Date: 20110404
Docket: T-1591-05
Citation: 2011 FC 410
BETWEEN:
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DISTRIMEDIC INC.
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Plaintiff
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and
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DISPILL INC. AND EMBALLAGES RICHARDS
INC.
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Defendants
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AND BETWEEN:
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EMBALLAGES RICHARDS INC.
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Plaintiff by Counterclaim
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and
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DISTRIMEDIC INC., ROBERT
POIRIER, CLAUDE FILIATRAULT, DISTRIMEDIC CANADA INC., EMBALLAGES ALPHA INC.,
AND LA SOCIÉTÉ D’IMPRESSION FILIATRAULT & POIRIER INC. SOMETIMES CARRYING ON BUSINESS AS LA
SOCIÉTÉ D’IMPRESSION AND AS SERVI PHARM
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Defendants by Counterclaim
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ASSESSMENT
OF COSTS - REASONS
[1]
On
February 12, 2010, the Plaintiff filed a Notice of Discontinuance wholly
discontinuing the main action in this proceeding. On October 5, 2010, the
Defendants filed a Bill of Costs pursuant to Rule 402 of the Federal Courts
Rules. As the parties have filed their submissions concerning costs, I will
now proceed with the assessment.
[2]
As a
preliminary issue in the assessment, the Plaintiff submits that the Defendants
seek costs in relation to both the main action and the Counterclaim, even
though it is only the main action that has been discontinued. The Plaintiff
submits that the Statement of Defence and Counterclaim was filed on December 1,
2005 and amended on November 27, 2006 and January 29, 2007. At paragraph 9 of
its Written Representations the Plaintiff contends:
In
addition to alleging infringement of the ‘045 Patent (thus covering precisely
the subject-matter of Distrimedic’s Main Action), Richards’ Counterclaim added
several new issues, namely (i) infringement of the disclaimed patent claims,
both in their disclaimed form and , for a time, in their original form; (ii)
the validity of the disclaimer (which is not presumed); (iii) copyright
infringement; (iv) several issues related to trade-mark rights alleged to be
held by Richards; (v) breach of the Competition Act; and (vi) damages claimed
in relation to the various allegedly infringed rights. The counterclaim also
named five new parties as Defendants to the Counterclaim, all individuals and
companies affiliated with Distrimedic…
[3]
The
Plaintiff continues by arguing that a counterclaim embodies a separate,
independent and stand-alone action, which is able to continue notwithstanding
the discontinuance of the main action. Several cases were provided in support
of this argument.
[4]
At
paragraph 14 of its Written Representations, the Plaintiff submits:
The
basic principle of law applies when a court proceeds to the assessment of costs
payable in a matter that includes both a main action and a counterclaim. The
terms of an award of costs in the former will not, absent indication to the
contrary, be applicable to the latter.
[5]
In
support of this argument, the Plaintiff relies on decisions in Peerless Ltd.
v. Aspen Custom Trailers Inc., 2010 FC 618 at paragraph 17 and Rolls-Royce
plc v. Fitzwilliam, 2004 FC 521 at paragraph 7.
[6]
Although
the Plaintiff concedes that the Defendants are entitled to the costs of the
discontinued action forthwith, it argues that the Defendants are not entitled
to any costs relating to the ongoing Counterclaim. At paragraph 16 of its
Written Representations, the Plaintiff contends:
In
order to claim costs with respect to matters relating to its Counterclaim
despite it being ongoing, Richards would have to point to an order of this
Court which granted it this exceptional right. Indeed, courts have stated many
times before that, absent specific wording to the contrary in the Court
Order(s) granting costs, said costs become payable only following the final
disposition of the case.
[7]
In
support of this position, the Plaintiff relies on Culhane v. ATP Aero
Training Products Inc., 2004 FCA 367 at para. 7; Duchesnay v. Canada (Minister of National
Revenue),
2002 FCA 27 at para. 3 and Nature’s Path Foods Inc. v. Country Fresh
Enterprises Inc., [1999] F.C.J. No. 827, at para. 7. As each of these cases
deal with the attempted assessment of the costs of an interlocutory motion
prior to the disposition of the substantive matter before the Court, I am of
the opinion that their fact scenarios are not directly applicable to the
present case.
[8]
The
Plaintiff further submits that the costs should be appropriately allocated
between the main action and the Counterclaim. At paragraph 18 of its Written
Representations, the Plaintiff argues:
Noting
that all of the issues that were present in the main action remain in issue in
the Counterclaim, and keeping in mind the principles of law discussed above, it
is apparent that virtually all of the costs claimed by Richards in its Bill of
Costs are impermissible because they relate, either chiefly or entirely, to the
Counterclaim. Further, no Court has granted Richards the right to request any
costs in relation to the Counterclaim at this time.
[9]
The
Plaintiff continues by arguing that the discontinuance does not dispose of any
of the issues in dispute between the parties. Further, as any costs which
relate to both the main action and the Counterclaim may not be claimed twice,
no amount should be allowed for fees and disbursements relating to these items.
The Plaintiff contends that to assess the costs that relate to the main action
and the Counterclaim would be inefficient as it would be necessary to make
reference to the present assessment when the costs of the Counterclaim are
assessed.
[10]
The
Plaintiff’s final submission concerning this preliminary issue is that there
are steps claimed in the Bill of Costs, which are entirely related to the
Counterclaim, that are not payable. These include costs relating to the
plaintiffs bifurcation motion and costs related to parties other then the
Plaintiff and Defendants to the main action.
[11]
At
paragraph 8 of their Written Representations filed October 26, 2010, the
Defendants submit:
In
its statement of defence to the Distrimedic action, Richards packaging alleged
that Distrimedic has marketed and offered to sell its kits to customers of
Richards Packaging and claims it will seek to recover full compensation in
respect thereof. Richard Packaging also alleges that by its manufacture, use
marketing, offering for sale and sale of the Distrimedic Product and by its
promotion and inducement of such use, Distrimedic has threatened to infringe
and infringed the exclusive right, privilege and liberty of Richards Packaging
as claimed in claims 1-28 of the 045 Patent prior to the disclaimer filed on
November 8, 2005 with the Canadian Intellectual Property Office, and claims
1-15, 17-28 of the 045 Patent as they read after the disclaimer and continues
to infringe such exclusive rights.
