Date: 20011106
Docket: T-625-97
Neutral Citation: 2001 FCT 1214
Action in rem and in personam
BETWEEN:
FRANCOSTEEL CANADA INC.
Plaintiff
and
THE M.V. "AFRICAN CAPE",
HER OWNERS, BONAVERIA SHIPPING CO. LTD.
and
HER MANAGERS, DIMKO
INTERNATIONAL COMPANY S.A.
Defendants
REASONS FOR ORDER
RICHARD MORNEAU, PROTHONOTARY
[1] This is a joint motion by the parties asking that the Court proceed under Rule 400 et seq. of the Federal Court Rules, 1998 (the Rules) to award costs between the parties and to establish the quantum of the said costs.
[2] In April 1997, the plaintiff sued the defendants for damages caused to a shipment of metal coils in the course of their carriage by sea. The parties subsequently agreed to leave the final determination of liability and quantum of damages to an arbitrator, who rendered his decision on December 21, 2000. However, the parties had agreed to leave the issue of costs to this Court.
[3] In his decision the arbitrator held the defendants liable for the damages incurred and assessed them in the amount of $85,879.44. The plaintiff had claimed damages of $485,117.99 in the arbitration proceedings.
[4] On September 29, 1997, some six months after the commencement of the proceedings in this Court, the defendants made a formal written offer to the plaintiff to settle the litigation in the amount of $125,000 including principal, interest and costs (the offer). This offer remained on the table until November 9, 2000, that is, until the fourth day following the commencement of the arbitration proceeding, which was held November 6 to 20, 2000. On November 9, 2000, the offer was revoked by the defendants' representative.
ANALYSIS
[5] The first aspect that must be discussed is which of the parties, the plaintiff or the defendants, is entitled to costs.
[6] In this regard I think it is necessary to look first at the possible application of Rule 420(2)(a).
[7] The defendants argue that this rule is applicable in this case. If such is the case, the award of costs will then be resolved. This rule reads as follows:
| 420.(2) Unless otherwise ordered by the Court, where a defendant makes a written offer to settle that is not revoked,
(a) if the plaintiff obtains a judgment less favourable than the terms of the offer to settle, the plaintiff shall be entitled to party-and-party costs to the date of service of the offer and the defendant shall be entitled to double such costs, excluding disbursements, from that date to the date of judgment;
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420.(2) Sauf ordonnance contraire de la Cour, lorsque le défendeur présente par écrit une offre de règlement qui n'est pas révoquée et que le demandeur :
a) obtient un jugement moins avantageux que les conditions de l'offre, le demandeur a droit aux dépens partie-partie jusqu'à la date de signification de l'offre et le défendeur a droit au double de ces dépens, à l'exclusion des débours, à compter du lendemain de cette date jusqu'à la date du jugement;
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[8] The defendants acknowledge that this rule specifies that the offer must not have been revoked. In the case at bar, it is admitted that the offer was in fact revoked.
[9] However, the important thing, according to the defendants, is that the offer was not revoked before the commencement of the arbitration. They argue that an offer to settle is intended to avoid a trial, the stage at which a vast portion of the costs is incurred. Once the trial or arbitration has begun, the dynamics of an offer that is still pending change. According to the defendants, the revocation of an offer at that time, particularly when the arbitration is approaching its conclusion, avoids the likelihood that the party that made the offer will have it accepted by the adverse party, which at that point might consider the offer more than tempting in light of its assessment of the developments in the proceedings and the unlikelihood of its own ultimate success.
[10] It appears from paragraph 62 of the affidavit of Alan Loiseau, filed by the defendants, that this is in part the assessment that the defendants had made of the developments in the arbitration, and was the motive behind the revocation of the offer. This paragraph reads as follows:
62. On 9 November 2000, prior to the resumption of the hearing before the arbitrator that day, I informed Plaintiff's counsel verbally that the Cdn. $125,000 settlement offer that had been made by the Defendants on 29 September 1997 was withdrawn on instructions from the North of England that had been received overnight. The settlement offer was withdrawn because it had been made to avoid the necessity of a trial or arbitration hearing, and also because it was becoming clear from the evidence led to that point that the offer probably exceeded any amount that the Plaintiff was likely to be awarded by a significant margin. The Defendants had incurred enormous costs in defending the claim to that point, and the Defendants were concerned that if the offer was left open it might be accepted at the conclusion of the arbitration hearing, thereby preventing the Defendants from seeking any costs award since the offer had been made on an "all-inclusive" basis.
[11] The defendants argue, therefore, that we should, by implication, read into paragraph 420(2)(a) of the Rules the same reference as is found in Rule 49.10(2) of the Ontario Rules of Civil Procedure. That rule reads:
49.10 (2) Defendant's offer - Where an offer to settle,
(a) is made by a defendant at least seven days before the commencement of the hearing;
(b) is not withdrawn and does not expire before the commencement of the hearing; and
(c) is not accepted by the plaintiff,
and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to party and party costs to the date the offer was served and the defendant is entitled to party and party costs from that date, unless the court orders otherwise.
[12] Although the defendants' argument has a certain attraction, I do not think the situation in the case at bar requires that Rule 420(2)(a) of the Rules be read as if it had the same wording as the Ontario rule.
[13] In the first place, the Rules were enacted in April 1998, while the most recent amendment to the Ontario rules appears to date back to 1991. Accordingly, it must be presumed that when the rules were enacted the rules committee of the Federal Court was aware of the Ontario rule and chose not to adopt the same language.
