IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20130429

Docket: 19093

Registry:
Cranbrook

Between:

Lenord Russell

Plaintiff

And

Kenneth Manson
Parks

Defendant

Before:
The Honourable Mr. Justice Melnick

Reasons for Judgment

[1]            
This is an application to set aside a garnishing order issued after
judgment.

I.        BACKGROUND

[2]            
This action arose out of a motor vehicle accident that occurred in July
2008. A trial took place before Mr. Justice Abrioux. He gave reasons for
judgment indexed at 2012 BCSC 1128. He gave subsequent reasons for judgment
indexed at 2012 BCSC 1962 which dealt primarily with costs. However, prior to
the issuance of the latter reasons, the plaintiff filed an appeal.

[3]            
In his reasons respecting costs, Mr. Justice Abrioux awarded the
plaintiff 75% of his costs until April 13, 2012, a date on which the defendant
made an offer to settle. Counsel for the parties subsequently exchanged
correspondence respecting the quantum of these costs. March 4, 2013 was fixed as
the date for taxation of the costs. On January 30, 2013, counsel for the
defendant wrote to counsel for the plaintiff confirming his understanding of an
agreement reached respecting the amount payable to the plaintiff by the
defendant for the costs. He wrote:

I am writing further to our
recent exchange of correspondence on the above-noted matter. While my client
still has some minor issues regarding the number of units claimed and the
sufficiency of evidence to substantiate some of the disbursements, in the
interest of saving all parties some time and expense going forward, we have
agreed on the total amount payable based on the Order and your proposed Bill of
Costs, being $26,000.00. Considering this is in excess of what you had earlier
offered in your correspondence, I am assuming this is acceptable to you and as
such, could I please hear back from you as soon as possible confirming that the
taxation scheduled for March 4, 2013 has in fact been adjourned.

[4]            
Counsel for the plaintiff replied the same day:

The sum of $26,000.00 payable to
the writer in trust is acceptable. I have forwarded the Order on to the Court
Registry for entry.

[5]            
It should be pointed out that, as in most motor vehicle accident cases
in British Columbia, counsel for the defendant was in fact retained by the
Insurance Corporation of British Columbia (“ICBC”), and it was known to all
concerned that it was ICBC that was responsible for making any payment to the
plaintiff for which the defendant might be found liable.

[6]            
Counsel for the plaintiff expected that he would receive a cheque from
counsel for the defendant forthwith. However, counsel for the defendant did not
send a cheque for the costs. Instead he wrote in a letter dated February 1,
2013:

I am writing further to your most recent letter of January
30, 2013. Notwithstanding that we have now agreed regarding the costs payable
pursuant to the order given at the trial of this matter, I also have
instructions to proceed with an application for security for costs and stay of
enforcement with respect to the payment of the costs, pending your appeal.

I will have my office immediately
coordinate with yours a date that is workable for both of our calendars in the
very near future, so that this issue can be addressed one way or another.

[7]            
Counsel for the plaintiff says he received this letter on February 5,
2013. He was not pleased. It was his expectation that the agreement on costs
would include immediate payment. Correspondence from counsel for the defendant
had not said that. As a result, counsel for the plaintiff prepared a
certificate of costs for the agreed lump sum of $26,000. He wrote to counsel
for the defendant on February 12, 2013, setting out his position on why he felt
the defendant was not entitled to security for costs and stating that he would
not have settled the quantum of costs (he used the word “compromised” rather
than settled) had he been given any prior indication that it would not be paid
forthwith. Unfortunately, he did not include, as intended, the certificate of
costs with this correspondence. So he sent it on February 21, 2013 with a
letter that also addressed when he was available to speak to the defendant’s
application in the Court of Appeal for security for costs. He also stated his
position that defendant’s counsel had “made a deal” and had “reneged on that
deal”. By this, he meant that, in his view, the costs should have been paid to
him forthwith after agreement as to their amount.

[8]            
Further correspondence in early March resulted in counsel for the
defendant signing the certificate of costs for the defendant and returning it
to counsel for the plaintiff. On March 1, 2013, counsel for the defendant
wrote:

I am writing further to your most recent letters of February
27, 2013 and March 1, 2013. You are aware of what our position is on the
outstanding issues. Although it is not entirely clear as to what the intent was
of your recently filed materials, I do believe the amount of your Bill of Costs
has in fact been agreed to. As such, I am enclosing a copy of the executed
Certificate of Costs with the original to follow by Courier. I look forward to
receipt of the filed copy.

