Docket: A-543-12
Citation: 2014 FCA 174
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CORAM:
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PELLETIER J.A.
DE MONTIGNY J.A. (ex
officio)
MAINVILLE J.A.
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BETWEEN:
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CATHERINE LEUTHOLD
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Appellant
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and
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CANADIAN BROADCASTING CORPORATION ET AL
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Respondent
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REASONS FOR
JUDGMENT
PELLETIER
J.A.
[1]
This appeal is the companion to Leuthold v.
Canadian Broadcasting Corporation, 2014 FCA 173, in which this Court
dismissed Ms. Leuthold’s appeal from the decision of the Federal Court ordering
the Canadian Broadcasting Corporation (the CBC) to pay her approximately US
$20,000 as damages for infringement of her copyright in certain images.
Notwithstanding the fact that she was the successful plaintiff, Ms. Leuthold
was ordered to pay the CBC double costs because she recovered less than the amount
of CBC’s Rule 420 offer to settle. These reasons deal with Ms. Leuthold’s
appeal from the costs order. For the reasons that follow, I would dismiss the
appeal with costs.
[2]
The material facts are straightforward. Ms.
Leuthold’s claim against the CBC was for approximately US $20 million. Early in
the litigation, the CBC made a formal offer to settle Ms. Leuthold’s claim for
US $ 37,500 plus costs plus interest to the date of the offer. Ms. Leuthold did
not accept the CBC’s offer and went to trial where she was awarded US $19,200
damages and $168.74 by way of disgorgement of profits arising from the
infringing acts. After allowing for currency conversion, Ms. Leuthold’s total
recovery is substantially less that the amount of the CBC’s offer. At the
conclusion of trial, the Trial Judge asked for further submissions on the issue
of costs. After having heard from the parties, the Trial Judge ordered Ms.
Leuthold to pay double costs pursuant to Rule 420(2), and fixed costs at the
high end of column 3. Ms. Leuthold appeals from this order.
[3]
An order of costs is a discretionary order and
should not be disturbed unless the court below has erred in principle or the
costs award is plainly wrong: see Sun Indalex Finance, LLC v. United
Steelworkers, 2013 SCC 6, [2013] 1 S.C.R. 271, at paragraph 247.
[4]
Ms. Leuthold argues that the Trial Judge erred
in ordering double costs because the CBC’s offer contained no element of
compromise, and because Ms. Leuthold’s recovery was so near the amount of the
offer so as to make it inequitable to order double costs.
[5]
It is not disputed that the CBC’s offer to
settle met the formal requirements of Rule 420.
[6]
While we do not have the details of the
components of CBC’s offer to settle, we know that Ms. Leuthold accepted the sum
of US $2,500 for one network broadcast of the documentary containing the images
in which Ms Leuthold held the copyright. The CBC admitted to having broadcast
the images without authorization on 6 occasions. A reasonable approach to
constructing an offer of settlement in these circumstances would have been to
assume that Ms. Leuthold would recover the original licence fee for each
unauthorized broadcast. The total for the six unauthorized broadcasts would be
US $15,000. The difference between US $15,000 and US $37,000 plus costs plus
interest is, to my mind, a reasonable compromise.
[7]
Ms. Leuthold also argues that since her recovery
was so near to the CBC’s offer, the Trial Judge should have exercised his
discretion to not order double costs. The Trial Judge considered that Ms.
Leuthold’s failure to accept the CBC’s offer reflected her assessment that she
would do better than the offer of settlement. Ms. Leuthold was free to make
that determination but she must also accept the consequences if she is wrong.
[8]
I agree with the Trial Judge’s comments on risk
assessment. I might add that in this case, Ms. Leuthold developed a very
technical argument in support of an amount which she could never have
negotiated in the course of business. No one, under any circumstances, would
have paid Ms. Leuthold twenty million dollars for the right to broadcast her
images six times over a national network. In assessing her risk, Ms. Leuthold
was bound to consider if the position she was taking made commercial sense. Had
she done so, she might have viewed the CBC’s offer in a different light. As a
result, I do not believe that the fact that Ms. Leuthold recovered an amount in
the general area of the CBC’s offer is of any assistance to her.
[9]
Ms. Leuthold then argues that the Trial Judge,
had he decided not to award double costs, should have awarded her costs as the
successful litigant. Ms. Leuthold, unfortunately, is engaged in wishful
thinking. The Rules provide for the making of a formal offer of settlement with
cost consequences if the offer is not accepted. That is what happened here. It
does little good to argue after the fact that no effect should be given to Rule
420.
[10]
Ms. Leuthold argues that the law is clear that
costs are not to be used to penalize a party, nor are they to be punitive or
crippling in nature. She argues that an award of costs of some $80,000 is
punitive and a penalty for a person whose gross annual income is approximately
$20,000 per year.
[11]
I agree with Ms. Leuthold’s statements of
principle but those principles have to be applied in light of the objective
sought to be achieved through Rule 420, which is to deter parties from
incurring costs and inflicting them on others by creating a financial incentive
to compromise their claims. The incentive, in the case of the double costs rule,
is the avoidance of a penalty. I do not think it is contentious to say that
doubling the costs a party would otherwise have to pay, or imposing costs on a
modestly successful party, is a penalty. As a result, it does not assist Ms.
Leuthold to say that costs should not operate as a penalty. Costs should not
operate as a penalty unless the Rules specifically intend them to do so.
[12]
Ms. Leuthold argues that, having regard to her
financial circumstances, an order for costs of $80,000 is punitive. It is true
that an impecunious claimant with a meritorious claim should not be prevented
from bringing his or her claim by an order for security for costs, or advance
costs : see British Columbia (Minister of Forests) v. Okanagan Indian Band,
2003 SCC 71, [2003] 3 S.C.R. 371, at paragraph 36 and following. However, once
a matter has proceeded to trial and judgment has been rendered, a party’s
impecuniosity is not a relevant factor in the assessment of costs. The person
entitled to costs has had to incur the costs of proceeding to trial and has the
right to be compensated within the limits prescribed by the Rules of Court.
Issues of enforceability are distinct from issues of entitlement.
[13]
Finally, Ms. Leuthold argues that an order of
costs ought not to be such as to bring the administration of justice into
disrepute. Once again, this is an argument based on impecuniosity. The sad fact
of the matter is that litigation produces winners and losers; that is why it is
such a blunt tool in the administration of justice. But justice is not served
by allowing persons who have imposed costs on others by pursuing or defending a
claim which lacks merit to avoid the consequences of their behaviour. Such a
policy would be more likely to bring the administration of justice into
disrepute than the result in this case.
[14]
The arguments raised by Ms Leuthold have not
persuaded me that the Trial Judge acted on a wrong principle or that his
decision is clearly wrong. In my view, his decision is correct. I would therefore
dismiss the appeal with costs.
"J.D. Denis
Pelletier"
“I agree
Yves de Montigny J.”
“I agree
Robert M. Mainville
J.A.”
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