[12]
Concerning
the preliminary issue, the Defendants submit that they are entitled to the
costs of the main action regardless of whether the issues in the main action
are also at play in the counterclaim. In support of this, the Defendants refer
to the order of Prothonotary Morneau dated January 19, 2010 which held:
AS
TO the alternative
orders raised by Distrimedic in its notice of motion, to wit to be permitted to
discontinue its claim in its statement of claim on a without costs basis or, at
most, with costs to be determined at a later stage, considering rules 402 and
412 and the response provided by Emballages Richards in opposition to such
remedies, the Court is not prepared to grant Distrimedic said alternative
orders. If Distrimedic wants to discontinue its claim, it can do so with Emballages
Richards being entitled to its costs, assessable on the filing of the notice of
discontinuance…
[13]
At
paragraph 6 of their Written Representation in Rebuttal, the Defendants further
argued:
As
such, the arguments that Distrimedic raises relating to the overlap between the
issues in the main action and those still at play in the counterclaim as a
basis for denying Richards its costs in the main action or deferring any
assessment of costs in the main action until disposition of the counterclaim
were previously considered and rejected by Prothonotary Morneau.
[14]
Toward
the end of their Written Representations in Rebuttal, the Defendants contend
that the overlap between the main action and the Counterclaim does not
disentitle the Defendants to their costs in the main action. It was further
submitted that the Plaintiff did not provide any jurisprudence to suggest
otherwise. Finally at paragraph 35 of their Written Representations in Rebuttal,
the Defendants argue:
Further,
to do as Distimedic requests and disallow all costs where issues in the main
action remain in the counterclaim would set a precedent that in cases where a
counterclaim is raised based on the same issues in the main action, the
plaintiff is free to discontinue the main action without concern that it will
be liable for costs incurred therein as any such costs will fall to be
determined on the conclusion of the counterclaim. There is no such restriction
in Rule 402.
[15]
The
Defendants are correct in submitting that Rule 402 contains no restriction
concerning the assessment of costs when a counterclaim remains at issue. Rule
402 states:
Unless
otherwise ordered by the Court or agreed by the parties, a party against whom
an action, application or appeal has been discontinued or against whom a motion
has been abandoned is entitled to costs forthwith, which may be assessed and
the payment of which may be enforced as if judgment for the amount of the costs
had been given in favour of the party.
[16]
On
the other, hand it is clear that the costs contemplated by Rule 402 are the
costs related to the discontinued process, in this case the Plaintiff’s main
action. The order of Prothonotary Morneau dated January 19, 2010 infers a
similar finding when it states “If Distrimedic wants to discontinue its claim, it
can do so with Emballages Richards being entitled to its costs, assessable on
the filing of the notice of discontinuance”, clearly tying the costs to the
Plaintiff’s claim.
[17]
As
submitted by the Plaintiff, there are many decisions which have held that a defendant’s
counterclaim embodies a separate, independent and stand-alone action that is
grafted procedurally onto an existing action (See: Ruhrkohle Handel Inter
GmbH et al. v. Fednav Ltd. et al, (1992) 42 C.P.R.(3d) 414 at 418). Further,
Rule 190 of the Federal Courts Rules states that a counterclaim may be
proceeded with notwithstanding that judgment is given in the action or that the
action is stayed or discontinued.
[18]
Given
the provisions of Rules 190 and 402, the order of Prothonotary Morneau and the
longstanding legal axiom that a counterclaim is a separate, stand-alone action,
it follows that one cannot apply the same reasoning as one would for an
interlocutory motion, that is, that the costs relating to the main action cannot
be assessed until the final disposition of a counterclaim or vice versa. For
these reasons, and it is not contested, I find that I may assess the
Defendants’ costs associated with the discontinuance of the action.
[19]
Further,
I find that I have no jurisdiction to assess the costs of the counterclaim as
there has not been a determination as to which party is to be awarded costs or
whether costs will be awarded at all. Given this, I find that the costs related to parties other than the
Plaintiff and Defendants to the main action cannot be assessed.
[20]
As
to those costs which may relate to both the main action and the counterclaim, I
am in agreement with the Defendants. Although it may complicate matters
somewhat, I can find no reason to delay the Defendants’ entitlement to those
costs. It was open to the Defendants to delay seeking an assessment of costs
until the final determination of the counterclaim. However, as Prothonotary
Morneau has indicated, the Defendants are entitled to their costs, assessable
on the filing of the Notice of Discontinuance.
[21]
What
I am left with is the dilemma of making a determination concerning which costs relate
to the action.
[22]
The
Plaintiff has referred to the decision in Rolls-Royce plc v. Fitzwilliam
(supra). In that decision, the Assessment Officer held:
My second concern was a function of the principle that a
counterclaim is essentially an action independent of the main action. I wished
to satisfy myself that the claims for costs of the counterclaim were a function
of the judgment or perhaps a separate judgment. The Plaintiffs noted that the
Defendants' counterclaim had sought relief declaring that two registered
trade-marks were invalid and striking their registrations. Instead, the
judgment held that both trade-marks were valid. Therefore the Plaintiffs are
entitled to the associated costs of the counterclaim. I have examined the
pleadings and I agree with the Plaintiffs.
[23]
The
principle I deduce from the above is that an Assessment Officer must be able to
discern a thread which may be followed from the judgment to the counterclaim. However,
having determined that the costs of the counterclaim may not be assessed, I do
not find the Assessment Officers findings instructive to the issue before me.
[24]
In Dableh v. Ontario Hydro, [1995] F.C.J. No. 551 the Court
made the following observations in upholding the decision of an Assessment
Officer:
Having reviewed the evidence in this case, it is clear that the
amounts taxed were fair and reasonable under the circumstances. The issue of
the amount of trial time allocated to the counterclaim was a highly contentious
issue that lacked substantiation from either side. This coupled with the words
of Muldoon, J. that the counterclaim was "so assimilated to the
defence", indicates that the wide exercise of discretion was required. The
Taxing Officer is in a better position to determine these matters. Even if I
would have exercised my discretion in a somewhat different manner, I am not
convinced that the fees and disbursements granted are excessive or that the
apportionment between the claim and counterclaim was capricious. Consequently,
this does not satisfy the threshold requirements of IBM Canada, supra, that
would warrant my interference.
[25]
Even
though I have found that the counterclaim is a stand alone proceeding, I find
that the notion of the counterclaim being assimilated to the defence is
instructive to the matter before me.
