Date: 20071005
Docket: T-2108-03
Citation: 2007 FC 1029
Ottawa, Ontario, October
05, 2007
PRESENT: The Honourable Madam Justice Tremblay-Lamer
BETWEEN:
M.K.
PLASTICS CORPORATION
Plaintiff
and
PLASTICAIR
INC.
Defendant
REASONS FOR ORDER AND ORDER
[1]
This is a motion pursuant to R. 403(1), whereby
Plasticair requests directions to be given to the assessment officer respecting
the assessment of costs in Federal Court file no. T-2108-03.
BACKGROUND
[2]
M.K. Plastics Corporation commenced an action
for patent infringement on November 10, 2003. The defendant, Plasticair,
defended and counterclaimed for a declaration that M.K. Plastics’ Canadian
Patent No. 2,140,163 was invalid. The trial was held in Montreal between March 19 and March 27,
2007 for a total duration of 5 days.
[3]
Both M.K. Plastics’ action and Plasticair’s
counterclaim were dismissed with costs to Plasticair on May 30, 2007.
[4]
The defendant submits that it is entitled to its
costs at the upper end of Column IV as it was successful at trial in the main
action and absolved of any liability. Moreover as it incurred $326, 286.99 in
fees and disbursements defending the action, assessment of costs in accordance
with the upper end of Column IV is appropriate to ensure that the costs awarded
reasonably reflect Plasticair’s actual costs of litigation.
[5]
Furthermore, the litigation was important given
that if M.K. Plastics had succeeded in its action, Plasticair would likely have
gone out of business.
[6]
According to the defendant, the litigation was
also complex, and encompassed complicated legal issues which merit assessment
in Column IV.
[7]
With respect to preparation for and attendance
at trial, Plasticair submits it was reasonable to have first and second counsel
present. Thus, it is entitled to costs of second counsel at trial as well as
reasonable travel expenses for both counsels.
[8]
It submits that it is entitled to be wholly
reimbursed for fees and disbursements paid to the expert witness called to
testify on its behalf at trial ($18,137.38). The fees relate to advising
counsel in respect of the case, preparation of expert reports and attendance
through the duration of the trial. Plasticair asserts that the amount is
entirely reasonable given the importance and stakes of the case.
[9]
The defendant contends that it is entitled to
double costs as it served an Offer of Settlement on August 24, 2006, which was
neither revoked nor accepted at the commencement of the trial. The offer was
more favourable to M.K. Plastics than the ultimate result of the action: had it
accepted, it would have received $50,000 from Plasticair.
[10]
Moreover, the offer was unequivocal and
unambiguous: it provided that M.K. Plastics’ action would be dismissed, that
Plasticair’s Counterclaim would be withdrawn, that Plasticair would have its
costs throughout subject to any previous order regarding costs of interlocutory
proceedings, and that Plasticair would pay $50, 000 to M.K. Plastics. The
offer was served in a timely fashion, approximately 7 months before trial, and
had the offer been accepted, it would have brought an end to the dispute
between the parties.
[11]
The plaintiff asserts that the matter raised in
the present case was not of greater importance than most intellectual property
cases given that there were only three main issues involved: infringement,
invalidity, and unfair trade practice.
[12]
Furthermore, it submits that it also made an
Offer of Settlement to Plasticair, which was definite, serious, made not
shortly before trial, and in good faith.
[13]
The plaintiff alleges that Plasticair’s conduct
was improper, sometimes vexatious and significantly increased the amount of
work that it had to carry out. It was required to file three Motions to
compel the defendant to follow the rules and the time limit with respect to
submissions of affidavit of documents. It contends that when finally four
affidavits of documents were served, they included many lengthy and irrelevant
documents. Moreover, when it requested that Plasticair identify the relevant
documents as it was its duty to do, Plasticair failed to respond.
[14]
Further, when it
requested to examine, as a representative of Plasticair, Mr. Paul Sixsmith,
Plasticair refused and forced M.K. Plastics to examine Mr. Richard Sixsmith who
had no recollection or knowledge of the facts in litigation.
