T-3837-77
McCain Foods Limited (Plaintiff)
v.
C. M. McLean Limited (Defendant)
Trial Division, Walsh J.—Ottawa, December 13,
1979.
Practice — Costs — Application for increase in Tariff B
costs — Motion allowed in part as defendant undoubtedly
suffered and costs were greatly increased as a result of a very
belated discontinuance — Federal Court Rules 344 and 346.
Defendant's counsel moves pursuant to Rule 324 for
increased costs pursuant to Rules 344 and 346. The plaintiff
initiated proceedings in October 1977. After pleadings and
discovery of plaintiff were completed, the defendant sought a
trial date in the spring of 1979, but encountered difficulties in
obtaining trial dates suitable to plaintiff. A pre-trial conference
was held in September 1979, at which time the question of the
jurisdiction of the Court over the proceedings was raised. The
plaintiff then moved for a preliminary determination of a
question of law respecting this, and in October this application
was dismissed. The action was set down for trial, commencing
November 20. On the day before trial, the plaintiff applied for,
and was granted, leave to discontinue the proceedings. The
order dismissing the action specifically granted defendant leave
to apply pursuant to Rule 324 for a special order that costs be
dealt with pursuant to Rules 344 and 346(1).
Held, the motion succeeds in part. This is not 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. On the other hand, defend
ant undoubtedly suffered and costs were greatly increased as a
result of the very belated discontinuance. While settlements
and discontinuances are certainly to be encouraged, it is unfor
tunate when these are left until the last minute without any
apparent justification for so doing. In view of some doubt
having been cast by the Smerchanski case on the appropriate
ness of a direction pursuant to Rule 344(7) to the taxing officer
to increase the amount allowed under Tariff B for fees when
costs are to be taxed on a party and party basis, it is preferable
to apply Rule 344(1) and direct the payment of a lump sum in
lieu of taxed costs.
Smerchanski v. Minister of National Revenue [1979] 1
F.C. 801, distinguished.
APPLICATION.
COUNSEL:
J. I. Minnes for plaintiff.
J. R. Morrissey for defendant.
SOLICITORS:
Scott & Aylen, Ottawa, for plaintiff.
Barrigar & Oyen, Ottawa, for defendant.
The following are the reasons for order ren
dered in English by
WALSH J.: Defendant's counsel moves pursuant
to Rule 324 for increased costs pursuant to Rules
344 and 346 and submits written representations
in support of this motion. Plaintiff's counsel sub
mits written representations opposing this motion.
The proceedings herein brought by virtue of the
provisions of the Trade Marks Act, R.S.C. 1970,
c. T-10, in October 1977 related to defendant's
packaging of french fried potatoes and sought an
injunction and damages or an accounting for prof
its. After pleadings and discovery of plaintiff were
completed it was defendant that sought a trial date
in the spring of 1979, but encountered difficulties
in obtaining trial dates suitable to plaintiff. A
pre-trial conference was ordered and held on Sep-
tember 5, 1979 at which the Court of its own
motion raised questions as to the jurisdiction of the
Court over the proceedings brought by virtue of
section 7 of the Trade Marks Act. As a result
plaintiff then moved for a preliminary determina
tion of a question of law respecting this. By judg
ment of October 4, 1979 this application was
dismissed in view of the doubt as to whether this
Court continues to have jurisdiction over actions
brought under section 7(b) of the Act as a result of
the decision of the Supreme Court in MacDonald
v. Vapor Canada Ltd. [1977] 2 S.C.R. 134
respecting section 7(e) of the Act.
On October 9, 1979 the action was set down for
trial, commencing November 20, 1979. On the day
before trial, November 19, 1979, plaintiff applied
for leave to discontinue the proceedings. The terms
of this discontinuance were argued and an order
permitting it was granted on November 20, 1979.
Bearing in mind the judgment of the Federal
Court of Appeal in the case of Smerchanski v.
M.N.R. [1979] 1 F.C. 801 which sets out the
conditions under which the Court may make an
order respecting costs which departs from the
Tariff, the order of November 20, 1979 dismissing
the action specifically granted defendant leave to
apply pursuant to Rule 324 for a special order that
costs be dealt with pursuant to Rules 344 and
346(1) provided that such application be made
within 10 days. The present application complies
with this order.
Rule 344(1) reads 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.
Rule 344(7) reads in part:
Rule 344. ..
(7) Any party may
(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.
Rule 346 provides for taxation of party and
party costs by the taxing officer pursuant to the
Court's judgment and Tariff B which in turn
provides that only the amounts set out therein
shall be allowed for services of solicitor and coun
sel save by direction of the Court pursuant to Rule
344(7).
