[1] This action arose from a contractual dispute over the alleged failure of the defendant to pay for supplies and services rendered on a public wharf. The initial claim for damages filed on June 13, 1996 was in the amount of $36,626.02. Two years later the plaintiff Sun Construction Company Ltd. was allowed to amend its statement of claim and increase the relief sought by $23,360.00. On October 6, 2000, the plaintiff filed a notice of motion returnable at the commencement of the trial on October 16, 2000 seeking leave to further amend the statement of claim to increase the claim to $57.380. At the commencement of the trial the plaintiff advised that it was withdrawing its allegations and claim for $28,466.02. The trial Judge finally allowed the quantum of the claim in the amount of $57,380.
[2] The trial, which had been scheduled to last ten days, was concluded after five days, the Court dismissing the action with costs. By agreement of the parties, the assessment of costs proceeded on the 22nd day of March 2001 by way of a teleconference. Mr. David Moores spoke on behalf of the plaintiff and Mr. Kevin Stamp on behalf of the defendant. A further conference call took place on April 10, 2001 to discuss the issue of doubling specific assessable services arising from the defendant's offer to settle as provided by Rule 420(2)(b).
COUNSEL FEES
[3] Mr. Stamp claims 7 units for item 2 (filing of statement of defence). Under this item counsel includes several other entries for miscellaneous services such as:
- preparation/filing of affidavit of documents;
- preparation/filing of status review proposal;
- preparation/filing of 2 proposed timetables;
- preparation/filing of motion record;
- preparation/filing of expert reports;
- preparation/filing of the offer to settle and
- preparation/filing of the trial factum. Some of the above-noted services are also included under items 6, 7, 8.
[4] Mr. Moores argues that this action was not complex and that the high end of the scale is not justified. Mr. Stamp disagrees and points out that the issues before the Court were complicated in that they involved contractual law and competing expert evidence. Moreover, he points out that the defendant had to respond to two further amendments to the quantum of damages sought in the original statement of claim and did not know what kind of evidence would be led with regards to the condition of the work site before the actual work began. Counsel for the defendant submits two additional factors to be considered:
i) the lengthy litigation process and
ii) the seniority of defendant's counsel.
[5] Having considered the arguments presented by each party I accept defendant's contention and 7 units will be allowed for item 2. Item 3 will be allowed as presented.
[6] Counsel for the defendant seeks 4 units (2 units x 2 hours) for appearing on plaintiff's motion to amend its claim in August 1998. The Order of the Court allowed the amendment, but was silent as to costs. In the absence of specific directions from the Court regarding costs in an interlocutory matter the assessment officer cannot substitute his/her authority for the Court's. In my view the provisions of Rule 400(1) are clear and counsel is referred to two reported decisions of assessment officers who have previously dealt with this issue[1] as well as to "Orkin the Law of Costs (2nd Ed.) 1998 para 105.7:
Similarly if judgment is given for a party without any
order being made as to costs, no costs can be assessed
by either party; so that when a matter is disposed of on
a motion or at trial with no mention of costs, it is as
though the judge had said that he "saw fit to make no order
as to costs" [citations omitted].
As a result this item will be disallowed.
[7] Mr. Stamp claims 5 units for items 7 and 8 with regard to the examinations for discoveries. According to Mr. Moores the issues were not complex nor time consuming. He also questions the presence of two defence lawyers at the examinations for discoveries, implying that the presence of junior counsel was for training purposes. Mr. Stamp denies the allegation and maintains the necessity of having two lawyers present to deal with the intricate issues involved.
[8] I think Mr. Moores has a valid argument. He did not require the assistance of junior counsel during discoveries and Mr. Pringle, the defendant's lawyer at the time was senior counsel with the Justice Department. Consequently I will reduce each of these items to 4 units. Items 9, 10 and 11 are not opposed by the plaintiff and are allowed as presented.
[9] Five (5) units are claimed for item 13a. Mr. Moores offers his standard objection to the effect that this was a simple matter. I will allow the maximum number of units based upon the fact that parties were preparing for a ten(10) day trial, which by itself requires additional preparation.