[15]
In addition, M.K. Plastics submits that
Plasticair’s counterclaim of $1,000,000 based on unfair trade practice was
exaggerated, without legal basis, and was expeditiously set aside by this
Court.
[16]
The plaintiff alleges that Plasticair’s expert was
useless in this case as he did not have the qualification and skills, the
ability and the credibility to help the Court to decide on the issue of
infringement or any other issue.
[17]
According to the plaintiff, the disbursements
claimed by Plasticair are exaggerated. The travel fees incurred at trial by
counsel, Mr. Robert H.C. MacFarlane, are almost five times the fees incurred by
counsel, Ms. Christine Pallota ($5, 030.11 and 1,613.31 respectively). The
costs of photocopying for the out of Court examination are also exaggerated.
There is no evidence of the actual costs of each disbursement and thus
Plasticair does not abide by the best evidence rule.
[18]
As for the defendant’s Offer of Settlement, it
was refused by the Plaintiff and thus was revoked pursuant to article 1392
C.c.Q.
1. Column IV
[19]
As per Apotex Inc. v. Syntex Pharmaceuticals International Ltd. et
al., [1999] 2 C.P.R. (4th) 368 (FCTD) (QL), at para.4, partially overturned
but not on this point at (2001) 12 C.P.R. (4th) 413 (FCA): “[…] the general philosophy is that party and party costs should
bear a reasonable relationship to the actual costs of the litigation.” Therefore
the fact that the defendant has spent $326, 286.99 in fees and
disbursements in defending the action should be taken into consideration.
[20]
Conversely, costs should neither be punitive nor extravagant but should
represent a compromise between “compensating a successful party and not unduly
burdening an unsuccessful party.” (Apotex Inc. v. Wellcome
Foundation Ltd. (1998), 159 F.T.R. 233 (F.C.T.D.), aff'd. (2001)
199 F.T.R. 320 (F.C.A.)).
[21]
Column III of Tariff B represents the default assessment of
party-and-party costs (R.407). Therefore, “[a]bsent special considerations,
(see rule 400(3)), the Court should be reluctant to attempt to rewrite Tariff B
[…]” (Wihksne v. Canada (Attorney General), [2002] FCA
356, [2002] F.C.J. No. 1394 (QL), at para. 11).
Factors to be taken into
account
[22]
In Visx, Inc. v. Nidek Co., [2001] FCT 1183, [2001] F.C.J. No.
1597 (QL), Dubé J. held at para. 6:
The costs of the action shall be
assessed at the highest end of Column IV of Tariff B of the Tariff of Fees on
the grounds that a higher than usual volume of work was involved, important and
complex legal issues were raised and the actual expenses of the litigation were
much greater than the costs recoverable under Column III.
[23]
With respect to the issue of complexity, there is divergence in the case
law as to how patent litigation is to be treated. For example, in Apotex
Inc. v. Syntex, supra, at para. 9, the Court suggested that
patent cases are generally more complex than non-patent cases and thus merit
being assessed above Column III level costs.
[24]
However, TRW Inc. v. Walbar of Canada Inc., (1992) 43 C.P.R. (3d)
499, 146 N.R. 57, 34 A.C.W.S. (3d) 743, at pp. 456-7, Stone J.A. indicated that
cases involving infringement and validity are commonplace and that while the
technology is complex, it is the complexity of the legal issues raised that
must be considered when increased costs are contemplated.
[25]
In my view, the present case did not raise any complex legal issue and
was not more complex than most of the intellectual property cases.
[26]
On the issue of importance, it is the legal significance of the case,
not the economic and business significance to the parties that must be
considered (TRW, supra, at p. 457). In Balfour v. Norway House
Cree Nation, [2006] FC 616, [2006] F.C.J. No. 870 (QL), at para. 15, citing
Aird v. Country Party Village Property (Mainland) Ltd., [2004] FC 945,
[2004] F.C.J. No. 1153 (QL), at para. 6, the Court emphasized “[r]egarding the
importance and complexity of the issues, it is the legal significance and
complexity, including the number of issues, that are to be considered and not
the factual subject matter.” (emphasis added).
