IN THE SUPREME COURT OF BRITISH COLUMBIA  
Citation:  
Cardero Coal Ltd. v. Carbon Creek  
Partnership,  
2022 BCSC 1103  
Date: 20220630  
Docket: S159680  
Registry: Vancouver  
Between:  
And  
Cardero Coal Ltd.  
Plaintiff/Defendant by Counterclaim  
Carbon Creek Partnership  
Defendant/Plaintiff by Counterclaim  
- And -  
Docket: S160477  
Registry: Vancouver  
Between:  
And  
Peace River Partnership  
Cardero Coal Ltd.  
Plaintiff  
Defendant  
Before: The Honourable Mr. Justice Branch  
Reasons for Judgment on Costs  
Counsel for Plaintiff:  
S. Stephens  
Counsel for Defendant:  
P.T. Linder, Q.C.  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 2  
Written Submissions of Cardero Coal Ltd.:  
Vancouver, B.C.  
April 14, 2022  
Written Submissions of Carbon Creek  
Partnership and Peace River Partnership:  
Vancouver, B.C.  
May 6, 2022  
Reply Written Submissions of Cardero Coal  
Ltd.:  
Vancouver, BC  
May 13, 2022  
Place and Date of Judgment:  
Vancouver, B.C.  
June 30, 2022  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 3  
Table of Contents  
I. INTRODUCTION ................................................................................................ 4  
II. PARTIES’ POSITIONS....................................................................................... 4  
III.  
ANALYSIS...................................................................................................... 5  
A. Enforcement of the Indemnities....................................................................... 5  
1. Cardero’s entitlement to a costs indemnity under the JVA .......................... 7  
2. PRP’s entitlement to a costs indemnity under the Lease........................... 13  
B. Proper Costs Treatment of the Claims and Counterclaim ............................. 13  
C. Substantial Success in the JVA Counterclaim............................................... 14  
D. The Relevance of Substantial Success in the Lease Action.......................... 15  
1. Is the “substantial success” test applicable to a claim for contractual costs?  
16  
2. Determination of substantial success ........................................................ 18  
E. Proper Scale of Costs ................................................................................... 20  
F. Cardero’s Offer to Settle................................................................................ 23  
G. The Appropriate Order .................................................................................. 30  
VI.  
CONCLUSION.............................................................................................. 30  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 4  
I.  
INTRODUCTION  
These two underlying actions sought a determination of the rights of the  
[1]  
parties in relation to a coal mining development project in northern British Columbia.  
My decision on the merits is reported at Cardero Coal Ltd. v. Carbon Creek  
Partnership, 2022 BCSC 253 (the “Reasons”). These are my supplementary reasons  
on costs. I will not repeat the facts set out in the Reasons except as required for this  
decision, and I will use the same defined terms.  
II.  
PARTIES’ POSITIONS  
[2]  
The presence of various contractual terms, claims, results, and an offer to  
settle makes for a very complex costs evaluation.  
[3] Cardero’s primary position is that it is entitled to costs of the JVA Action on an  
indemnity basis from CCP pursuant to the terms of the JVA. Alternatively, Cardero  
argues that it should receive:  
a) double costs for all steps after an offer to settle delivered August 19, 2021  
(the “Cardero Offer”); or  
b) costs at Scale C.  
[4]  
In relation to the Lease Action, Cardero says that:  
a) the parties should bear their own costs up to the date of the Cardero Offer;  
and  
b) PRP should be denied costs and Cardero should be awarded costs at Scale  
B for all steps taken after the date of the Cardero Offer.  
[5]  
PRP submits that costs of the Lease Action ought to be awarded to it as  
follows:  
a) on a full indemnity basis pursuant to the terms of the Lease;  
b) in the alternative, PRP should be awarded Scale C costs; and  
   
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 5  
c) the Cardero Offer should be disregarded, as it was not capable of acceptance  
by PRP alone and, in any event, it was not one that ought reasonably to have  
been accepted by PRP.  
[6]  
CCP submits that costs of the JVA Action should be awarded as follows:  
a) Cardero's claim for indemnity costs should be denied as not having been  
pled, argued, or proven.  
b) In the alternative, if awarded, indemnity costs should be limited to the portion  
of the JVA Action dealing with Cardero's claim that CCP breached the JVA.  
The award should exclude the cost of defending CCP's counterclaim as it  
does not fall within the scope of the contractual indemnity. Given the  
allocation of time and effort between the various claims, CCP argues that  
Cardero's indemnification should be limited to 10% of its full legal costs.  
c) If indemnity costs are not awarded, Cardero’s costs for the JVA Action should  
be assessed at Scale B, pursuant to the Supreme Court Civil Rules, B.C.  
Reg. 168/2009 [Rules].  
d) CCP proposes that the costs for any steps common to both Actions be split  
evenly.  
e) With respect to the treatment of the Cardero Offer, CCP submits that the  
Court should exercise its discretion not to award double costs for steps taken  
after August 19, 2021, as it was not unreasonable for CCP not to accept the  
Offer in the circumstances.  
III.  
ANALYSIS  
A. Enforcement of the Indemnities  
The first issue is whether there is any right to costs at an indemnity level,  
[7]  
pursuant to the terms of the JVA or the Lease.  
   
Cardero Coal Ltd. v. Carbon Creek Partnership  
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[8] Contractual costs indemnities will generally be enforced. As stated by Justice  
Voith in Eisler Estate v. GWR Resources Inc., 2021 BCCA 247 [Eisler Estate CA] at  
para. 8, when assessing the effect of such indemnitees, "[a] contract is a contract."  
Parties are free to contract for indemnities, including for costs of legal proceedings  
on a solicitor-and-client basis.  
[9]  
Justice Brown summarized the legal principles applicable to costs indemnities  
in Bakshi v. Shan, 2013 BCSC 969 at para. 44:  
[44]  
Generally, parties are free to contract as between themselves that a  
party is entitled to a specific order of costs in certain circumstances. Where a  
contract exists, however, a contractual right to be indemnified by solicitor-  
and-client costs must be clearly and unequivocally expressed: M. Orkin, The  
Law of Costs, 2d ed. (looseleaf) (Toronto: Thomson Reuters, 2012) at  
§219.1.1. Nevertheless, no magical incantation is required in order for a party  
to be entitled to a specific order of costs: Canada Deposit Insurance Corp. v.  
Canadian Commercial Bank, 1999 ABQB 266 at para. 19. Like all questions  
of contractual interpretation, the reasonable intention of the parties falls to be  
determined on the basis of the language used: Aegon Canada Inc. v. ING  
Canada Inc., [2003] O.J. No. 1239 (S.C.) at para. 8. See also: Epoch Press  
Inc. v. Sewak, 2011 BCSC 323.  
[10] Justice Donegan discussed the distinction between the statutory costs regime  
under the Rules and costs awarded pursuant to a contract in the lower court  
decision in Eisler Estate v. GWR Resources Inc., 2020 BCSC 562 [Eisler Estate  
SC], aff’d Eisler Estate CA:  
[28]  
Courts have recognized a distinction between costs and legal (and  
other) expenses. Costs are awarded pursuant to the Supreme Court Civil  
Rules, B.C. Reg. 168/2009 [Civil Rules], and a judge cannot impose costs  
sanctions that are not authorized by those rules: Tanious v. The Empire Life  
Insurance Company, 2019 BCCA 329 at para. 45, leave to appeal refused  
[2019] SCCA No. 417. Rule 14-1 allows two categories of costs - party and  
party costs and special costs. The Civil Rules do not provide for "full  
indemnity costs": Tanious at para. 45.  
