Date: 20080626
Docket: T-2289-03
Citation: 2008 FC 814
BETWEEN:
NETBORED
INC.
Plaintiff
and
AVERY HOLDINGS INC.
SEAN EREN, SUSAN EREN
SUSAN KATZ, COREY KATZ AND
BINARY ENVIRONMENTS LTD.
Defendants
ASSESSMENT OF
COSTS - REASONS
Charles E. Stinson
Assessment Officer
[1]
This
action asserted allegations of copyright infringement, breach of
confidentiality and breach of fiduciary and contractual relationships between
an employer and former employee. The Defendants, Avery Holdings Inc.,
Susan Eren, Susan Katz and Corey Katz (the Avery Defendants) present ten bills
of costs totalling $353,691.01 for assessment against the Plaintiff further to
several Orders. Two of these Orders are of particular interest. The Order of
the Honourable Mr. Justice Hughes dated October 14, 2005 vacated the Anton
Piller order and set aside the interim injunction both issued December 15, 2003
and awarded costs to the Avery Defendants some of which were to be on a “full
recovery basis” (Susan Eren, Susan Katz and Corey Katz) and some to be on a
Column IV basis (Avery Holdings Inc.) (the 2005 Hughes J. Order). The Order of Prothonotary
Milczynski dated October 25, 2006, dismissed the action against the Avery
Defendants and directed that an assessment officer set a schedule for
assessment of costs if the parties could not agree on one between themselves,
determine further to submissions from the parties whether the hearing of the
assessment would be oral or in writing and determine the scale or level of
costs apart from those already confirmed by the 2005 Hughes J. Order (the 2006
Milczynski P. Order). The 2006 Milczynski P. Order also directed that the Avery
Defendants present their evidence in affidavit form, that the “plaintiff shall
first cross-examine on any affidavit filed and nothing in this Order shall be
completed until cross-examinations are completed, to include answers to
undertakings and all reasonable questions relating thereto” and that there be a
reference on damages.
[2]
These
reasons address two preliminary issues: (1) should the assessments of costs
proceed or be delayed further; and (2) should they be heard orally?
Circumstances sometimes arise requiring an Assessment Officer to determine
issues other than those particular to setting the actual dollar amount for each
item of costs in turn. An example would be entitlement to costs further to an
order silent on costs. My practice is to receive the submissions on
entitlement, reserve on the preliminary issue and then direct that the parties
continue the hearing with submissions on the appropriate and actual dollar
amounts to be allowed. If I determine that no entitlement exists, then I do not
need to consider the submissions on amount. If I determine that entitlement
does exist, I can make my findings on amount without the expense of reconvening
the parties before me. As there may be only a few items with such preliminary
issues in a bill of costs, this permits a single and uninterrupted hearing.
Generally, the two issues above should not require a decision as here
preliminary to the actual assessment of the dollar amount of each item of costs
in turn.
[3]
However,
there are circumstances, which I think should be very limited, when an
Assessment Officer may issue findings by way of reasons and certificate of
assessment on a preliminary issue of law or matter of practice. Such findings
would not be confined as in the example above to isolated items in a bill of
costs, but rather to issues or matters affecting the assessment of costs as a
whole and for which considerations of time and costs would make it practical to
divorce their determination from the detailed dissection of the dollar claims
of the individual items of costs. This would afford the parties the opportunity
to challenge such findings further to Rule 414 or some other basis or perhaps
preclude considerable and additional costs if such preliminary findings are
accepted. Examples have been Furukawa v. Canada, [2002] F.C.J. No. 189
(A.O.), affirmed by [2002] F.C.J. No. 434 and No. 439 (F.C.T.D.), affirmed on
one point and reversed on another point by [2003] F.C.J. No. 551 (F.C.A.); Halford
v. Seed Hawk Inc., [2005] F.C.J. No. 600 (A.O.) and Urbandale Realty
Corp. v. Canada, [2008] F.C.J. No. 910 (A.O.). For the reasons following, I
think that the circumstances here warrant preliminary findings.
[4]
On
February 14, 2007, counsel for the Avery Defendants (Avery Defendants’ counsel)
requested an assessment of costs and a case conference to discuss
scheduling. That same day, the Avery Defendants filed their costs materials in
chief including a supporting affidavit sworn on December 21, 2006 by Susan
Eren (the Eren affiant). The assessment officer resident in Toronto initially
addressed scheduling matters. The matter of an oral hearing (the Plaintiff
wanted an oral hearing and the Avery Defendants wanted written submissions)
remained outstanding. By the time the Avery Defendants’ counsel wrote on May
24, 2007 to request directions on an issue that had arisen during the
cross-examination of the Eren affiant, the assessment officer resident in Toronto
was no longer available and it fell to me to address this court file.
