Carruthers v. The Queen, 83 DTC 5076, [1983] CTC 15 (FCTD)

Walsh, J:—Plaintiff moves pursuant to Rule 324 for an order extending the time to make the application and for the Court to make a special direction concerning costs to the effect that the action be considered as a Class III action within the meaning of Tariff B and that payments to the expert witnesses called by the plaintiff be increased to $7,684.

The motion is supported by an affidavit and written representations together with an affidavit in support of same have also been filed. Answering representations have been filed by defendant. Judgment of the first instance was rendered herein on December 3, 1981 and a notice of appeal dated December 24, 1981 was filed on or about December 30, 1981. It was stated in the notice of appeal that the sole question to be raised by the plaintiff was the issue that in establishing the fair market value of the shares of Griffith Saddlery and Leather Limited on December 31, 1971, disposed of by the plaintiff in 1976, the agreements and the terms of the agreements referred to in the reasons for judgment should be considered. Written submissions were made by appellant dated January 6, 1982, pursuant to Rule 324 for an order limiting the contents of the case under appeal so that the appellant would not be required to prepare copies of the transcript of the verbal testimony nor the documentary exhibits filed during the hearing other than the agreements referred to in the reasons for judgment. The respondent filed answering representations pursuant to Rule 324 dated February 26, 1982, to which plaintiff replied on March 16.

By judgment rendered on April 8, 1982, by Ryan, J the application was dismissed without prejudice to the making of an agreement between the parties under Rule 1204 as to the contents of the case.

Plaintiff received an account from Price, Waterhouse on June 28, 1982, for the services of its expert witness, Mr Phillip W Bowman for preparation for and attendance in Court to give evidence in the amount of $7,684, which included $334 for out-of-pocket expenses. The trial lasted two days. On the issue of the class of the action plaintiff points out that on May 31, 1978, John Carruthers was assessed tax in the amount of $34,951.69 with interest of $2,564.40. Interest is calculated thereafter bringing the amount to $50,018.26 as of December 3, 1981. Some five months after the judgment of Ryan, J refusing to limit the contents of the appeal case plaintiff on September 20, 1982, filed a notice of discontinuance of the appeal, as did Emma Carruthers in the associated case bearing Court No A-873-81.

No matter what date is taken it appears that this Motion has been filed too late. Rule 344 (7) of the Rules of this Court reads as follows:

344. (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 contemplated 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 3 judges to review a decision so obtained.

Rule 337(5) to which reference is made reads as follows:

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 pronouncement, to reconsider the terms of the pronouncement, on one or both of the following grounds, and no others:

(a) that the pronouncement does not accord with the reasons, if any, that may have been given therefor,

(b) that some matter that should have been dealt with has been overlooked or accidently omitted,

In the judgment under appeal no special direction was sought nor made respecting costs which were not spoken to. Had this been done I would no doubt at the time have made a special direction with respect to the costs of Mr Bowman of Price Waterhouse. The fact that in the reasons for judgment I indicated a preference for the approach to evaluation of the shares by Mr Dalgleish, defendant’s expert, and in fact based my decision on an earlier report of Mr Clayton made for the defendant, should not be considered as detracting from the usefulness of Mr Bowman’s report nor is it any reflection on his competence. In cases in which experts are called by both parties and they give conflicting opinions the Court has to choose the opinion of one of the experts as preferable to the other, unless the Court chooses to reject both opinions and substitute its own based on the evidence, but the fact that one expert’s report is rejected or not accepted in full would not justify nonpayment of his fees'for the preparation of same unless the court finds that the requisitioning of such a report was entirely unnecesary or the contents useless. That was not the case here, where an intricate and difficult question of evaluation of shares was involved in which the assistance of accounting experts was valuable and necessary. It is generally accepted that the payment for an expert witness of $35 pursuant to rule 4(1) of Tariff A is completely inadequate and unreasonable. Subsection (2) provides that there may be paid to a witness who appears to give evidence as an expert a reasonable payment for the services performed by the witness in preparing himself to give evidence and giving evidence.