[10] Mr. Stamp claims 36 units for item 13b to compensate for the additional four days of trial. However, an adjustment must be made here; the tariff allows 3 units for each day after the first day in Court. I will therefore reduce this item to 12 units. The figure of thirty-two and one half hours of presence in Court under item 14 is substantiated by the minutes of hearing and in the absence of comments from Mr. Moores will be allowed at the 3 unit level.
[11] Mr. Stamp seeks 1 unit for counsel fees for travelling time to attend the motion and the trial under item 24. I mentioned to counsel that the discretion to allow compensation for this item is with the presiding judge, and not with the assessment officer. I refer parties to paragraph 8 of the decision of Assessment Officer Stinson in the case of Grant Wilson v. Her Majesty the Queen (Court no. T-1677-79 et al) where he held that:
The context of Rule 2 defining "assessment Officer",
means that I do not exercise the "discretion of the
Court" to authorize item 24 in the first instance. That
authorization being absent, I must disallow the two
item 24's.
Furthermore, in the case of The Deputy Minister of National Revenue v. Specialize
Bicycle Components Canada Inc. Court number A-45-97, Assessment Officer Pace's
comments regarding the applicability of item 24 also support my conclusion. He wrote at paragraph 16:
"Having regard to the wording in Tariff item 24, I will remove the one hour claimed since "the discretion of the Court" referred to in that item does not extend to "an assessment officer" as described in Rule 2."
[12] Items 25 and 26 will be allowed as submitted.
DISBURSEMENTS
[13] The following expenses are either not objected to or/and supported by evidence and will be allowed as submitted:
- Out of office copies... $ 61.25
- Quick Law search... $ 15.89
- Court Reporter Fee... $225.00
- Courier service... $ 7.40
- Photographic materials... $104.00
- Discovery Transcripts... $611.80
[14] The amount of $243.95 claimed to make copies of affidavits of documents and trial materials will be reduced to $174.25 to reflect the adjusted rate of 0.25 per page.
[15] The plaintiff contests a portion of the invoiced disbursements for Mr. Smith's attendance at discoveries. Mr. Moores argues the amount of $304.05, representing Mr. Smith's fee to attend at the examinations for discovery, is excessive. Counsel refers to paragraph 3(1) of Tariff A with respect to the compensation of ordinary witnesses and suggests to apply the provincial tariff of $50.00 per day, which in his view, would be more acceptable.
[16] In response Mr. Stamp refers to paragraph 3(3) of Tariff A where a witness may be entitled to a greater amount than under section 3(1) and 3(2), that greater amount being equal to the expense or loss incurred by the witness in attending a proceeding. Mr. Stamp tendered an invoice from Mr. Smith's employer, Elliott & Elliott Ltd. in the amount of $304.05 plus H.S.T. for three and one-half days work. In my opinion the amount of $86.00 per day for over three days' work is proven and reasonable and that portion of the invoice will stand.
[17] At the assessment Mr. Stamp verified the invoices making up Mr. Smith's expenses during discoveries and found an adding mistake. The correct figure should have been $3,038.53 instead of $2,457.23. In response Mr. Moores says that the amount of $2,400 would be reasonable compensation for this witness' expenses. On the other hand, Mr. Stamp suggests to deduct $300 from this item to make up for the error. I accept Mr. Stamp's suggestion and will allow the amount of $2,569.27 for this disbursement which represents the middle range between the position of each party.
[18] The final contested item of disbursement concerns Mr. Smith's fees to attend at the trial. According to Mr. Moores the amount of $889.60 should be reduced to reflect his actual attendance during the five day trial. That amount represents eight days of work. He agrees the witness should be compensated for his actual presence in Court, but not for a longer period. In reply Mr. Stamp says it was necessary to have Mr. Smith involved for three days of preparation prior to the trial.
[19] I agree with Mr. Moores' arguments.. Furthermore, this is in keeping with the philosophy of Tariff A regarding the compensation of an ordinary witness. Mr. Smith's fees will therefore be based upon forty hours of work instead of the sixty-four hours claimed. Inclusive of H.S.T. Mr. Smith's fees are reduced to $639.40. As a result this item is allowed in the amount of $2,665.25.
