Citation: 2010 TCC 476
Date: 20100920
Docket: 2008-3556(IT)G
BETWEEN:
BARRINGTON LANE DEVELOPMENTS LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Pizzitelli J.
[1]
This
is a motion by the Appellant brought pursuant to Rule 147(7) of the Tax Court
of Canada Rules (General Procedure) seeking that this Court reconsider its
award of costs in my judgment of July 19, 2010, pertaining to this matter (which
has been amended for clarification not related to the issue of costs). In
effect, I allowed the Appellant’s appeal with costs without being aware of the
Offer to Settle of the Appellant. The Appellant now seeks 100% of all fees and
disbursements from May 20, 2010, being its alleged date of settlement offer. The
Respondent’s position is that it accepts the costs award as per the judgment
and requests the costs and disbursements be taxed pursuant to Tariffs A and B
as a Class C Proceeding even though the appeal was filed as a Class B
proceeding, thus conceding more generous costs to the Appellant.
[2]
Rule
147 of the Tax Court of Canada Rules(General Procedure) reads as
follows:
147(1) The Court
may determine the amount of the costs of all parties involved in any
proceeding, the allocation of those costs and the persons required to pay them.
(2) Costs
may be awarded to or against the Crown.
(3) In
exercising its discretionary power pursuant to subsection (1) the Court may
consider,
(a)
the result of the proceeding,
(b)
the amounts in issue,
(c)
the importance of the issues,
(d)
any offer of settlement made in writing,
(e)
the volume of work,
(f)
the complexity of the issues,
(g)
the conduct of any party that tended to shorten or to lengthen
unnecessarily the duration of the proceeding,
(h)
the denial or the neglect or refusal of any party to admit anything that
should have been admitted,
(i)
whether any stage in the proceedings was,
(i)
improper, vexatious, or unnecessary, or
(ii)
taken through negligence, mistake or excessive caution,
(j)
any other matter relevant to the question of costs.
(4) The
Court may fix all or part of the costs with or without reference to Schedule
II, Tariff B and, further, it may award a lump sum in lieu of or in addition to
any taxed costs.
(5) Notwithstanding
any other provision in these rules, the Court has the discretionary power,
(a)
to award or refuse costs in respect of a particular issue or part of a
proceeding,
(b)
to award a percentage of taxed costs or award taxed costs up to and for
a particular stage of a proceeding, or
(c)
to award all or part of the costs on a solicitor and client basis.
(6) The
Court may give directions to the taxing officer and, without limiting the
generality of the foregoing, the Court in any particular proceeding may give
directions,
(a)
respecting increases over the amounts specified for the items in
Schedule II, Tariff B,
(b)
respecting services rendered or disbursements incurred that are not
included in Schedule II, Tariff B, and
(c)
to permit the taxing officer to consider factors other than those
specified in section 154 when the costs are taxed.
(7) Any
party may,
(a)
within thirty days after the party has knowledge of the judgment, or
(b)
after the Court has reached a conclusion as to the judgment to be
pronounced, at the time of the return of the motion for judgment,
whether or not the
judgment included any direction concerning costs, apply to the Court to request
that directions be given to the taxing officer respecting any matter referred
to in this section or in sections 148 to 152 or that the Court reconsider its
award of costs.
[3]
As
this motion was brought August 18, 2010, it is within the 30-day period
contemplated by subsection 147(7) of the above Rule.
[4]
The
Appellant basically relies on the fact a settlement offer was made on May 20, 2010,
wherein the Appellant offered to settle the matter by payment of $50,000 to the
Respondent with both sides responsible for their own costs. On the same
date, the Respondent’s counsel wrote to the Appellant’s counsel and advised
that as the basis of payment was an unsubstantiated amount, they could not
agree to the offer as submitted but also advised it would be prepared to
reconsider their position if, and I quote:
… Should you be able to provide some
factual or legal basis for the $50,000 figure offered, …
[5]
On
May 27, 2010, the Appellant’s counsel faxed a letter of reply to the
Respondent’s counsel reiterating the above offer and identifying the
substantive issue in the appeal with great clarity and setting out the
precedents relied upon to support its position, including Krauss v. R.,
2009 TCC 597, 2009 DTC 1394, and Trom Electric Co. v. Canada, 2004 TCC
727, 2005 DTC 62, which were considered with approval in my judgment.
[6]
On
May 31, 2010, the Respondent replied to the above second letter and stated:
… As the offer does not contain any legal
or evidentiary basis for settling on the terms proposed by the appellant, we
cannot agree to the terms proposed.
[7]
Counsel
for the Respondent also took the position the case law quoted by the Appellant
was quoted out of context, although did not explain why, and suggested it did
not stand for the general principle suggested in the proposal letter, which of
course I disagreed with in my judgment.
[8]
No
counter offer was contained in the above reply and the Respondent’s counsel
enclosed a revised partial agreed statement of facts with only minor changes to
that earlier proposed by the Appellant itself as well as an Amended Reply
to the Notice of Appeal, later consented to by counsel.
[9]
On
June 2, 2010, counsel for the Appellant advised counsel for the Respondent by
telephone that the revised partial agreed statement of facts was unacceptable
and that there would be no agreed facts. There was no written position given by
counsel for the Respondent as to why the minor changes to the suggested
statement were unacceptable.
[10]
It
should also be noted that a significant amount of time at the beginning of the
trial was spent on the issue raised by the Appellant as to whether the notice
of assessment for 2004 was mailed within the normal assessment period or
whether it was statute barred, which of course was considered before the second
issue. The Appellant was unsuccessful on this issue at trial.
