NHM International Inc. v. All Risks (The), 2003 FCT 373

Docket: T-1865-02

Neutral citation: 2003 FCT 373

ADMIRALTY ACTION IN REM

AND IN PERSONAM

BETWEEN:

                                                        NHM INTERNATIONAL INC.

                                                                                                                                                         Plaintiff

                                                                                 and

                                                                F.C. YACHTS LTD.,

THE OWNERS AND ALL OTHERS

INTERESTED IN THE MOTOR VESSEL ALL RISKS,

also known as F.C. YACHTS LTD. HULL NUMBER QFY76003K102

                                                                                                                                               Defendants

                                                            REASONS FOR ORDER

HARGRAVE P.

[1]                  These reasons as to costs arises out of a motion dealt with on and an Order dated 10 January 2003, the Order concluding with the provision that "if costs cannot be agreed, the parties may make written submissions".

[2]                  I have considered a letter from Plaintiff's counsel dated 4 February 2003 and a letter from counsel for the Defendants, F.C. Yachts Ltd., dated 18 March 2003. The issue between the parties is whether there ought to be solicitor and client costs to reflect the Plaintiff's legal costs of $14,037.00 (exclusive of disbursements) or costs to reflect a lower award pursuant to Tariff B. Here I would note that present solicitors and counsel for the Defendants, F.C. Yachts Ltd., are not the solicitors and counsel who prepared material and attended on the hearing of the motion for F.C. Yachts Ltd. which was a motion to set security for the release of the "All Risks".

CONSIDERATION

[3]                  Counsel for the Plaintiff notes that in my Reasons of 21 January 2003 I observed that security to reflect to construct the vessel on a cost-plus basis "would be unreasonable and indeed inconceivably extravagant" (paragraph 32). I also noted that to proceed on the basis on a cost-plus construction contract, which would be to ignore the documentation and conduct of the parties, would be an abuse "both as to the use of the arrest and bail procedures of the Court and an abuse of NHM International Inc." (paragraph 37). Similarly, I summed up a request for $800,000.00 in additional security, based upon pure conjecture, as "inconceivable, extravagant and unreasonable" (paragraph 44). These are factors to take into consideration in setting costs.

[4]                  The bail ordered by the Court, to secure the F.C. Yachts Ltd. claim of $1,980,000.00 (US), was set at $125,000.00 (US), together with a sum of $71,000.00 (US) which constituted the holdback on the price of the vessel. Counsel for the Plaintiff points out that the bail ordered by the Court was thus only $3,000.00 (US) more than that offered by the Plaintiff.

[5]                  In his motion counsel for the Plaintiff sought costs on a solicitor and own-client basis, now presented, without an actual breakdown, at $14,000.37, with the submission that costs should be fixed at $14,000.00, payable by F.C. Yachts Ltd., to the Plaintiff forthwith.

[6]                  Present counsel for F.C. Yachts Ltd. correctly points out that lack of success is not a reason to impose costs which are punitive, for to institute such a practice would discourage others from seeking appropriate bail. That is a proper observation which would apply to a party seeking a bona fide amount of bail, or even bail inflated by some legitimate expectations and here I have in mind cases involving salvage, where the award could well be a figure within a substantial range. However in the present instance the bail amount sought by F.C. Yachts Ltd. was beyond a reasonable expectation, was based upon a good deal of conjecture and supposition, not supported by any documents or law and thus, as I indicated, extravagant, unreasonable and inconceivable to such an extent that it constituted an abuse. The difference between a demand for bail constituting an abuse and a demand for bail which is merely at an optimistic end of the scale may not be an exacting division, but it is one that parties, lawyers and the Court ought to be able to clearly recognize when they see it.

[7]                  Counsel for F.C. Yachts Ltd. submits that by itself the material, research, argument and attendance on the motion were not overly complex. Yet the Plaintiff did have to be prepared, including as to documentation, to meet many arguments, some nebulous and difficult to grapple with, and the motion lasted some three hours. Were these the only factors costs might be at the high end of Column III of Schedule B. However the matter of solicitor and client costs having been raised, in a legitimate context, I should deal with that request.

[8]                  Had F.C. Yachts Ltd. accepted the security offered by the Plaintiff, or perhaps bargain for a reasonable additional amount it would, in either event, have been adequately protected. However, the request of F.C. Yachts Ltd. went beyond the reasonable and into the realm of the unreasonable and indeed the abusive. This brings up the concept of costs as a deterrent to unreasonable activity, dealt with at length in an interesting article by Mr Gordon Turriff, "Towards a New World of Costs", published in Volume 51 of the Advocate, at page 717. In that article Mr Turiff referred to the then recent cases of Houweling Nurseries Ltd. v. Fisons Western Corporation (1988), 37 B.C.L.R. (2d) 2, a decision of Madam Justice Appeal McLachlin, as he then was, leave to appeal to the Supreme Court of Canada refused 37 B.C.L.R. (2d) as noted at page 2 and to Fullerton v. Matsqui District (1992), 74 B.C.L.R. (2d) 311 (BCCA).

