A-26-81
Warwick Shipping Limited (Plaintiff)
v.
The Queen (Defendant)
Court of Appeal, Thurlow C.J., Pratte J. and
Hyde D.J.—Montreal, April 21; Ottawa, Septem-
ber 9, 1983.
Practice — Costs — Appeal by plaintiff from award of
increased Tariff B costs to defendant for discovery, trial
preparation, and conduct of trial — Other decisions consistent
with restrictive approach in Smerchanski to increases — No
rule of thumb that party and party costs approximate one
third of solicitor-client when increase warranted — Tariff
speaking at current date and starting-point for increase —
Increase justified where plaintiff responsible for cost-amplify
ing events outside contemplation of Smerchanski case, but not
where additional costs occasioned by pre-trial death of witness
— Tariff s. 2(1)(b) permitting allowance only for actual
examination days — Per diem basis compensating for length
of examination and trial — Discovery allowance increased
since counsel's work in fulfilling undertakings shortened
examination time and enhanced value — Increase for trial
preparation not excessive — Separate award relating to junior
counsel at trial improper since single amount intended to cover
all lawyers — Importance and complexity of case not grounds
for increasing trial allowance — Appeal allowed — Federal
Court Rules, C.R.C., c. 663, Tariff B, ss. 2(1)(b) (as am. by
SOR/79-57, s. 37), (d),(e), 3.
The plaintiff's action, which resulted from the grounding of
its ship, was unsuccessful. In an order made pursuant to section
3 of Tariff B, the Trial Division awarded the defendant
amounts greater than those specified in the Tariff, for services
of solicitors and counsel in relation to examination for discov
ery, preparation for trial, and conduct of the trial. The award in
respect of the conduct of the trial included an amount desig
nated as relating to the services of junior counsel, although no
distinct allotment of this sort had been requested.
The plaintiff appealed the order as to costs.
Held, the appeal should be allowed, and the judgment of the
Trial Division varied.
In the Smerchanski case, Chief Justice Jackett stated that
party and party costs are not intended to provide the successful
litigant with full compensation, and he adopted a restrictive
view as to what circumstances would justify the awarding of
amounts greater than those set forth in Tariff B. This interpre
tation of the Tariff is correct and ought to be followed. It was
not departed from in Manitoba Fisheries, either by the Trial
Judge or by the majority in the Court of Appeal. The only point
determined in Manitoba Fisheries was that, because the
action's costs were increased by virtue of its being a test case, a
direction granting increased costs was, in the circumstances,
justified. McCain Foods as well is quite consistent with Smer-
chanski. In accepting that an award of increased costs might be
proper where the plaintiff's delay in discontinuing the action
had caused the defendant to incur unnecessary costs, the Court
of Appeal in McCain Foods was simply identifying one of the
"factors arising out of the conduct of the particular proceed-
ing"—which factors could, according to Smerchanski, afford a
basis for varying the tariff figures.
In the case at bar, the Trial Judge appears to have taken two
factors into account in granting the increases in question. The
first was that the amounts of expert evidence and trial prepara
tion which were necessary were considerably greater than
usual, because the subject vessel had been delivered to ship-
breakers before the issues between the parties had been fully
raised, because many of the ship's documents were lost, and
because the pilot died before the trial. Secondly, the Trial
Judge apparently took the view that where the award of an
amount greater than Tariff is justified, the Court might take it
to be a rule of thumb that party and party costs should be
approximately one third of solicitor-client costs, inasmuch as
the value of the dollar has declined since the Tariff was
legislated.
The second of these considerations is not a proper one, for
the acceptance of such a rule of thumb would amount to the
abandonment of the scale set out in the Tariff. The Tariff must
always be regarded as speaking at the current date, and must
be taken as the starting point when one is considering any
increase.
Furthermore, even if the pilot's death did occasion an addi
tion to the costs of the defence, it does not follow that the
plaintiff should be required to pay increased costs. On the other
hand, the untimely disposal of the ship, and the loss of docu
ments, were cost-amplifying occurrences for which the plaintiff
was responsible. They were therefore matters which the Trial
Judge could properly have regarded as grounds for supplement
ing the tariff amounts, even though it would seem that they
were not matters of the sort which Jackett C.J. had in mind
when he spoke of factors arising out of the conduct of the
proceeding.
