GMA Machinery Canada Ltd. v. Cartocci Imports Date:, 2011 BCPC 53

Citation: GMA Machinery Canada Ltd. v. Cartocci Imports Date: 20110228 2011 BCPC 0053 File No: 0821229 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: GMA MACHINERY CANADA LTD. CLAIMANT AND: CARTOCCI IMPORTS LTD; PIER PAOLO CARTOCCI DBA CARTOCCI GROUP TRADING DEFENDANTS RULING ON APPLICATION FOR COSTS OF THE HONOURABLE JUDGE N.N. PHILLIPS Counsel for the Claimant: D. Stewart Counsel for the Defendant: L. Spencer Place of Hearing: Vancouver, B.C.

Date of Hearing of Application: February 22, 2011 Date of Ruling on Application: February 28, 2011 [ 1 ] On December 30, 2010, this court issued reasons for judgment following a trial held in this case. The court found the Defendants liable to pay $5,000.00 to the Claimant. No order for costs was made given the divided success at trial. On January 27, 2011, the Defendants took steps to have the matter put before the court to afford counsel the opportunity to address the issue of costs and penalties under Rule 10.1 of the Small Claims Rules. That application was heard on February 22, 2011.

This is the ruling of the court on that application. [ 2 ] At the hearing of this application for costs, counsel for the defendants referred the court to a letter setting out an offer to settle which had been sent to counsel for the claimant on September 17, 2009. The “without prejudice” letter stated the following: ...My client would be agreeable to paying the sum of $8,000.00 in return for your client dismissing its Notice of Claim... My client’s preference would be, as it has been from the beginning when he willingly returned monies to your client, to settle this matter.

Can you please advise at your earliest convenience whether or not your client is open to accepting the $8,000.00 offer from my client. If that is the case then we could come to an agreement on this prior to mediation session set for 1:30 Monday, September 21, 2009. [ 3 ] The correspondence does not set a deadline for the offer to settle to be accepted and it would appear to have been left open for consideration up to the time of trial.

The position of the defendants on this application is that the offer to settle was made at an early stage in these proceedings and that mandatory mediation, the trial preparation conference and the trial could have been avoided had the claimant accepted the offer. Counsel for the defendants asks the court to apply the provisions of Rule 10.1 and award a penalty of up to

$1,600.00 (representing 20% of the $8,000.00 offer) against the claimant. [ 4 ] Counsel for the Claimant company takes the position that the only basis upon which this court may order costs based upon an offer to settle is as prescribed in Rule 10.1. The claimant submits that the defendants’ offer to settle did not comply with Rule 10.1 and thus this application must fail. [ 5 ] The relevant portions of Rule 10.1 are as follows: Any party may offer to settle

(1) A party may offer to settle one or more claims by (

a) completing an offer to settle (Form 18), and (

b) serving the party to whom the offer is made with the completed offer to settle as if it were a notice of claim (see Rule 2). If an offer is rejected by claimant

(5) The trial judge may order a claimant to pay the defendant a penalty if the claimant (

a) does not accept an offer to settle made by the defendant under subrule (1), and (

b) is awarded at trial an amount, including interest and all expenses, that equals or is less than the defendant's offer. Amount of penalty

(7) A penalty under subrule (5) or (6) is in addition to any other expenses or penalties, and may be up to 20% of the amount of the offer to settle. What the judge must consider

(8) When deciding the amount of a penalty under subrule (5) or (6), a judge must consider (

a) the difference between the amount awarded at trial and the amount of the offer to settle, (

b) the interest of the parties in proceeding to trial to determine the credibility of witnesses or a point of law, and (

c) the time when the offer was made. [ 6 ] Counsel for the claimant referred the court to the decision of Howard, J. in Lago v. Zimmerman [1998] CarswellBC 1340 . Although the facts of that case are distinguishable from the case at bar, Judge Howard’s consideration of Rule 10.1 is instructive. [ 7 ] In order for a party to take advantage of the Small Claims Court’s authority to impose a penalty under Rule 10.1, notice of the offer to settle must be given to the other party in Form 18 (see Lago @ paragraph 16).

That form was not used in this case nor was any reference to Rule 10.1 made in the September 17, 2009 offer to settle. The use of the form is important because it contains information for the recipient of the offer as to the consequences of making and accepting the settlement offer. [ 8 ] This court is a statutory court and authority for the court to do something must be derived from statute. In Lago, Howard, J. stated (@ paragraph 19): I have no jurisdiction to assess a penalty against the defendant under Rule 10.1 where the pre-conditions of the Rule have not been met by the claimant.

The application for a penalty under Rule 10.1 is dismissed. [ 9 ] I conclude that in order to obtain a penalty costs award under Rule 10.1, the applicant must comply with the provisions of the Rules and make the offer in Form 18. That not having been done in this case, the application for costs under Rule 10.1 cannot succeed. [ 10 ] I should add that the defendants’ offer to settle was written in the form of a Calderbank letter and was made on a “without prejudice” basis. On this issue, again I find Judge Howard’s reasoning in Lago (@ paragraph 23 & 24) persuasive.

I conclude, as she did, that the jeopardy of increased costs attaching to Calderbank letters relates to counsel fees. The Small Claims Act s. 19(4) specifically prohibits the recovery of any sum for counsel fees. [ 11 ] Finally, given that success was divided at trial, I am unable to find that the claimant proceeded to trial without a reasonable basis for success and thus a penalty under Rule 20(5) is also not appropriate. [ 12 ] For all of the above-noted reasons, the defendants’ application for costs is dismissed. ______________________ N. N. Phillips Provincial Court Judge