[29]  
Party and party costs are the default option. As they are to be  
assessed on a tariff, party and party costs are recognized to only provide a  
partial indemnity to the successful party. In Tanious, the Court explained that  
the partial indemnity default option; that is, party and party costs, is intended  
to allocate the high cost of litigation fairly between the parties: Tanious at  
paras. 46-47. Special costs, however, serve a different function. They are not  
compensatory; they are punitive: Smithies Holdings Inc. v. RCV Holdings  
Ltd., 2017 BCCA 177 at para. 56. The purpose of special costs is to censure  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 7  
and deter litigation misconduct, not to compensate the successful party.  
Special costs are also not a substitute for damages or to be conflated with  
damages for mental distress, punitive damages or contractual costs: Tanious  
at para. 51.  
[30]  
Contractual costs are different. Courts have recognized that in  
entering into a contract, the parties may agree that one party will reimburse  
the other for actual legal fees and other expenses in certain circumstances.  
When those circumstances arise, entitlement to recovery of those actual legal  
fees and other expenses is derived from the terms of the contract and not  
from the statutory costs regime in the Civil Rules: Tanious at para. 52.  
[11] Both parties claim a right to a costs indemnity—Cardero under the JVA and  
PRP under the Lease.  
1. Cardero’s entitlement to a costs indemnity under the JVA  
[12] Article 19.1 of the JVA requires CCP to indemnify Cardero for any “Losses”  
directly or indirectly incurred or suffered as a result of, or arising out of, any breach  
of the JVA by CCP. "Losses" is defined in Article 1.1 as, “claims, losses, demands,  
judgments, liabilities, expenses, damages, fines, charges and costs including legal  
costs incurred on a solicitor and own client basis”.  
[13] There is no question Cardero incurred legal costs as a result of CCP's  
breaches of the JVA. However, CCP argues that Cardero’s pleading was inadequate  
to alert CCP to Cardero’s intention to seek indemnity costs.  
[14] In its notice of civil claim under “relief sought”, Cardero listed “costs”.  
[15] In Eisler Estate SC, the plaintiffs also merely pled for “costs”, but were  
nonetheless generally successful in pursuing a claim for a contractual indemnity  
after trial. Further, on appeal, the plaintiff respondents did not include a claim for  
contractual indemnity costs in their factum (despite the form requiring “any special  
disposition desired with respect to costs” to be stated). The Court of Appeal  
nonetheless awarded the respondent costs in accordance with the contract:  
[5]  
Before us, as they did before Justice Donegan, the respondents rely  
on this clause in seeking full indemnity for their legal fees and expenses  
incurred in relation to this appeal. Like Justice Donegan, we can see no  
reason not to make the order requested.  
 
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 8  
[6]  
The appellant does not raise any issue of contractual interpretation.  
Rather, it seeks to avoid its clear contractual obligation by relying on the  
contents of one of this Court's forms. It says that Form 10 stipulates that Part  
4 of the factum "must include any special disposition that is desired with  
respect to costs", and it points out that the respondents did not make this  
claim for contractual indemnity in their factum…  
[7]  
In our view, the appellant's obligation is entirely independent of this  
Court's rules, which govern costs within the discretion of the Court. Rather, it  
arises under contract…  
[8]  
Nothing in this Court's Rules purports to override any such obligation,  
nor is the appellant relieved of its contractual obligations by the application for  
security. A contract is a contract.  
[9]  
The appellant's submission that it might not have proceeded to the  
hearing of the appeal if it had known that the [respondent] would seek  
indemnity costs is without merit. It had Justice Donegan's costs reasons in  
hand months before the hearing of this appeal, and has obviously been  
aware of its contractual obligations throughout this litigation.  
[16] In arguing that its pleading was sufficient to engage the contractual indemnity,  
Cardero relies on 0923063 B.C. Ltd. v. JM Food Services Ltd., 2019 BCSC 553:  
[109] The governing authority for considering a costs provision in the  
applicable contract appears to be P&T Shopping Centre Holdings Ltd. v.  
Cineplex Odeon Corp., [1995] B.C.J. No. 330 (C.A.). There, Southin J.A.  
addressed court-awarded costs when the lease between the parties obligated  
the tenant in default to pay the landlord "the complete legal costs incurred by  
the landlord". Southin J.A. held that the landlord had to cho[o]se between  
suing on the costs provision in the lease while receiving no court-awarded  
costs, or receiving ordinary (party and party) costs by court order.  
[110] In their submission before me, the Plaintiffs elected to rely on the  
costs provision quoted above from the Standard Franchise Agreement.  
Given that election, relatively recent authority of this Court has, in effect,  
removed the need to sue on the costs provision under the contract, and  
instead simply permits the Court to make the following order, which I make  
here:  
I direct that the Registrar of the Supreme Court conduct an  
assessment under Rule 18–1(1) of the Supreme Court Civil Rules to  
determine the amounts recoverable by the Plaintiffs under the  
Standard Franchise Agreement for reasonable legal fees and  
expenses, as costs of the action, in accordance with these Reasons  
for Judgment. I direct that the Registrar certify the result of the  
assessment pursuant to Rule 18–1(2)…  
[Emphasis added.]  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 9  
[17] I have determined that the same approach should apply here—the  
contractual indemnity should be enforced in Cardero’s favour, and the Registrar  
directed to determine the appropriate amount of said indemnity.  
[18] CCP cites Seven Estate Ltd v. Co-operators General Insurance Co., 1997  
2372 (B.C.S.C.), for the proposition that a party must specifically plead a  
claim for contractual costs. However, I agree with Cardero that this aspect of the  
decision is obiter. At para. 72 of Seven Estate Ltd., the court found that as a matter  
of contractual interpretation, the provision at issue did not provide an indemnity for  
legal costs of the proceeding. Hence, any comment on the adequacy of the pleading  
was not necessary to the result.  
[19] It should also be noted that at paras. 76-77 of Seven Estate Ltd., the court  
went on to say it would have declined to make the award because the plaintiff had  
failed to establish an evidentiary basis for the claimed solicitor-client costs at trial. I  
have some concerns about such an approach. If such an approach were adopted, it  
would suggest that if a party wishes to obtain an award for contractual costs, they  
would have to tender their own lawyer's accounts at trial. Such a requirement is  
inconsistent with case law providing that a party need not plead particulars of any  
possible future costs claim at the outset, as costs are not part of the original lis  
between the parties. Rather, costs are generally a separate matter to be determined  
after all other issues have been resolved: A.I. MacFarlane & Associates Ltd. v.  
Delong (1986), 55 O.R. (2d) 89 (H. Ct. J.) at para. 6; Real Estate Council of Alberta  
v. Moser, 2021 ABQB 787 at para. 25.  