Tariff B section 2(2)(a) provides that all disbursements made under Tariff A may be allowed except that payments to a witness under paragraph 4(2) may only be allowed to the extent directed by the Court under Rule 344(7).

As already stated Rule 344(7) refers back to Rule 337(5) which requires such an application be made within 10 days from the pronouncement of the judgment although it contains a provision that this may be extended to such further time as the Court may allow, either before or after the expiration of that time. Rule 337(5) is precise however as to the grounds on which the pronouncement may be varied, including that some matter which should have been dealt with has been overlooked or accidentally omitted. It is difficult to conclude that a special direction respecting costs of an expert witness is something which was overlooked or accidentally omitted as there is no requirement that the Court should decide whether such an order should be made when rendering judgment.

However, defendant itself concedes that the action involved an issue of some importance and difficulty which necessitated the calling of expert evidence, which is by no means unusual in this court. I find it somewhat surprising therefore that defendant does not consent to the payment to plaintiff’s expert of “a reasonable payment for services performed by the witness in preparing himself to give evidence and giving evidence” pursuant to section 4(2) of the tariff. In the absence of a direction pursuant to Rule 344(7) defendant is not of course obliged to but it is nevertheless customary in cases where an expert has been called to pay him a realistic fee, and this is frequently done by consent.

In the present case plaintiff succeeded only to the extent that the valuation day evaluation of his shares was increased from $7.45 as found by the Tax Review Board to $11. This had the result of reducing his taxable capital gain by $5,966, and it would be most unjust if he were to benefit pursuant to the judgment only to the extent of a re-assessment reducing his taxes by the tax on this $5,966, only to be obliged to pay $7,684 for his expert, more than wiping out any gain from the judgment which upheld his contentions at least in part. It is clearly a case where the discretion of the Court under rule 344(7) would have been exercised, and it is perhaps not going too far to give a liberal interpretation to Rule 337(5)(b) and find that this is a matter which should have been dealt with but was overlooked.

The discretion of the Court as to costs was greatly inhibited by the judgment of Justice Jackett, CJ in appeal in the case of Mark G Smerchanski v MNR, [1974] 1 FC 801; [1974] CTC 241; 74 DTC 6197 and in particular at 807 in the Appendix to it the learned Chief Justice stated:

Rule 344(7) authorizes applications for special directions to be carried out on the taxation of costs. It does not authorize applications to change a “pronouncement” of judgment or a judgment after it has been signed.

In the case of Hillsdale Golf and Country Club Inc v The Queen, [1979] 1 FC 809, I considered the effects of the Smerchanski case in detail stating at 814:

Reading Rule 344(7) with Rule 337(5) it is contemplated that an application for a direction increasing costs should be made while the matter is sufficiently fresh in the mind of the Court that the Court is in a position to appreciate whether there were present in the particular case circumstances justifying a departure from the normal tariff amount.

Aside from the fact that there had been no unreasonable delay the judgment specifically pointed out that defendant’s counsel acquiesced so that no formal motion under Rule 337 was necessary. In the present case there has not only been no consent to the fixing of the expert’s fee at a fair and reasonable figure by counsel for the defendant, but the present motion is totally opposed.

Reference was made by plaintiff to the decision of my brother Cattanach, J in Spur Oil Limited and Her Majesty The Queen, judgment dated June 8, 1982, in record No T-3505-76. In it the Trial Division had rendered a judgment maintaining the action only in part, otherwise dismissing it, and awarding costs to be taxed to the defendant. It was appealed by plaintiff and the Appeal Division allowed the appeal on July 3, 1981 ordering that plaintiff should have its costs in both the Trial Division and in the Appeal Division. The summer recess intervened and leave to appeal to the Supreme Court applied for on September 9 was refused on September 30, 1981. Cattanach, J found that expiration of the time to move for increased costs pursuant to the judgment of the Court of Appeal was on September 10 but on September 9 defendant had applied for leave to appeal to the Supreme Court of Canada. The first draft of plaintiff’s bill of costs was not presented to the Attorney General until January 20, 1982, at which time the Attorney General took exception to some items, but apparently not to the expert’s fees so the only question remaining was counsel’s fees. This dispute led to a notice of motion dated May 10, 1982, long after October 10, 1981, when the period of 10 days after September 30, 1981 when leave to appeal was refused by the Supreme Court would have expired. However, Cattanach, J points out that the delay from October 10, 1981, to May 10, 1982, was not made an issue, but rather merely that the application should have been made prior to October 10, 1981. In view of the intervention of the long vacation before the application was appealed to the Supreme Court this constituted special circumstances of an exceptional nature to warrant the delay of the application for increased costs.

