Barnabé Estate v. The Queen, docket 96-1166-IT-G

Date: 20001013

Docket: 96-1166-IT-G

BETWEEN:

ROGER BARNABE AND RICHARD BARNABE IN THEIR CAPACITIES AS EXECUTORS OF THE ESTATE OF LOUIS BARNABE,

Appellants,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for order

Mogan J.T.C.C.

[1]            This is a motion under section 159 of this Court's Rules of General Procedure ("the Rules") to review the taxation of costs by R.D. Reeve, a Taxing Officer acting under sections 153 to 158 of the Rules.

[2]            The history of this litigation is not complicated. In April 1996, the executors of the Estate of the late Louis Barnabe (the "Appellants") filed a Notice of Appeal in this Court with respect to the 1992 taxation year. The principal issue was whether the deceased had disposed of certain assets prior to his death on May 10, 1992. On January 19, 1998, Judge McArthur of this Court signed a judgment dismissing the appeal in these words:

The appeal from the assessment made under the Income Tax Act for the 1992 taxation year is dismissed with costs.

[3]            The Appellants appealed from Judge McArthur's decision to the Federal Court of Appeal by notice dated February 13, 1998. In the Federal Court of Appeal, Sexton J.A. writing reasons for the majority concluded with the following sentence:

Thus, the appeal should be allowed with costs to the appellants.

On June 22, 1999, the Federal Court of Appeal delivered a formal judgment allowing the Appellants' appeal in these words:

The appeal is allowed with costs to the appellants and the matter is remitted to the Minister for reassessment in accordance with the reasons for judgment of this Court.

[4]            The taxation of costs in this Court was conducted before Mr. Reeve, the Taxing Officer, by telephone conference on March 21, 2000. The Taxing Officer issued his Reasons for Taxation on July 6, 2000 deciding that the Appellants were not entitled to recover any costs in this Court. In his Reasons, the Taxing Officer stated:

In view of the wording of the Court of Appeal I am not persuaded that I have the authority to give a broader interpretation to a court decision which would allow costs at the Tax Court level and additional costs in the Court of Appeal.

(paragraph 18)

If I were to interpret the decision to include costs throughout, it would certainly cover all litigation, but I believe in this instance it would expand the decision of the Court of Appeal beyond what it says.          (paragraph 18)

In this instance I do not have jurisdiction to award costs at the Tax Court of Canada level.                                                                                                     (paragraph 20)

[5]            Before considering the merits of this motion, I will digress to comment briefly on the last sentence quoted above. With respect, the Taxing Officer did have jurisdiction to award costs at the Tax Court level. In exercising that jurisdiction he construed the words used by the Federal Court of Appeal when it allowed the Appellants' appeal from the decision of Judge McArthur. The Taxing Officer construed those words to mean that the Federal Court of Appeal intended to award costs to the Appellants only with respect to the hearing in that Court. It is from the Taxing Officer's decision interpreting the judgment of the Federal Court of Appeal that this motion is brought.

[6]            This motion was heard at Winnipeg on September 22, 2000. I understand from submissions by counsel that the Appellants' costs in the Federal Court of Appeal have already been taxed. I am therefore concerned only with whether the Appellants are entitled to recover costs in this Court. Like the Taxing Officer, I must construe the words of the formal judgment of the Federal Court of Appeal set out in paragraph 3 above. In the Federal Court Rules, the word "Court" is defined as follows:

"Court" means the Federal Court of Canada and, according to the context, shall be taken as referring to the Trial Division or the Court of Appeal, or both;

Section 344 of the Federal Court Rules provides:

344(1)      The Court shall have full discretionary power over payment of the costs of all parties involved in any proceeding, the amount and allocation of those costs and determining the persons by whom they are to be paid.

(2)            Costs may be awarded to or against the Crown.

(3)            In exercising its discretionary power pursuant to subsection (1) the Court may consider

(a)            the result of the proceeding;

(b)            ...

The Federal Court of Appeal exercised its discretionary power to award costs in this case when it used the words "The appeal is allowed with costs to the Appellants ... " in its formal judgment. Prior to 1987, subsection 344(1) of the Federal Court Rules had different words as follows:

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.

When construing this earlier version of subsection 344(1) in RCP Inc. v. M.N.R. et al, [1986] 1 F.C. 485, Rouleau J. stated at pages 488-489:

                Over the years, the meaning of the word "event" has been judicially considered in various and different circumstances. In Creen v. Wright (1877) 25 W.R. 502 (C.A.), the Court held that where on the trial of an action a non-suit is directed which is set aside and a new trial granted and on the second trial the plaintiff has a verdict and a judgment, the plaintiff is entitled to the costs of the first trial as part of the costs which "follow the event". The verdict of the jury on the second trial is the event.

                In Field v. Great Northern Railway Company (1878), 26 W.R. 817 (Div. Ct.), the event was held to be the result of all the proceedings incidental to the litigation, and the costs which follow the event include the costs of all the stages of litigation.