[27]
Thus, the defendant’s assertion that the litigation was of
importance given the risk of going out of business relates to business or
economic significance, and not to the legal significance
relevant to the assessment of costs.
[28]
The amount of work involved in the action is also a primary
consideration in awarding increased costs. In Unilever PLC v. Procter &
Gamble Inc., [1995] 61 C.P.R. (3d) 499, at p. 527, Stone J.A. asserted that
due to the tremendous volume of work including over four and one-half sitting
days, approximately 30 volumes of transcript and 30 volumes of appeal book, 58
page appellant and 65 page respondent memorandums of fact and law, increased
costs were merited.
[29]
However, with respect to patent cases specifically, Mackay J. in Monsanto
Canada Inc. v. Schmeiser, [2002] 19 C.P.R. (4th) 524 (QL) at para. 17, held
that:
[…] To the extent that the
volume of work was higher than usual, and actual expenses were much greater
than recoverable under column III, those factors were in substantial part the
necessary consequence of the nature of the patent in suit and the problems of
evidence inherent from it to establish infringement. Costs reflecting these
consequences should not be expected to be borne by the defendants in this
case. In my opinion, they are an aspect of the plaintiffs’ overall business
expenses. Some inventions may be inherently more expensive to defend than
others. In my opinion, that is a factor which should not be reflected in a
higher than normal level of party-and-party costs awarded.
I agree. This is not a factor which
in the present case is determinative.
[30]
A party’s actions may also affect the costs assessed. In Glaxo Group
Ltd. et al. v. Novopharm Ltd., [1999] 3 C.P.R. (4th) 333 (QL),
at paras. 18 and 31, the Federal Court responded unfavourably to tactics
employed by the plaintiff. The plaintiff took under advisement and objected to
3,000 questions at the examination which caused significant delays and consumed
an undue quality of judicial resources. The Court found that an award of
party-and-party costs would be fully justified in the circumstances.
[31]
In the present case, the defendant, “[…] failed to comply with not one
but two orders of this Court requiring it to serve its affidavit of documents
on the Plaintiff within a 10 day delay […].” Prothonotary Tabib indicated
that, in the circumstances, she “would have to infer that the Defendant
deliberately prioritized the preparation and serving of its motion for summary
judgement [sic] over compliance with this Court’s order.” While Prothonotary
Tabib did indicate that the plaintiff itself contributed to the delay by
failing to promptly bring its motion after the defendant breached the court
order, I note that the defendant’s conduct did cause delays in the action.
[32]
Overall, I am not satisfied that this is a case that warrants a
departure from Column III of Tariff B.
2. Additional Counsel at Trial
and Travel costs
[33]
I am satisfied that it was reasonable and necessary to have first and
second counsel present at trial. Therefore, costs of a second counsel (at 50%
of the rate of fist counsel) for preparation and attendance at trial are
approved. I am also satisfied that reasonable travel, accommodation and
related expenses for both counsel at trial and closing argument are justified
and should be reimbursed.
3. Expert Fees
[34]
Whether expert fees are to be included in an assessment of costs is to
be determined with reference to the reasonableness of the disbursement.
[35]
In Dableh v. Ontario Hydro, [1994] F.C.J. No. 1810 (QL), at para.
15, Taxing Officer Stinson indicated that:
The test or threshold, for
indemnification of disbursements such as these, is not a function of hindsight
but whether, in the circumstances existing at the time a litigant's solicitor
made the decision to incur the expenditure, it represented prudent and
reasonable representation of the client both in terms of leading and responding
to Rule 482 expert evidence and of filling the void of technical expertise
requisite to the solicitor's preparation and conduct. Austerity must be a
factor in costs: I am not suggesting that experts should always be indemnified
for the entire period of a trial.
[36]
Similarly, in the case of Canada v. Meyer, [1988] F.C.J. No. 482
(QL), Taxing Officer Stinson indicated that the proper inquiry when determining
the amount of expert fees to be awarded is whether the claiming party acted
“reasonably and necessarily in view of the situation at the time the
disbursement was made.”