[26]
In Peerless
Ltd. v. Aspen Custom Trailers Inc. (supra), the Assessment Officer held:
My findings in Halford above required
an awareness of the distinction between a main action and a counterclaim in
circumstances of costs awarded in one but not the other. I kept that in mind in
my allowances here given that there has been no award of or right to costs of
the counterclaim.
[27]
In
order to fully understand the reasoning of the Assessment Officer in the Peerless
decision, one must turn to Halford v. Seed Hawk Inc. 2006 FC 422. At
paragraph 1 of Halford, it states that the Court dismissed the main
action and the counterclaim and that after judgment a direction was issued
awarding costs to the Defendant and denying the Plaintiff costs relative to the
defence of the counterclaim. At paragraph 23 the Assessment Officer commences
an analysis concerning the issue of invalidity, the basis of the Defendant’s
counterclaim. After outlining the arguments of the parties, at paragraph 56 the
Assessment Officer held:
… I should not view the counterclaim judgment as somehow
inconsistent with or inhibiting the effect of the main action judgment. Rather,
I should apply the main action judgment to costs as I would any other judgment
to permit the Defendants here to recover their costs for the full range of
their defence of non-infringement, including costs for those elements of
invalidity in said defence, regardless of clarification or not in the evidence
or the judgment concerning the role or extent of that failed portion of the
defence.
[28]
When
the decisions in Peerless (supra) and Halford (supra) are read
together I find that when there is no award of or
right to costs of the counterclaim, an Assessment Officer should apply the main
action judgment to costs as they would any other judgment to permit the
Defendants to recover their costs for the full range of their defence.
[29]
Although the main action before me was discontinued prior to
judgment, Rule 402 states “a party against whom an action, application or appeal has
been discontinued or against whom a motion has been abandoned is entitled to
costs forthwith, which may be assessed and the payment of which may be
enforced as if judgment for the amount of the costs had been given in favour of
the party”(emphasis added). Given this, I am of the opinion that it is open
to me to permit the Defendants to recover their costs
for the full range of their defence.
[30]
Having read the Twice Amended Statement of Defence and
Counterclaim, it is noted that at paragraph 9 the Defendants allege:
As to paragraph 7 of the Amended Statement of Claim, the
Defendants state that Canadian Patent No. 2,207,045 was issued to Dispill and
since September 27, 2005 has been registered in the name of Richards Packaging.
Canadian Patent No. 2,207,045 has been and is now valid and in full force and
effect.
[31]
And, at paragraph 14 and 15 of their Twice Amended Statement of
Defence and Counterclaim, the Defendants contend:
By its manufacture, use, marketing, offer for sale and sale of the
DISTRIMEDIC Product and by its promotion and inducement of such use, the
Plaintiff has threatened to infringe and infringed the exclusive right,
privilege and liberty of Richards Packaging as claimed in claims 1-28 of
Canadian Patent No. 2,207.045 prior to the disclaimer and claims 1-15, 17-28 of
Canadian Patent No. 2,207,045 as they read after the disclaimer and continues
to infringe such exclusive rights.
The precise numbers, amounts and dates of all of such
manufacturing, using, selling, promoting and inducing by the Plaintiff are
unknown to the Defendants but are within the knowledge of the Plaintiff and the
Defendants will claim to recover full compensation in respect thereof. The Defendants
will further seek to enjoin the Plaintiff‘s threats to so infringe, on a quia
timet basis.
[32]
Further, at paragraph 16, the Plaintiff by Counterclaim repeats
and relies upon the allegations set out in the Statement of Defence therein. Then
at paragraph 17, the Plaintiff by Counterclaim sets out the claims against the
Plaintiff and the other Defendants to the Counterclaim. Without repeating the
claims in their entirety, it is noted that the allegations contained in
paragraphs 9, 14 and 15 of the Statement of Defence are also found in the
Counterclaim. The notable difference is that the counterclaim contains claims
with respect to trademark and copyright infringement.
[33]
Having already decided at paragraph 21 above that the costs related to parties,
other than the Plaintiff and Defendants to the main action, cannot be assessed
and, as neither party has substantiated the amount of the fees and
disbursements which should be allocated to trademark and copyright infringement
claims, I find the counterclaim so closely assimilated to the defence that it
requires a wide exercise of discretion in the determination of which fees and
disbursements may be allowed and which fees and disbursements relate strictly
to the counterclaim and therefore cannot be allowed.
[34]
Having reached this conclusion, I will assess the Defendants’
costs keeping in mind that there has been no award, and therefore, no right to
costs of the counterclaim. I will leave any consideration of the costs of the
counterclaim, should they be awarded, to whoever is assigned to assess those
costs.
[35]
The Defendants have claimed 7 units under Item 2, preparation and
filing of all defences, replies, counterclaims or respondents’ records and
materials. At paragraph 27 of their Written Representations, the Defendants
submit:
The issues raised in the Distrimedic action were factually and
legally complex necessitating a considerable amount of work for the preparation
of Richards Packaging’s Statement of Defence and Counterclaim and amendments
thereto. Specifically the action raised, inter alia, issues of: (a)
infringement of claims 1-28 of the 045 Patent prior to the disclaimer filed on
November 8, 2005 in the Canadian Intellectual Property Office, and claims 1-15,
17-28 of the 045 Patent as they read after the disclaimer; (b) validity of the
disclaimer itself pursuant to Section 48 of the Patent Act; (c) validity
of the claims of the 045 Patent existing following the disclaimer in view of
the American Patent No. 2,780,856 to Braveman; and (d) entitlement of Distimedic
to bring its action as a party interested pursuant to section 60(2) of the Patent
Act.
[36]
At paragraph 17 of its Written Representations, the Plaintiff
submits that costs which relate to the main action and the counterclaim should
be appropriately allocated between the two. Then at paragraph 38, the Plaintiff
argues that the appropriate number of units for all fees claimed are those at
the middle of Column III. Specifically concerning Item 2, the Plaintiff
contends that most of the issues cited in paragraph 27 of the Defendants’
Written Representations relate exclusively to the counterclaim. The Plaintiff further
argues that the issue of Distrimedic’s entitlement to bring the main action is
not an issue as the Defendants’ inclusion of a claim of infringement in their
Counterclaim eliminated it as an issue before it was truly in dispute. In its proposed
Amended Bill of Costs submitted at Tab B to its Written Representations, the
Plaintiff suggests that $357.50 should be allowed for Item 2.