...

                In the course of conducting research, I have been unable to find a case which supports the proposition that when a matter has been settled between the parties and further litigation is unnecessary there can be no order made as to costs. The "event" which costs are to follow is nothing more than the outcome of the litigation; in the case at bar the outcome was that the applicant obtained the relief it sought in the form of a settlement. ...

[7]            Although the words "follow the event" were taken out of subsection 344(1) in the 1987 amendment, the first matter which the Court may consider in exercising its discretionary power is set out in paragraph 344(3)(a) "the result of the proceeding". In my view, the "result" is the decision of the Federal Court of Appeal but is the "proceeding" only the hearing on appeal or does it include the hearing in the lower court from which the appeal is taken? There would be no proceeding in any court of appeal if there were not a proceeding in a lower court from which the losing party could launch an appeal. Having regard to the manner in which Rouleau J. concluded in RCP v. M.N.R. that the "event" is the outcome of the litigation, I am inclined to the view that the "proceeding" in paragraph 344(3)(a) of the Federal Court Rules is the proceeding at trial and in the court of appeal. My view does not necessarily win the day for the Appellants, however, because paragraph 344(3)(a) is only the first matter to be considered.

[8]            Should I draw any conclusion from the fact that the reasons for the majority in the Federal Court of Appeal and the formal judgment of that Court are silent with respect to the trial before Judge McArthur in this Court? Are those documents silent with respect to the proceeding in this Court because the Court of Appeal assumed that it was awarding costs at both levels or because the Court of Appeal had made a conscious decision not to award costs at the trial level? In his text "The Law of Costs", second edition 1999, (Canada Law Book Inc.) Mark M. Orkin stated at paragraph 802.11:

                When an appeal is allowed, the general principle is that the order for costs at trial is set aside and the costs at trial and on appeal are awarded to the successful appellant, but the court has a discretion to depart from this approach in unusual circumstances.

                Although, as noted, costs of the appeal follow the event in the absence of special circumstances, costs of the trial must be sought in the factum and at the oral hearing.

[9]            In the material before me on this motion, I do not have a copy of the Appellants' factum in the Federal Court of Appeal and so I do not know if costs of the trial before Judge McArthur were sought in that factum. The Affidavit of Robert C. Lee in support of this motion is imprecise. In paragraph 5 of the Affidavit, Exhibit "D" is described as a copy of "the judgment rendered by the Court" (i.e. the Federal Court of Appeal) but Exhibit "D" is in fact a copy of the reasons for judgment and not the formal judgment. And in paragraph 7, Exhibits "F" and "G" are described as the "Certificate of Taxation together with the Reasons for Taxation". Exhibit "F" is in fact a copy of the letter from this Court to the Appellants' solicitors enclosing a true copy of the Certificate of Costs but the Certificate itself is not part of the Affidavit. The Affidavit also fails to include a copy of the Appellants' factum used in the Federal Court of Appeal.

[10]          A review of seven reported decisions by the Federal Court of Appeal in 1998 on appeals under section 27 of the Federal Court Act does not disclose a consistent pattern concerning costs in the court below. For example, in the following three cases:

                                Semiahmoo Indian Band                    [1998] 1 F.C.R. 3

                                Andrew Donnelly                                                 [1998] 1 F.C.R. 513

                                Carpenter Fishing Corp.                    [1998] 2 F.C.R. 548

appeals were allowed with costs and a specific reference to the "court below". In the following four cases:

                                Beothuk Data Systems Ltd.                 [1998] 1 F.C.R. 433

                                Ken Rubin                                                              [1998] 2 F.C.R. 430

                                Mary Robinson et al                            [1998] 2 F.C.R. 569

                                Shell Canada Ltd.                                                [1998] 3 F.C.R. 64

appeals were allowed with costs but no reference to the "court below". The Federal Court of Appeal may have been responding to the manner in which costs were requested in the various factums filed by the respective appellants.

[11]          I cannot determine in this case whether the Federal Court of Appeal intended to deny the Appellants any costs in this Court when it allowed their appeal "with costs" but no reference to the "court below", or whether it intended to award costs at both levels and assumed that the words "with costs" would achieve that result. In my opinion, there was an onus on the Appellants to satisfy me that, in their factum, they had asked for costs in both the Federal Court of Appeal and the Tax Court of Canada. If they had produced their factum in the Federal Court of Appeal showing such a request, I could have inferred that the Federal Court of Appeal was awarding costs at both levels when it allowed the appeal "with costs". Without seeing the Appellants' factum, however, I will not draw that inference because I do not know if the Federal Court of Appeal was asked to direct its mind to the question of costs at both levels.

[12]          The motion is denied. Because of the real uncertainty as to what the Federal Court of Appeal intended in its formal judgment, I will not award costs with respect to this motion. No costs were requested by either party.

Signed at Ottawa, Canada, this 13th day of October, 2000.

"M.A. Mogan"

J.T.C.C.