[20] In Alberta Permit Pro v. Booth, 2008 ABQB 167, the Alberta court held that,  
given the strong policy reasons to enforce contractual agreements, applying a strict  
rule that solicitor-client costs must be pled at the outset would constitute an  
"extremely formalistic" approach: para. 45. The successful party was awarded  
contractual indemnity costs despite failing to plead the particular costs clause in the  
agreement:  
Cardero Coal Ltd. v. Carbon Creek Partnership  
[43] Several of the cases indicate that the underlying rationale to require  
Page 10  
disclosure of costs sought, such as enforcement of a covenant or agreement  
to pay costs on a solicitor and client basis, is late introduction of this  
argument within a proceeding. See in particular Marianayagam v. Bank of  
Montreal, supra. Essentially, this is because these cost-related clauses are ‘a  
surprise’ to the other side, and to allow parties to argue application of these  
clauses late in the proceeding unfairly prejudices the other party.  
[44]  
That ratio would seem particularly applicable where one party to a  
legal action is legally naive, while the other party seeking to enforce payment  
of costs on a solicitor and client basis is an entity experienced and familiar  
with legal proceedings, documents, and terminology. This principle would  
also apply where the clause requiring payment of such costs is included in a  
standard form agreement and the party sought to be made liable had no input  
into the negotiation of the terms. An example of this is where a financial  
institution attempts to enforce a boilerplate term in a mortgage: Laurentian  
Bank of Canada v. Ellacott, supra.  
[45]  
That is not the scenario here. Instead, two experienced businessmen,  
each supported by legal counsel, negotiated and entered into a contract of  
sale that was then re-examined and scrutinized in a series of no less than  
three amendments. To say that these parties did not know the full substance  
of the agreement into which they had entered would seem a peculiar  
proposition. In essence, to apply as a strict rule that solicitor-client costs  
when claimed under an agreement will never be ordered unless the specific  
provision of the agreement is pled would be to adopt an extremely formalistic  
approach to evaluation and application of the substance of pleadings.  
[46]  
I note, further, that Alberta Permit Pro also pled entitlement to costs  
on a solicitor•client basis in the Amended Amended Statement of Claim, also  
without reference to the particular clause of the Original Purchase and Sale  
Agreement.  
[47]  
Many cases have said that where parties have agreed to pay party  
and party costs on a solicitor and client basis, that agreement should  
generally be acknowledged, accepted and applied by the courts: 369413  
Alberta Ltd. v. Pocklington, 1999 ABQB 936, supplementary reasons at  
paras. 48, 50, 741431 Alberta Ltd. v. Devon (Town of), 2003 ABQB 377, at  
paras. 37-8.  
[48]  
There is a strong policy reason in this case to enforce the agreement  
made by the parties that if either party breached the terms of their agreement,  
the offending party would be liable to pay costs on a solicitor-client basis. In  
my view, the knowledge these parties had of the agreements they had  
reached, taken together with the fact Jazz Bailey has pled in the counterclaim  
“... costs of the Counterclaim to be taxed on a solicitor and own client basis.”  
provides fair notice to the Plaintiffs that they may be held responsible for the  
Defendants' costs on a solicitor and client basis.  
[Emphasis added.]  
[21] The Court’s approach is also supported by the decision in Brown v. Silvera,  
2010 ABQB 224, where the defendant/plaintiff by counterclaim had not expressly  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 11  
pled the relevant contractual provision, but the court nonetheless awarded  
contractual solicitor-client costs:  
[21]  
… Brown argued in the costs application that costs ought not to be  
awarded to Silvera pursuant to the cost clause in the Minutes because she  
did not specifically plead those Minutes. The court must therefore address the  
issue of whether solicitor-client costs stemming from indemnification  
provisions of a contract may be awarded even if the provisions were not pled.  
[22]  
… In Brown v. Silvera, a number of factors indicate that effective or  
fair notice was in fact given to Brown. The contract containing the  
indemnification provision was drafted by Brown's counsel on his instructions  
and signed by both parties who received legal advice from their lawyers. As  
well, Brown himself is an experienced businessman who is expected to have  
a good understanding of the contractual agreement.  
[23]  
I also note that solicitor-client costs have been formally pled in this  
application by Brown – both in his Statement of Claim and his Statement of  
Defence to Counterclaim. He was well aware of the concept of solicitor-client  
costs. In fact, in his Statement of Defence to Counterclaim, he pled solicitor-  
client costs and punitive costs. I observe that his pleading was not for solicitor  
and own client costs.  
[24]  
As there is no indication that Brown did not have effective notice, one  
must conclude that Silvera may rely on the indemnification provisions without  
pleading the contractual clause in making her claim for solicitor-client costs  
on a contractual basis.  
[25]  
Therefore, I find that Silvera did not have to plead solicitor-client  
costs. nor solicitor and own client costs specifically. The clause in the Minutes  
applies and will be enforced. On this basis, I award Silvera solicitor and own  
client costs…  
[Emphasis in original.]  
[22] It must be acknowledged that the case law in Alberta developed in a  
somewhat different context, as Rule 120 of the former Alberta Rules of Court, Alta.  
Reg. 390/68, stated that parties need not make any specific claims for costs in their  
pleading. However, the current Alberta Rules of Court, Alta. Reg. 124/2010, do not  
include such an express provision, yet courts continue to follow the reasoning in  
Brown: see e.g., HSBC Bank Canada v. Lourenco, 2012 ABQB 648 at para. 37;  
Ravencrest Water Systems Ltd v. Smith, 2019 ABQB 124 at paras. 16, 29-30.  
[23] Our Rules do not contain a specific provision relating to pleadings for costs.  
Notwithstanding this difference between the jurisdictions for at least part of the  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 12  
relevant period, I find that the general principles set out in the Alberta cases  
discussed above are logical, and supportive of Cardero’s position.  
[24] In sum, I find that the following factors favour allowing Cardero to pursue its  
claim for contractual indemnity costs:  
a) Cardero at least made a claim for “costs” in its notice of civil claim.  
b) The JVA was negotiated by sophisticated businesspersons who would—or  
should—have appreciated the significance of the relevant clause.  
c) The contractual costs clause was obviously intended to deter breaches.  
Accordingly, when such breaches occur, the clause should be respected  
unless there is a good reason not to.  
d) PRP—a related party to CCP and represented by the same counsel at trial—  
made its own claim for contractual costs under the Lease. Having sought to  
rely upon a contractual costs clause in its favour, the Partnerships cannot  
reasonably argue that they were surprised that Cardero would rely on the  
parallel clause in the JVA.  
e) There is little purpose mandating that a party plead a claim for contractual  
costs with particularity before the merits of the claim are determined.  
Mandating more particular pleading for solicitor and own client costs at the  
outset may create discovery obligations that would interfere with the solicitor-  
client privilege otherwise enjoyed during the initial course of a matter.  
f) There is also little purpose in preventing Cardero from pursuing its contractual  
costs now, given that the case law suggests it would have the ability to  
subsequently pursue such a contractual claim in a separate proceeding: see  
e.g., B.U.K. Investments Ltd. v. Ken Pappas, 2002 BCSC 161 at para. 33;  
Halle v. Ritchie, 2008 BCSC 1452 at para. 67; P & T Shopping Centre  
Holdings Ltd. v. Cineplex Odeon Corp. (1995), 3 B.C.L.R. (3d) 309 (C.A.) at  
paras. 21-24; The Owners, Strata Plan NWS3075 v. Stevens, 2018 BCSC  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 13  
1784 at paras. 81-83; Law and Equity Act, R.S.B.C. 1996, c. 253, s. 10. I note  
that certain aspects of these decisions could be interpreted as going as far as  
to suggest that Cardero has no option but to pursue a contractual costs claim  
in a separate proceeding commenced after the fact.1 However, unsurprisingly,  
PRP does not oppose Cardero’s claim for contractual costs on this basis,  
presumably because such a rule would also prevent PRP from advancing its  
own claim for contractual costs within the Lease Action.  