[14] Secondly, although it is desirable that the defendants' apprehensions in regard to a settlement offer not materialize, the defendants could have avoided this apprehension by stipulating that the offer excluded costs if it were not accepted before the commencement of trial or of any arbitration. Then, irrespective of the time at which such offer might have been accepted, the reservation as to costs could have allowed the defendants to make an application to the Court for costs.
[15] Thirdly, the apprehension of a belated acceptance that developed among the defendants seems to derive solely from their own assessment of the plaintiff's internal thought process around the fourth day of the arbitration. The defendants' apprehension does not appear to come from any indications or statements of the plaintiff at that time. In this regard, judging from the evidence produced by the plaintiff's counsel at the hearing of this motion, at all times prior to the receipt of the arbitrator's decision the plaintiff expected to receive more than the arbitrator's award even though the arbitrator had adopted the harshest approach developed by the defendants in their expert evidence. It can therefore be anticipated that the plaintiff was not prepared to accept the offer.
[16] There is reason, therefore, to think that Rule 420(2)(a), which would award costs to the defendants from the date of the offer, is inapplicable in this case, since that offer was revoked. We might note at this point that although this offer cannot prevail over the costs award, this does not mean that the offer should not be given some weight for the purposes of Rule 400(3)(e) (see infra, par. [28]).
[17] In terms of the award of costs to either party, the other factor which merits consideration -- and which in my opinion should govern the award of costs -- is the result of the proceeding within the meaning of Rule 400(3)(a).
[18] In this connection, it seems to me that in this case it is the plaintiff who should be considered the victor. The arbitrator determined the liability factor in its favour. And liability was clearly the matter of most concern in the dispute leading up to and during the arbitration.
[19] Furthermore, a portion of the damages the plaintiff was seeking was awarded to it. That the amount obtained by the plaintiff was much less than the amount claimed may be of some relevance as to the quantum of costs to be allowed to the plaintiff, as is the fact that there was a written offer.
[20] The defendants suggest that they are the winners for the purposes of Rule 400(3)(a) since they advanced an offer that was higher than the amount obtained on arbitration. As the plaintiff's counsel argued, I do not think that we should draw a conclusion under Rule 400(3)(a) on the basis of an offer which is made outside the proceedings and which remains unknown to those proceedings until the very end.
[21] The costs therefore go to the plaintiff. It remains, however, to determine the quantum of those costs.
[22] In this regard, the plaintiff filed a bill of costs totalling $79,015.44. This amount is comprised of a sum of $33,087.87 as costs under Tariff B, $12,254.84 as disbursements and $33,672.73 as expert-related costs.
[23] As to the Tariff B costs, some amounts must be corrected now. It appears that the $1,800 for Attending Discovery should be replaced by $600. The $5,000 for Plaintiff's representative attending Arbitration should be struck out completely since the plaintiff was unable to justify this amount.
[24] The Tariff B costs cannot exceed $26,887.87, therefore.
[25] The $12,254.84 should disappear entirely since it was proved at the hearing of this motion that the items it includes were claimed before the arbitrator as damages. Accordingly, the arbitrator's award disposes of all the damages. The items making up the sum of $12,254.84 can no longer be claimed here as disbursements, therefore.
[26] As to the costs pertaining to the experts, for the reasons cited in the preceding paragraph, an amount totalling $5,423.58 ($5,173.56 + $250.02) should be subtracted from the $12,875.60 pertaining to Bodycote Technitrol Inc. The expert-related costs are therefore in principle $28,249.15, or the sum of $7,452.02 + $11,663.07 + $9,134.06.
[27] The plaintiff's costs cannot, in principle, be greater than the total of the sums of $26,887.87 + $28,249.15, or $55,137.02.
[28] Now, since the defendants presented a written offer that must be given some weight here under Rule 400(3)(e) owing to its reasonable and adequate nature; and since the amount recovered by the plaintiff at arbitration is clearly less than the amount claimed (Rule 400(3)(b)), I am of the opinion that under Rule 400(4) I should award the plaintiff, in lieu of its assessed costs, a lump sum of $40,000.
[29] In view of the divided success on this motion, no costs will be awarded on the motion.
Prothonotary
MONTRÉAL, QUEBEC
, 2001
Certified true translation
Suzanne M. Gauthier, LL.L., Trad. a.
Federal Court of Canada
Trial Division
Date: 20011106
Docket: T-625-97
Action in rem and in personam
BETWEEN:
FRANCOSTEEL CANADA INC.
Plaintiff
and
THE M.V. "AFRICAN CAPE",
HER OWNERS, BONAVERIA SHIPPING CO. LTD.
and
HER MANAGERS, DIMKO
INTERNATIONAL COMPANY S.A.
Defendants
REASONS FOR ORDER
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET NO: T-625-97
STYLE: Action in rem and in personam
Between:
FRANCOSTEEL CANADA INC.
Plaintiff
and
THE M.V. "AFRICAN CAPE",
ITS OWNERS, BONAVERIA SHIPPING CO. LTD.
and
ITS MANAGERS, DIMKO INTERNATIONAL COMPANY S.A.
Defendants
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: September 26, 2001
REASONS FOR ORDER OF RICHARD MORNEAU, PROTHONOTARY
DATED: November 6, 2001
APPEARANCES:
Richard L. Desgagnés for the plaintiff
Marc Duquette
Victor DeMarco for the defendants
SOLICITORS OF RECORD:
Ogilvy Renault for the plaintiff
Montréal, Quebec
Brisset Bishop for the defendants
Montréal, Quebec
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