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New Brunswick Court Exercises Discretion on Cost Award for “Frivolous” Claim

Whalen & Chaisson v Allstate et al, 2022 NBKB 233

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By: Chloe Jardine (Articled Clerk)

A dispute between Peter Whalen and Nicole Chiasson (“the Plaintiffs”) and their insurer, Allstate Insurance Company of Canada (“the Defendant”) regarding restoration costs to the Plaintiffs’ property following a flood resulted in the filing of a Third Party Claim against 668339 New Brunswick Inc. doing business as Puroclean Services of Moncton (“the Third Party”), who prepared the restoration quote. The Third Party Claim filed by the Defendant alleges that the employee that prepared the quote made false representations regarding the restoration that could or should be done under the Plaintiffs’ insurance policy.

The Plaintiffs and Defendant settled their dispute via mediation. The Defendant sought discontinuance of the Third Party Claim upon payment of $182.50 to the Third Party, but the Third Party refused, stating that it had spent $2,838.55 defending itself against the Claim and was entitled to the full amount. The Defendant filed a motion to discontinue the Third Party Claim upon payment of $182.50, and the Third Party requested the full extent of their legal costs using the Court’s discretion under Rule 59.01 of the New Brunswick Rules of Court, submitting that the Third Party Claim was frivolous, vexatious, and could not proceed.

The Court agreed that the Third Party Claim was “tenuous at best,” stating that the primary action was a contractual coverage dispute between the Plaintiffs and the Defendant, and that a representation made by a third party should not have been considered in the primary action. The Court stated that cost awards on a solicitor-client basis, as requested by the Third Party, are limited, and while the Court was not prepared to award such costs in this case, it applied its discretion under Rule 59.01 to award the Third Party costs totalling $1,500.00 and discontinued the action.

While discussing the Court’s discretion regarding costs, Chief Justice DeWare emphasized that the purpose of costs is to compensate parties and discourage frivolous claims, but that New Brunswick’s cost regime is “grossly outdated and provides little deterrence against the filing of questionable proceedings” [para 15]. Chief Justice DeWare calls for a “long overdue” overhaul of the provinces cost structure under Rule 59 of the New Brunswick Rules of the Court.

Link: https://www.canlii.org/en/nb/nbkb/doc/2022/2022nbkb233/2022nbkb233.html?searchUrlHash=AAAAAQAMImluc3VyYW5jZSIgAAAAAAE&resultIndex=2

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