[5]
I
convened case conferences on June 28 and August 24, 2007, which addressed
scheduling matters such as completion of cross-examination, but not whether an
oral hearing would be permitted. On November 7, 2007, the Avery Defendants’
counsel wrote to confirm that the cross-examination and delivery of
undertakings were complete and to request a case conference on further
scheduling. On December 14, 2007, I convened a case conference during which
counsel for the Plaintiff (Plaintiff’s counsel) indicated that permitting an
oral hearing of the issues of costs might be enough for his client to
accept my assessment as a final disposition. I set a hearing date for March 14,
2008, in Toronto, set time limits for the submissions on that day and set a
schedule for the service and filing of reply and rebuttal materials in
advance of the hearing date; including January 11, 2008 as the latest date for
service and filing by the Plaintiff of any motion (to be made returnable at the
earliest sitting day permissible under the Rules) for directions.
[6]
On
February 8, 2008, Plaintiff’s counsel wrote to request an adjournment on the
basis that certain steps taken by the Avery Defendants had made the December
14, 2007 case conference a waste of time. Specifically, the Avery Defendants
had commenced an action on October 15, 2007 alleging that the Plaintiff had
made fraudulent conveyances and that parties additional to the Plaintiff were
responsible for payment of the assessed costs here of the Avery Defendants.
Plaintiff’s counsel noted that the allegation of fraudulent conveyance was
opposite to the evidence of the Eren affiant during her cross-examination on
September 24, 2007 that she did not have any evidence of fraudulent conveyance
by the Plaintiff and that the lack of candour of the Eren affiant had caused
other delay, i.e. swearing that she had paid some $30,000 to her former counsel
to be part of the assessed costs here only to admit near the end of her cross-examination
that the $30,000 had been forgiven. Plaintiff’s counsel asserted that the new parties
would require independent counsel and cross-examination to advance their
respective positions. Counsel for the proposed new parties, Fiona Anne
Ridley, Tyne and Wear Capital Inc. and Allan Crosier (the proposed
Interveners), confirmed this latter assertion. The action filed on October 15,
2007 was done so in the Ontario Superior Court of Justice Commercial List
(the Ontario action) by
counsel other than the Avery Defendants’ counsel and without the knowledge
of the Avery Defendants’ counsel. The Avery Defendants apparently waited
(December 17, 2007) until after the case conference on December 14, 2007 to
effect service of the Ontario action.
[7]
On
February 29, 2008, I convened a case conference with the three counsel.
The submissions convinced me that the proposed Interveners had raised a
matter serious enough to warrant adjournment of the assessments of costs
scheduled for March 14, 2008. I noted on the record that I accepted without
reservation the assertion by the Avery Defendants’ counsel that his clients had
hired another law firm and served the Ontario action on the Plaintiff
and on the proposed Interveners without his knowledge. I also noted that his clients
bore sole responsibility for this turn of events. I directed that counsel
appear before me on March 14, 2008 to address scheduling.
[8]
On
March 14, 2008, counsel for the proposed Interveners (the proposed Interveners’
counsel) argued for standing on the assessments of costs. The other parties and
I indicated that standing limited to oral submissions might be acceptable. The
Avery Defendants would not agree to cross-examination or the filing of
evidence. I directed that the proposed Interveners must serve and file by April
4, 2008 any motion for this latter extent of standing and that to permit time
for its disposition, the assessments of costs would be adjourned to May 27,
2008 with June 23, 2008 as an alternative date should additional time be
required for resolution of the issue of standing.
[9]
The
proposed Interveners filed a motion for standing. While it was outstanding,
Plaintiff’s counsel resisted agreement to any schedule for service of the
Plaintiff’s materials on the basis of unnecessary duplication. That is, his
cross-examination strategy was apparently based on the limited liability of the
Plaintiff as a company, already found to be impecunious, as opposed to the
proposed Interveners as individuals with unlimited liability. He intended to
prepare the Plaintiff’s materials after conferring with the proposed
Interveners’ counsel and following the latter’s cross-examination of the Eren
affiant. The Avery Defendants’ counsel disagreed and submitted that their
respective interests run in parallel and are not contingent on each other. He
submitted that this was a delay tactic to compromise the scheduled assessment
date and that the Plaintiff should be required to serve its materials
particularly given that it had had the Avery Defendants’ materials for over two
months.
