T-7186-82
John Ernest Kenney (Plaintiff)
v.
The Ship Cape York, her Owners and all others
interested in her and National Sea Products Lim
ited, a body corporate (Defendants)
INDEXED As: KENNEY v. CAPE YORK (THE) (T.D.)
Trial Division, McNair J.—Ottawa, March 28,
1989.
Practice — Costs — Judgment awarding plaintiff damages
of $1,072, costs, and pre and post-judgment interest from date
of injury — Defendants having paid $5,000 into Court prior to
trial — Court unaware of payment — Defendants claiming
costs of action from date of payment in as damages award less
than amount paid in — Court endorsing practice that fact of
payment into Court not be disclosed — Issues to be considered
in determining whether costs allowed from date of payment
into Court.
In an action to recover damages resulting from the negligent
operation of the defendant's stern trawler, the plaintiff secured
a judgment awarding $1,072 for damages, together with pre
and post-judgment interest to run from the date of the injury,
and costs. Prior to trial, the defendants had paid $5,000 into
Court in satisfaction of all causes of action. The payment in
was not revealed to the Court until judgment had been pro
nounced as to liability and damages. The defendants claim
their costs from the date of the payment into Court as the
judgment award was substantially less than the amount paid in.
Held, the award of costs will be varied to give the plaintiff
his taxable costs to the date of the payment into Court and
disallow any costs to either party thereafter.
The Federal Court Rules dealing with the payment of a sum
into Court, were designed to promote the settlement of litiga
tion, by forcing plaintiffs to reconsider their position, in view of
the possibility of being penalized in costs.
Furthermore, it is preferable that no communication of the
fact of payment into Court be made to the judge, until all
questions of liability and the amount of damages have been
decided.
The calculation of the amount of the plaintiff's judgment, for
the purpose of determining whether the amount thereof was
less or more than the amount paid into Court, in reference to
costs, should include the pre-judgment interest. Additional
factors to be considered in the determination of whether the
defendant should be allowed costs from the date of the payment
into Court are the duration of the litigation as a result of the
contestation, and the complexity of the issues to be tried.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
England, Rules of the Supreme Court (No. l) 1933, Ord.
22, RR. I, 6 (as am. by Rules of the Supreme Court
(No. I) 1934).
Federal Court Rules, C.R.C., C. 663, RR. 324,
337(2)(a),(b),(5)(b), 344(1) (as am. by SOR/87-22I,
s. 2), (3), 441, 442, 443.
Nova Scotia, Civil Procedure Rules, R. 41.07.
Ontario, Rules of Civil Procedure, R. 49.06.
Ontario, Rules of Practice, I977, RR. 306, 317.
CASES JUDICIALLY CONSIDERED
APPLIED:
Klaus v. Beck (1966), 59 D.L.R. (2d) 284; 58 W.W.R.
361 (Man. C.A.); Rushton v. Lake Ontario Steel Co.
Ltd. (1980), 29 O.R. (2d) 68 (H.C.); Ryan v. McGregor,
[ 1926] 1 D.L.R. 476 (Ont. C.A.).
CONSIDERED:
Milligan v. Carter, [1935] 2 W.W.R. 662 (Alta. S.C.);
Fraser et al. v. Lochead et al. (1981), 126 D.L.R. (3d) 86
(Ont. H.C.); Findlay v. Railway Executive, [ 1950] 2 All
E.R. 969 (C.A.).
AUTHORS CITED
Sgayias, David et al., Federal Court Practice 1988,
Toronto: Carswell, 1987.
COUNSEL:
Walton W. Cook, Q.C. for plaintiff.
Mark E. MacDonald for defendants.
SOLICITORS:
Walton W. Cook, Q.C., Lunenburg, Nova
Scotia, for plaintiff.
Stewart MacKeen & Covert, Halifax, for
defendants.