[37]
In the present case, I recognize that it was reasonable and necessary
for the defendants to obtain an expert. The case involved matters
necessitating the explanations of expert witnesses. Thus, I will allow fees
for the work of the defendant’s expert including his attendance at trial, the
amount to be determined by the taxing officer.
4. Agreed Statement of Facts
and Joint Book of Documents
[38]
I am satisfied that the defendant should be awarded costs for reasonable
time spent preparing the Agreed Statement of Facts and Joint Book of Documents
to be assessed by the taxation officer.
5. Double Costs and Offer to
Settle
[39]
In order to trigger the double costs rule, an
offer must be clear and unequivocal in that the opposite party need only decide
whether to accept or reject the offer (Apotex Inc. v. Syntex Pharmaceuticals,
[2001] FCA 137, [2001] F.C.J. No. 727 (QL), at para. 10). The offer must also
contain an element of compromise (or incentive to accept) (Canadian Olympic
Assn. v. Olymel, Société en commandite, [2000] F.C.J. No. 1725 (QL), at
para. 10). The offer must also be presented in a timely fashion such that the
benefit would still be derived from the opposite party if accepted (Sammammas
Compania Maritima S.A. v. Netuno (the) Action in rem against the Ship “Netuno”,
[1995] F.C.J. No. 1442 (QL), at paras. 30 and 31). Finally, if accepted, the
offer must bring the dispute between the parties to and end (TRW, supra,
at p. 456).
[40]
I am satisfied that the defendant’s offer
contained all elements and thus is capable of triggering double costs.
[41]
Therefore, double costs are ordered on all
assessable items excluding disbursements, pursuant to r. 420, after August 24,
2006, the date on which Plasticair served an Offer to Settle on the Plaintiff,
M.K. Plastics Corporation.
[42]
The plaintiff submits that it refused the offer
on November 2, 2006, and that pursuant to article 1392 C.c.Q, the offer was
thereby revoked and incapable of triggering double costs. I do not agree.
[43]
Article 1392 C.c.Q., upon which the plaintiff
relies, indicates that “[a]n offer lapses […] in respect of the offeree if he
has rejected it”. However, Rule 420 was established to deal specifically with
this type of situation where a party has rejected an offer to settle. It is
precisely when the offeree refuses an offer to settle that the application of
r.420 is triggered. For the plaintiff, an award of double costs is barred when
an offer to settle is rejected; however, to interpret article 1392 C.c.Q. in
this manner would, in effect, render r. 420 inapplicable.
[44]
In the present case an offer to settle was made
by the defendants and was rejected by the plaintiffs as per article 1392
C.c.Q. The rejection then triggered the application of r. 420 and the award of
double costs which flows there from.
ORDER
THIS COURT ORDERS that
- Costs
of the proceedings are to be assessed under Column III of Tariff B of the
Federal Courts Rules on all assessable items.
- Costs
of travel to examination for discovery of the Plaintiff in Montreal in April 2005 and July
2006 for first Counsel and accommodation, living and related expenses are
allowed.
- Costs
for time reasonably spent in the preparation of the Agreed Statement of
Facts and Agreed Book of Documents submitted at trial are allowed.
- Costs
of second counsel (at 50% the rate of first counsel) for trial preparation
and attendance are allowed.
- Costs
of travel to Montreal for trial and closing
argument, as well as accommodation, living and related expenses for first
and second counsel are allowed.
- Costs
of expert fees for preparation of the expert report, testifying at trial
and assistance to counsel at trial as well as travel, accommodation,
living and related expenses incurred during preparation for and attendance
at trial are allowed.
- Costs
of travel, and accommodation, living, and related expenses incurred during
preparation for and attendance at trial by Paul Sixsmith are allowed.
- Double
costs on all assessable items after August 24, 2006 the date on which
Plasticair served an offer to settle on the plaintiff are allowed.
- Post judgment interest on any award of
costs and disbursements is allowed.
- Costs of this motion are allowed.
The ultimate amount of all listed items to be determined by
an assessment officer with regard to what is reasonable in the particular circumstances
of the case.
“Danièle
Tremblay-Lamer”
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