Rule 345 applies only to discontinuances with
out leave in which case defendant may tax his
costs, presumably limited to a party and party
basis. The present discontinuance had to be made
with leave however pursuant to Rule 406(3) which
specifically reserves to the Court the terms to be
fixed as to costs.
In rendering his judgment in the Smerchanski
case (supra) the learned former Chief Justice
Jackett said at pages 805-806:
All that has been established here is that the respondent
incurred a very large solicitor and client bill in connection with
the appeal, which would have been relevant if costs had been
awarded on a solicitor and client basis but is not ordinarily
relevant to the determination of costs on a party and party
basis. Nothing has been put forward to suggest that there was
anything in the conduct of the appeal to warrant any increase
in the party and party tariff. While there is no principle with
reference to the basis for ordinary party and party costs that is
apparent to me from a study of the relevant Rules, it does seem
to be clear that party and party costs are not designed to
constitute full compensation to the successful party for his
solicitor and client costs.
and again at page 806:
I have difficulty in accepting volume of work in preparation
considered alone, or in conjunction with such factors as the
difficulty or importance of the case, as constituting a basis for
exercising the judicial discretion to increase Tariff B costs
items. It must be obvious that such items are so low in relation
to what is involved in a very substantial proportion of the
matters that come before the Court that they are not designed
to provide complete compensation to the successful party for
the costs incurred by him in the litigation. (Indeed, what is
sought in this case is an increase that would still leave the
successful party largely uncompensated for solicitor and client
costs.) If Federal Court party and party costs are not designed
to provide full reimbursement, as it seems to me, what is
intended is that they be made up of the completely arbitrary
amounts fixed by or in accordance with the rules subject to
variations (where authorized) based on factors arising out of
the conduct of the particular proceeding.
Although these comments must be given appro
priate weight I note that the learned Chief Justice
did leave the door open to an increase when the
facts justify it, stating [at page 805] "Nothing has
been put forward to suggest that there was any
thing in the conduct of the appeal to warrant any
increase in the party and party tariff" and again
he refers to "costs" made up of the completely
arbitrary amounts fixed by or in accordance with
the rules subject to variations (where authorized)
based on factors arising out of the conduct of the
particular proceeding. [Emphasis mine.]
It is on this basis that I find that defendant's
motion should succeed in part. 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 prelim
inary determination 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 discon
tinuance and cannot properly conclude that the
proceedings were without merit.
On the other hand defendant undoubtedly suf
fered and costs were greatly increased as a result
of the very belated discontinuance. 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 addi
tional and unnecessary expense was incurred by
defendant's attorneys in interviewing and subpoe
naing 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 produced) 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
discontinuances 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.
An examination of the schedule submitted by
defendant's solicitors, however, with the motion
leads me to conclude that the fees claimed are
excessive. While the hourly charges are not shown,
time of articling students would not justify a high
hourly charge in view of the very moderate salaries
such students are paid, and after making a nomi
nal allowance for their time, it would appear that
lawyers' time is being billed at over $125 an hour
which is, in my view, unacceptable, especially for
the time spent in office consultations, preparation,
etc. (or what might be considered as solicitor's
work) as compared to the comparatively little time
in Court in connection with the pre-trial confer
ence, motion for preliminary determination of the
question of law, and motion for leave to discontin
ue the proceedings.
In view of some doubt having been cast by the
Smerchanski case on the appropriateness of a
direction pursuant to Rule 344(7) to the taxing
officer to increase the amount allowed under
Tariff B for fees when costs are to be taxed on a
party and party basis, I prefer to apply Rule
344(1) and direct the payment of a lump sum in
lieu of taxed costs. Defendant claims fees of
$15,855 plus disbursements of $3,929.26. I do not
believe that fees should be allowed in excess of
$7,000. The difficulty which arises is that in the
absence of details as to the disbursements in the
said Schedule and a taxation of same there is no
means of verifying the amounts, but as I read Rule
344(1) its application precludes taxation, and
without making a direction under Rule 344(7) I
cannot direct the taxing officer to tax the disburse
ments only and then add $7,000 in lieu of Tariff B
fees. Some details of the disbursements up to the
discontinuance are given in the affidavit of defend
ant's counsel and there is no reason to doubt their
accuracy.
Pursuant to Rule 344(1) therefore I fix the costs
payable to defendant in the lump sum of
$10,929.26.
ORDER.
Costs payable by plaintiff to defendant on the
discontinuance of the proceedings herein are fixed
in the lump sum of $10,929.26 composed of $7,000
fees and $3,929.26 disbursements.
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.