The following are the reasons for order ren
dered in English by
MCNAIR J.: Reasons for judgment were filed
herein on January 10, 1989 and formal judgment
was pronounced concurrently therewith on the
same date. The plaintiff's action was for the
damage suffered as a result of the negligent opera
tion of the defendants' stern trawler in an entan
glement encounter at sea with his fishing vessel on
September 14, 1981. Judgment was awarded in
favour of the plaintiff for damages of $1,072 to
gether with pre-judgment interest thereon from
the date of injury at the rate of 8% per annum and
post-judgment interest thereafter at the same rate,
and his taxable costs of the action.
On October 5, 1988, five days before the com
mencement of trial the defendants paid into Court
the sum of $5,000 in satisfaction of all causes of
action in respect of which the plaintiff claimed,
inclusive of interests and costs. The plaintiff was
given the appropriate notice thereof, but chose not
to accept the money in satisfaction of his cause of
action, as he was entitled to do. In accordance with
what the defendants' solicitors felt to be the better
practice, no communication of the fact that this
money had been paid into Court was made to me
until after the judgment had been pronounced as
to liability and damages. My first intimation of it
was a memorandum received from the registry in
Ottawa on or about February 9, 1989. The memo
randum transmitted under separate cover the
formal judgment and reasons therefor, a letter of
January 16, 1989 from the defendants' solicitors to
the Halifax registry, and a letter to the same
registry from the plaintiff's solicitor dated January
31, 1989. The signatories to these letters are the
same counsel who participated at the trial, and
both are agreed that these letters should serve as
their respective submissions relating to the proper
disposition of costs. As stated, the judgment
awarded the plaintiff his costs of the action
throughout.
Counsel for the defendants points out that the
award of damages, inclusive of interests and costs
to the date of the payment into Court, is substan
tially less than the amount of $5,000 paid into
Court. Consequently, it is his submission that the
defendants should have their costs of the action
from the date of payment into Court.
Counsel for the plaintiff argues that the actual
costs of trial could be greater than those to which
the plaintiff would be entitled down to the time of
payment in, and he stresses the point that the
award of costs is a matter of judicial discretion to
be exercised according to the particular circum
stances of the case. He also adverts to the fact that
the plaintiff advanced a strong claim to punitive
damages which, though unsuccessful, should still
feature as a discretionary factor for disallowing
"any costs to the strong defendant".
Rule 344(1) [Federal Court Rules, C.R.C., c.
663 (as am. by SOR/87-221, s. 2)] codifies the
basic rule that an award of costs is in the complete
discretion of the court. Subsection (3) of Rule 344
enumerates in lettered clauses some of the factors
to be considered in exercising the judicial discre
tion to award costs, among which are:
Rule 344. (3) ....
(a) the result of the proceeding;
(b) the amounts claimed and the amounts recovered;
(c) the importance of the issues;
(J) any payment of money into Court under Rules 441 et seq
and the amount of that payment;
(g) any offer of settlement made in writing;
(j) the complexity of the issues;
(k) the conduct of any party that tended to shorten or to
lengthen unnecessarily the duration of the proceeding;
Rule 441 deals with the matter of the payment
of a sum of money into court in satisfaction of the
cause of action in respect of which a plaintiff
claims, and Rules 442 and 443 relate generally to
the procedural results consequent thereon. These
Rules afford no guidelines as to the effect of a
payment into court vis-Ã -vis an award of costs.
Nevertheless, it is my view that they are designed
to promote the settlement of litigation by forcing
plaintiffs to think twice about going on and being
penalized in costs. In saying this, I am merely
echoing what has been stated in many judicial
pronouncements on the subject.
In Klaus v. Beck (1966), 59 D.L.R. (2d) 284; 58
W.W.R. 361 (Man. C.A.), Monnin J.A., express
ing the opinion of the Court, said at pages 287
D.L.R.; 364 W.W.R.:
These cases all indicate that the trial Judge has an inherent
discretion as to costs, but that when the defendant has paid
money into Court and the amount awarded is less than the
amount paid in, the costs subsequent to the payment in should
be given to the defendant unless there are circumstances justi
fying the exercise of a discretion to the contrary.
I regard this as an excellent statement of the
prevailing general rule.
Milligan v. Carter, [1935] 2 W.W.R. 662 (Alta.