[25] As such, I would allow Cardero to advance its claim for contractual costs  
arising from breaches of the JVA at the present time. The proper scope of this claim  
is discussed further below.  
2. PRP’s entitlement to a costs indemnity under the Lease  
[26] Cardero does not dispute PRP’s ability to seek its contractual indemnity costs  
generally, but argues that PRP is not entitled to such an award because it did not  
achieve "substantial success". This issue is discussed below.  
B. Proper Costs Treatment of the Claims and Counterclaim  
[27] There were three claims advanced at trial: Cardero’s claim in the JVA Action  
(the “JVA Claim”), CCP’s counterclaim in the JVA Action (the “JVA Counterclaim”),  
and PRP’s claim in the Lease Action (the “Lease Claim”). To determine the costs  
consequences of the Reasons, it is necessary to consider how these three claims  
should interact.  
[28] Generally, counterclaims are treated as separate actions for the purposes of  
costs: Litt v. Gill, 2016 BCCA 288 at paras. 55-56. However, courts retain a  
discretion to consider claims and counterclaims together for costs purposes where  
they are “completely intertwined” or are “mirror images of each other”: The Owners,  
1 In J. Fiddick and C. Wardell, The Manual to British Columbia Civil Litigation, 2020  
CanLIIDocs 630, the authors suggest that this issue remains open:  
Contract: Pursuing special costs according to the terms of a contract may require a second  
action pursuing those costs as contractual damages. It will be relevant whether the contract  
requires that there be a demand for payment of special costs.  
[Emphasis added.]  
   
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 14  
Strata Plan LMS 3259 v. Sze Hang Holdings Inc., 2017 BCCA 346 at para. 96. This  
may occur where the claim and counterclaim arise from the same factual matrix,  
involve much of the same evidence, or the counterclaim is largely responsive to the  
underlying claim: Belpacific Excavating & Shoring Limited Partnership v. Crown and  
Mountain Creations Ltd., 2022 BCSC 412 at paras. 10-11.  
[29] Absent the need to enforce the contractual indemnities, I would have  
concluded that the JVA Claim and Counterclaim were sufficiently intertwined to be  
considered together for costs consequences. However, the contractual costs  
provision in favour of Cardero in the JVA complicates matters, and I find necessarily  
and effectively severs the connection.  
[30] As explained above, Cardero’s indemnity in the JVA Action is applicable to  
the JVA Claim. Under the clause, Cardero is entitled to costs incurred because of  
breaches of the JVA by CCP. However, I agree that Cardero’s costs in defending  
CCP’s JVA Counterclaim are not captured by the language of the indemnity. As a  
matter of contractual interpretation, any costs incurred by Cardero in defending the  
JVA Counterclaim did not “aris[e] out of… any breach of” the JVA by CCP. Rather,  
they arose because of alleged breaches of the JVA by Cardero.  
[31] Accordingly, I conclude that the best way to proceed in the present case is for  
the JVA Claim and JVA Counterclaim to be considered separately for the purposes  
of costs. Cardero is only entitled to rely on the indemnity clause in respect of the  
JVA Claim. Costs for the JVA Counterclaim should be awarded separately to the  
substantially successful party, or if no party was substantially successful, each  
should bear their own costs (subject to the potential effect of the Cardero Offer).  
C. Substantial Success in the JVA Counterclaim  
[32] Did any party achieve substantial success in the JVA Counterclaim? In  
Fotheringham v. Fotheringham, 2001 BCSC 1321 at para. 46, Justice Bouck  
described the approach to analyzing "substantial success" as a four-step process:  
 
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 15  
a) First, by focusing on the "matters in dispute" at the trial. These may or may  
not include "issues" explicitly mentioned in the pleadings.  
b) Second, by assessing the weight or importance of those "matters" to the  
parties.  
c) Third, by doing a global determination with respect to all the matters in  
dispute and determining which party "substantially succeeded" overall, and  
therefore won the event.  
d) Fourth, where one party "substantially succeeded," a consideration of whether  
there are reasons to "otherwise order" that the winning party be deprived of  
their costs and each side then bear their own costs.  
[33] Applying this approach, I am satisfied that Cardero was substantially  
successful in the JVA Counterclaim. In the Counterclaim, CCP alleged that Cardero  
breached the JVA by abandoning property in the Freehold, contrary to the  
abandonment clause in the JVA. In the Reasons, I found that CCP failed to establish  
any breach of the JVA by Cardero: para. 181. Accordingly, Cardero was  
substantially successful in defending the JVA Counterclaim and is entitled to its  
costs therein. I address the appropriate scale below.  
D. The Relevance of Substantial Success in the Lease Action  
[34] Cardero takes the position that PRP was not substantially successful in the  
Lease Action, given that it only recovered $500,000 of the $2,500,000 claimed.  
[35] PRP advances two arguments in response:  
a) The substantial success test is not applicable to a claim for contractual costs.  
b) In the alternative, PRP was substantially successful.  
 
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 16  
1. Is the “substantial success” test applicable to a claim for  
contractual costs?  
[36] I agree with PRP that the substantial success test is not applicable to a claim  
for contractual costs given the language of the indemnity. As stated in Eisler Estate  
SC, “entitlement to recovery of those actual fees and other expenses is derived from  
the terms of the contract and not from the statutory costs regime in the Civil Rules”:  
para. 30.  
[37]  
Pursuant to Article 30.2 of the Lease, Coalhunter (the corporate predecessor  
to Cardero) agreed to indemnify and hold harmless PRP from and against any and  
all “Losses” directly or indirectly incurred or suffered in connection with, as a result of  
or arising out of “any breach of this Lease by Coalhunter”. Pursuant to Article 1.1(s),  
“Losses” is defined as “claims, losses, demands, judgments, liabilities, expenses,  
damages, fines, charges and costs (including legal costs incurred on a solicitor and  
own client basis)”.  
[38] I find that this is a clear and unequivocal expression of contractual intent:  
Hudson's Bay Company v. Cherry Lane Shopping Centre Holdings, 2022 BCSC 563  
at paras. 43-46. These clauses clearly do not require that PRP establish “substantial  
success” in order to entitle it to contractual costs. Rather, it is enough if there were  
legal costs “directly or indirectly incurred… as a result of or arising out of any  
breach”. This language is broad and encompassing and does not permit—or  
require—a finely tuned analysis of the degree of success.  
[39] Cardero submits that the Court retains a residual discretion to deny PRP its  
contractual costs in the Lease Action, and should exercise it in the present case.  
While the Court’s discretion with respect to costs may not be completely fettered by  
the existence of a contractual costs provision, any such discretion is narrow in scope  
and is not triggered in the present case. Courts should generally enforce a  
contractual covenant to pay solicitor and own client costs absent misconduct by the  
party advancing the costs claim, or inequity to the party being asked to pay the  
costs. I do not find that either such condition is engaged here.  
