Executive Summary: Key Legal and Evidentiary Issues

• Remedies were sought under section 227 of the Business Corporations Act regarding corporate matters.

• The appellants applied to amend their petition to plead facts and law supporting suspension of the limitation period under the Limitation Act.

• The chambers judge granted the amendments in part, allowing them for the personal appellant but not for the corporate appellant.

• Special costs were ordered against the appellants by the chambers judge, although not sought by the respondent and not the subject of submissions.

• The appellants appealed, arguing lack of notice, lack of opportunity to make submissions, and absence of justification for special costs.

• The court allowed the appeal, set aside the special costs order, and ordered that each party bear their own costs of the application below and of the appeal.

Facts and outcome of the case

Background and parties

James Lyman Humphrey and H6 Enterprises Ltd. (the appellants) brought proceedings against B.L. Resort Ltd. (the respondent) in the Supreme Court of British Columbia. The appellants sought various remedies under section 227 of the Business Corporations Act, S.B.C. 2002, c. 57, against the respondent.

Proceedings in the Supreme Court

On April 2, 2024, the chambers judge delivered oral reasons for judgment immediately following the hearing of the appellants’ application to amend their petition. The purpose of the proposed amendments included pleading material facts and law in support of a suspension of the applicable limitation period under section 25 of the Limitation Act, S.B.C. 2012, c. 13. The application was granted in part, with amendments allowed in relation to the personal appellant but not in relation to the corporate appellant. The chambers judge, although not requested by the respondent and not the subject of submissions, ordered special costs against the appellants.

Appeal to the Court of Appeal

The appellants appealed the award of special costs. They submitted that the chambers judge erred by failing to provide sufficient reasons for the special costs order, exercising discretion arbitrarily without making a finding of reprehensible conduct or identifying any exceptional circumstances, misapplying or disregarding the principles governing special costs, and denying procedural fairness by making the order without notice or the ability to make submissions. The respondent took no position on whether the chambers judge erred but, if the appeal was granted, asked that it be awarded the costs of the application below or, alternatively, that the parties bear their own costs.

Court’s analysis and decision

The court stated that an award of special costs is discretionary and demands a high degree of deference, but may be set aside if the judge misdirected themselves on the law, made an error in principle, made a palpable and overriding error on a factual matter, or the award is clearly wrong. The court found that the chambers judge erred in making an award of special costs in a procedurally unfair manner and without justification, as the appellants had no notice and no opportunity to make submissions on the issue, and the record contained no evidence to justify such an award.

Outcome

The court allowed the appeal, set aside the special costs order, and ordered that the parties bear their own costs of the application below and of the appeal. No damages were awarded.