[10]
On
April 30, 2008, the Court dismissed the motion for standing with costs of
$2,000 payable forthwith to the Avery Defendants (the 2008 Milczynski P.
Order). Said Order noted that the Plaintiff could adequately defend a common
interest with the proposed Interveners. On May 8, 2008, I convened a case
conference. The proposed Interveners’ counsel confirmed that a motion (the
appeal motion) was being filed that day, to be returnable on June 23, 2008, to
appeal the 2008 Milczynski P. Order. He agreed to attempt to secure an earlier
hearing date. I adjourned the assessments to June 23, 2008 and directed that
the Plaintiff serve and file its reply materials by June 18, 2008, or ten
days from the date of disposition of the appeal motion whichever date is
earlier and that the Avery Defendants serve and file any rebuttal materials by
June 20, 2008.
[11]
On
June 11, 2008, the proposed Interveners filed a revised motion, returnable June
16, 2008, adding as a ground an assertion of a fraud on the Court on the part
of the Avery Defendants. The Court took the matter under reserve on June
16, 2008. On June 17, 2008, Plaintiff’s counsel wrote to request an adjournment
of the June 23, 2008 hearing date. He had not yet served any reply materials.
He had given notice to the Avery Defendants’ counsel that he had instructions
to bring a motion (the fraud motion), presently returnable August 11, 2008 and
supported by the affidavit of Allan Crosier sworn June 9, 2008 (the Crosier
affidavit) (my recollection from the June 20, 2008 case conference is that the
Crosier affidavit is the one filed in support of the revised motion of the
proposed Interveners), to vary the 2005 Hughes J. Order by vacating its award
of costs to the Avery Defendants on grounds that the Eren affiant had committed
a fraud both on the Court and on the Avery Defendants’ counsel.
[12]
The
proposed Interveners’ counsel wrote on June 17, 2008 also arguing for
adjournment and indicated that his client would likely give him instructions to
appeal should the revised motion be dismissed given that the Avery Defendants
had already admitted certain of the facts underlying the allegations of fraud.
The Avery Defendants’ counsel wrote on June 17, 2008 strongly opposing any
adjournment. He submitted that the Plaintiff had had over five weeks to prepare
its reply materials, that his clients are still prepared to proceed in writing
as opposed to an oral hearing, that the Plaintiff’s asserted adamant need for
an oral hearing was a device for delay and that there was no prejudice for the
Plaintiff in proceeding on June 23, 2008 as it could ask for costs thrown away
if successful on the fraud motion. He also submitted that it would be premature
to adjourn the June 23, 2008 date as the Court still might rule before then on
the revised motion and that the proposed Interveners have shown a complete and
utter disregard for the assessment process with particular regard to the fact
that Allan Crosier is the principal of the Plaintiff. As well, they have
deliberately attempted to delay the assessments without just cause.
[13]
On
June 18, 2008, the Court struck the Crosier affidavit from the record,
dismissed the revised motion, denied the proposed Interveners any standing on
the assessments and awarded costs of $3,000 payable forthwith to the Avery
Defendants (the 2008 Mosley J. Order). The Court’s decision expressed doubt on
whether the record established fraud. It affirmed the finding in the 2008
Milczynski P. Order that the Plaintiff could adequately defend the interests of
the proposed Interveners.
[14]
I
convened a case conference on June 20, 2008 at which I informed counsel that I
would advance my views of the status of the assessments of costs and my
intention, subject to what I might hear from counsel that day, to issue reasons
and a certificate of assessment on the two preliminary issues noted above in
paragraph 2.
[15]
For
the first issue (should the assessments proceed or be delayed further), I
indicated that I cannot speculate on the possible success of any appeal of
the 2008 Mosley J. Order. The Federal Court in two separate hearings has firmly
rejected any role for the proposed Interveners and in the absence of a stay, it
would be presumptuous of me to take into account the time required for an
appeal. The proposed Interveners’ counsel indicated before me that he has
instructions to appeal. I had no hesitation in permitting him to appear on
this case conference as I felt that his clients had limited standing to engage
the appeal provisions of the Federal Courts Act. I indicated that I felt
I should issue a decision now on this preliminary issue to permit his
clients to decide what, if any, other relief to seek relative to my decision
that the assessments would proceed.
