Executive Summary: Key Legal and Evidentiary Issues

• Dispute over allocation of post-trial costs through a Sanderson order following complex, multi-party litigation.

• Determination of whether insolvency of plaintiffs constitutes a “special circumstance” justifying a Sanderson order against co-defendants.

• Analysis of the reasonableness and fairness in joining multiple defendants and issuing third-party proceedings.

• Examination of the conduct of defendants in attributing liability and whether such conduct warrants shifting costs.

• Consideration of statutory and common law duties of care in the context of government and private liability for flood damage.

• Assessment of the appropriate party responsible for paying significant trial and appeal costs after appellate reversal.

Facts and outcome of the case

Background and parties involved

The case arose from a devastating flood in June 2012 that severely impacted the business operations of Waterway Houseboats Ltd., Vinco Holdings Ltd., Waterway Houseboat Charters Ltd., and 63 individual houseboat owners. These parties, collectively referred to as the Waterway Plaintiffs, initiated legal action seeking damages against the Province of British Columbia, the District of Sicamous, and Bryan and Constance McLaughlin. The core allegation was that the flood was caused by debris becoming lodged under a bridge owned by the McLaughlins, which was alleged to have been improperly constructed or approved.

All defendants responded to the claims and also issued third-party proceedings against each other, seeking contribution or indemnity in the event of liability. The litigation was lengthy and complex, involving expert testimony and multiple legal theories, including negligence and statutory liability under the former Water Act.

Trial and appellate history

After a 57-day trial, the court initially found the Province, Sicamous, and the McLaughlins liable, with damages awarded to the individual houseboat owners totaling $312,997 plus pre-judgment interest. All parties appealed. Before the appeals were heard, a settlement was reached with 47 of the 63 individual houseboat owners, releasing the parties from further costs obligations.

On appeal, the Court of Appeal overturned the finding of liability against the Province, holding that it owed no duty of care to the Waterway Plaintiffs. The issue of the Province’s duty of care to the McLaughlins in the third-party proceedings was remitted to the trial court. The findings of liability against the McLaughlins and Sicamous were largely upheld, except for a narrow statutory issue.

Application for costs and key arguments

Following its success on appeal, the Province sought to recover its trial and appeal costs, estimated at $750,000. However, because the main plaintiffs (Waterway and Vinco) were insolvent, the Province applied for a Sanderson order to recover costs directly from the McLaughlins, arguing that their conduct during litigation justified such an order. The McLaughlins opposed the application, contending that they did not cause the Province to be sued, that their conduct did not warrant a Sanderson order, and that the Province should pursue costs from the original plaintiffs.

Court’s analysis and decision

The court analyzed the legal framework for Sanderson orders, emphasizing that such orders are discretionary and typically require special circumstances, such as conduct by a defendant that justifies shifting costs. The court found that it was reasonable for the plaintiffs to have sued all defendants and that the third-party proceedings were standard in complex, multi-party litigation. The court concluded that the McLaughlins did not engage in conduct that would justify a Sanderson order and that insolvency of the plaintiffs alone did not constitute a special circumstance warranting such an order.

Outcome

The court dismissed the Province’s application for a Sanderson order against the McLaughlins, ruling that it would not be just, fair, or equitable for them to bear the Province’s costs. No costs were awarded to the Province against the McLaughlins in this decision. The damages previously awarded to the individual houseboat owners remained as determined in the earlier judgment, with joint and several liability among the original defendants for $312,997 plus pre-judgment interest.