A-5-80
McCain Foods Limited (Appellant) (Plaintiff)
v.
C. M. McLean Limited (Respondent) (Defendant)
Court of Appeal, Urie, Heald and Ryan JJ.—
Ottawa, September 9 and 12, 1980.
Practice — Costs — Appeal from order of Trial Division
awarding costs (fees and disbursements) to respondent —
Whether unduly large costs — Whether misunderstanding of
principle to be applied — Federal Court Rules 344 and 346,
Tariff B, ss. 2(2)(a),(b), 4.
This is an appeal from an order of the Trial Division whereby
on an application for increased costs pursuant to Rules 344 and
346, the respondent, against which the appellant's action was
discontinued just before trial (after the holding of examinations
for discovery and a pre-trial conference—the delay between
those proceedings being of some fourteen months), was award
ed costs comprising fees and disbursements. The question is
whether the Motions Judge erred in his understanding of the
principle to be applied by assessing unduly large costs.
Held, the appeal is allowed. That the taxing officer, in this
case the Motions Judge, had authority in the circumstances to
impose higher than Tariff B costs is implicit by virtue of Rules
344(1),(4) and (5). The same applied to his authority to impose
a lump sum in lieu of taxation. While, undoubtedly, some
departure from the Tariff is contemplated by the Rules, in
fixing a lump sum it must not be wholly disregarded. The
learned Judge ought to have had some regard to Tariff B as the
basis for a determination of the lump sum to be awarded at
least for the period up to and including examinations for
discovery, since certainly there was no delay to that point,
before taking into account the period of delay justifying the
award of additional costs. The portion of the award of costs
relating to disbursements should be reduced on the ground that
a client's expenses and loss of time are not properly taxable
items. Finally, the costs of an articled student form part of the
overhead of the law firm and, as such, are not properly taxable
items.
IBM Canada Ltd.—IBM Canada Ltée v. Xerox of Canada
Ltd. [1977] 1 F.C. 181, considered. Kaufman v. New York
Underwriters Insurance Co. [1955] O.W.N. 496, con
sidered.
APPEAL.
COUNSEL:
J. I. Minnes for appellant.
J. R. Morrissey for respondent.
SOLICITORS:
Scott & Aylen, Ottawa, for appellant.
Barrigar & Oyen, Ottawa, for respondent.
The following are the reasons for judgment
rendered in English by
URIE J.: This is an appeal from an order of the
Trial Division [[19801 2 F.C. 580] whereby, on an
application for increased costs pursuant to Rules
344 and 346 of the General Rules and Orders of
the Federal Court of Canada, the respondent,
against which the appellant's action was discon
tinued just before trial, was awarded costs in the
sum of $10,929.26 comprised of $7,000 for fees
and $3,929.26 for disbursements.
The relevant Rules in relation to the application
are as follows:
Rule 344. (1) The costs of and incidental to all proceedings in
the Court shall be in the discretion of the Court and shall
follow the event unless otherwise ordered. Without limiting the
foregoing, the Court may direct the payment of a fixed or lump
sum in lieu of taxed costs.
(4) Where in any action anything is done or omission is made
improperly or unnecessarily by or on behalf of a party, the
Court may direct that no costs shall be allowed to that party in
respect of it, and that any costs occasioned by it to other parties
shall be paid by him to them.
(5) Without prejudice to the generality of paragraph (4), the
Court shall for the purpose of that paragraph have regard in
particular to the following matters, that is to say,
(a) the omission to do anything the doing of which would
have been calculated to save costs;
(b) the doing of anything calculated to occasion, or in a
manner or at a time calculated to occasion, unnecessary
costs; and
(c) any unnecessary delay in the proceedings.
(7) Any party may
(a) after judgment has been pronounced, within the time
allowed by Rule 337(5) to move the Court to reconsider the
pronouncement, or
(b) after the Court has reached a conclusion as to the
judgment to be pronounced, at the time of the return of the
motion for judgment,
whether or not the judgment includes any order concerning
costs, move the Court to make any special direction concerning
costs contemplated by this Rule, including any direction con
templated by Tariff B, and to decide any question as to the
application of any of the provisions in Rule 346. An application
under this paragraph in the Court of Appeal shall be made
before the Chief Justice or a judge nominated by him but either
party may apply to a Court composed of at least three judges to
review a decision so obtained.
Rule 346. (1) All costs between party and party shall be as
determined by, or pursuant to, the Court's judgment and
directions and, subject thereto, Tariff B in the Appendix to
these Rules and this Rule are applicable to the taxation of
party and party costs.