The amount granted by the Trial Judge in respect of discov
ery was too great, but some enhancement of the tariff amount
under this head is warranted. Paragraph 2(1)(b) permits an
allowance to be made only in respect of days on which the
examination actually occurs; and by making the allowance
recoverable on a per diem basis, it compensates for the length
of an extended examination. Nevertheless, an examination may
be substantially shortened by counsel's undertaking to supply,
at some later time, answers which the witness is unable
immediately to provide. Costs are thereby saved, and the
practice should not be discouraged. If it results in a reduction
in the number of days taken up by the examination, that result
is due to the work which counsel, having given the undertaking,
is obliged to perform in order to furnish the answers. Such
work, though, adds to the value of the actual examination time,
so when the case is one in which augmented costs are called for,
an increase in the daily allowance for discovery would be
justified. An increase should be granted in the present case, in
which discovery lasted ten days, but defendant's counsel under
took to provide answers to 150 questions.
An increase in the amount relating to trial preparation also is
appropriate, and the figure chosen by the Trial Judge is not
unduly large.
However, no increase should have been granted with respect
to the conduct of the trial. Under the Tariff, a single amount is
intended to cover all solicitors or counsel whom a party
engages. There is, accordingly, no justification for making a
separate or further allowance on the ground that the impor
tance and complexities of the case necessitated the presence at
trial of an additional, junior counsel. Nor does the case's
importance or complexity constitute a proper reason for
increasing the single amount. Again, the per diem nature of the
tariff rate compensates for an escalation of costs attendant
upon a prolongation of the trial, and it also compensates for the
factors previously identified as warranting an increase in costs.
CASES JUDICIALLY CONSIDERED
FOLLOWED:
Smerchanski v. Minister of National Revenue, [1979] 1
F.C. 801 (C.A.).
APPLIED:
MacMillan Bloedel (Saskatchewan) Ltd. v. Consolboard
Inc. (1981), 124 D.L.R. (3d) 342 (F.C.A.); Guerin, et al.
v. The Queen, [1982] 2 F.C. 445 (T.D.).
CONSIDERED:
Manitoba Fisheries Limited v. The Queen, [1980] 2 F.C.
217 (C.A.), affirming [1980] 1 F.C. 36 (T.D.); McCain
Foods Limited v. C. M. McLean Limited, [1981] 1 F.C.
534 (C.A.).
COUNSEL:
P. G. Côté and J. Gauthier for plaintiff.
D. H. Aylen, Q.C. for defendant.
SOLICITORS:
Ogilvy, Renault, Montreal, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
THURLOW C.J.: This is an appeal by the plain
tiff from that portion of an order of the Trial
Division [dated January 7, 1981, T-3324-75, not
reported] which, under section 3 of Tariff B of the
Rules of Court [Federal Court Rules, C.R.C., c.
663], directed increases in the amounts taxable for
services of solicitors and counsel for discovery,
preparation for trial and conduct of the trial under
paragraphs 2(1)(b) [as am. by SOR/79-57, s. 37],
(d) and (e) of the Tariff. For convenience, in what
follows I shall refer to the plaintiff as the appellant
and to the defendant as the respondent.
Section 3 provides:
3. No amounts other than those set out above shall be
allowed on a party and party taxation, but any of the above
amounts may be increased or decreased by direction of the
Court in the judgment for costs or under Rule 344(7).
The relevant parts of section 2 are:
2. The following may be allowed unless the Court otherwise
directs:
(1) For services of solicitors and counsel:
(b) for examination for discovery, taxing costs, taking evi
dence on commission, a reference, or cross-examination on
an affidavit (including preparation);
Class III—$100 per day or part day of hearing;
(d) preparation for hearing either in the Trial Division or
Court of Appeal:
Class 11I—$350
(e) conduct of hearing either in the Trial Division or Court of
Appeal:
Class III—$400 plus $200 for every day after the first;
The amounts claimable under the Tariff, the
amounts asked by the respondent and the amounts
allowed by the Trial Division are as follows:
Tariff Asked Allowed
Discovery
Item 2(1)(b) 10 days 1,000 3,000 3,000
Preparation for trial
Item 2(1)(d) 350 10,000 3,000
Conduct of trial
Item 2(1)(e) 22 days 4,600 13,800 13,800
Junior Counsel 6,900
Totals 5,950 26,800 26,700
The respondent's application for an increase in
the taxable amounts was supported by an affidavit
of the respondent's counsel setting out some of the
history of the litigation arising out of the ground
ing of the appellant's ship, Golden Robin, and
describing the work involved in defending the
appellant's action. In addition, the learned Trial
Judge would have had in mind many facts brought
to his attention in the course of the 22-day trial of
the action, involving as it did a claim for damages
totalling $1,286,418.69. In his reasons for making
the order under appeal the learned Judge said [at
page 2] :
The case at bar was undoubtedly an important one not
mainly because of the amounts involved but rather by reason of
the issues raised and the basic difficulties which arose in
determining the facts in issue. These difficulties were due to
certain circumstances which are touched upon in the third
paragraph on page 3 of my reasons for judgment [the first
paragraph on page 152 of [1982] 2 F.C. 147]. Because of these
special circumstances, considerably more than the normal
amount of expert evidence and preparation for trial were
required. Many facts had to be established by circumstantial
evidence and expert opinion which would, in most cases, have
been readily established by direct evidence.