S.C.), was an automobile collision case involving
gross negligence on the part of the defendant, who
had paid into Court the sum of $769.50 in satisfac
tion of the plaintiff's claim. The plaintiff was
awarded damages of $653 and costs. Argument
was subsequently heard on the question of costs,
the defendant claiming that he should have his
costs of trial and all proceedings subsequent to the
payment into Court. The Court held that the
defendant should be deprived of these costs in the
circumstances.
Simmons C.J.T.D. said at page 663:
In regard to the costs of the trial if there were no circum
stances disentitling the defendant to his costs, I think he should
have the costs of the trial. The circumstances of this case were
such as I think entitle me to deprive the defendant of the costs
of the trial. The collision was caused by negligence of a very
aggravated character as will appear by the reasons for judg
ment given at the end of the trial. It was only by a very
fortunate escape on the part of the plaintiff that very serious
injury or loss of life did not arise out of the accident. There was
absolutely no justification for the gross negligence of the
defendant driving as he did on the wrong side of a well-
travelled highway in full view of an approaching car. Notwith
standing these circumstances he continued to occupy the left-
hand portion of the driveway and I think I am justified in
depriving him of his costs in lieu of punitive or exemplary
damages arising out of such wanton and reckless conduct
exercised by the defendant.
In Fraser et al. v. Lochead et al. (1981), 126
D.L.R. (3d) 86 (Ont. H.C.), Mr. Justice Lerner
set out a number of factors to be considered by
courts in justifying a departure from the general
practice of giving a defendant his costs after pay
ment of money into court when the amount recov
ered by the plaintiff is less than the amount paid
in, among which were the following [at page 92]:
(a) whether payment into Court was at a reasonable length of
time before trial;
(b) whether the defendant contested liability and, if so, how
vigorously;
(c) the disparity between the amount paid into Court and the
judgment recovered;
(f) the behaviour of the defendant (particularly whether there
was behaviour so wanton as to justify the equivalent of
exemplary damages), and ....
In the circumstances of the particular case, the
learned Judge exercised his discretion by awarding
the plaintiffs their costs up to the time of payment
in and one day's counsel fee at trial and no costs to
either party thereafter. The rules that featured in
the case were former Ontario Rules [Ontario
Rules of Practice, 1977] 306 and 317, which read:
306. A defendant may, at any time pay into court a sum of
money in satisfaction of the claim or cause of action, or of one
or more of the claims or causes of action for which the plaintiff
sues.
317. Except in an action to which a defence of tender before
action is pleaded or in which a payment is made under The
Libel and Slander Act, no statement of the fact that money has
been paid into court under the preceding rules shall be inserted
in the pleadings, and no communication of that fact shall at the
trial of any action be made to the judge or jury until all
questions of liability and amount of debt or damages have been
decided, but the judge shall, in exercising his discretion as to
costs, take into account the fact that the money has been paid
into court, the amount of such payment, the date and time of
delivery of notice of payment in and whether liability has been
admitted or denied.
Findlay v. Railway Executive, [1950] 2 All
E.R. 969 (C.A.), was an action for damages for
personal injuries in which the defendants admitted
liability and paid £920 into court. At trial, the
plaintiff recovered damages of £867. Defendants'
counsel asked for costs by reason of the lesser
amount recovered. Plaintiff's counsel submitted
that the matter was one of discretion and asked for
costs, which the judge gave. An appeal was taken
from that decision and the Court held that the
defendants were entitled to their costs from the
date of payment in.
Somervell L.J. said at page 971:
The main purpose of the rules for payment into court is the
hope that further litigation will be avoided, the plaintiff being
encouraged to take out the sum paid in, if it be a reasonable
sum, whereas, if he goes on and gets a smaller sum, he will be
penalised wholly or to some extent in costs.
Denning L.J., expanding on this theme with his
usual inimitable flourish, stated at page 972:
In the present case I can well understand that the judge
wanted to award the plaintiff her costs. A judge nowadays does
not know what amount has been paid into court, and it is
particularly galling for a judge, whose mind may have been
fluctuating between £750 and £1,000, to find that because he
chose the lower figure, the plaintiff not only gets merely that
lower figure, but also has to pay much of it away in costs to the
defendant. Knowing how close a thing it was in his own mind,
he does not want a plaintiff to suffer because the payment into
court happens to exceed the amount he awards. He would
prefer not to take the payment into account, but the rules
require him to do it.