[37]
By way of rebuttal, the Defendants submit that the amounts claimed
under Item 2 relate to the defence of the main action and the allegations
raised in the Statement of Claim. At paragraph 11 the Defendants provide a
table which outlines the issues raised in paragraph 27 of their Written
Representations filed October 26, 2010 and the associated paragraphs where
these issues were raised in the pleadings. Further, at paragraph 14 in their
Rebuttal, the Defendants contend:
Hindsight cannot factor into an assessment of costs. Rather an
assessment is to proceed from the vantage point of the solicitor at the time
the cost was incurred. In this case at the time the defence was prepared and
filed Distimedic’s entitlement to bring the main action was a live issue raised
by Distimedic in the Statement of Claim and addressed by Richards in its
defence. Consequently, Richards identification of the issue of Distrimedic’s
entitlement to bring the main action as a complicating factor is not
disingenuous as Distrimedic suggests, but rather is based on the allegations
raised by Distrimedic in its Statement of Claim which were facing Richards at
the time it prepared its defence.
[38]
Having regard to Item 2, the Defendants’ claim relates to the
Statement of Defence which is contained in the Statement of Defence and
Counterclaim. Given that the counterclaim remains unresolved, in assessing the
costs under Item 2, I will consider only the Statement of Defence portion of
said document. This approach is open to me as it has been held that the Counterclaim
is a stand-alone proceeding.
[39]
The Plaintiff has suggested that the amount allowed should be
allocated equally between the defence and the counterclaim. This would result in
an allowance amounting to ½ the amount allowable under Tariff B to the Federal
Courts Rules.
[40]
Under Tariff B, Column III, the range of allowable units for Item
2 is 4 – 7. In its representations the Plaintiff suggests an appropriate
allowance would be 2.75 units ($357.50 ¸ $130 = 2.75 units). This would
amount to an allowance equivalent to using Column II for the assessment of Item
2. Pursuant to Rule 407 of the Federal Courts Rules, unless the Court
orders otherwise, party-and-party costs shall be assessed in accordance with
column III of the table to Tariff B. In Songhee Indian Band v. Canada (Minister
of Indian Affairs and Northern Development), 2007 FC 1099 it was held:
The
Applicants' materials presumed that an assessment officer can exercise
jurisdiction under Rule 400(5) which provides that the Court can specify a
Column in Tariff B to use for costs. The Applicants argued that, as the
judgment did not specify which Column to use, the assessment officer should
apply Rule 400(3)(c) (importance and complexity of the issues), (d)
(apportionment of liability), (g) (amount of work) and (h) (public interest) to
set low Column II amounts for counsel fees. The Estate Respondents correctly
pointed out that Rule 407 specifies Column III unless the Court directs
otherwise. I have therefore considered the Applicants' materials as an argument
for minimum Column III amounts.
[41]
I find the approach taken by the Assessment Officer in this
decision to be sound and will utilize the same approach for this and other
Items to which it may apply.
[42]
The Defendants have submitted that the defence was factually and
legally complex. Although it is more challenging to make a determination of
complexity without the benefit of a judgment, it is recognized that
intellectual property cases are generally somewhat complex because of their
very nature. On the other hand, from my reading of the pleadings, the patent
concerns the manufacture of individual containers for pills. It would appear
that this is not an action involving complex pharmaceutical formulations or
complicated technological processes. Although the Plaintiff’s entitlement to
commence the action may have added some complexity to the defence, I do not
find that the addition of one paragraph overly complicated matters. For these
reasons I allow Item 2 at 6 units for the preparation and filing of the Statement
of Defence.
[43]
The Defendants have claimed 7 units under Item 5 for the
Plaintiff’s bifurcation motion. The Defendants submit that there was
considerable work involved in preparing material in response to the motion. At
paragraph 35 to of their Written Representations, the Defendants contend:
Richards Packaging was successful in resisting Distrimedic’s
Motion for Bifurcation. Moreover, Richards Packaging’s position that the
financial documents of the defendants by counterclaim are relevant and
necessary in order to understand the extent to which the Companies were
involved in the sale of the product at issue found favour with the Court and
was a basis upon which Prothonotary Morneau dismissed Distrimedic’s Bifurcation
Motion.
[44]
In response, the Plaintiff argues that any fee claimed by the Defendants
regarding the Plaintiffs bifurcation motion relate to the counterclaim. It was
further submitted that in the absence of more specific wording granting costs
forthwith, the claim is inappropriate and should not be allowed. The Plaintiff
further submits:
As is typical, Distrimedic’s Bifurcation Motion sought to sever
the question of Distrimedic’s liability in relation to the allegations of
infringement from the quantification of damages allegedly resulting therefrom.
In Prothonotary Morneau’s own words, the object of Distrimedic’s Bifurcation
Motion was to have the issues related to its liability under the
counterclaim “[…] determined first and the issue of remedies[…] dealt with
in a separate proceeding”. Because both the infringement allegations and the
claims for damages were raised in Richards’ Counterclaim, Distrimedic’s
Bifurcation Motion was squarely concerned with the Counterclaim; Distrimedic’s
Main Action was irrelevant to said motion.
[45]
By way of rebuttal, the Defendants submit that they were awarded
costs in the Bifurcation motion and have claimed fees in accordance with that
order.
[46]
I am in agreement with the Plaintiffs. Even though I found that
the issues between the defence and counterclaim are closely assimilated, for
the following reasons, this is one situation where the costs clearly relate to
the counterclaim.
[47]
First, Prothonotary Morneau’s order dated May 1, 2008 states that
“the motion by the defendants by counterclaim under rules 3 and 107 is dismissed,
with costs”. This clearly recognizes that the motion was not brought by the
Plaintiff but by the Defendants by counterclaim. It is of note that some of the
Defendants to the counterclaim are not parties to the main action.
[48]
Second, Distrimedic’s bifurcation motion sought to sever the
question of Distrimedic’s liability from the quantification of damages. The
Plaintiff’s Amended Declaration filed November 3, 2005, as translated, Exhibit
A to the Affidavit of Valerie Flint, seeks an order:
A. Declaring that the
Plaintiff’s Product DISTRIMEDICTM does not infringe on claims 1 to
28 of Canadian patent 2,207045.
B. Stipulating any
other remedies that this Honourable Court might deem appropriate.