In that regard and as you are
aware, we are proceeding with an application for stay of enforcement and
security for costs, to be set down for the week of March 19, 2013. In that
regard, we ask that you take no steps of enforcement until such time as that
application is heard. In addition, I note in your letter of February 27, 2013
that you reference Mr. Parks specifically. As you are aware, this is an
insured claim for Mr. Parks and any settlement or judgment amounts will be
paid and satisfied by his insurer, the Insurance Corporation of British
Columbia. Further and in that regard, with respect to the offer provided to
you, the intent of the offer was to try and resolve all outstanding issues
collectively and in that regard, we would reiterate our earlier offer and leave
it to you to decide how you wish to address it.

[9]            
Subsequently, on March 4, 2013, counsel for the plaintiff wrote:

With respect to the Certificate of Costs you are sending to
me, as matters now stand I intend to return it to you unfiled upon receipt. If
you wish the writer to file the Certificate without restrictions, please
advise.

We are not going to accept any
undertakings that would limit or delay our ability to collect this debt now.
Your client’s failure to honour his commitments leaves us no choice but to
proceed to collect this debt through the Courts the costs of which will be
payable by Mr. Parks.

[10]        
Counsel for the defendant replied on March 5, 2013:

I am writing further to your
first letter of March 4, 2013 with respect to the above-noted matter. To be
clear, there are no ‘restrictions’ attached to the filing of the Certificate.
It is simply the case and I am again reminding you of our pending application
addressing the stay of enforcement.

[11]        
On March 7, 2013, counsel for the plaintiff filed the certificate of
costs for $26,000. On the next day, he filed an application for a garnishing
order after judgment. The affidavit in support of the application was sworn by
the plaintiff and simply stated:

(1)        I am the person entitled to enforce the judgment
or order referred to in this Affidavit.

(2)        On a judgment entered in this action, the above
named KENNETH MANSON PARKS (hereafter called the “judgment debtor”) was found
to be indebted to the above named LENORD RUSSELL for $26,000.00 and the whole
sum remains due and it is justly due and owing by KENNETH MANSON PARKS to
LENORD RUSSELL after making all just discounts.

(3)        That to the best of my
information and belief, […] a chartered bank, and […] a company, the
garnishees, are indebted, under obligation or liable to the judgment debtor and
that the garnishees are in the jurisdiction of this court.

[Redacted by the Court]

[12]        
Notice of this application was not given to the defendant.

[13]        
A garnishing order was issued on March 8, 2013. The garnishees were apparently
served on that date, and a no-doubt upset defendant soon contacted defence
counsel.

[14]        
The defendant is apparently a financial advisor. He had his personal and
corporate bank accounts “frozen” as a result of the garnishing order. He had a
professional obligation to forward the order to the BC Securities Commission to
determine whether he was able to continue to carry on business. As a result of
the defendant’s concerns, this application was filed on March 14, 2013.

II.       DISCUSSION

[15]        
It is the position of the defendant that, in seeking this garnishing
order on an ex parte basis, the plaintiff was bound to make full and
frank disclosure of what counsel for the defendant contends were relevant
material facts, namely that payment of the costs was coming from ICBC and that
counsel for the defendant was bringing an application for an order granting a
stay of execution and security for costs in the Court of Appeal to attach all
or part of the $26,000 pending the hearing of the appeal.

[16]        
The plaintiff contends that there were no conditions attached to the
certificate of costs and, as such, by Rule 14-1-(13) of the Supreme Court
Civil Rules, B.C. Reg. 168/2009, the costs were payable forthwith. In the
view of counsel for the plaintiff, counsel for the defendant had no right to
withhold them pending an application to the Court of Appeal that, at that
point, had not even been filed.

[17]        
Rule 14-1(13) of the Supreme Court Civil Rules states:

(13)      If an entitlement to
costs arises during a proceeding, whether as a result of an order or otherwise,
those costs are payable on the conclusion of the proceeding unless the court
otherwise orders.

[18]        
Counsel for the plaintiff takes the position that he had no duty of
disclosure of any of the discussions he had with counsel for the defendant respecting
the latter’s, at that stage only intended, application. He also argues he had
no duty to disclose the party (ICBC) from which it was anticipated that, in the
usual course of events, the judgment for costs would be satisfied. In any
event, suggested counsel for the plaintiff, an application to stay execution
would have to come before this Court, not the Court of Appeal. Counsel for the
defendant also disagrees with this argument.