The hardship on the plaintiff in the instant case has to be
weighed against the disadvantages which would ensue if plain
tiffs generally who have been offered reasonable compensation
were allowed to go to trial and run up costs with impunity. The
public good is better secured by allowing plaintiffs to go on to
trial at their own risk generally as to costs. That is the basis of
the rules as to payment into court, and I think we should
implement them here, even though it means that the plaintiff
has to pay out much of her damages in costs to the defendants.
The only issue in the case was the amount of damages. The
defendants paid a reasonable sum into court. The plaintiff took
her chance of getting more, and, having failed, she must pay
the costs.
The applicable English rules at the time Findlay
v. Railway Executive was decided were very simi
lar to former Ontario Rules 306 and 317: see
Order 22, RR. 1, 6, Rules of the Supreme Court
(No. 1 ) 1933, as amended by Rules of the Supreme
Court (No. 1) 1934. Rule 41.07 of the Civil
Procedure Rules of Nova Scotia contains a similar
prohibition regarding non-disclosure of payment
into court, and reads as follows:
41.07. Except in a proceeding where the defence of tender
before the commencement of the proceeding is pleaded, the fact
that money has been paid into court under the foregoing
provisions of this Rule shall not be pleaded, or communicated
to the court or jury at or before the trial or hearing of the
proceeding until all questions of liability and the amount of
debt and damages have been decided, or the proceeding has
been stayed under rules 41.03(1) or 41.05(2).
Incidentally, the new Ontario Rules regarding
the payment of money into court make no mention
of any prohibition against communicating the fact
of such payment to the judge or jury until after the
determination of all questions of liability and the
amount of debt or damages. Instead, a somewhat
similar prohibition is incorporated in the new
Rules of Civil Procedure pertaining to offers to
settle: see Rule 49.06.
The learned authors of Federal Court Practice
1988 (Carswell, 1987) note that there is no provi
sion in the Federal Court Rules to prevent notice
of a payment into court from coming to the atten
tion of the judge. Accepting that the object of our
Rules relating to costs and payments into court is
to encourage the settlement of litigation, it seems
to me that the precepts of better practice would
dictate that no communication of the fact of pay
ment into court should be made to the judge until
all questions of liability and the amount of debt or
damages have been decided. Otherwise, there is an
element of risk that knowledge of the fact of
payment into court might somehow influence the
determination of the final result, or be seen as
having done so.
As indicated, the formal judgment gave the
plaintiff his costs of the action throughout and, in
that regard, was in strict accordance with the
reasons for judgment filed at the same time. The
defendants maintain that they should have their
costs of the action from the date of payment into
court by reason that the total judgment award was
substantially less than the amount of $5,000 paid
in. Prima facie, this would seem to entail varying
the judgment as to costs by some legitimate proce
dural means, irrespective of the usual difficulties
attendant thereon. As matters turned out, it might
have been better had I invited counsel for the
successful party to submit a draft judgment and
move for judgment pursuant to Rule 337(2)(b)
and Rule 324, thus affording the other side an
opportunity to advise of the payment into court
and speak to the matter of costs. In such case, the
question of the proper award of costs in the cir
cumstances could have been resolved before the
pronouncement of formal judgment under Rule
337(2)(a).
The problem with which I am now confronted
poses, as it seems to me, these questions, namely:
(1) whether the award of costs should be varied by
reason of the payment into court; and (2) how can
this be best accomplished?
The plaintiff was awarded damages of $1,072,
together with pre-judgment interest from the date
of the mishap to the date of judgment at the rate
of 8% per annum, compounded annually. Should
this pre-judgment interest be included in calculat
ing the amount of the plaintiff's judgment for the
purpose of determining whether the amount there
of was less or more than the amount paid into
court in reference to the question of costs? In my
opinion it should. See Rushton v. Lake Ontario
Steel Co. Ltd. (1980), 29 O.R. (2d) 68 (H.C.).