In his reasons for his order the learned Motions
Judge had this to say [at pages 583-584]:
I do not believe that this is an appropriate situation in which to
allow costs on a solicitor and client basis as defendant suggests.
No finding should be made that the action was frivolous or
unjustified. The Court itself has found that there was sufficient
doubt as to the want of jurisdiction that no preliminary deter
mination of this issue on a question of law should be made, and,
as to the merits, the Court heard no evidence as a result of the
discontinuance and cannot properly conclude that the proceed
ings were without merit.
On the other hand defendant undoubtedly suffered and costs
were greatly increased as a result of the very belated discon
tinuance. There was a substantial period of time following the
discovery for plaintiff to decide whether or not it had a cause of
action which was likely to succeed, and after the pre-trial
conference on September 5, and again after the Court's refusal
to settle the issue of jurisdiction on a question of law on
October 4 there was ample opportunity for plaintiff to seek
leave to discontinue. By delaying any indication of this to
defendant until Friday of the week before trial there is little
doubt that considerable additional and unnecessary expense
was incurred by defendant's attorneys in interviewing and
subpoenaing witnesses (although fortunately they were not
brought from New Brunswick to Ottawa for the trial when the
formal notice of application for leave to discontinue was pro
duced) as well as in retaining and instructing experts and
preparation for trial in general, to say nothing of serious
inconvenience to the Court. While settlements and discontinu
ances are certainly to be encouraged, it is unfortunate when
these are left until the last minute without any apparent
justification for so doing. Defendant should therefore not have
to bear the full burden of this unnecessary work of its attorneys
and experts.
The general rule in appeals of this nature is well
settled. It is that the discretion of the Court or the
taxing officer "ought not to be interfered with
unless the amounts allowed are so inappropriate or
his decision is so unreasonable as to suggest that
an error in principle must have been the cause".'
I IBM Canada Ltd. IBM Canada Ltée v. Xerox of Canada
Ltd. [1977] 1 F.C. 181, at p. 185.
Gale J., as he then was, in Kaufman v. New
York Underwriters Insurance Co. 2 acknowledged
this rule but pointed out that the Court is not,
however, entirely powerless and quoted Middleton
J. in Re Solicitors, 3 who said:
In all these cases it is exceedingly difficult for a Judge upon
an appeal to interfere with the quantum allowed by an
experienced taxing officer. At the same time, it is important
that it should be understood that there is some limitation to the
statement found in many cases that the quantum of a fee which
is primarily in the discretion of the officer is not to be inter
fered with upon appeal. In many cases it is impossible to
substitute the discretion of the appellate tribunal for the discre
tion of the taxing officer with any confidence that the one is
any better than the other. There may be cases in which the
amount allowed is so excessive as to call for interference, and it
must not be forgotten that there is given by the statute a right
of appeal calling upon the judicial officer to exercise his own
judgment.
While recognizing the general limitation
imposed on the Court in appeals of this kind, I am
of the opinion that the allowance for fees granted
by the learned Judge on the motion was so inap
propriate in the circumstances of the case as to
suggest that he erred in his understanding of the
principle to be applied. The circumstances to
which I have particular reference are:
(1) the action was instituted in October 1977;
(2) the plaintiff's list of documents was dated February 1978;
(3) examinations for discovery took place in June 1978;
(4) a pre-trial conference was held on September 5, 1979;
(5) on October 4, 1979 a motion for a preliminary determi
nation on the jurisdiction of the Trial Division to try the
action was dismissed;
(6) on November 19, 1979 the plaintiff sought leave to
discontinue the action.
If any undue delay occurred it will be seen to
have been between the completion of the examina
tions for discovery and the pre-trial conference in
September 1979, a period of some fourteen
months. At first blush this would appear to be a
rather substantial period but it must be borne in
mind that preparation for trial of an action in
which counsel for both parties do not reside at or
near the places of business of their respective
clients as was the case here, militates against
speedy preparation. Moreover, the difficulty in
assessment of the worthiness of a client's case after
2 [1955] O.W.N. 496, at p. 497.
3 (1921) 20 O.W.N. 84.
production of documents and examinations for
discovery, the weighing of the possibilities of suc
cess or failure with the client and obtaining his
instructions is also exacerbated by the distance
between counsel and his client. Whether the delay
was greater than it ought to have been up at least
until the pre-trial conference is a matter of opinion
but certainly it was a circumstance properly to be
taken into account in settling the question of costs.