The official Tariff provided for in the Rules should be
adhered to as much as possible. However, when, as in the
present case, special circumstances do exist which justify an
increase and, when one is considering what would be reasonable
under those circumstances, it is well to bear in mind that
approximately ten years have now elapsed since most of the
tariff items were fixed and that the value of the dollar has
decreased by over 50% in the interval. A useful method of
determining what might be fair on a party and party basis,
when the Tariff appears to be inordinately low, would be to
consider the converse application of the rule of thumb which
the courts have often applied in taxation of fees on a solicitor
and client basis, to the effect that they are generally calculated
at three times the party and party tariff.
At page 3 of his reasons for judgment [[1982] 2
F.C. 147, at page 152] the learned Judge had said:
Several circumstances rendered the determination of the true
factual situation in the case at bar more difficult than usual:
the ship had been delivered to shipbreakers for scrap before the
issues between the parties were fully raised, including an issue
as to engine response. Many of the ship's original documents
and logs were lost or mislaid and the pilot died before the date
of trial. The parties and the Court were thus deprived of
important evidence including the benefit of the viva voce
examination of the pilot at trial. As the latter had previously
been a party to the action and had been examined for discovery
as such, a transcript of his examination was filed by consent as
an exhibit to be used in evidence. It was understood as a
condition of the filing that the discovery of the pilot was not to
be considered as having been submitted by either of the two
parties as an integral part of their cases. It was, however, to be
considered as fully admissible evidence as to all issues before
the Court, with each party remaining free to rely on, contradict
or argue for or against any portion of that evidence.
The appellant's case was, first, that as no fee for
a junior counsel had been sought none should have
been allowed and, second, that the increases in the
other amounts in issue were contrary to estab
lished principles applicable to the exercise of the
discretion of the Court to increase tariff items. The
case for the respondent was that the decision was
one for the exercise of the discretion of the learned
Trial Judge and that the discretion was properly
exercised in the circumstances. Counsel also sub
mitted that the interpretation of the Rules in the
judgments of the Court in Smerchanski v. Minis
ter of National Revenue' and MacMillan Bloedel
(Saskatchewan) Ltd. v. Consolboard Inc. 2 steril
izes the authority of the Court to direct increased
costs on the basis of the importance of the case
and the volume of the work involved in it. He
referred to Manitoba Fisheries Limited v. The
Queen 3 where the Trial Judge was said to have
directed the taxing authority to take such factors
into account in a judgment which was sustained by
a majority of the Court on appeal.
In the Smerchanski case, Jackett C.J. put the
matter thus [at pages 805-806]:
Finally, I should say on this point that the material submit
ted in support of this application does not, in my opinion,
provide a reasonably arguable case for an exercise of judicial
discretion increasing the fees for services of solicitors and
counsel in connection with this appeal. Such a direction must
be based on relevant considerations and must not be made on
an arbitrary basis. 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. (This must certainly be
so in a case such as this where the successful party has chosen
to instruct counsel whose base of operations is elsewhere than
the appropriate place for the hearing of the appeal.)
Reference was made to some four or five decisions of the
Trial Division where Tariff B items were increased apparently
"having regard particularly to the great volume of work done in
preparation ...". I have difficulty in accepting volume of work
' [1979] 1 F.C. 801 (C.A.).
2 (1981), 124 D.L.R. (3d) 342 (F.C.A.).
3 [1980] 2 F.C. 217 (C.A.), affirming [1980] 1 F.C. 36
(T.D.).
in preparation considered alone, or in conjunction with such
factors as the difficulty or importance of the case, as constitut
ing 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 propor
tion 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. As it seems to me, the
vague basis put forward on behalf of the respondent would put
the Court in the position, in a very substantial proportion of
proceedings, of weighing imponderable factors, or factors that
are not capable of determination, with a view to making an
allowance of an undefined portion of solicitor and client costs.
In my view, such an approach is not acceptable as a basis for
exercising a judicial discretion under Tariff B and would open
the way for an unseemly complication of our practice. [Foot-
note omitted.]