C. Granting him legal
costs of this lawsuit on a solicitor-client basis.
[49]
As the Plaintiff made no claim for damages, the only basis for the
bifurcation motion is found at paragraph 17(f) of the Statement of Defence and
Counterclaim which reads:
Damages exceeding $50,000 and an accounting of profits of each of
the Defendants to the Counterclaim or in respect of copyright infringement
statutory damages as the Defendant Richard Packaging (Plaintiff by
Counterclaim) may elect;
[50]
Finally, the Defendants submission as to costs that: “Richards
Packaging’s position that the financial documents of the defendants by
counterclaim are relevant and necessary in order to understand the extent to
which the Companies were involved in the sale of the product at issue”, clearly
indicated that in arguing the motion the Defendants recognized that the issue
of bifurcation related to the financial documents of the defendant by counterclaim.
[51]
For the above reasons, the Defendants claim under Item 5, relating
to the bifurcation motion of the Defendants by counterclaim, cannot be allowed.
[52]
It follows that the Defendants’ two claims under Item 6 for
attendance at Distrimedic’s bifurcation motion on March 21 and April 28, 2008
may not be allowed for the same reasons.
[53]
The Defendants’ have also claimed 7 units under Item 5 for the
plaintiff’s motion to reverse the order of evidence from the expert witnesses.
The Defendants submit that the preparation of responding materials required a
fair amount of work. At paragraph 47 of their Written Representations, the
Defendants argue:
Not only was Richards Packaging successful in opposing
Distrimedic’s Reversal Motion, the Court denied the motion stating that it
shared the views of Richards Packaging that Distrimedic, since the beginning of
the case and through the discovery process, enjoyed and acted as the plaintiff
in this case, such that it would be unjust within the spirit of Rule 3 of the Federal
Courts Rules to reverse the order for the presentation of expert
affidavits.
[54]
In response the Plaintiff contends that the Defendants have
submitted nothing that indicates that a high level of preparation was required.
It was further suggested that the Defendants submissions were seven pages long.
The Plaintiff submits that the Defendants be allowed 5 units.
[55]
I am in agreement with the Plaintiff. Having read the order of
January 19, 2010 and the Written Representations filed in opposition to the
motion, it is evident that this was not an overly complicated motion. On the
other hand, the Court relied on the reasoning of the Defendants in reaching its
decision. When the level of complexity is weighed together with the success of
the Defendants, I allow 5 units under Item 5 for the reversal motion.
[56]
The Defendants have claimed 3 units (3 units x 1 hour) under Item
6 for appearance at Distrimedic’s reversal motion. Counsel submits that 1.90
hours were billed in preparation and presenting argument on the day of the
Plaintiff’s reversal motion. It is further submitted that 3 units is reasonable
given the Defendants success and the amount of work required.
[57]
The Plaintiff relies on the arguments presented for the
preparation for the reversal motion to submit that the Defendants claim should
be reduced. It is further submitted that the hearing lasted only 22 minutes.
[58]
The Plaintiff has submitted that 0.8 units (0.4 Hrs x 2 units) be
allowed for appearance at the reversal motion. Although the hearing lasted
somewhat less than 30 minutes I am of the opinion that it is an appropriate
practice for counsel to arrive at a hearing in sufficient time to allow for proper
Courtroom preparations prior to arguing a motion. I will allow the Defendants
one hour as claimed. However, for the reasons given concerning Item 5,
preparation for the reversal motion, I find 2 units/hour reasonable. I allow a
total of 2 units under Item 6 for the appearance at the Plaintiff’s reversal
motion.
[59]
The Defendants have submitted two claims under Item 7, one for
inspection of the Plaintiff’s Affidavit of Documents (5 units) and one for preparation
of the Defendants Affidavit of Documents (5 units). Counsel submits that the
Defendants affidavit of documents consisted of 208 documents comprising 8
volumes. Concerning the inspection of the Plaintiff’s affidavit of documents,
at paragraph 65 of its written representations, the Defendant submits:
Part of the inspection of Distimedic’s Affidavit of Documents
included an on site review of the documents listed in Ditrimedic’s Affidavit of
Documents. On July 17, 2008 Alison Hayman, a lawyer with Lang Michener, counsel
to Richards Packaging, attended at the offices of Ogilvy Renault in Montreal to
inspect the documents listed on Distrimedic’s Affidavit of Documents and obtain
copies of certain documents. 2.30 hours were billed for Mrs. Hayman’s
attendance on July 17, 2008.
[60]
In response, the Plaintiff contends that no amount should be
allowed under Item 7 as the documents relate to all of the issues in dispute,
all of which are relevant to the Counterclaim and some of which are only
relevant to the Counterclaim. At paragraph 52 of its Written Representations,
the Plaintiff further argues:
Secondly, item 7 is intended to cover all costs of discovery of
documents and should therefore be awarded only once. The title of the item is
“Discovery of documents, including listing, affidavit and inspection”. The
references to “listing” and “affidavit” suggest a reference to a party’s own
documentary discovery process, while the reference to “inspection” suggests a
reference to the discovery process of the opposing party’s documents. Item 7 contemplates
only a single claim for discovery of documents by all parties.
[61]
The Plaintiff’s final submission concerning Item 7 is that there
are no circumstances which would warrant costs at the top of Column III.
[62]
By way of rebuttal, the Defendants contend that Item 7 contains no
restriction concerning the number of times it may be claimed and that there is
no case law to support the contention that no amount should be allowed for
discoveries due to the overlap of issues between the main action and the
counterclaim. The Defendants further submit:
The fact is that the action proceeded through discoveries before
it was discontinued. Despite that issues in the main action overlapped with
those of the counterclaim, costs were still incurred in discoveries in respect
of the main action.