That judgment is not of much assistance to plaintiff, however. Plaintiff’s appeal in this case was not met by any counter-appeal so there was no danger of him losing costs already awarded. While the judgment of Justice Ryan on April 8, 1982, respecting the contents of the appeal book did not dispose of the appeal it appears probable that it was the reason for plaintiff’s decision to discontinue the appeal on September 23, 1980. The present motion was also dated September 23, 1982, although neither it nor the discontinuance were filed until October 12. Over 10 months had elapsed since the judgment of December 3, 1981 and there do not appear to have been any delays which could be attributable to defendant.

While there is no excuse for the delay in seeking reconsideration of the pronouncement so as to make a special direction with respect to the expert’s costs I am nevertheless prepared to exercise my discretion pursuant to rule 337(5) and extend the delay for reconsidering the pronouncement of judgment on the basis that this is a matter which should have been dealt with but which was overlooked and that it would be most inequitable and contrary to the normal practice not to make such a direction.

I might add that in exercising this discretion to extend the delay for making this motion, and in making a special direction pursuant to rule 344(7) for expert’s costs, I am of the view that a clear distinction should be made between an order making special directions respecting expert’s costs, and an order increasing counsel fees beyond those fixed by the tariff or awarding a lump sum in lieu of taxed costs. The current view of the Court of Appeal, following the Smerchanski judgment (supra) is that it is only in very exceptional circumstances that the tariff, even if inadequate, should be departed from in the party and party taxation of costs. Had plaintiff sought an increase in the counsel fees provided for in the tariff, I would have rejected this, and had this been the only issue I would not have exercised my discretion to excuse the delay in seeking a modification of the pronouncement of judgment.

It should not be concluded that I consider that the amount of $7,684 is necessarily reasonable and proper under the circumstances for this is a matter to be determined by agreement or on taxation followed by an appeal from it if necessary. Defendant submits that much of the account was not properly incurred in preparation for trial, but had previously been incurred for an earlier report prior to the hearing before the Tax Review Board.

With respect to plaintiff’s request that the matter be considered as a Class III action this is dismissed. Subsections 1(3)(b) and (c) of Tariff A read as follows:

1. (3) Unless the Court otherwise directs in respect of a particular step in a proceeding, or in respect of all steps in a particular proceeding,

(b) where a step is a step in a proceeding that is, or was in its inception, an appeal to the Trial Division or any other proceeding in the Trial Division where no judgment is being sought for payment of an ascertained amount, it shall be classified as Class II step,

(c) where a step is a step in a proceeding in which there is an amount involved on the fact of the proceedings that is $5,000 or more and less than $50,000, it shall be classified as a Class II step.

The present proceedings can hardly be considered as seeking a judgment for payment of an ascertained amount, and even if they were the amount involved is less than $50,000. Defendant’s representations include various calculations and accompanying affidavits, but even if the shares had been valued at $44.70 the figure plaintiff sought, rather than at $7.45 a share, the amount established by the Tax Review Board, the difference in taxable capital gain would have been the difference between $3,460.81 and $66,059.44, the amount of tax being $30,798.23. Unless interest is taken into consideration and in my view it should not, and even taking plaintiff’s own figure for reassessment of tax of $34,951.69 and if interest were included to the date of institution of proceedings in January 1980 the total would still be less than $50,000.

I therefore find the proceedings to be a Class II action.