Moreover, I consider this proposition to be more in
keeping with the practice of this Court in admiral
ty cases in awarding interest as an integral part of
the damages suffered on the broad principle of
restitutio in integrum. In the present case, a rough
calculation of pre-judgment interest yields an
approximate figure of $1,910 which, when added
to the damages, gives a total judgment debt of
$2,982, exclusive of costs. This amount is substan
tially less than the sum of $5,000 paid into Court.
On the other hand, I am of the view that the
matter of costs should not be brought into any
calculation of the amount of the plaintiff's recov
ery balanced against the amount paid into Court
by the defendants. The fundamental principle of
costs as between party and party is that they are
given by the law as an indemnity to the person
entitled to them; they are not imposed as a punish
ment on the party who pays them, nor given as a
bonus to the party who receives them: see Ryan v.
McGregor, [1926] 1 D.L.R. 476 (Ont. C.A.) per
Middleton J.A., at page 477.
In the present case, the defendants vigorously
contested the issue of liability, the theory being
that the loss suffered by the plaintiff was solely
attributable to his own negligence or, failing that,
was substantially contributed to by his negligence.
I found on the evidence that it was the defendants'
negligence in manoeuvring their large stern trawl
er too close to the plaintiff's anchored fishing
vessel that was the sole cause of the damage
occasioned by the entanglement of their trawling
warp with the latter's anchor rope. Under the
circumstances, I made no apportionment of fault
against the plaintiff. The duration of the proceed
ing might have been shortened to some extent had
the defendants elected to admit liability and con
test the quantum of damages. However, they chose
to contest the issue of liability, as they had every
right to do. In the result, the issues that had to be
litigated at trial necessarily became more complex.
In my view, these are all factors that must be
weighed in considering the defendants' submission
that they be allowed their costs of the action from
the date of the payment into Court.
On the other hand, the plaintiff submits that it
would be unfair to disentitle him to his costs of the
action throughout by reason of his strong assertion
of a claim for punitive damages arising out of the
careless and reckless conduct of the defendants in
the operation of their fishing trawler, even though
the claim for such punitive damages failed. Actu
ally, I found that the defendants' negligence was
not so contumelious as to justify an award of
punitive damages and I am not about to reverse
myself on that score. However, there was some
evidence that the plaintiff's safety might have been
gravely imperilled but for the fortuitous severance
of the entangled anchor rope at the point when his
vessel might conceivably have been swamped or
pulled under. In my opinion, this factor is one that
could be considered in terms of having added some
degree of aggravation to the negligent course of
conduct, but not to the extent of entitling the
plaintiff to his costs throughout in lieu of punitive
or exemplary damages.
Having regard to all the foregoing factors, I am
of the opinion that the proper award of costs in the
circumstances of this case would be to give the
plaintiff his taxable costs to the date of the pay
ment into Court and disallow any costs to either
party thereafter. This disposition will afford the
plaintiff some indemnity in the way of costs and at
the same time give recognition to the fact that the
judgment amount recovered was substantially less
than the amount paid into Court by the defen
dants. Consequently, the judgment will have to be
varied as to the present award of costs.
It seems to me that the matter falls within the
scope of Rule 337(5)(b) of the Federal Court
Rules, which reads:
Rule 337... .
(5) Within 10 days of the pronouncement of judgment under
paragraph (2)(a), or such further time as the Court may allow,
either before or after the expiration of that time, either party
may move the court, as constituted at the time of the pro
nouncement, to reconsider the terms of the pronouncement, on
one or both of the following grounds, and no others:
(b) that some matter that should have been dealt with has
been overlooked or accidentally omitted.
What was overlooked here was the award of
costs without regard to the amount of judgment
recovered and the amount paid into Court by the
defendants and this resulted from the rule or prin
ciple of practice that the fact of payment into
court should be kept secret from the presiding
judge. I have no problem with extending the time
beyond the ten days prescribed by the Rule to
February 9, 1989, which is the date when I was
first made aware of the matter.
In the result, an order will issue to vary the
award of costs in the judgment to accord with
these reasons. There will be no costs of this
application.
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.