[16]
I
indicated that the Plaintiff had had several months to digest the materials of
the Avery Defendants. Rule 400(1) characterizes the Court’s power to award
costs as ”discretionary” meaning there is no guarantee that the Plaintiff would
receive costs thrown away. Paragraph 14 of the fraud motion asserts discovery
in 2007 of the alleged fraud. Timeliness in bringing the fraud motion may be an
issue. I do not speculate on the potential outcome of the fraud motion, but I
do note case law such as TMR Energy Ltd. v. State Property Fund of Ukraine
(2005), 250 D.L.R. (4th) 10 (F.C.A.) holding that the Rules do not
permit indefinite attacks on judgments. The outstanding fraud motion does not
operate as a stay of the assessments. The assessments of costs should proceed
unless I think that the circumstances are so strong as to suggest to do so
would be unreasonable, i.e. that success on the fraud motion is a given. I
doubt that is so and I direct that the assessments of costs shall proceed.
[17]
As
for the second issue (should the assessments of costs be heard orally), I do
not speculate on whether the Plaintiff or the proposed Interveners have used
the scheduling of an oral hearing as a device for delay. I think that the
Plaintiff’s focus at this point will be on the fraud motion. If I had forced
the assessments to proceed orally on June 23, 2008, I think that I would have
put the Avery Defendants at risk of incurring further costs to respond to an
appeal, not on the basis of my disposition of the individual items of costs,
but on the basis that the Plaintiff had been denied fair opportunity to advance
its position. I refused to do that. However, this decision on the preliminary
issues means that the time has come for the Plaintiff to make some hard
decisions, i.e. move to set aside this decision, move to stay it or simply
perfect the assessment materials.
[18]
One
of the submissions by the Avery Defendants’ counsel on an earlier case
conference was that disposition by way of written submissions was to be
preferred because it would ensure completeness in the record of the respective
positions of the parties. The allegation of fraud might be advanced as a factor
further to Rules 409 and 400(3)(o) (any other matter considered relevant)
affecting my findings on the sufficiency of the evidence and one or both sides
might challenge such findings on appeal. I think that requiring the parties to
fully document their position in the record via written submissions is to be
preferred at this point and therefore I withdraw permission for an oral
hearing.
[19]
I
do not know whether the fraud motion may be heard by a judge other than Mr. Justice
Hughes. I indicated to counsel my thinking on fixing dates for the service of
materials on the assumption that the fraud motion would proceed on August 11,
2008. After some discussion with counsel, I set this timetable:
(i)
The
Plaintiff shall serve and file reply materials by August 14, 2008.
(ii)
Counsel
for the Avery Defendants shall advise counsel for the Plaintiff within three
days of service of the Plaintiff’s materials whether he needs to cross-examine.
If he does need to do so, the Plaintiff’s affiant shall be made available to
permit cross-examination by August 29, 2008 and the Plaintiff shall perfect its
materials by service and filing of written submissions by September 12, 2008.
If he does not need to do so, the Plaintiff shall perfect its materials by
service and filing of written submissions by August 29, 2008.
(iii)
The
Avery Defendants shall serve and file rebuttal materials two weeks from service
of the final written submissions of the Plaintiff (due either on August 29 or
September 12, 2008)
(iv)
Any
issue of sur-reply or sur-rebuttal is to be deferred until after all of the
above materials are in the record.
[20]
A
Certificate of Assessment will issue as follows:
I
HEREBY CERTIFY that I reject the request of Fiona Anne Ridley, Tyne and Wear
Capital Inc. and Allan Crosier (the proposed Interveners) to adjourn the
assessments of the costs of the Defendants, Avery Holdings Inc., Susan Eren, Susan
Katz and Corey Katz (the Avery Defendants) until after the disposition of an
appeal by the proposed Interveners from the decision of the Federal Court dated
June 18, 2008 denying them standing on the assessments of costs.
I
HEREBY FURTHER CERTIFY that I reject the request of the Plaintiff to adjourn the
assessments of the costs of the Avery Defendants until after the disposition of
the Plaintiff’s motion to vary the decision of the Federal Court dated October
14, 2005 by vacating its award of costs to the Avery Defendants.
I
HEREBY FURTHER CERTIFY that I withdraw the permission given earlier to the Plaintiff
for an oral hearing of the assessments of the costs of the Avery Defendants and
that I direct that the assessments of costs proceed in writing further to the
timetable issued today by separate mailings by the Registry to the parties.
“Charles
E. Stinson”
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