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Inherent Jurisdiction Limited by Principles Guiding Application of Rules of Court

In the recently published case of Fan v. Chana, 2011 BCCA 516, the Court of Appeal discussed a trial judge’s exercise of discretion in relation to costs. The appeal related to decisions rendered in a trial in 2010 in which a plaintiff was awarded $25,000 in non-pecuniary damages for soft tissue injuries that lasted less than two years. In assessing the plaintiff’s costs following the trial, the trial judge disallowed the plaintiff recovery of disbursements for two expert reports. The plaintiff appealed with respect to the amount of the award and the disallowance of the disbursements.


Writing for the Court, Madam Justice Levine held that the trial judge had not made an error with respect to the amount of the damages but had failed to apply the proper test in denying recovery of the disbursements for the expert reports.


The appellant plaintiff argued that legal authorities set out that the proper test was whether the disbursement was proper at the time it was incurred. The appellant also argued the trial judge’s discretion in awarding costs was limited by the Rules of Court in respect of disallowing costs.


The Court decided that the trial judge had not exercised his discretion in a judicially and consistently with the Rules of Court. In coming to that decision, Justice Levine said the following:


[51] In my opinion, the principle in Van Daele remains the appropriate guiding principle for a trial judge in deciding under the Rules whether to deny disbursements for expert reports that are found, after a trial on conflicting evidence, to be inconsistent with the facts as found by the trial judge. The more general language of Rules 57(7) and (9) does not exclude this principle. The question to be asked is whether it was reasonable to incur the disbursement when it was incurred, not after judgment has been rendered and it has been determined whether or not the report was helpful.


[52] If the trial judge considered the situation at the time the disbursements for the two reports were incurred, he concluded, at least with respect to Dr. Hahn’s reports, that the disbursements were reasonably incurred. In Costs Ruling 1 (at para. 19) he stated that in exercising judicial discretion on costs, costs should not be a penalty for failing to guess the outcome when litigants hold honest, but, ultimately, mistaken views of their claims. Proceeding to court for a legal resolution “should be a valid option for those who seek it, not a form of deemed unreasonableness”. Thus, he did not find that it was unreasonable for the appellant to refuse to settle and proceed to trial, based on the expert reports.


Justice Levine said the following in respect to the trial judge’s decision regarding one of the reports in question:


…His decision to disallow the disbursements was made on the basis that the facts on which Dr. Hahn relied in his report were inconsistent with those he found after the trial. Thus he erred in disallowing the disbursement by failing to apply the Van Daele principle that a disbursement should not be disallowed that was reasonably incurred at the time it was incurred. I would accede to the appellant’s argument on this issue, set aside the order disallowing the disbursement for Dr. Hahn’s reports, and order the appellant is entitled to the cost of these reports.


Justice Levine went on to further discuss the limits of judicial discretion and stated that it is “inappropriate” for a judge to “invoke inherent jurisdiction to justify a decision that is contrary to the principles guiding the application of the Rules.” She found that in the instant case the Rules provided for the trial judge to exercise his discretion to disallow recovery of disbursements but that there were no “extenuating circumstances” that called for the judge to “go beyond the Rules to find the discretion to deny disbursements”. On that point, Justice Levine stated that “the power to do so is in the rules, governed by the principles developed to guide discretionary decision making.


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