monday, May 16. On Thursday May 12,
2016 at 8:53 p.m., counsel for Ms. Cottrill rejected the offer.

[25]

At the time the offer was made, the parties had concluded discoveries
and had filed trial briefs setting out the issues for trial and their
respective positions. The trial was less than a month away. It was common
ground that the written employment agreement was signed by Ms. Cottrill on
her first day of work. The respondents trial brief indicated that she was the
only witness scheduled to appear on her own behalf and no documentary evidence
had been produced in the litigation in support of the claim to aggravated
damages. The Company submits that in the circumstances the plaintiff should
have known that proceeding with a five-day trial (which ultimately lasted six
days) was a significant gamble and there was a substantial risk that the claims
beyond entitlement to eight weeks notice would not succeed.

[26]

The Company submits that its offer was not a nuisance offer, but one that
reflected the full amount of notice payable in the event that Ms. Cottrill
was found to have been wrongfully dismissed. The Company submits that in all of
the circumstances, the offer was one which ought to have been accepted and the
Company should be awarded its costs of the proceeding below from the date that
the offer was served.

[27]

In
C.P.
at paras. 9495, this Court summarized the principles
of the offer to settle rule:

[94]      The underlying purpose of
the offer to settle rule was set out in
Hartshorne
:

[25]      An award of double costs
is a punitive measure against a litigant for that partys failure, in all of
the circumstances, to have accepted an offer to settle that should have been
accepted. Litigants are to be reminded that costs rules are in place to
encourage the early settlement of disputes by rewarding the party who makes a
reasonable settlement offer and penalizing the party who declines to accept
such an offer (
A.E. v. D.W.J
., 2009 BCSC 505, 91 B.C.L.R. (4th) 372 at para. 61,
citing
MacKenzie v. Brooks
, 1999 BCCA 623,
Skidmore v. Blackmore
(1995), 2 B.C.L.R. (3d) 201 (C.A.),
Radke v. Parry
, 2008 BCSC 1397). In
this regard, Mr. Justice Frankels comments in
Giles
, are apposite:

[74]      The purposes for which
costs rules exist must be kept in mind in determining whether appellate
intervention is warranted. In addition to indemnifying a successful litigant,
those purposes have been described as follows by this Court:

§

[D]eterring frivolous actions or defences:
Houweling
Nurseries Ltd. v.
Fisons
Western Corp.
(1988), 37 B.C.L.R. (2d) 2 at 25 (C.A.), leave refd, [1988] 1 S.C.R. ix;

§

[T]o
encourage conduct that reduces the duration and expense of litigation and to
discourage conduct that has the opposite effect:
Skidmore v. Blackmore
(1995), 2 B.C.L.R. (3d) 201 at para. 28 (C.A.);

§

[E]ncouraging litigants to
settle whenever possible, thus freeing up judicial resources for other cases:
Bedwell
v. McGill
,
2008 BCCA 526, 86 B.C.L.R.
(4th) 343
at para. 33;

§

[T]o have a winnowing
function in the litigation process by requir[ing] litigants to make a careful
assessment of the strength or lack thereof of their cases at the commencement
and throughout the course of the litigation, and by discourag[ing] the
continuance of doubtful cases or defences:
Catalyst Paper Corporation v.
Companhia de Navegação Norsul
,
2009
BCCA 16, 88 B.C.L.R. (4th) 17
at para. 16.

[95]      A plaintiff who rejects a
reasonable offer to settle should usually face some sanction in costs. To do
otherwise would undermine the importance of certainty and consequences in
applying the Rule:
Wafler v. Trinh
,
2014 BCCA 95
at para. 81.
The importance of those principles was emphasized by this Court in
A.E.
Appeal
at para. 41:

[41]      This conclusion is
consistent with the importance the Legislature has placed on the role of
settlement offers in encouraging the determination of disputes in a
cost-efficient and expeditious manner. It has placed a premium on certainty of
result as a key factor which parties consider in determining whether to make or
accept an offer to settle. If the parties know in advance the consequences of
their decision to make or accept an offer, whether by way of reward or
punishment, they are in a better position to make a reasoned decision. If they
think they may be excused from the otherwise punitive effect of a costs rule in
relation to an offer to settle, they will be more inclined to take their
chances in refusing to accept an offer. If they know they will have to live
with the consequences set forth in the Rule, they are more likely to avoid the
risk.

[28]

As set
out above, when making an order under R. 9-1(5), the court may consider the
factors set out in R. 9-1(6). We will consider those factors in turn.

i.     Should the Offer
Have Been Accepted

[29]

Whether an offer to settle is one that ought reasonably to have been
accepted is assessed not by reference to the award that was ultimately made,
but under the circumstances existing when an offer was open for acceptance. In
Hartshorne
v. Hartshorne,
2011 BCCA 29 at para. 27, this Court explained:

[27]      The first factor - whether the offer to settle was one
that ought reasonably to have been accepted - is not determined by reference to
the award that was ultimately made. Rather, in considering that factor, the
court must determine whether, at the time that the offer was open for
acceptance, it would have been reasonable for it to have been accepted:
Bailey
v. Jang
, 2008 BCSC
1372, 90 B.C.L.R. (4th) 125
at para. 24;
A.E.
v. D.W.J.
at para. 55. As was said in
A.E. v. D.W.J.
, The
reasonableness of the plaintiffs decision not to accept the offer to settle
must be assessed without reference to the courts decision (para. 55).
Instead, the reasonableness is to be assessed by considering such factors as
the timing of the offer, whether it had some relationship to the claim (as
opposed to simply being a nuisance offer), whether it could be easily
evaluated, and whether some rationale for the offer was provided. We do not
intend this to be a comprehensive list, nor do we suggest that each of these
factors will necessarily be relevant in a given case.