[63]
The Plaintiff has contended that only one claim under Item 7 may
be allowed. The Defendants argue that there is no case law to support this
notion. In fact, in Early Recovered Resources Inc. v. Gulf Log Salvage
Co-Operative Assn., 2001 FCT 1212, it is held that:
Counsel
for Gulf Log correctly pointed out that the wording of item 7 could permit
discreet allowances relative to one's own discovery and to one's opponent. In
Registry Procedure & Assessment of Costs supra, I presumed a single
indemnity in the nature of a merged or blended service embracing all
discoveries in a proceeding. The inadequacy of that narrower construction is
evident in circumstances such as this litigation in which Gulf Log's
adversarial position with the Plaintiff was complicated by the need to conduct
itself cognizant of the position of independent Defendants with whom it needed
a separate discovery. Therefore, I will alter my previous position, but with
certain reservations. I think that, as each discovery occurs, there may be a
reasonable expectation, or not, that information useful for subsequent
discoveries will surface thereby tending to warrant lower allowances for second
and subsequent claims under item 7. In the circumstances here, I will allow an
item 7 for each of the discovery of documents relative to Gulf Log, the
Plaintiff and the provincial Crown, presented at 3, 5 and 5 units respectively,
at 3, 5 and 3 units respectively.
[64]
Even though there are not multiple parties to the main action, I
find that the Defendants are entitled to claim Item 7 for both the inspection
of the Plaintiff’s Affidavit of Documents and preparation of the Defendants’
Affidavit of Documents.
[65]
Although the Plaintiff has indicated that some documents are only
relevant to the Counterclaim, neither party has provided me with any
substantiation concerning the inspection of documents. In the absence of
submissions detailing which documents relate to the Counterclaim and which ones
relate to the main action, I have been left with the task of attempting to draw
some conclusions through a review of the respective Affidavits of Documents.
[66]
Having reviewed the Affidavits of Documents for the Plaintiff and
Defendants, it is apparent that in both circumstances there were a significant
number of documents relating to trademarks and invoicing and financial matters.
As these all have a direct relation to the Counterclaim, they will have an
impact on the number of units which may be allowed. Further, although the
Defendants’ documents were voluminous, many were corporate records, e-mails and
copies of magazines.
[67]
Concerning the Plaintiff’s documents, the Defendants’ only
submission is that 2.30 hours were spent at the offices of Plaintiff’s counsel
inspecting documents and obtaining better copies. Although the inspection of
documents is a service which may be allowed, obtaining better copies would seem
to be a clerical function involving duplication. As was held in Pharmacommunications
Holding Inc. v Avencia International Inc., 2010 FCA 179, duplication of
documents is considered a clerical function and is not an assessable service of
counsel. Balancing the requirement to inspect the documents with the clerical
function of obtaining better copies, I find that a claim of 5 units is
excessive. For the above reasons I allow 4 units for each of the Defendants’
two claims under Item 7.
[68]
The Defendants have presented three claims for each of Item 8 (preparation
for examination for discovery) and Item 9 (Attending on examination, per hour),
for the examination for discovery of Robert Poirier, Claude Filiatrault and
Gerry Glynn. For Mr. Poirier, the Defendants claimed 5 units and 45 units (15
hours x 3 units) respectively. For Mr. Filiatrault, the Defendants claimed 5
and 48 units (16 hours x 3 units) respectively and for Mr. Glynn, the Defendants
claimed 2 and 27 units (9 hours x 3 units) respectively.
[69]
In support of the claims under Item 8, the Defendants submit that
the issues involved were complex as the matter involved numerous parties,
claims and counterclaims and that the issues and facts were relevant to the
claims and counterclaims. At paragraph 75 of their Written Representations, the
Defendants contend:
As part of the preparation for examinations for discovery of
Robert Poirier and Claude Filiatrault, counsel to Richards Packaging prepared
Discovery Exhibit Briefs for use during discoveries which consisted of two (2)
volumes of approximately 300 pages each. The Discovery Exhibit Briefs contained
copies of the documents produced by the parties and were used during
examinations for discovery to allow documents to be identified by tab number
rather that referring to each parties production numbers.
[70]
Concerning Mr. Glynn, who was produced on behalf of Richards
Packaging, the Defendants submit that the lowest allowable amount was claimed
for preparation for cross examination.
[71]
Concerning the claims under Item 9, the Defendants submit:
It is respectfully submitted that the amounts claimed in Richards
Packaging’s Bill of Costs for item 9 are reasonable in view of the substantial
amount of time spent conducting examinations for discovery of Robert Poirier
and Claude Filiatrault and attending on examination of Gerry Glynn.
[72]
The Plaintiff’s submission for Items 8 and 9 are substantially the
same. Concerning the Examination for discovery of Mr. Poirier, the Plaintiff
submits that Mr. Poirier was examined solely as a personal defendant in the
counterclaim and as the Counterclaim has yet to be resolved, no costs may be
allowed.
[73]
Concerning Mr. Filiatrault, the Plaintiff submits that he was
examined as a personal defendant and also as a representative of Distrimedic
and three other defendants by Counterclaim. Counsel also contended that since
all the issues he was examined on related to the Counterclaim and some related
to only the counterclaim, no amount should be allowed for his examination for
discovery. At paragraph 58 of its Written Representations, the Plaintiff
submits:
Further, to justify Richards’ claim at the top of Column III, it
has cited the complexity of the issues in light of the number of parties and
the issues raised in the Counterclaim. But these issues relate solely to the
Counterclaim and should not be considered in determining the costs related to
the Main Action.
[74]
By way of rebuttal, the Defendants submit that the main action was
not discontinued until after discoveries and as a result, costs were incurred
for discovery in the main action. At paragraph 24 of their Written
Representations in Rebuttal, the Defendants contend:
In respect of the examination of Claude Filiatrault and Gerry
Glynn, both of these individuals were examined on issues relevant to the main
action which issues also overlapped with issues in the counterclaim. In respect
of the discovery of Robert Poirier, although he was examined as a personally
named defendant in the counterclaim, his examination touched upon matters that
were relevant to the main action, namely the allegation raised in paragraph 10
of the Richards defence.
[75]
The Defendants’ final submission concerning discoveries contends
that any overlap between the main action and the counterclaim should not
disentitle Richards to its costs relating to discoveries in the main action.
[76]
Having regard to the amounts claimed for the examination of Mr.
Poirier, he was not a party to the main action. Further, there is no evidence indicating
that he was produced for examination by the Plaintiff in the main action. Mr.
Poirier’s Affidavit of Documents indicated that he is a defendant to the
counterclaim. Although the Defendants have submitted that his discovery touched
on the allegations raised in paragraph 10 of the Statement of Defence, I do not
think this is significant enough to justify the examination for discovery of Mr.
Poirier as being related to the main action. Absent evidence to the contrary, I
am in agreement with the Plaintiff that Mr. Poirier’s examination for discovery
was substantially related to the counterclaim against him. For the above reasons,
the claims relating to Mr. Poirier under Item 8 and 9 are not allowed.