 
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 17  
[40] Cardero relies on 152030 Ontario Inc. v. 2051187 Ontario Inc., 2006  
42788 (Ont. Sup. Ct. J.) at paras. 7-12, where an Ontario court held that contractual  
indemnity provisions do not oust the court's discretion in awarding costs. That  
decision relied in turn on guidance from the Ontario Court of Appeal in Re Haasz  
Estate (1959), 21 D.L.R. (2d) 764 (Ont. C.A.). A similar line of authority has  
developed in Alberta: see e.g., 369413 Alberta Ltd. v. Pocklington  
(2000), 79 Alta. L.R. (3d) 222 (Q.B.) at para. 50 [Pocklington], rev'd in part on other  
grounds 2005 ABCA 376.  
[41] While I accept that these cases indicate that parties may not entirely fetter the  
discretion of the court with respect to costs via contract, the discretion to override  
clear contractual language with respect to costs is limited. In HSBC Bank Canada,  
the court stated as follows:  
[31]  
The law is to the effect that where a contract is sufficiently clear, the  
courts will generally enforce express covenants for solicitor client costs,  
unless there is misconduct or harshness: Manufacturers Life Insurance Co. v.  
Toronto Dominion Bank (1988), 92 A.R. 92, [1989] 1 W.W.R. 474 (Alta. C.A.).  
Mason J. discussed this general principle in 369413 Alberta Ltd. v.  
Pocklington (2000), 79 Alta. L.R. (3d) 222, [2000] A.J. No. 410 (Alta. Q.B.):  
[50]  
Contractual provisions as to costs are considered in  
Orkin's The Law of Costs, 2d. ed. (Aurora: Canada Law Book, 1999) at  
para. 219.1.1. In the context of a mortgagee defending its security,  
contractual solicitor-client costs are common, and "a contractual right  
to [such] costs ... should generally be ordered". Orkin also points out,  
however, that "the right is always subject to the court's discretion, and  
costs on the lower scale may be ordered". The court may refuse to  
enforce the contractual right where there are good reasons - the  
successful party has engaged in inequitable conduct, or the case  
presents special circumstances which makes the imposition of  
solicitor-client costs unfair or unduly onerous: Bossé v. Mastercraft  
Group Inc. [1995] O.J. No. 884 at para. 65; see also C.D.I.C. v.  
Canadian Commercial Bank (1989), 68 Alta. L.R. (2d) 194 (C.A.) at 203-  
04.  
[Emphasis added.]  
[42] Turning to British Columbia, in Mee Hoi Company Bros. Ltd. v. Borving  
Investments (Canada) Ltd., 2017 BCSC 1910, the court held that it retained a  
residual discretion to override a contractual costs provision where “improper conduct  
on the part of the claimant may vitiate some or all of its claim for recovery”: para.  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 18  
198. The court went on to provide that the only limiting factors to a claim for  
contractual costs were that the costs should be “incurred as a result of the breach of  
another contracting party and [were]… incurred honestly and in good faith”: para.  
235.  
[43] In Rai v. Can-Pacific Farms and Packers Ltd., 2014 BCSC 957, the court  
again accepted that parties could not entirely fetter the discretion of the court with  
respect to costs, but once again reinforced the general applicability of contractual  
costs clauses:  
[61]  
In Canadian Petcetera Limited Partnership v. 2876 R Holdings Ltd.,  
2010 BCCA 469, the Court, at para. 42, said the following:  
A distinction must be made between costs and legal (and other)  
expenses. Costs are awarded pursuant to the Rules of Court. They  
are normally granted on a party and party basis in accordance with a  
tariff contained in the Rule of Court, and they amount to only a portion  
of the party's actual legal expenses. By contrast, it is open to the  
parties to a contract to include a provision for reimbursement by one  
party to the other party for its actual legal and other expenses in  
certain circumstances. These are sometimes referred to as indemnity  
costs or contractual costs.  
[62]  
Parties cannot by agreement fetter the discretion of the courts with  
respect to costs: 1152030 Ontario Inc. v. 2051187 Ontario Inc., [2006] O.J.  
No. 5153 (S.C.J.). They can however contract for reimbursement for their  
actual legal expenses. In my view, because the parties have agreed to a  
comprehensive lease which provides for reimbursement for their legal costs,  
the plaintiffs are entitled to rely on the lease with respect to their legal costs.  
[Emphasis added.]  
[44] There is no evidence before me suggesting that extraordinary circumstances  
such as misconduct or inequity exist in the present case. I find that there is no basis  
to prevent PRP from seeking to enforce the Lease’s contractual costs provision.  
2. Determination of substantial success  
[45]  
If I am incorrect and the substantial success test is applicable to PRP’s claim  
for contractual costs in the Lease Action, I agree with Cardero that PRP did not  
achieve substantial success.  
 
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 19  
[46] As noted above, in Fotheringham, Justice Bouck described the court's  
approach to analyzing "substantial success" as a four-step process: para. 46.  
[47] In the Lease Action, PRP alleged that Cardero failed to make the Advance  
Royalty Payments due on June 2, 2013 and June 2, 2014, for $500,000 and  
$2 million, respectively.  
[48] While it is true that there was only one cause of action plead, there were  
effectively two "matters in dispute" at the trial of the Lease Action, and PRP only  
succeeded in one.  
[49] The first and second Advance Royalty Payments was sufficiently distinct so  
as to qualify as separate matters in dispute. Furthermore, in terms of importance,  
PRP's second failed claim involved a sum 400% larger than its first. As the court  
held in Can-West Development Ltd. v. Parmar, 2020 BCSC 439:  
[11]  
… I reject the plaintiff's argument that they were the successful party  
because the defendants must make any payment to them. The plaintiff  
sought payment of $351,530. The reasons for judgment awarded the plaintiff  
$80,718. That amount will now change somewhat based on the clarification  
orders I have made. However, it will not change substantially and will remain  
far less than the quantum sought by the plaintiff. The plaintiff’s argument on  
substantial success rests on the premise that it is successful if any payment  
is owed to it. I disagree. No case law was cited in support of this analysis,  
and I agree with the defendants that this assessment of substantial success  
is contrary to the principles in the cases cited by the defendants.  
[50] I conclude that while PRP enjoyed some success in the Lease Action, it was  
not substantially successful.  
[51] PRP seeks to analogize to personal injury cases where courts have held that  
a plaintiff was substantially successful even if they did not recover all of the  
damages sought. I do not find this to be a persuasive analogy. Here, there were two  
payments allegedly owing, each requiring different contractual and contextual  
analyses. The two payments were factually distinct, and not necessarily  
interdependent—as in Hudson's Bay Company at para. 34. Cardero could have paid  
one payment and not the other. Cardero could have (and was) found to be in breach  
in relation to one payment and not the other.  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 20  
E. Proper Scale of Costs  
[52] There are two issues with respect to the scale of costs that must be  
considered. First, since Cardero was substantially successful in the JVA  
Counterclaim but is not entitled to a contractual indemnity, what scale of costs is it  
entitled to? Second, in the event I am incorrect and the indemnities should not be  
applied to the JVA Claim or the Lease Claim, what scale of costs would Cardero and  
PRP be entitled to for those?  
[53] Perhaps not surprisingly, but arguably inconsistently, the parties each argue  
that any claim for costs payable under the Rules should be assessed at Scale B for  
the claim in which they were unsuccessful, and at a higher scale for the claim in  
which they were successful.  
