Executive Summary: Key Legal and Evidentiary Issues

• Metal Yapi, a Turkish corporation with no assets in British Columbia, faced security for costs applications due to the practical impossibility of enforcing costs awards in Turkey.

• The court applied the four-factor test from Citizens for Foreign Aid Reform to determine security for costs entitlement, with Metal Yapi conceding the arguable defence and undue hardship factors.

• Additional security of $150,000 per applicant (totaling $300,000) was ordered prior to a 60-day trial, reduced from requested amounts due to cost overlap and expert report timing concerns.

• Trial adjournment was granted with costs thrown away payable forthwith, calculated at five units per day for 60 days of trial preparation ($73,920 total).

• On appeal, the associate judge's costs methodology was partially upheld, but the quantum was set aside for failing to determine the actual degree of wasted trial preparation.

• Fresh evidence regarding post-adjournment document production was denied admission on appeal due to Metal Yapi's failure to exercise due diligence.

Background and parties involved

This complex construction dispute arises from the "Davie Safeway" project, a multi-tower residential construction project located at 1611 Davie Street in Vancouver, British Columbia. The plaintiffs, 1600 Davie Limited Partnership and 1600 Davie Commercial Holdings Ltd., are entities incorporated by Westbank Projects Corp. solely to act as the owners on record for the project. ITC Construction Management BC Inc. was engaged as the construction manager, while Metal Yapi Holdings A.S., a large company in the construction industry based in Turkey, entered into a subcontract to supply certain materials and work to the project, including the residential curtain wall, window wall, tower glazing, metal panels, and related materials. Siber Façade Installations Ltd. was engaged to install the materials supplied by Metal Yapi.

The underlying dispute

The plaintiffs filed a notice of civil claim on April 16, 2021, alleging, among other things, that Metal Yapi breached the subcontract by providing materials that were defective and deficient, and caused the project to be delayed. The plaintiffs also alleged that Metal Yapi was negligent in the performance of the subcontract. Metal Yapi filed a response to civil claim on July 14, 2021, and on the same day filed a counterclaim against the plaintiffs and ITC Construction, along with a third-party notice against Siber Façade and Westbank Projects Corporation. The litigation progressed slowly, and a 60-day trial was eventually scheduled to commence on April 7, 2025.

Initial security for costs decision (2023)

On April 17, 2023, Justice Macintosh heard applications by ITC Construction and Siber Façade seeking security for costs against Metal Yapi, rendering his decision on May 26, 2023. ITC sought $475,000, while Siber Façade sought $247,000. The court applied the well-established test from Kropp v. Swaneset Bay Golf Course Ltd., which grants broad discretion to order security while balancing the risk of stifling legitimate claims against the unfair pressure of impecuniosity on defendants.

Justice Macintosh noted that Metal Yapi had nothing in British Columbia except this litigation. It is a Turkish corporation, incorporated under the laws of that country, with no assets in British Columbia and not registered in British Columbia to carry on business. From the evidence filed, Metal Yapi is a large company participating, sometimes through subsidiaries, in construction projects elsewhere, including the United Kingdom. Critically, Turkey has no reciprocal relationship with British Columbia, and from a practical viewpoint, it would be all but impossible for the applicants to enforce in Turkey the costs claims to which they would be entitled from successfully defending against Metal Yapi in this jurisdiction. It was common ground that an order for security for costs would not visit undue hardship on Metal Yapi such that it would prevent its counterclaim and third-party claims from being heard.

Exercising his discretion, Justice Macintosh ordered that before Metal Yapi can take any further step in the litigation against ITC, it must post security for ITC's costs in the amount of $50,000. He made the same order, in the same amount, as between Metal Yapi and Siber Façade. He also granted liberty to apply for further security for costs, after a trial date has been set, between 60 and 90 days prior to that trial date.

The guillotine order and compliance issues

After the initial decision was rendered, Metal Yapi did not make the security for costs payments and no steps were taken in the counterclaim or the third-party claim. On December 20, 2024, the applicants sought and obtained an order (the "Guillotine Order") from Justice Whately, which required Metal Yapi to post the security into court by December 27, and ordered that Metal Yapi's claims would be struck if it failed to post security by that deadline. On December 30, 2024, after the expiry of the Guillotine Order deadline, Metal Yapi posted the security in full. Counsel for Metal Yapi explained that the failure to meet the deadline appears to have been a series of unfortunate errors that were not the fault of the client. On January 23, 2025, Metal Yapi filed an application to extend the Guillotine Order deadline to December 30, such that their claims would not be struck. That extension was granted by Justice G.C. Weatherill on February 7, 2025.

Application for additional security (2025)

With the pending trial about a month away, ITC Construction and Siber Façade brought applications before Justice Francis for additional security for costs from Metal Yapi. The court considered Metal Yapi's three arguments: first, that the trial would likely be adjourned, in which case pre-trial and trial legal fees are not imminently payable; second, that there is overlap between the legal work done for ITC Construction and legal work done for the plaintiffs, and that this should result in a reduction in any security for costs advanced; and third, that the amounts sought by both applicants were inflated.