[19]        
The defendant relied on Evans v. Umbrella Capital LLC, 2004 BCCA
149 [Evans], in this application. Evans was principally concerned
with a garnishing order (absolute), and a second related garnishing order. In
upholding the decision of the trial judge to set aside the orders, Mr. Justice
Donald, writing for the Court, made the following observations at paras. 32-35
respecting the duty of disclosure to the Court on an ex parte
application:

32        There is no disagreement between the parties on the
principles of disclosure. The rule on ex parte applications (which was the
nature of the proceeding on 18 December 2002) was described in the frequently
cited decision of Wilson J., later C.J.S.C., in Gulf Islands Navigation Ltd.
v. Seafarers International Union of North America (Canadian District) et al.
(1959), 18 D.L.R. (2d) 216 at 218:

I find there is some divergence of
judicial thought as to the grounds upon which an ex parte order ought,
upon notice, to be discharged. The area of divergence does not include such
generally accepted fundamental concepts as this: That the ex parte order
is obtained periculo petentis so that if there has not been made to the
Judge a full and frank disclosure of relevant facts, the order will be voided.
Sheppard J.A. in Kraupner v. Ruby (1957), 7 D.L.R. (2d) 383 at p. 391
cites Scrutton L.J. in Lazard Bros. & Co. v. Banque Industrielle de
Moscou, [1932] 1 K.B. 617 at p. 637:

"’Persons applying ex parte to
the Court must use the utmost good faith, and if they do not, they cannot keep
the results of their application.’" To emphasize the strictness with which
this rule is applied, see also Re Gedye, (1852), 15 Beav. 254 at p. 257,
51 E.R. 535.

33        The appellant may have convinced himself that no
notice to the other parties was required and that their claims were immaterial
in respect of his application for an order absolute, but his counsel was
obliged as an officer of the court to disclose any facts which might
have influenced the court’s decision. In Money in a Minute Auto Loans Ltd.
v. Price, 2001 BCSC 864, McKinnon J. makes the point in a summary of the
law with which I respectfully agree, at paras. 12-14:

[12]      It is trite law to
observe that an ex parte applicant must make full and frank disclosure
of all material facts to the court and failure to do so allows the court to set
the order aside without regard to the merits of the application: Gulf
Islands Navigation Ltd. v. Seafarers’ International Union (1959), 18 D.L.R.
(2d) 625 (B.C.C.A.) ("Gulf Islands"); R v. Kensington Income Tax
Commissioners, [1917] 1 K.B. 504 (C.A.). Counsel must also display a high
standard of candour and diligence in disclosure: Wilder v. Davis & Co.
(1994), 92 B.C.L.R. (2d) 385 (C.A.).

[13] A material fact is one
that may or might affect the outcome of an application: C.P.R. v.
U.L.T.U. loc. 144 (1970), 14 D.L.R. (3d) 497 (B.C.S.C.) at 500 – 501. It is
for the court to decide what is a material fact: Brink’s-MAT Ltd. v. Elcombe,
[1988] 3 All E.R. 188 (C.A.); Pulse Microsystems Ltd. v. SafeSoft Systems
Inc., [1996] 6 W.W.R. 1 (Man. C.A.).

[14]      The court also has
jurisdiction to set aside an ex parte order on its merits, whether or
not there was material misrepresentation, if a person affected by the order
applies under B.C.S.C. Rule 52(12.3): also see Martinuik v. Martinuik,
[2001] B.C.J. No. 588 (S.C.M.), 2001 BCSC 424. An application to set aside the
order is heard de novo as to the law and facts of the original
application: Gulf Islands, (above).

[Emphasis in Original]

See also Bank of Credit and Commerce International v.
Akbar, 2001 BCCA 204 at para. 24.

34        It is not for the applicant in an ex parte
proceeding to decide nice questions of law bearing on materiality and then to
withhold information based on that decision. In Girocredit Bank
Aktiengesellschaft Der Sparkassen v. Bader, [1998] B.C.J. No. 1516, Goldie
J.A. in giving the decision of this Court quoted with approval from the
compendium of principles enumerated by Ralph Gibson L.J. in Brink’s-MAT Ltd.
v. Elcombe [1988] 3 All E.R. 188 (C.A.) at 192:

…(ii) The material facts are
those which it is material for the judge to know in dealing with the
application as made; materiality is to be decided by the court and not by
the assessment of the applicant or his legal advisers….

[Emphasis in Original]

Conclusion

35        This appeal can be disposed of on the sole ground
that the appellant was not entitled to the order absolute on the merits of the
application. But counsel’s behaviour is sufficiently concerning that I think it
is necessary to dismiss the appeal on the additional and independent ground of
a failure to make full and frank disclosure of material facts. In this regard I
am in substantial agreement with the reasons of the chambers judge in the
following passage:

[33]      While Mr. Antle says that
there was no duty to disclose anything more than he did, I respectfully
disagree. On the facts known to his client there was a clear duty on him to
inform the court of the facts and circumstances surrounding the source and
nature of the funds, and in particular of the claims of the other claimants to
them, so as to enable the court to properly and fairly exercise its equitable
discretion. Not only was the application equivalent to an ex parte
application, Evans was seeking Draconian rights over persons who should have
been there to protect their interests, and counsel faced the same strict and
inflexible duty of disclosure by which counsel on any ex parte application must
be guided. Full and fair disclosure must be voluntarily made by counsel of any
information or facts which might persuade the Chambers Judge to refuse to make
the order sought, or in some cases to order the attendance on the motion of
other persons whose interests may be affected by the order sought.