[54] Under s. 2 of Appendix B of the Rules, the court may fix the scale of costs at  
A, B, or C. The appropriate scale is determined by reference to the matter's relative  
difficulty:  
2(1) If a court has made an order for costs, it may fix the scale, from Scale A  
to Scale C in subsection (2), under which the costs will be assessed, and  
may order that one or more steps in the proceeding be assessed under a  
different scale from that fixed for other steps.  
(2) In fixing the scale of costs, the court must have regard to the following  
principles:  
(a) Scale A is for matters of little or less than ordinary difficulty;  
(b) Scale B is for matters of ordinary difficulty;  
(c) Scale C is for matters of more than ordinary difficulty.  
(3) In fixing the appropriate scale under which costs will be assessed, the  
court may take into account the following:  
(a) whether a difficult issue of law, fact or construction is involved;  
(b) whether an issue is of importance to a class or body of persons, or  
is of general interest;  
(c) whether the result of the proceeding effectively determines the  
rights and obligations as between the parties beyond the relief that  
was actually granted or denied.  
[55] In Meghji v. British Columbia (Ministry of Transportation and Highways), 2014  
BCCA 105, the Court of Appeal explained that Scale C captures all matters involving  
 
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 21  
more than ordinary difficulty (i.e., regardless of how little or great the level of difficulty  
exceeds “ordinary”):  
[135] In addressing the issue of the scale of costs, the trial judge was of the  
view that the class of cases that can now be characterized as matters of  
ordinary difficulty is broader than the class of cases that were characterized  
as matters of ordinary difficulty under the old Supreme Court Rules. He was  
of the view that in place of five categories the Rules now established three  
categories, each broader than the categories that had been replaced. In our  
opinion, the Rules should not be so interpreted. In our view, the effect of the  
change in the Rules was to merge Scales 1 and 2 into Scale A and to merge  
Scales 4 and 5 into Scale C, as suggested by McEwan J. in Slocan Forest  
Products Ltd. v. Trapper Enterprises Ltd., 2010 BCSC 1494, 100 C.P.C. (6th)  
70, and to eliminate subtleties that, in his considered view, with which we  
agree, "may be more metaphysical than practical."  
[136] We say this for two reasons. First, given the existing case law defining  
matters of ordinary difficulty, the drafters of the Rules, by using the same  
phrasing, appear to have intended to continue the existing cost regime in  
relation to cases of ordinary difficulty, as that phrase has been defined and  
judicially considered. Further, the Rules reflect an intention to collapse, into  
one category, all cases of less than ordinary difficulty. The language of the  
current Rules combines matters of little difficulty (which formerly fell into  
Scale 1) and matters of less than ordinary difficulty (formerly Scale 2) into  
what is now Scale A. There was not an equal and proportionate expansion of  
the range of cases falling within each scale in the new tariff. Having  
consolidated all matters of less than ordinary difficulty into one scale, it is our  
view that the drafters also consolidated all matters of more than ordinary  
difficulty, including matters of unusual difficulty or importance, into Scale C.  
[56] In Mort v. Board of School Trustees of School Board District No. 63  
(Saanich), 2001 BCSC 1473 at para. 7, Justice Wilson set out a list of factors for the  
court to consider when assessing a matter's relative difficulty:  
a) the length of the trial;  
b) the complexity of the issues involved;  
c) the number and complexity of pre-trial applications;  
d) whether or not the action was hard fought with little or nothing being  
conceded along the way;  
e) the number and length of examinations for discovery;  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 22  
f) the number and complexity of the expert reports; and  
g) the extent of the effort required in the collection and proof of the facts.  
[57] None of the above factors are determinative, nor is the list exhaustive.  
Ultimately, the court must exercise its discretion based on experience and the  
specific circumstances of the case before it: Monument Mining Limited v. Balendran  
Chong & Bodi, 2013 BCSC 179 at para. 6.  
[58] I accept that each matter here involved issues of more than ordinary difficulty.  
[59] First, the trial was of more than ordinary length. Despite pre-trial agreements  
and diligent efforts of experienced counsel, the trial nonetheless consumed 13  
days—not overly long, but longer than most: see e.g., Slocan Forest Products Ltd. v.  
Trapper Enterprises Ltd., 2010 BCSC 1494 at para. 9; Kevin LaRoche, M.  
Laurentius Marais & David Salter, “The Length of Civil Trials and Time to Judgment  
in Canada: A Case for Time-Limited Trials”, (2021) 99 Can Bar Rev 286 at 292.  
[60] Second, the underlying facts were highly technical. Some of the matters  
requiring consideration included the types of coal and their attributes, the various  
levels of study undertaken during the course of exploration, the differences between  
reserves and resources, the rules and regulations governing public disclosure of  
exploration results, and the benchmark versus realizable prices and changes over  
time, among other matters.  
[61] Third, the relevant factual period spanned a number of years and was  
relatively document intensive.  
[62] Fourth, the parties made numerous pre-trial applications and appearances,  
including for production of documents, to have the JVA Action and Lease Action  
tried together, for a summary trial, and for a ruling on the admissibility of CCP's  
valuation report. These applications were in addition to case planning conferences  
and at least four trial management conferences/judicial management conferences.  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 23  
[63] Fifth, the parties ultimately delivered and relied on six expert reports from  
three experts.  
[64] Sixth, significant amounts were in issue.  
[65] Seventh, the action was hard fought. Neither party conceded much ground.  
The parties' closing arguments comprised 94 and 79 pages, respectively. While  
counsel tenaciously advocating for their clients’ interests “is a hallmark of most  
actions”, and this factor must be treated with some caution, I am satisfied that the  
circumstances of the present case render it of more than ordinary difficulty:  
Monument Mining Ltd. at para. 13.  
[66] PRP also relies on Cardero’s litigation conduct to support a Scale C finding in  
the Lease Action. Given my findings above, it is unnecessary to opine on such  
conduct in order support a Scale C finding. I do note that Scale C costs are not  
punitive: Carrier v. Tate, 2009 BCCA 183 at paras. 51-57. A party’s conduct is only  
relevant insofar as it complicated the litigation or increased its costs. As I have found  
that the litigation was inherently complex and the parties each brought numerous  
pre-trial applications, there is no utility in further delving into the relative fault each  
party may bear for the conduct of the litigation.  
[67] Accordingly, I find that Cardero’s costs in the JVA Counterclaim will be  
assessed at Scale C. As an alternative finding to my conclusion on the entitlement to  
costs pursuant to the indemnity clauses, I would have found that Cardero was  
entitled to its costs at Scale C in the JVA Claim and PRP would have been entitled  
to its costs at Scale C for the Lease Claim.  
F. Cardero’s Offer to Settle  
[68] The Cardero Offer remains relevant to Cardero’s claim for costs in relation  
to the JVA Counterclaim. Cardero also argues that it remains relevant to PRP’s  
claim for contractual costs of the Lease Action  
 
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 24  
[69] Cardero sought double costs against CCP in the JVA Action for all steps  
taken after August 19, 2021 (being the date of the Cardero Offer). Cardero also  
argues that PRP should be denied its costs of the Lease Action after that date.  
[70] In my view, the Cardero Offer should have been accepted for the reasons  
expressed below. Accordingly, Cardero is entitled to double costs in respect of  
the JVA Counterclaim from August 19, 2021 onward. Furthermore, if I am wrong  
and the contractual indemnities do not apply, Cardero would be entitled to  
double costs in respect of the JVA Claim from August 19, 2021 onward. I do not  
agree that PRP should be denied any of its contractual costs in the Lease  
Action.  