I agree with this interpretation, and in my opin
ion it ought to be followed. If the amounts pro
vided by the Tariff are not adequate under pre-
sent-day conditions and no basis of the kind
suggested for increasing them is present in the
particular situation, in my view, the Tariff must
govern not only in its amounts but also in the items
for which amounts may be allowed. That appears
to me to be the plain meaning of section 3 of Tariff
B.
I also agree with the view expressed by Ryan J.
in the following passage of his judgment in Mac-
Millan Bloedel (Saskatchewan) Ltd. v. Consol -
board Inc. [at pages 346-347]:
Section 3 of Tariff B does, however, make it possible, in apt
circumstances, to increase solicitor and counsel costs in respect
of the preparation and conduct of an appeal. I have, therefore,
considered whether any direction ought to be made in respect
of solicitor or counsel costs under s. 3 of the Tariff. But, having
in mind the observations of Chief Justice Jackett which I have
quoted, I do not find it possible to hold that the solicitor and
counsel charges provided in the Tariff should be increased in
this case on the basis of the circumstances set out in Mr.
Macklin's affidavit, particularly in its paras. 6 and 9. Even
assuming that many technical issues were raised and argued on
the appeal by MacMillan Bloedel and that the issues raised
"constituted a significant challenge to traditional interpretation
of the Patent Act, and a departure from the accepted require
ments of a patent, as practised by the patent profession", I am
of opinion that it would not be proper to increase taxable
charges simply on this basis. The statements made in paras. 6
and 9 of the affidavit appear to me to amount to no more than
an assertion that the volume of work in preparing the appeal
was very great and that the appeal was difficult and possibly
important. But these are circumstances which Chief Justice
Jackett stated he would find difficulty in accepting as a basis
for exercising discretion to increase Tariff B costs.
Counsel for Consolboard placed some reliance on The Queen
v. Manitoba Fisheries Ltd., [1980] 2 F.C. 217, 35 N.R. 129, a
case in which the Federal Court of Appeal held that the
circumstance that a case is a test case may justify an increase
in relevant tariff items. Counsel submitted that the present case
is such a case. I do not, however, find in the affidavits or other
material evidence to support this submission, not did counsel
call my attention to anything in the record of the case to
support it.
I also understood counsel to suggest that Manitoba Fisheries
supports a broad reading of the words "... factors arising out
of the conduct of the particular proceeding ..." appearing in
the passage I quoted above from Chief Justice Jackett's reasons
for judgment in the Smerchanski case. The sentence in which
these words appear reads: "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."
I do not find it necessary in the present case to set precise limits
to the words referred to by counsel. It is enough for purposes of
this case to note, as I have noted above, that the volume of
work in preparing the case, its difficulty or importance are not
in themselves elements on which to direct costs above the tariff
items.
In the Manitoba Fisheries case the majority of
the Court [of Appeal] took the view that the fact
that the action was a test case had increased the
costs and as that course had resulted in the settle
ment of a number of other actions based on the
same act of the Crown in putting fish processing
companies out of business a direction for increased
costs was warranted. That had been the view of
the learned Trial Judge and the basis for his
direction for an increase in the tariff items. He
said at page 49:
I am of the opinion that the applicant should be entitled to
tax higher costs than are provided in Tariff B, Class III. I base
my conclusion on the test nature of the case and the greatly
increased responsibility and work resulting therefrom.
Other bases for increased costs advanced by
counsel for the plaintiff were rejected. The special
directions thereafter given as to what elements
were to be taken into account by the taxing officer
were given because no amounts had been stated in
the affidavit setting out the work done by counsel
in connection with the case. I do not read either
the reasons of the learned Trial Judge or those of
the majority of the Court of Appeal as sanctioning
a departure from the interpretation of the rule
expressed in the Smerchanski case. What the case
appears to me to decide is simply that the circum
stance that the costs of conducting the action were
increased by reason of its being a test case in the
particular situation justified a direction for
increased costs.
Counsel also brought to our attention the judg
ment in McCain Foods Limited v. C. M. McLean
Limited 4 where the Court recognized an undue
delay by the plaintiff in discontinuing an action
until shortly before trial as having led to unneces
sary costs to the defendant for preparation for trial
and as being a possible basis to be considered by
the Trial Division in exercising its discretion to
direct an increase in the taxable costs. This I
regard as entirely within the principle suggested by
Jackett C.J. in the Smerchanski case when he
referred to "factors arising out of the conduct of
the particular proceeding".