[34]      The strictness with which
the courts apply the principle of disclosure, and continue to do so, is
emphasized in the decision of Chief Justice Wilson in Gulf Islands
Navigation Ltd. v. Seafarers International Union Of North America (1959),
18 D.L.R. (2d) 216, (B.C.S.C.) particularly at p. 218 and the decision of
McIntrye J, then of this court, in Canadian Pacific Railway v. United
Transportation Union, Local 144, et al (1970), 14 D.L.R. (3d) 497
(B.C.S.C.) at p. 500, where it is stated that persons applying ex parte
to the court must use the utmost good faith and if they do not, they cannot
keep any benefits of their application. And reference there is made to Re:
Gedye (1852), 51 Beav. 254 at p. 257, 51 E.R. 535 for the proposition:

All matters must be stated. If
there is suppression the court will not inquire if it would have been entitled
to make the same order but only if the matters omitted required full discussion
and notice should be given.

These and other cases make it clear that the principle of
full and fair disclosure is one of our most fundamental principles of justice.
Its abuse simply cannot be justified. Finally, I would commend the consensual
decisions of the three judges in Brink’s Mat Ltd. v. Elcombe et al,
[1988] 1 W.L.R. 1350 (C.A.), particularly that of Ralph Gibson L.J., which
thoroughly cover the subject matter.

[20]        
I find that these are the principles that must guide me on this application.

[21]        
By his March 4, 2013 letter to counsel for the defendant, counsel for
the plaintiff gave notice to counsel for the defendant that, in view of what he
regarded as a failure of the defendant “to honour his commitments”, there was
no choice but to proceed “to collect this debt through the Courts”. Of course,
in these circumstances, if there was a commitment made by anyone (and on the
material before me at least, I cannot say that there was any implied
undertaking to forthwith pay the costs to counsel for the plaintiff), it was by
counsel for the defendant. Counsel for the plaintiff knew full well that the
defence was being provided by ICBC, the defendant’s insurer. In these
circumstances, it strikes me that the appropriate thing to do would have been
for the plaintiff’s counsel to bring the application for the garnishing order
after judgment on notice to counsel for the defendant. However, having chosen
to proceed ex parte, it was his obligation to disclose to the Court the
intended defence application respecting the stay of enforcement and the
security for costs. The plaintiff may well have been successful on such an
application if he put these material facts before the Court, but that was a
decision for the Court to make with this relevant information before it.

[22]        
I am less sure about the necessity to disclose the ICBC obligation to
pay for any judgment against the defendant, but against the background of this
dispute, that likely should have been disclosed as well as it would have gone
to the issue of the urgency, likely even the necessity, for a garnishing order
to be issued to collect a debt owing by an insured in a motor vehicle action
where the insured’s insurer was bound to indemnify him.

[23]        
The bottom line is that counsel for the plaintiff chose to pursue tactics
which he expected would give his client an advantage over his obligation to
make full and fair disclosure to the Court. The plaintiff cannot keep the
benefit of the garnishing order obtained on incomplete disclosure. It is set
aside.

[24]        
When this application came before me, I indicated that I would reserve
my decision. Counsel who was acting as agent on behalf of counsel for the
plaintiff and counsel for the defendant indicated what I took to be their
agreement that, as a pragmatic measure, the entire amount sought by the
plaintiff in the garnishing order would be paid into the trust account of the solicitor
for the plaintiff together with the costs sought in the garnishing order. The
sum total was $26,340. I also understood the garnishing order would either be vacated
or its execution stayed. I asked counsel to keep me apprised if anything should
develop that affected the necessity for me to deliver these reasons. I have not
been made aware of any such development.

III.       CONCLUSIONS

[25]        
Assuming that the garnishing order is still in force and has not been
withdrawn, it is set aside. In any event, the $26,340 is to be returned by the
solicitor for the plaintiff to the solicitor for the defendant forthwith upon
the expiry of the period in which this judgment can be appealed or, if
appealed, upon such further order of this Court or, if applicable, the Court of
Appeal.

[26]        
The defendant is entitled to his costs of this application on Scale B.
That amount shall be subtracted from the costs owed to the plaintiff by the
defendant.

“Melnick,
J.”