On the adjournment argument, Justice Francis stated that she had to look at where things stand as they are today, not where they might stand after a successful adjournment application. There was a trial set to commence for 60 days on April 7, 2025, and if the defendant were not successful in obtaining an adjournment, an enormous investment of legal fees would need to be expended by the applicants in very short order. On the overlap issue, the court accepted Metal Yapi's submission that some of the items in ITC Construction's bill of costs appear to be costs that would overlap with costs incurred by the plaintiffs, who are represented by the same counsel as ITC Construction. In the court's view, this does not mean that ITC Construction is not entitled to security for costs, but it does suggest that the quantum should be more modest. Regarding the quantum, the court observed that if the matter proceeded to trial in April, it seemed unlikely that there would be any expert reports tendered by either applicant, given the lack of time to prepare such reports before April. Regardless of the outcome of the adjournment application, the expert costs were unlikely to be incurred any time soon.

The court exercised its discretion to order that Metal Yapi must provide security for costs to each applicant in the amount of $150,000 each, for a total of $300,000. If the trial were adjourned and a new trial date set, Siber Façade and ITC Construction were granted liberty to apply for further security for costs between 60 and 90 days prior to the trial.

Trial adjournment and costs decision

On March 7, 2025, one month before the start of the trial, Metal Yapi filed a notice of application seeking to have the trial adjourned generally. The hearing of the adjournment application occurred on March 20, 2025, in general Associate Judge's Chambers. The associate judge gave oral reasons for judgment from the bench that same day.

The associate judge granted the adjournment and ordered that the next trial date would be peremptory on Metal Yapi. With respect to costs, the associate judge ordered that Metal Yapi pay the plaintiffs, ITC, and Siber for their costs thrown away for the preparation of the 60-day trial. The costs were fixed and assessed at a lump sum of $36,960, calculated based on five units per day for 60 days of trial preparation for a total of 300 units (at Scale B) plus tax. Metal Yapi was to make two payments of this amount, one to the plaintiffs and ITC collectively, and one to Siber individually, for a total of $73,920. The deadline to make the payment was May 26, 2025.

In her reasons, the associate judge made the following factual findings: Metal Yapi had been dilatory; Metal Yapi was not prepared for trial, and their late demand for documents was not an excuse for not being prepared for trial; and there was no fault on the part of the plaintiffs, ITC, or Siber.

Appeal of the costs decision (2026)

Metal Yapi appealed the associate judge's costs decision. Metal Yapi did not appeal the associate judge's orders adjourning the trial on a peremptory basis. Metal Yapi submitted that the associate judge erred: by finding that the plaintiffs, ITC, and Siber were entitled to be paid their trial preparation costs, thrown away; by finding that the costs thrown away should be payable forthwith; by finding that the costs thrown away should be assessed summarily and the amount fixed pursuant to Rule 14-1(15) of the Supreme Court Civil Rules; and by fixing the costs thrown away in the amount of $36,960 payable to the plaintiffs and ITC collectively and $36,960 payable to Siber individually.

Justice Morishita applied the "clearly wrong" standard of review applicable to decisions of an associate judge on interlocutory matters.

On the entitlement to costs thrown away, the appeal court found no evidence that the associate judge made a mistake as to the substance of the evidence, failed to consider relevant evidence, or failed to give proper effect to evidence. Metal Yapi's attempt to introduce fresh evidence showing that, following the adjournment hearing, the plaintiffs and Siber did not oppose Metal Yapi's document production application and produced significant documents was denied. The court found that Metal Yapi did not exercise due diligence, as the exercise of due diligence required Metal Yapi to bring a document production application very soon after receiving the plaintiffs' expert reports, not two months later.

On the issue of costs payable forthwith, the appeal court found no error. The associate judge ordered the costs to be payable forthwith in order to send a message to Metal Yapi to stop being dilatory in its approach to the litigation. The appeal court noted that costs represent an important instrument by which courts are able to promote or sanction litigation conduct.

On the summary assessment methodology, the appeal court found that while a presider has significant discretion and flexibility in how they summarily assess and fix costs, the case authority mandates that the presider must determine the degree of wasted costs. The court noted that the case law does not establish that summarily assessing and fixing party and party costs thrown away requires a detailed and specific assessment of what portion of the trial preparation steps actually undertaken will need to be repeated and therefore wasted, as is required when assessing special costs. However, the associate judge was required to make a finding of what proportion of trial preparation was complete at the time of the hearing and would be wasted.

Outcome of the appeal

Justice Morishita allowed the appeal in part. The associate judge did not err in ordering costs thrown away, payable forthwith, and by engaging in a summary assessment and fixing of those costs. However, the associate judge erred in the assessment of those costs by not determining and assessing the degree of wasted trial preparation costs. At the hearing, there was no evidence before the Court to support a finding that the respondents had completed all of their trial preparation, and that all of their trial preparation would need to be repeated. Thus, the order granting the respondents 100% of their tariff item costs thrown away was clearly wrong. The order assessing and fixing the costs at $73,920 was set aside, and the matter was remitted back to the associate judge to assess and fix the costs. Success on the appeal was divided, and accordingly, costs of the appeal were ordered in the cause.