[11]
The
Appellant’s position is based entirely on the fact its settlement offer was
turned down, without the Respondent making any offer or counter-offer, or
inviting a settlement discussion and having regard to the fact the Appellant
succeeded on the main issue even beyond its settlement offer then it should be
granted its request for 100% costs and disbursements from the date of the
offer. The Appellant has drawn the Court’s attention to the decision of Boyle J.
in Langille v. The Queen, 2009 TCC 540, 2009 DTC 1351, wherein Boyle J. awarded
80% of invoiced fees and disbursements billed for the period following the
making of the settlement offer. In that case, the settlement offer was made
only a few days before the hearing and its terms specifically matched the
ultimate result of the appeal. Boyle J. noted, however, that since the offer was
made only a few days before trial, most of the preparation would have been done
before the date of the offer and hence did not award 100%.
[12]
In
the case at hand of course, the settlement offer was made only a short period
before trial as well. In fact, I find that the Respondent was more than
reasonable in requesting on May 20, 2010, an explanation of the basis for the
settlement amount in its reply to the first letter, which the Appellant in fact
provided in its letter of May 27, 2010, one week later. I would contend the
relevant date for settlement purposes should be May 27, 2010, which of course
was just a few days before the hearing which took place over June 3 and 4, 2010,
much along the lines of Langille above.
[13]
There
is no disputing that while a settlement offer is only one of the factors to
consider under Rule 147(3)(d) above, it has taken on the role of one of
the more important factors, as alluded to in the decisions of this Court in Langille,
Donato v. R., 2010 TCC 16, 2010 CarswellNat 44, 2010 DTC 2788, and Campbell
v. R., 2010 TCC 323, 2010 CarswellNat 1701, 2010 DTC 3619, all of
which refer to the practice in many jurisdictions to award costs on a
solicitor/client basis where the unsuccessful party rejects a settlement offer
which is at least as favourable as the outcome of the hearing. In addition, the
growing importance of the settlement offer is mentioned by both Woods J. and
Boyle J. in Donato and Langille respectively, where reference was
made to the recent endorsement of the Rules Committee of the Court of an
increase in costs when a written settlement offer has been made that is no less
favourable than the actual outcome and the new Practice Note 17 issued by Rip C.J.
of this Court stressing the importance of settlement and the awarding of
solicitor/client costs to encourage settlement.
[14]
The
Respondent’s relies on the decision of Bowman J. in Continental Bank of
Canada v. Canada, 1994 T.C.J No. 863 (QL), in support of its position that
the Appellant’s request should be denied. In paragraph 10 of such decision, Bowman
J. stated:
10 In the normal course the tariff is to be respected
unless exceptional circumstances dictate a departure from it. Such
circumstances could be misconduct by one of the parties, undue delay,
inappropriate prolongation of the proceedings, unnecessary procedural
wrangling, to mention only a few. None of the elements exists here.
[15]
However,
while I agree the misconduct of the parties is obviously another factor to
consider in awarding costs beyond the Tariff amount, the Continental Bank
of Canada decision long preceded the proposed changes to the Rules and
Practice Note 17 which elevated the consideration of the settlement offer to a
more prominent role.
[16]
The
settlement offer is, however, not the only factor to consider under Rule
147(3), notwithstanding its important role. The result of the proceeding in
Rule 147(3)(a) is obviously a factor on its own, and here, while the
Appellant was successful on the issue of the manner of taxation of the loan
repayment, it was wholly unsuccessful on the issue as to whether the 2004
notice of assessment was statute barred as above mentioned.
[17]
In
addition, Rule 147(3)(h) provides that the denial or neglect or refusal
of any party to admit anything that should have been admitted is another factor
to consider. In this case, the Appellant himself initiated a draft agreed
partial statement of facts yet refused to consider even minor changes to it after
its settlement offer was rejected. There was in fact no real dispute as to the
material facts in the trial and an agreed-upon statement of facts would have
shortened the trial through the testimony of the various witnesses.
[18]
As
to the other factors to consider, clearly this case was not a complex one,
having been heard over two days with the material facts not in dispute, and the
parties during the hearing conducted themselves properly and astutely, save and
except I might note for the Respondent’s failure to have realized that the
Federal Court of Appeal case of Imperial Oil Ltd. v. Canada, 2004 FCA
361, 2004 DTC 6702 (F.C.A.), on which it relied to support its position in law,
had already been overturned by the Supreme Court of Canada.
[19]
Having
regard to all the relevant factors to consider above, I do not think that this
is a case in which 100% of costs and disbursements should be given. As in
the Langille case, since the offer to settle was only given a short time
before trial, most of the preparation work must have been undertaken before the
date of settlement offer. In addition, while the Appellant was successful
beyond the terms of his generous settlement offer on the main issue at trial,
the Appellant was unsuccessful on the statute-barred issue which occupied
significant time and the Appellant could have shortened the trial by proceeding
to further an agreed statement of facts, the process for which the Appellant
commenced and abruptly ended. On balance, however, I am of the view that some
form of enhanced costs should be awarded, and accordingly, I am directing the
taxing officer to tax the Appellant’s costs on the following basis:
(a) The
Appellant is to be awarded normal tariff costs based on a Class C
proceeding for a wholly successful litigant for the period up to 5:00 p.m. on Thursday,
May 27, 2010; and
(b) Thereafter,
costs on the basis of 80% of fees and disbursements billed to the Appellant for
final preparation for the hearing and conduct of the hearing, including preparation
and review of submissions.
[20]
The
Appellant shall also be awarded $600 as costs in respect of this motion.
Signed at Ottawa, Canada, this 20th day of September 2010.
“F.J. Pizzitelli”
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