[71] Pursuant to Rule 14-1(9), costs of a proceeding are awarded to the  
successful party unless the court otherwise orders. Rule 9-1 permits the court to  
make certain alternative costs awards in circumstances where a party made a  
formal offer to settle. A primary purpose of Rule 9-1 is to encourage settlement  
and thus preserve the court's and the parties' resources: Hartshorne v.  
Hartshorne, 2011 BCCA 29 at para 25.  
[72] Under Rule 9-1(4), the court may consider an offer to settle when exercising  
its discretion in relation to costs. Rule 9-1(5) provides the court with four options for  
costs consequences. The key option in the present case is the potential  
award of double costs for all or some steps taken after the date the Cardero  
Offer was delivered. Rule 9-1(6) sets out a non-exhaustive list of factors that the  
court may take into account in deciding whether to award double costs:  
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 delivered or 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.  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 25  
[73] None of the above factors are mandatory. Trial judges may consider  
whatever factors they consider appropriate so long as the discretion is exercised in a  
just, principled, and consistent way: Giles v. Westminster Savings Credit Union,  
2010 BCCA 282 at para. 88.  
[74] The Cardero Offer was contained in two letters. With respect to the JVA  
Action, the Cardero Offer stated, in relevant part, as follows:  
Below are alternative formal offers to settle the above noted action.  
The parties have exchanged documents, performed examinations for  
discovery and are on the eve of the third scheduled trial date.  
Extensive affidavit materials have been exchanged as well as  
relatively fulsome written arguments at the summary trial hearing.  
Accordingly, it is unnecessary to provide protracted commentary on  
the merits.  
CCP alleges that Cardero breached the JVA by terminating the coal  
lease. With respect, that assertion is bound to fail. Both the JVA and  
the coal lease expressly empowered Cardero to abandon/terminate  
the tenure. CCP's conduct both before and after the  
abandonment/termination amply demonstrates it understood and  
agreed Cardero was so empowered. In contrast, CCP outright refused  
to participate in the JV after the dispute arose between Cardero and  
PRP in respect of the $500,000 advance royalty. CCP clearly  
breached the JVA.  
The outcome of this action is binary. Either Cardero or CCP will be  
entitled to purchase the other's JV interest. Accordingly, it is difficult to  
"cut the baby in half." The compromise Cardero is able to offer CCP is  
relief from the significant adverse cost consequences it will ultimately  
suffer. Cardero hereby offers to settle by way of execution and entry  
of a consent order on the following terms:  
1. Cardero is entitled to purchase CCP's 25% interest in the  
Carbon Creek Joint Venture for fair market value in accordance  
with Article 12.1(e) of the Joint Venture Agreement.  
2. Upon receipt of the amount determined by the independent  
appraiser pursuant to Article 12.1(e), CCP shall transfer its  
interest in the Carbon Creek Joint Venture to Cardero.  
3. The parties have leave to apply with respect to the process  
under Article 12.1(e), including in regards to the appointment of  
the appraiser, and the transfer of CCP's 25% interest in the  
Carbon Creek Joint Venture to Cardero.  
4. The parties shall bear their own costs of this action up to the  
date of this order.  
We note CCP's recent delivery of a report valuing Cardero's 75%  
interest in the JV at $63, 107. That puts the value of CCP's 25%  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 26  
interest at $21,036. Cardero therefore makes the following alternative  
offer (i.e. CCP may accept either the offer above or the one that follows):  
1. Cardero shall pay $25,000 (i.e. materially in excess of CCP's  
own valuation) to CCP to purchase CCP's 25% interest in the  
Carbon Creek Joint Venture.  
2. The parties shall, with reasonable dispatch, take such steps  
and execute and deliver such agreements and other documents  
as may reasonably be necessary to transfer CCP's 25%  
interest in the Carbon Creek Joint Venture to Cardero.  
3. Forthwith after the parties have fulfilled their obligations  
under paragraphs [sic] and 2, the parties shall execute and  
enter a consent order dismissing the above noted action and  
counterclaim as if after a trial on the merits with no costs  
payable to either party.  
Cardero reserves the right to bring this/these offer(s) to the attention of  
the court for consideration in relation to costs after the court has  
pronounced judgment on all other issues in this proceeding.  
[75] With respect to the Lease Action, the Cardero Offer stated, in relevant part,  
as follows:  
We write with reference to our other letter of today's date setting out  
formal offers to settle the JV action (the "JV Offers"). Conditional upon  
CCP's acceptance of either of the JV Offers (i.e. this offer is incapable  
of acceptance unless and until CCP unconditionally accepts either of  
the JV Offers), Cardero offers to settle the above noted action on the  
following terms:  
1. Cardero shall pay $500,000 to PRP together with interest from and  
after June 3, 2014 to the date of payment at the rate of 6% per annum  
(the "Payment").  
2. Forthwith after PRP's receipt of the Payment, the parties shall execute  
and enter a consent order dismissing the above noted action as if  
after a trial on the merits with no costs payable to either party.  
CCP's argument that the $2 million advance royalty came due on June  
2, 2014, after termination of the coal lease, is exceedingly tortured.  
The above offer represents PRP's best case scenario while avoiding  
the costs, risks and inconvenience of trial.  
Cardero reserves the right to bring this offer to the attention of the  
court for consideration in relation to costs after the court has  
pronounced judgment on all other issues in this proceeding.  
[76] In essence, the Cardero Offer accurately predicted the outcome of the trial—  
Cardero’s liability for $500,000 in the Lease Action, and CCP’s liability to Cardero in  
the JVA Action.  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 27  
[77] PRP argues that the aspect of the Cardero Offer that related to the Lease  
Action was not capable of acceptance because it required that the other prong of the  
offer relating to the JVA Action be accepted by CCP. PRP relies on two decisions in  
this respect.  
[78] In Sherwood v. The Owners, Strata Plan VIS 1549, 2018 BCSC 2105, a joint  
offer was made to the plaintiffs and to the defendant strata corporation. The court  
held that an offer must be capable of being accepted by a party without the  
necessity of obtaining the cooperation or consent of another party:  
[51]  
… [F]or an offer to settle to have an effect on any given party's costs,  
the offer must be one that was capable of being accepted by that party  
without the necessity of obtaining the cooperation or consent of any other  
party: see Brook v. Tod Estate, 2013 BCSC 330 at para. 27.  
[79] However, I note that the plaintiffs in Sherwood were only one set of owners in  
the strata corporation. The strata corporation itself was not a plaintiff, but was  
instead named as a defendant. Further, these two groups were separately  
represented at trial. The court held that the plaintiffs and the strata corporation “did  
not have a joint interest in many of the claims addressed [in the offer]”: Sherwood at  
para. 50.  
[80] The Partnerships also rely on 0956375 B.C. Ltd. v. Regional District of  
Okanagan-Similkameen, 2021 BCSC 1849, where the court found that a joint offer  
would not be considered for costs purposes where it was conditional on another  
party's acceptance, even though they were related parties:  
[44]  
In my opinion, the settlement offer made by the defendant in these  
matters suffers from the same deficiencies as the offers made in Aspen and  
Sherwood. It was a joint offer to settle both the action by 0956375 and the  
action by 1016214. However, these were separate actions by different  
plaintiffs. The plaintiffs did not have a joint interest. Moreover, neither plaintiff  
was capable of accepting the offer without the consent or agreement of the  
other plaintiff.  