[9]                  In Houweling Madam Justice Appeal McLachlin, writing for the court, observed that:

This passage is bracketed with the concept that there are sound reasons for keeping costs within relatively modest limits, for otherwise costs might be a deterrent to those bringing meritorious claims or defences. I will return to this concept of the interplay between costs as a deterrent to, on the one hand, inappropriate behaviour and, on the other hand, to meritorious claims and defences.

[10]            In Fullerton (supra) the Court of Appeal, again dealing with solicitor and client costs, observed that:

[11]            Madam Justice Appeal McLachlin clearly limited solicitor and client costs in the Young v. Young (1994), 160 N.R. 1 (S.C.C.) at 41:

[12]            The case authority is clear that solicitor-client costs are the exception. The Federal Court of Appeal pointed out in Canada (Minister of National Revenue) v. Hassanali Estate (1996), 197 N.R. 51 (F.C.A.) at 54, that solicitor-client costs are an exceptional remedy. There the Court of Appeal referred to Bland v. National Capital Commission (1993), 1 F.C. 541 (F.C.A.) at 544 for the proposition that "[c]osts as between solicitor and client are exceptional and generally to be awarded only on the ground of misconduct connected with the litigation.".

[13]            In Smith & Nephew Inc. v. Glen Oak Inc. (1996), 198 N.R. 302 Mr Justice of Appeal Hugessen had a word to say on the question of costs. He gave examples of arguments advanced which "were wholly unfounded in law or unsupportable on the factual record." (page 314). He then said:

Here his signal was that even though the appeal was successful, the appellant was penalized for unsound and unsupportable argument. That has its counterpart in the present instance, there being many submissions on behalf of F.C. Yachts Ltd. which were both unsupportable on any reasonable view the facts, or wholly unfounded in any law.

[14]            Extreme positions and unreasonable allegations, stopping short of abuse, may also attract enhanced costs: see for example Kajat v. The Arctic Taglu (1997), 145 F.T.R. 102 (F.C.T.D.) at 106. There Madam Justice Reed ordered enhanced costs under Column V of Tariff B.

[15]            From all of this I take it that I must be cautious when awarding costs in excess of those set out in the Federal Court Tariff and indeed, it is not in the interest of the administration of justice to ignore the Tariff, except in exceptional circumstances or where there has been misconduct connected with the litigation. Even where punitive costs are called for, I should consider what is the appropriate measure of reasonable solicitor-client costs.

CONCLUSION

[16]            In the present instance I am reluctant, despite clear abuse, to award the solicitor-client costs requested at $14,000.00. While F.C. Yachts Ltd. took extreme, unreasonable and indeed extravagant positions, the solicitor and client costs sought are undocumented by any bill of costs.

[17]            In setting lump sum costs I have considered Column V of Tariff B, but believe an award on that basis would be a completely inadequate way in which to compensate the Plaintiff and to express disapproval of the positions taken by F.C. Yachts Ltd. on the motion to set security. However, I have also taken into account that since the motion was decided, there has been a change of solicitor for F.C. Yachts Ltd. and that, beyond an inability to agree as to the amount of costs, the litigation appears to have returned to appropriate give and take, with reasonable positions.

[18]            I have taken into account that the motion was lengthy and that there was clearly substantial work, on the part of the Plaintiff, in assembling material and in being prepared to deal with the positions taken by F.C. Yachts Ltd.

[19]            Taking all of the factors into consideration and bearing in mind that solicitor-client costs are not a blank cheque, but should be kept within reasonable bounds, consistent with a deterrent element, the costs of the motion are awarded in a lump sum of $9,000.00 payable forthwith.

(Sgd.) "John A. Hargrave"

                                                                                              Prothonotary

Vancouver, British Columbia

28 March 2003

                                                   FEDERAL COURT OF CANADA

                                                                    TRIAL DIVISION

                             NAMES OF COUNSEL AND SOLICITORS OF RECORD

MOTION DEALT WITH IN WRITING WITHOUT THE APPEARANCE OF PARTIES

DOCKET:                                           T-1865-02

STYLE OF CAUSE:                        NHM International Inc. v. F.C. Yachts Ltd. et al.

REASONS FOR ORDER:            Hargrave P.

DATED:                                              28 March 2003

WRITTEN SUBMISSIONS:        

David F McEwen                                                                        FOR PLAINTIFF

W Gary Wharton                                                                          FOR DEFENDANTS

SOLICITORS OF RECORD:

McEwen, Schmitt & Co.                                                            FOR PLAINTIFF

Barristers & Solicitors

Vancouver, British Columbia

Bernard & Partners                                                                     FOR DEFENDANTS

Barristers & Solicitors                    

Vancouver, British Columbia