Cannabis companies face increased costs for disclosure delays, but avoid special costs

Two cannabis companies must pay increased litigation costs for specified steps in a consulting-contract dispute after a British Columbia judge found that disclosure delays and unanswered requests put the plaintiffs to unnecessary expense. The court declined to award punitive special costs or increase costs for the entire action.

In Shakarchi v. Franchise Cannabis Corp., 2026 BCSC 2062, Justice Morley ordered ordinary Scale B costs with a 1.5-times uplift for defined categories of work. The October 27, 2026 ruling concerned costs following an earlier judgment; it did not set a dollar total for the costs award.

Jay Shakarchi and Christine Renee George brought the action against Franchise Cannabis Corp. and Franchise Global Health Inc. The costs reasons describe a consulting arrangement under which the plaintiffs moved to Colombia for proposed cannabis operations.

Repeated unanswered requests crossed the line

The judge distinguished missing an initial document-list deadline from ignoring repeated requests after it. A late list alone did not necessarily amount to misconduct. But parties should not have to repeatedly chase their opponents for disclosure, particularly when missing documents can delay examinations, expert reports and trial.

In this case, the defendants had abandoned a jurisdictional challenge by November 2022 but had not supplied their document list for examinations scheduled the following May. Requests in July 2023 went unanswered. After a change of counsel, a consent order required the list by October 2, 2023; it arrived the following day.

Morley found that the overall conduct warranted a remedy, although it was not sufficiently out of the ordinary to be labelled reprehensible. He allowed increased costs for steps taken to obtain the list from July 11 to October 3, 2023, including correspondence and obtaining the consent order.

Problems continued after a January 2024 examination of a corporate representative. A letter identifying 29 outstanding requests and several follow-ups received no response before the plaintiffs threatened an application. Responses were eventually delivered in August 2024. Attempts to complete the examination also encountered repeated delays.

The judge found that the pattern created excessive expense, but declined to characterize it as reprehensible without evidence of deliberate deception. The final order increased costs for specified discovery-related work, including outstanding requests, efforts to compel responses and attempts to arrange and conduct the continuation.

Higher costs were not punishment for losing

Ordinary costs under the court’s tariff provide only partial reimbursement of litigation expenses. Special costs require a different justification: generally, reprehensible conduct within the litigation itself. The court explained that misconduct underlying a lawsuit is distinct from misconduct in pursuing or defending it.

Uplifted costs occupy a different category. They may address unusual circumstances that make the ordinary tariff grossly inadequate or unjust, including unnecessary expense caused by litigation conduct falling short of the special-costs threshold. They can apply to particular steps rather than the entire proceeding.

The plaintiffs also sought increased costs over the defendants’ abandoned argument that Colombia was the proper forum. Morley rejected that request. The defendants conceded British Columbia was the proper forum two weeks before the scheduled jurisdiction hearing, relying on a contractual clause. Without assessing their proposed arguments against that clause, the judge would not treat the unsuccessful position as misconduct.

The court cautioned that exceptional cost consequences for withdrawing weak positions could encourage parties to argue them anyway. It also distinguished a general denial that requires a plaintiff to prove a claim from affirmative allegations of wrongdoing advanced recklessly or without merit.

Notice after bankruptcy mattered

Both defendants made assignments into bankruptcy on March 14, 2025. The plaintiffs received notice concerning Franchise Cannabis Corp., but did not learn of Franchise Global Health Inc.’s bankruptcy until June 10. The automatic stay caused a scheduled trial date to be lost; an Ontario bankruptcy court later permitted the claim’s validity and amount to be determined.

Morley declined to create a rule requiring advance disclosure of a possible bankruptcy without evidence of a violated legal duty. But once bankruptcy had occurred, counsel should have notified the plaintiffs, particularly with a fixed trial date approaching. The court therefore increased costs for steps taken between March 14 and June 10, 2025.

The final order leaves costs otherwise at ordinary Scale B and specifies the work eligible for the uplift. It also corrects a clerical error in the earlier order that had named the defendants, rather than the plaintiffs, as the recipients of costs. The ruling does not establish payment or recovery from the bankrupt companies.

Source: 2026 BCSC 2062, October 27, 2026.