[45]  
I am not unmindful of the fact that 0956375 and 1016214 are related  
corporations and that both are controlled by Mr. Grelish. However, there is no  
basis for piercing the corporate veils and ignoring the separate corporate  
identities. The defendant was well aware of the separate actions and  
separate corporate identities. It could have easily formulated an offer of  
settlement that respected the separate legal identities of the plaintiffs and  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 28  
made it possible for each plaintiff to accept the offer without needing the  
agreement or cooperation of the other.  
[81] I find that applying the same approach here would be putting form before  
substance. The Partnerships were jointly represented throughout the proceedings.  
There was never any suggestion that their interests were not aligned. They largely  
shared a “joint interest”. Control of both rested with the same principals. Although  
there was some evidence as to the existence of different stakeholders behind each  
Partnership, there was no evidence from PRP and CCP that this would have varied  
their approach to the various claims. Put another way, PRP does not assert that it  
would have accepted the Cardero Offer if it were not for CCP’s refusal, or vice versa.  
Finally, as these were partnerships, there is no issue of the Court having to “pierce  
the corporate veil”, which was a key concern in 0956375 B.C. Ltd.  
[82] The Partnerships also argue that the Cardero Offer provided for interest “at  
the rate of 6% per annum” when the contractual interest was for 6% per annum,  
“compounded monthly” pursuant to section 4.2(e)(iv) and (vii) of the Lease  
Amending Agreement. I do not see that the Cardero Offer necessarily intended to  
offer something different from what is provided for in the relevant contract. The fact  
that the Offer referenced a 6% rate suggests to me that Cardero was simply  
proposing to pay the rate set out in the Lease, even if this was not stated expressly.  
[83] Finally, the Partnerships argue that the tight timeline from the Offer to trial  
made it difficult to assess the Offer’s merits. Although this factor is properly given  
some weight, I do not find that it is a particularly heavy factor. The case involved  
sophisticated parties with experienced counsel who had been arguing about and  
litigating these issues for many years. There is nothing particularly complicated or  
surprising about the terms of the Cardero Offer. By the time the Cardero Offer was  
delivered, the parties had conducted examinations for discovery, exchanged  
affidavit evidence, and provided each other with written arguments for the  
purposes of the proposed summary trial. While the litigation was complex, I find  
that the amount of preparation the parties had put into the case by the date of  
the Cardero Offer, coupled with their respective levels of sophistication, meant  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 29  
that there was adequate time to properly assess the merits of the Offer: see e.g.,  
Uppal v. Rawlins, 2010 BCSC 11 at paras. 20-21.  
[84] The Cardero Offer, if accepted, would have:  
a) given PRP the $500,000 to which it was ultimately found to be entitled;  
and  
b) avoided the inconvenience and expense of trial.  
[85] While accepting the Cardero Offer would have resulted in PRP losing its  
ability to claim contractual costs in the Lease Action, CCP in turn would have not  
been liable for contractual costs for the JVA Claim. Given my finding below that  
more trial time was spent on JVA issues than Lease issues, this likely would  
have been a net benefit to the Partnerships. Further, while Cardero did not offer to  
pay PRP's costs to the date of its Offer, PRP would have saved the costs of trial by  
accepting it while achieving the same substantive result. Accordingly, I conclude that  
PRP would have been better off accepting the Cardero Offer to settle the Lease  
Action, and it ought reasonable to have done so.  
[86] However, that is not the end of the analysis given the presence of the  
contractual indemnities. As it relates to the costs of the Lease Action, I find that it  
would not be appropriate to deprive PRP of its contractual costs in the Lease Action  
after August 19, 2021. While I have found that PRP should have accepted the  
Cardero Offer, these sophisticated parties had previously agreed to indemnify each  
other for any legal costs arising from breaches of the Lease. They did not provide for  
an exception in the case of any offer to settle. Further, as discussed above, the  
courts will enforce such contractual terms absent extraordinary circumstances. In my  
view, the circumstances do not warrant the Court intervening and exercising its  
discretion to override the parties’ contractual intent, notwithstanding the existence of  
the Cardero Offer.  
[87] I find it was unreasonable for CCP to reject Cardero’s offer to settle the JVA  
Claim and Counterclaim. The Cardero Offer accurately outlined the ultimate result at  
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 30  
trial and was delivered with sufficient time for CCP to consider it. Given that there is  
no contractual tension driving a different result in relation to the JVA Counterclaim, I  
find that Cardero is entitled to double costs in respect of the JVA Counterclaim from  
August 19, 2021, onward.  
G. The Appropriate Order  
[88] As I have found that Cardero and PRP are entitled to enforce the contractual  
indemnities under the JVA and Lease respectively, it is necessary to provide for how  
those amounts will be determined. In Eisler Estate SC, Justice Donegan provided  
the following direction with respect to the assessment of contractual costs:  
[33]  
The plaintiffs seek, as their primary position, contractual costs on a full  
indemnity basis, but do not seek to have them assessed. Though the term  
“full indemnity” is suggestive of complete recovery of legal fees, their  
recovery is subject to review to ensure their reasonableness: Wanson  
(Bristol) Development Ltd. v. Sahba, 2019 BCCA 459 (Registrar). They are to  
be assessed.  
[89] I find that a similar direction is warranted in the present case, and order that  
the Registrar assess the amounts payable under the contractual indemnities.  
[90] While the Partnerships submit that relatively little time was allocated to the  
JVA Action, I disagree. The Partnerships downplay the time spent on the JVA  
Counterclaim in particular. The Partnerships allegations in the respect took up a  
significant portion of the trial time and the Reasons.  
[91] I find that the time spent at trial should be attributed as follows: 1/3 to the JVA  
Claim, 1/3 to the JVA Counterclaim, and 1/3 to the Lease Claim.  
[92] Unless either party wishes to argue before the Registrar that their pre-trial  
solicitor-client time was differently balanced, it may be logical to divide the earlier  
time spent on the file in this same proportion. However, I leave that for the parties to  
consider and to address before the Registrar, if necessary.  
VI.  
CONCLUSION  
[93] The following costs orders shall issue:  
   
Cardero Coal Ltd. v. Carbon Creek Partnership  
Page 31  
a) Cardero is entitled to be indemnified by CCP for its costs in advancing the  
JVA Claim pursuant to the terms of the JVA. The amounts recoverable by  
Cardero shall be assessed and certified by the Registrar.  
b) Cardero is entitled to costs as against CCP in relation to the JVA  
Counterclaim at Scale C, with double costs for all steps taken after August 19,  
2021. The amounts recoverable by Cardero shall be assessed and certified  
by the Registrar.  
c) PRP is entitled to be indemnified by Cardero for its costs in advancing the  
Lease Action, pursuant to the terms of the Lease. The amounts recoverable  
by PRP shall be assessed and certified by the Registrar.  
d) I direct that the allocation of trial costs as between the JVA Claim, the JVA  
Counterclaim, and the Lease Claim be divided equally (i.e., one third of trial  
time to each claim). The Registrar may determine the amount of pre-trial time  
reasonably attributed to each claim.  
“The Honourable Mr. Justice Branch”  


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