The Defendants and Plaintiffs by Counterclaim (“Appellants”) appealed the Costs decision of the Trial Judge who awarded full-indemnity Costs to the Respondent. The Trial Judge held that full-indemnity Costs were warranted given the totality of the Appellants’ actions, which consisted of having:

a)   made misleading and disingenuous requests for further information during pre-litigation negotiations as a delay tactic;

b)   attempted to introduce new evidence in its written argument following Trial;

c)   refused to admit facts which were not ultimately in issue; and

d)   alleged, but did not address or prove, fraud.

On appeal, the Appellants asserted that each party should bear their own Costs.

The Appellants’ Trial strategy was described as “let the other side prove its case”, where they required the Respondents to prove facts which the Appellants had no intention of disputing. The Court of Appeal noted that the Trial time would have been reduced from 14 days to 3 had the Appellants conceded items which they had no intention of contesting, and focused on the single issue in dispute between the parties.

Wakeling J.A. agreed with the Trial Judge’s reasons for awarding full-indemnity Costs, including that pre-litigation misconduct could be an appropriate ground to justify a full indemnification Costs award. However, both McDonald and Bielby J.J.A. held that pre-litigation misconduct, on its own, does not permit an award of full-indemnity Costs. Justice Bielby held that the remaining grounds upon which the Trial Judge based the Costs award were sufficient justification for the extraordinary remedy.

Justice Wakeling held that the Appellants’ Trial conduct was inconsistent with the foundational Rules generally, and Rule 1.2 specifically, which require the parties to “identify … the real issues in dispute and facilitate the quickest means of resolving the claim at the least expense”. Wakeling J.A. continued that the Respondent’s decision not to take any positive steps to expedite resolution or a narrowing of the issues, such as serving a Notice to Admit under Rule 6.37, or applying for Summary Judgment under Rule 7.3, did not relieve the Appellants of their obligations under Rule 1.2 to identify the real issues in dispute, and communicate openly, honestly, and in a timely way.

Wakeling J.A. held that the Appellants’ Trial conduct, and their allegation of fraud without addressing or proving the allegation at Trial, justified an enhanced Costs award. The Appellants’ conduct in trying to adduce new evidence through written argument following Trial was held to be a further ground to support the Costs award.

The Court upheld the Trial Judge’s Decision and dismissed the Appeal. McDonald J.A., in dissent, would have allowed the Appeal, and awarded Costs to the Respondents in accordance with Schedule C.