[77]
Having regard to the amounts claimed for the examination of Mr.
Filiatrault, although he is not a party to the main action, there is evidence
that he was produced for examination by the Plaintiff in the main action. Mr.
Filiatrault has sworn four affidavits of documents relating to either the main
action or the counterclaim. One is the Affidavit of Documents of Distrimedic Inc.
Although no evidence has been provided, as Distrimedic Inc. is plaintiff to the
main action and a defendant to the counterclaim, it is not unreasonable to
conclude that the Affidavit of Documents of Distrimedic Inc, as sworn by Mr.
Filiatrault , relates to both proceedings, and hence, at least a portion of his
examination for discovery is related to the main action. Once again, neither
party has provided substantiation concerning the portion of Mr. Filiatrault’s
examination to attributable to issues related to the main action.
[78]
Further, although the Defendants have submitted that the
examination for discovery was complex, without a transcript of the discovery,
or some other evidence as to complexity, it is difficult to gauge the
complexity for myself. Given this and that there is no substantiation
concerning the amount of the examination for discovery which related to the
main action, I allow 3 units under Item 8 for preparation for the examination
for discovery of Mr. Filiatrault.
[79]
For the same reasons, I find that there is no evidence justifying
a claim under Item 9 at the high end of Column III. Further I find it
reasonable to allocate 50% of the examination for discovery of Mr. Filiatrault
to the main action. Therefore, I allow 2 units/hour for 8 hours or 16 units
under Item 9 for the examination of Mr. Filiatrault.
[80]
Having regard to the amounts claimed for the examination of Mr.
Glynn, he was produced for examination by the Defendants in both the main
action and the counterclaim. Yet again, neither party has provided
substantiation concerning the portion of Mr. Glynn’s examination to attribute
to the main action. Further, absent evidence, it is difficult to make a determination
as to complexity.
[81]
As the Defendants have claimed Item 8 at the lowest allowable
amount for preparation for the examination of Mr. Glynn, the claim is allowed
as presented, at 2 units.
[82]
Having regard to Item 9, I have reviewed the Affidavit of Documents
of Mr. Glynn and it appears that many of the documents relate to invoicing and
financials. As the Plaintiff’s main action does not seek damages or an
accounting of profit, I find that these documents must be related to the
counterclaim. Considering that no evidence has been provided to substantiate how
much time was utilized for the examination concerning issues which related to
the main action, I will employ the same approach as for Mr. Filiatrault.
Therefore, I allow 2 units/hour for 4.5 hours for a total of 9 units under Item
9 for the examination of Mr. Glynn.
[83]
The final assessable service claimed by the Defendants is 6 units
under Item 26 for the assessment of costs. At paragraph 87 of their Written
Representations counsel submits:
The Bill of Costs itself is 9 pages long and contains a detailed
breakdown of the amounts claimed under each heading. By way of example in Part
II – disbursements, the Bill of Costs contains a detailed listing of each
letter sent by courier or fax in respect of which either courier or fax charges
are claimed. The same amount of detail can be seen in respect of charges
claimed in other areas of the Bill of Costs.
[84]
Counsel further submits that the affidavit of disbursements is 17
pages long and contains 47 exhibits.
[85]
In response, the Plaintiff submits that the Defendants should not
be allowed any amount for the assessment of costs. At paragraph 66 counsel
contend:
Richards justifies its claim for the maximum number of units by
stating that there had been a considerable amount of work involved. In
Distrimedic’s submission, if Richards had prepared and filed a reasonable Bill
of Costs (taking into account the costs related to the Main Action only,
and not the Counterclaim), the work involved in preparing it would have been
very modest. Further, the parties would likely have agreed on the amount of
costs, thus avoiding the need to proceed with the Assessment.
[86]
By way of rebuttal, Counsel for the Defendants submit that the
amount claimed under Item 26 is appropriate and ought to be allowed. At
paragraph 29 of their Written Representation in Rebuttal, the Defendants argue:
It is submitted that the amounts claimed in the bill of costs are
not extravagant and reflect actual work undertaken and costs incurred by
Richards. The work involved in preparing the material filed in this assessment
was substantial. The Bill of Costs is 8 pages and contains a detailed break
down of the amounts claimed therein. The supporting affidavit of Valerie Flint
totals 17 pages and comprises Exhibits A to UU contained in two bound volumes. Richards’s
written submissions totaled 30 pages and included a book of authorities which
contained 8 authorities. In response Distrimedic has filed Written Submissions
which total 19 pages, a Proposed Amended Bill of Costs and 15 case law
authorities. These reply submissions total 10 pages.
[87]
The Plaintiff has submitted that no amount should be allowed for
the assessment of costs. Given my finding that the Defendants are entitled to
their costs of the discontinued action, I find this position to be untenable.
Although the Defendants were required to address the challenge to their
entitlement to costs, the law is well established on this point. Further, the
fact that the matter had been discontinued prior to hearing reduced the number
of issues to be addressed. Also, the assistance of counsel concerning the
quantum of costs was not as exhaustive as the submissions provided for the
legal issues concerning the effect of the ongoing counterclaim. Consequently, I
find that 6 units are also untenable. On the other hand, as submitted by the
Defendants, substantial work was involved in preparing the material filed in
the assessment. Given the circumstances before me, I allow 5 units under Item
26 for the assessment of cost.
Disbursements
[88]
Having read the materials submitted by the parties and reviewed
the Bill of Costs and, further to my reasoning above; the Defendants claims for
photocopies, courier charges, facsimile transmissions and on-line case law
research, any disbursements relating to the Plaintiff’s bifurcation motion and
the discovery of Mr. Poirier cannot be allowed. I find all other disbursements
for photocopies, courier charges, facsimile transmissions and on-line case law
research to be reasonable in the circumstances and allow $387.00 for
photocopies, $81.21 for courier, $26.00 for facsimiles and $119.00 for on line
research (Quicklaw).
[89]
By far the largest disbursement claimed by the Defendants is for
the professional services of KPMG, an accounting and consulting firm. In
support of this claim, the Defendants relied on Aventis Pharma Inc. v. Apotex
Inc., [2009] F.C.J. No. 56, which held that an assessment of costs should
reflect the demands of litigation.