[30]

As recently noted by Justice Gomery in
Kobetitch v. Belski
, 2018
BCSC 2247 at paras. 2425, the wording of the subrule is important. The
issue is not whether the offer was reasonable but whether it was unreasonable
to refuse it. He explained the distinction as follows:

[24]      In my opinion, the wording of the subrule stating
this consideration is important. The consideration is not whether it would have
been reasonable for the plaintiff to have accepted the offer. It is whether the
plaintiff
ought
reasonably to have accepted the offer. The difference is
this. An offer might be such that a reasonable plaintiff could choose to accept
it or not. One might term it a reasonable offer. On the other hand, to say
that an offer ought reasonably to have been accepted is to say that a reasonable
person should have accepted it. It was unreasonable to refuse it.

[25]      According to the distinction I am drawing, having
regard to the wording of the subrule, the consideration is not whether the
offer was a reasonable offer. It is whether it was unreasonable for the
plaintiff to refuse it.

[Emphasis in original.]

[31]

We agree with that analysis. It is also important to point out that the
fact that it may be reasonable for a party to refuse an offer does not necessarily
immunize that party from the consequences of a reasonable offer to settle:
Wafler
v. Trinh
, 2014 BCCA 95 at paras. 7982. For example, in the oft cited
cases of
Bailey v. Jang
, 2008 BCSC 1372, and
A.E. v. D.W.J
, 2009 BCSC
505, referenced in the above quotation from
Hartshorne
, the plaintiffs were
sanctioned in costs notwithstanding that the trial judges in each case found
that it was not unreasonable for them to reject the offer to settle.

[32]

In this case the Companys offer to settle accurately forecast the
outcome of the trial. Ms. Cottrill had adequate time to consider the offer
as evidenced by her rejection of the offer while it remained outstanding. A
reasonable person may have chosen to accept the offer. The offer was, however,
for but a small fraction of the amounts that Ms. Cottrill was seeking in
the litigation and gave no recognition to the possibility that Ms. Cottrill
may be awarded more than eight weeks severance, as well as costs. The offer did
not offer a genuine compromise or an incentive to settle. Given the amounts
sought in the litigation, it was not unreasonable for her to refuse it. Ms. Cottrill
did not act
unreasonably by taking a chance and proceeding to trial. We are of the opinion
that the offer was not one that ought reasonably to have been accepted by the
plaintiff.

ii.    Relationship
Between Offer and Final Judgment

[33]

The offer to settle was for the equivalent of eight weeks salary with
each side paying their own costs. The trial judgment was for eight weeks
salary together with costs and disbursements. In those circumstances it cannot
be said that Ms. Cottrill would have been better served by accepting the
offer to settle because if she had done so she would given up her right to
costs.

iii.   Financial
Circumstances of the Parties

[34]

While Ms. Cottrills financial circumstances are undoubtedly less
than that of the Company, there is no evidence that the Company improperly used
its financial advantages in the litigation. In our view the relative financial
circumstances are not in this case a material consideration.

iv.   Other
Considerations

[35]

An offer that precisely
forecasts the outcome of an action is objectively reasonable. A party is
not required to compromise
its claim beyond their own objective assessment of the case in order to obtain
the benefit of an offer to settle:
Domtar
Inc. v. Univar Canada Ltd.
, 2012 BCSC 510 at para. 45;
Tham v.
Bronco Industries Inc
., 2018 BCSC 240 at para. 17.
The Companys offer recognized that Ms. Cottrill
would succeed on her wrongful dismissal claim but that her recovery would be
limited to eight weeks severance. While that was a reasonable positon, it was far
from generous and provided Ms. Cottrill with little incentive to settle.

C.       Conclusion

[36]

The purpose of the offer to settle rule is to encourage the settlement
of disputes by rewarding the party who makes a reasonable settlement offer and
penalizes the party who declines to accept such an offer. The most critical
factor in this case is that the offer to settle was, when costs are taken into
account, for a sum less than Ms. Cottrill was awarded at trial. A party
should not be punished in costs for refusing to accept an offer that is less
than the award received at trial.

[37]

Accordingly, in the circumstances of this case, we would not set aside
the trial costs award. Ms. Cottrill should receive the costs of trial as
though the offer had not been made.

SUMMARY

[38]

The Company is entitled to the costs of the appeal. We will not set
aside or modify the trial costs award. In regards to this application, Ms. Cottrill
has been successful on the contested issues and is entitled to the costs of the
application.

The Honourable Mr. Justice Goepel

The Honourable Mr. Justice Savage

The
Honourable Madam Justice Fisher