In the present case it appears from his reasons
that the learned Trial Judge, in granting the
increases in question, took into account:
1. That basic difficulties in the preparation of
the defence arose because:
(a) the Golden Robin had been delivered to
shipbreakers for scrap before the issues be
tween the parties were fully raised, including
the issue as to engine response,
(b) many of the ship's documents were lost or
mislaid, and
(c) the pilot died before the date of trial,
all of which made considerably more than the
normal amount of expert evidence and prepara
tion for trial necessary; and
[1981] 1 F.C. 534 (C.A.).
2. In a case where an increase over the tariff
amount is justified, as the value of the dollar has
declined since the tariff scale was enacted, a rule
of thumb that party and party costs should
approximate one third of solicitor and counsel
costs might be taken into account.
With respect I am unable to agree with this
reasoning. I do not think there is any justification
in principle or in law for applying a rule of thumb
so as to abandon the scale of Tariff B and over
come the effect of the erosion of the value of the
dollar since the scale was set. The Tariff, in my
opinion, must be regarded as always speaking and
as the starting point for the consideration of any
increase. 5 Further, any increase in the costs of the
defence occasioned by the death of the pilot before
the trial is not a reason why the appellant should
be required to pay increased party and party costs.
I do not think that the exercise of the discretion by
the Trial Judge on such grounds can stand.
On the other hand, while the delivery of the ship
to shipbreakers shortly after the grounding and
before the issues were raised and the loss of ship's
documents were not matters relating to the con
duct of the proceedings, of the kind which Jackett
C.J. appears to have had in mind when dealing
with the Smerchanski case, they are facts which
increased the costs of defending the action brought
by the appellant and for which the appellant was
responsible. As such they were, in my view, mat
ters which the learned Trial Judge could properly
treat as a basis for increasing the amounts pre
scribed by Tariff B.
In this situation, while it is, in my view, open to
the Court either to substitute its own view of what
increase should be directed or to refer the matter
back to the Trial Division, the case is, I think, one
in which the Court should give the judgment
which in its opinion the Trial Division should have
given.
5 See the judgment of Collier J. in Guerin, et al. v. The
Queen August 11, 1981, not reported [now reported: [1982] 2
F.C. 445 (T.D.), at page 454].
Undoubtedly the tariffs in the Federal Court, which were set
in 1971, are, because of the tremendous increase in inflation
and cost of living in the last 10 years, very low. The remedy
is, in my view, to increase the tariffs, not to make arbitrary
increases in individual cases to try and compensate for past
economic and inflationary increases.
Turning first to the allowance for discovery, as
Tariff item (1)(b) provides for a per diem amount
it compensates by that feature for a long hearing.
Moreover, it is only for days of hearing that an
allowance may be made. On the other hand, a
hearing may be and often is materially shortened
by undertakings given by counsel to provide
answers which the person giving discovery is
unable to give immediately at the hearing. That is
a practice which, in my view, saves costs and
should not be discouraged. If by following it the
number of days of hearings is shortened it is due to
the work which counsel on giving the undertal4ing
must do in order to provide the answers. That I
think makes the time spent in the hearing itself of
more value to the parties and when the case is one
in which increased costs are warranted it would I
think justify an increase in the daily amount allow
able. In the present case the discovery took ten
days. But the affidavit shows that counsel for the
respondent undertook to provide, and thereafter
was obliged to provide, answers to 150 questions
put by the appellant. In the circumstances I would
direct that the allowance for discovery may be
calculated at $200 per day for each of the ten
hearing days.
Having regard to the reasons for which, in my
view, a direction for increased costs is warranted, I
do not think the increase in the allowance for
preparation for trial from $350 to $3,000 author
ized by the learned Trial Judge is in the circum
stances excessive and I would affirm it.
Under Tariff B the allowance for services of
solicitors and counsel is, in my opinion, intended to
cover by a single amount calculated on a per diem
basis the allowance for any number of solicitors or
counsel engaged by a party. There is no justifica
tion for making a separate or additional allowance
because the importance and complexities of the
case justified the presence of a junior as well as a
senior counsel throughout the trial. Nor will the
importance of the case or the complexity of its
issues justify an increase in the prescribed scale.
The increase in costs resulting from the length of a
trial is compensated by a per diem rate. And that
in itself in my view also compensates for the two
factors which I have previously indicated, in my
view, warrant a direction for increased costs in this
case. I would therefore set the allowance that may
be made for solicitor and counsel at $4,600.
In the result I would allow the appeal with costs,
set aside the direction of the Trial Division and
direct that the amounts under Tariff B items
2(1)(b), (d) and (e) may be taxed and allowed at
$2,000, $3,000 and $4,600 respectively.
PRATTE J.: I agree.
HYDE D.J.: I agree.
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.