[90]
At paragraph 63 of the Affidavit of Valerie Flint, the Defendants submit
that KPMG assisted counsel with document production, review of Distrimedic’s
documents and the identification of issues for discovery. The Defendants
contend that the issues with respect to the financial statements in the
examination for discoveries were factually and legally complex. At paragraph
134 of their Written Representations, the Defendants argue:
In view of the forgoing, it is respectfully submitted that the
amounts claimed for disbursements for professional services rendered by KPMG
were essential to the production of relevant financial documents by Richards
Packaging, to the assessment of the financial productions of Distrimedic and to
the examination for discovery in respect of the financial documents produced by
Distrimedic. It is submitted that these costs are necessary to the litigation,
reasonable and ought to be allowed as claimed.
[91]
At paragraphs 72 and 73 of its Written Representations in response,
the Plaintiff submits:
By Richards’ own admission, KPMG’s services were exclusively aimed
at assisting counsel for Richards in addressing issues involving financial
documents. These services had nothing to do with Distrimedic’s Main Action.
Indeed, as previously mentioned, Distrimedic’s Statement of Claim did not seek
any damages whatsoever. It only sought a declaration of non-infringement of
Richards’ ‘045 Patent. Financial documents were utterly irrelevant to
Distrimedic’s Main Action.
Distrimedic’s financial documents are only relevant to Richards’
Counterclaim, which alleges infringement of various rights and seeks damages in
relation thereto. The extent of Distrimedic’s sales of a given product was not
relevant to any relief sought by it in its Main Action; this information would
have absolutely no relevance to the infringing or non-infringing nature of
Distrimedic’s product. In sum, KPMG’s services were squarely concerned with
Richards’ Counterclaim and not Distrimedic’s Main Action.
[92]
By way of rebuttal, the Defendants rely on their submissions
previously filed.
[93]
The Defendants have presented two invoices from KPMG totaling
$25,354.88. As submitted by the Defendants, the invoices relate to professional
services relating to the review and preparation of documents and the
preparation of a list of issues for discovery. Although not mentioned in the
Affidavit of Valerie Flint, the Defendants specify in their written submissions
that the services relate to financial documents.
[94]
The Plaintiff has submitted that financial documents would only be
relevant to an allegation of infringement which seeks damages. Although there
may be other matters which could require financial documents for other reasons,
having reviewed the pleadings, I am in agreement with the Plaintiff that, in
the circumstances of this particular case, the only claim that could lead to a
requirement for the discovery of financial documents would be a claim for
damages and an account of profits.
[95]
Having reviewed the translation of the Plaintiff’s Amended
Declaration filed November 3, 2005, attached as Exhibit A to the Affidavit of
Valerie Flint, it is clear that the Plaintiff were seeking a judgment
“declaring that the Plaintiff’s Product DISTRIMEDICTM does not
infringe on claims 1 to 28 of Canadian patent 2,207,045”. Upon close
examination of the Declaration, there does not appear to be any relief in the
nature of profits or damages which would trigger a requirement for the
discovery of financial documents.
[96]
On the other hand, the Defendants, at paragraph 17(f) of their
Counterclaim request:
Damages exceeding $50,000 and an account of profits of each of
the Defendants to the Counterclaim or in respect of copyright infringement
statutory damages as the Defendant Richards Packaging (Plaintiff by
Counterclaim) may elect.
[97]
At paragraph 15 of their Statement of Defence, the Defendants contend,
“The precise numbers, amounts and dates of all of such manufacturing, using,
selling, promoting and inducing by the Plaintiff are unknown to the Defendants
but are within the knowledge of the Plaintiff and the Defendants will claim
to recover full compensation in respect thereof”. (emphasis added)
[98]
Although I found that the Defendants’ contention at paragraph 15
was of assistance in coming to a determination that the closely assimilated
defence and counterclaims require wide exercise of discretion in the determination
of which fees and disbursements may be allowed, I do not find that it justifies
the Defendants’ claim for the professional services of KPMG.
[99]
I
find that by contending that they “will claim to recover full compensation” the
Defendants are indicating intent to claim for damages or an account of profit.
The actual claim for damages and an account of profit is found at paragraph
17(f) of the Counterclaim. This being the situation,
I am in agreement with the Plaintiff that KPMG’s services were squarely
concerned with Richards’ Counterclaim and not Distrimedic’s main action.
[100] Therefore,
having found no claim for profits or damages in the Plaintiff’s Declaration,
and finding that the Defendants’ claim for damages and an account of profit is
found in their Counterclaim, the Defendant’s claim for the professional
services of KPMG is not allowed as it relates to the Counterclaim still at suit.
[101] The
Defendants have submitted a claim of $5,430.45 for the transcripts of the
discoveries of Mr. Glynn, Mr. Filiatrault and Mr. Poirier. In support of this
claim, the Defendants submit that the claims are reasonable and that the
transcripts were essential to the conduct of the discoveries.
[102] In response,
the Plaintiff relies on its submissions concerning the discoveries to submit
that no amount should be allowed for the transcriptions.
[103] In keeping
with my finding concerning Item 9, the portion of the transcription relating to
Mr. Poirier is not allowed.
[104] For the
transcription of Mr. Glynn and Mr. Filiatrault, the parties have not provided
any substantiation as to what portion of the discovery transcripts relate to the
main action. Therefore, in keeping with my finding under Item 9, for the
transcription of Mr. Glynn and Mr. Filiatrault, an aggregate amount of $2,500.00
is allowed.
[105] The
Defendants have claimed $3,080.68 for travel costs. The Defendants submit that
this amount includes two trips for attendance at the Plaintiff’s bifurcation
motion and travel to Montreal for examinations for discovery.
[106] The Plaintiff
relies on its prior submissions concerning the bifurcation motion and discovery
to contend that no amount should be allowed for travel.
[107] In keeping
with my prior findings, the amounts claimed for travel to attend the
Plaintiff’s bifurcation motion are not allowed as that motion clearly relates
to the counterclaim.
[108] Having
regard to the cost of travel to the examination for discovery in Montreal, consistent
with my findings concerning Item 9, the amount claimed is reduced to account
for expenses incurred for the examination of Mr. Poirier.
[109] Therefore, I
allow a total of $1,159.00 for travel costs.
[110] For the above reasons, the Bill of Costs presented at $60,840.45
is assessed and allowed at $11,908.82.
“Bruce
Preston”
Toronto,
Ontario
April 4, 2011
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