Gaiga and Morgan v. Pacific Coast Floor, 2018 BCPC 310

Citation: Gaiga and Morgan v. Pacific Coast Floor 2018 BCPC 310 Date: 20181126 File No: 170181 Registry: Victoria IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: MARISA GAIGA and TERENCE MORGAN CLAIMANTS AND: PACIFIC COAST FLOOR COVERING INC DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE GOUGE Appearing in person: Ms. Gaiga and Mr. Morgan Appearing for the Defendant: Mr. Dougans Place of Hearing: Victoria , B.C. Date of Hearing: November 20, 2018 Date of Judgment: November 26, 2018

The Issue [1] The Claimants ask me to award a penalty under Rules 10.1(6) and 10.1(7) of the Small Claims Rules BC Reg 261/93(underlining added): 6 The trial judge may order a defendant to pay the claimant a penalty if (

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

b) the claimant is awarded at trial an amount, including interest and all expenses, that equals or exceeds the claimant's offer. 7 A penalty under subrule … (6) is in addition to any other expenses or penalties, and may be up to 20% of the amount of the offerto settle. The Facts [2] This case arose from a contract for the supply and installation of hardwood flooring in the Claimants’ condominium. TheClaimants alleged that the installation was defective and that the floor needs replacement.

The Defendant denied any defect in theinstallation. [3] Two settlement conferences were held in this action, one on June 21, 2017 and the other on August 16, 2017. In hissubmissions on this application, Mr. Morgan told me that: (

i) at the first settlement conference, His Honour Judge MacCarthy directedMr. Dougans to inspect the floor; (ii) Mr. Dougans did not comply with that direction; and (iii) at the second settlement conference, HerHonour Judge Chaperon urged Mr. Dougans to make a settlement offer, which he declined to do. Mr. Dougans raised no objection toMr. Morgan’s submissions, and did not contradict Mr. Morgan’s account of events at the settlement conferences. [4] On November 29, 2017, the Claimants served an offer to settle in Form 18 to the Small Claims Rules.

By that document, theymade an offer to settle in the following terms: The claimants offer to settle their claim against the defendant in the amount of $9963.47 …. Payable in full by way of a certified chequewithin 7 … days of acceptance. Claimants to retain flooring and dispose of as they see fit. The Defendant did not respond to that offer. [5] I presided at the trial of the action on August 21 and September 17, 2018. On September 19, 2018, I granted judgment infavour of the Claimants in the amount of $10,653.19 plus court order interest and disbursements: Morgan v.

Pacific Coast FloorCovering Inc. 2018 BCPC 236; [2018] BCJ No 3296. There has been no appeal from my judgment, and the time for appeal has expired:Small Claims Act RSBC 1996, c 430, s 6. [6] Mr. Morgan complains that the judgment remains unpaid, some two months after it was rendered. Mr. Dougans responds thathe will pay the judgment when, and only when, Mr. Morgan provides evidence that he has replaced the floor. Analysis [7] Proceedings at settlement conferences are, by necessarily implication, “without prejudice”. The privilege described in Middelkamp v.

Fraser Valley Real Estate Board (BC CA), [1992] BCJ No. 1947; 96 DLR (4th) 227; 71 BCLR (2d)276 precludes disclosure of the proceedings at settlement conferences, and requires me to disabuse my mind of Mr. Morgan’s

summaryof such proceedings in this case. [8] Rule 10.1(8) of the Small Claims Rules provides: When deciding the amount of a penalty under subrule … (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. This provision differs significantly from Rule 10(6) of the Supreme Court Civil Rules BC Reg 168/2009, which is the correspondingprovision in Supreme Court practice: In making an order under subrule (5), the court may consider the following: (

a) whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was deliveredor served or on any later date; (

b) the relationship between the terms of settlement offered and the final judgment of the court; (

c) the relative financial circumstances of the parties;

(

d) any other factor the court considers appropriate. I infer that the Legislature intended that different considerations should govern the exercise of discretion under the Small Claims Rules . As a result, the Supreme Court jurisprudence is of little assistance when considering the question of a penalty under the Small Claims Rules. [ 9 ] The power to order a penalty under Rule 10.1(6) is discretionary - the court “may”, not “must”, order a penalty if the conditions precedent stated in the rule are satisfied. Rule 10.1(8) requires me to consider three factors. Addressing each in turn: a.

The difference between the amount of the offer and the amount awarded is about $690, or about 6% of the claim. b. No significant point of law arose in this case. The case turned on the relative credibility of the Claimants’ independent expert and the Defendant’s employees who did the work. c. The offer was made in a timely fashion, 9 months before the trial. [ 10 ] There are three interests to be considered in balancing those factors: a. Civil dispute resolution is a public service which is provided to citizens at taxpayers’ expense.

A fair, impartial and principled system for the resolution of civil claims is a necessary part of a healthy commercial ecosystem. It is also expensive. Settlements cost the taxpayers less than trials, and are to be encouraged for that reason. b. Litigation is expensive and stressful for the litigants. A settlement relieves the parties and the witnesses of the expense and inconvenience of a trial, and so is generally a desirable outcome. c. Against that, one must balance the right of a citizen to have her rights and obligations judicially determined after a trial of the case on its merits.

I do not think that we should create situation in which members of the public are deterred from advancing arguable claims or defences by the threat of a financial penalty if the claim or defence ultimately fails. In this case, the first and third of the factors identified in Rule 10.1(8) are not significant. The difference between the amount of the offer and the amount of the judgment is small, and the offer was made long before trial. The second factor is significant. Mr. Dougans firmly believed that the Claimants’ complaints were unfounded and that his staff had done the job properly.

I expect that he still believes that. I found against him on the evidence, but I respect his right to insist that the matter be determined on evidence tendered at a trial. I do not think that he should be punished for that. I would take a different view if I considered Mr. Dougans’ defence to be frivolous or insincere, but I do not. [ 11 ] However, Mr. Dougans’ refusal to pay the amount of the judgment is a different matter. Rule 10.1 describes the payment which may be ordered as a “penalty”.

The applicable definition of “penalty” provided by the Canadian Oxford Dictionary is: “… a punishment, esp. a fine for a breach of law, contract, etc.”. One of the purposes of Rule 10.1 is to punish and deter misconduct in litigation. The amount of the judgment in this case is modest, and Mr. Dougans does not suggest that it is beyond the Defendant’s financial capacity. The judgment is payable forthwith, and is not contingent upon replacement of the floor. The Claimants may, if they choose, refrain from replacing the floor and put the money to another use. Mr.

Dougans’ demand for evidence that the floor has been replaced is unjustifiable. The conditions precedent to the award of a penalty under Rule 10.1(6) have been satisfied. If Mr. Dougans persists in his refusal to pay the judgment, a penalty may be appropriate. Disposition [ 12 ] The application is adjourned to the Judicial Case Manager to fix a date for its continuation. During that interval, Mr. Dougans should reconsider his position. November 26, 2018 __________________________ T. Gouge, PCJ