In assessing the extent to which it should be
considered, the desirability of plaintiff discontinu
ing or settling actions having little chance of suc
cess, after the normal procedures in ascertaining
whether its case can be proved, ought to be
encouraged and not discouraged. If a party is
penalized in costs for delaying discontinuance or
settlement beyond a reasonable time and the
penalty is too severe, discontinuance or settlement
might be discouraged. It thus becomes a question
of deciding what quantum of penalty should be
assessed for a perceived unnecessary delay, a ques
tion which is essentially a matter of opinion. Great
weight must be given to the opinion of the Judge,
but here, as I see it, he failed to appreciate proper
ly the balancing factors and thereby erred in prin
ciple by assessing unduly large costs.
The delay in discontinuing in this case undoubt
edly led to unnecessary costs to the defendant for
preparation for trial but the fact that the action
was discontinued did save it the substantial solici-
tor-client costs which would have been incurred if
the action had proceeded to trial and the respond
ent had successfully defended it. That the taxing
officer, in this case the Motions Judge, had au
thority in the circumstances to impose higher than
Tariff B costs is implicit by virtue of Rules 344(1),
(4) and (5), supra. The same applied to his au
thority to impose a lump sum in lieu of taxation.
However, I would have thought that having found,
as the learned Judge did, that this was not a
proper case for the imposition of solicitor-client
costs, the lump sum costs should have some rela
tionship to Tariff B. While undoubtedly, some
departure from the Tariff is contemplated by the
Rules, in fixing a lump sum it must not be wholly
disregarded in my opinion.
As I see it, the learned Judge ought to have had
some regard to Tariff B as the basis for a determi
nation of the lump sum to be awarded at least for
the period up to and including examinations for
discovery since certainly there was no delay to that
point, before taking into account the period of
delay justifying the award of additional costs.
While it is clear that he did not fix the lump sum
on the basis of the solicitor-client bill suggested by
the respondent, the basis upon which he based his
award of fees equally clearly has no relationship to
the Tariff.
In so far as that portion of the award of costs
relating to disbursements is concerned, it should be
observed that under Tariff B sections 2 and 4
provide that such disbursements in addition to
those allowable under Tariff A may be allowed as
are essential for the conduct of the action provided
they "shall be supported by affidavit or other
acceptable evidence ...." In an affidavit filed in
support of the motion for increased costs, one of
the counsel for the respondent verified numerous
disbursements incurred by his firm during the
proceedings. It was further deposed that substan
tial executive time was spent by officers and senior
employees of the respondent estimated to be at
least 50 hours, valued at $30 per hour, for a total
of $1,500. Similarly $375 in travel and other
expenses were estimated to have been incurred by
the respondent none of which was in any way
verified. The learned Motions Judge allowed
$1,000 for executive time estimated to have been
lost and the estimated $375 for the respondent's
disbursements in the total out-of-pocket expenses
of $3,929.26 awarded on the motion. In my opin
ion he ought not to have done so. I have grave
doubts that they are properly taxable items at all,
but, assuming they are, the proof submitted as to
their validity is too substantially deficient to
permit their allowance in any event and I would,
therefore, reduce the award for out-of-pocket
expenses by $1,375 to the sum of $2,554.26. I
would therefore, allow the appeal, and remit the
matter back to the Trial Division for the fixing of
a lump sum bill of costs in a manner not inconsist
ent with these reasons. Since the appellant has
been substantially successful, it should be entitled
to its taxable costs of the appeal.
I ought not to leave this matter without pointing
out that it may be inferred from the Motion
Judge's reasons that the fees for the time of arti-
cled students expended in proceedings in the Trial
Division are properly taxable. In my opinion such
is not the case. The costs of an articled student are
part of the costs incurred in the operation of a law
practice in the same way as the costs of any
employees other than qualified lawyers entitled to
practise at the bar. Those costs form part of the
overhead of the law firm, the proportion thereof to
be borne by the lawyer in question being included
in the hourly rate chargeable by him to his clients.
In my view, at least so far as the Federal Court is
concerned, it is quite improper for any costs to be
allowed for the services of articled students pro
vided in any matter other than as part of the
responsible lawyer's charges. By the same token,
the hourly rate to be allowed to a solicitor or
counsel is a matter within the discretion of the
taxing authority who will consider all those mat
ters traditionally taken into account in fixing coun
sel and solicitors' fees including, but not limited to
the importance of the matter, whether counsel is
lead or junior counsel and the complexity of the
matters in issue.
* * *
HEALD J.: I concur.
* * *
RYAN J.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.