OFFER TO SETTLE
Issues
1. Is the offer to September 7, 2000 an offer to settle as contemplated by Rule 420(2)(b)?
2. If so, what are the costs consequences of the plaintiff's failure to accept the offer?
BACKGROUND
[20] On September 7, 2000 the Defendant served a written offer to settle upon the plaintiff in the following terms:
The defendant, Her Majesty the Queen, offers to
settle the Plaintiff's claim inclusive or pre-judgment
interest and costs to date for the sum of two
thousand dollars ($2,000.00).
The trial began five weeks later on October 16, 2000 with this offer not having been revoked. Following a five day trial Madam Justice Dawson dismissed the plaintiff's claim with costs.
[21] The relevant provisions of Federal Court Rule 420(2)(b) read:
(2) Unless otherwise ordered by the Court, where a defendant makes
a written offer to settle that is not revoked,
(b) if the plaintiff fails to obtain judgment, the defendant shall be
entitled to party-and-party costs to the date of the service of the
offer and to double such costs, excluding disbursements, from
that date to the date of judgment.
[22] Mr. Moores observes that in his opinion the words "Unless otherwise ordered by the Court" in the context of Rule 420(2) mean that the "doubling of costs" is not presumed to take effect unless a Judge orders it specifically. I respectfully disagree. In my view assessment officers must assess bills of costs as submitted including any provisions under Rule 420, unless the Court has clearly ordered otherwise. In the present case the offer to settle was not known to the Trial Judge and the issue was not part of the Court's record until the filing of the bill of costs.
[23] Mr. Moores refers to a decision of the Newfoundland Supreme Court in Burton et. Al. V. Global Benefit Plan Consultants Inc. et.al.[2] in support of his arguments that the provisions of Rule 420(2)(b) do not apply to the present case.
[24] Counsel also quotes two sections of Rule 20 A (offers to settle) of the Rules of the Supreme Court of Newfoundland:
Effect of Offer [Rule 20A.04(1)]:
20A.04. (1) An offer to settle shall be deemed to be an offer to
compromise made without prejudice, and shall not be taken as
an admission of liability, unless the offer to settle provides
otherwise.
Effect of Failure to accept [Rule 20A.08(2)]:
(2)Unless ordered otherwise, when an offer to settle was made by
a defendant at least seven days before the commencement of the trial or
hearing of the proceeding and was not revoked or accepted prior to
commencement of the trial or hearing, and where the plaintiff obtains
a judgment no more favourable than the terms of the offer to settle,
the plaintiff shall be entitled only to party and party costs plus taxed
disbursements to the date of service of the offer to settle, and the
defendant shall be entitled to taxed disbursements plus, from the
date of service of the offer to settle, costs on a party and party or some
other greater basis as the judge deems appropriate.
[25] Mr. Moores also relies upon the provisions of Rule 49 of the Ontario Rules of Civil Procedure regarding costs consequences of failure to accept an offer to settle as stated below:
49.10(1) Plaintiff's offer - Where an offer to settle,
(1) is made by a plaintiff at least seven days before the
commencement of the hearing;
(2) is not withdrawn and does not expire before the
commencement of the hearing; and
(a) is not accepted by the defendant,
and the plaintiff obtains a judgment as favourable as or more favourable than
the terms of the offer to settle, the plaintiff is entitled to party and party costs to the
date the offer to settle was served and solicitor and client costs from that date,
unless the court orders otherwise.
(2) Defendant's offer - Where an offer to settle,
(1) is made by a defendant at least seven days
Before the commencement of the hearing;
(2) is not withdrawn and does not expire before the
commencement of the hearing; and
(3) is not accepted by the plaintiff.
and the plaintiff obtains a judgment as favourable as or less favourable than
the terms of the offer to settle, the plaintiff is entitled to party and party costs
to the date the offer was served and the defendant is entitled to party and party
costs from that date, unless the court orders otherwise.
ANALYSIS OF VARIOUS CONTENTIOUS POINTS
Was the offer to settle a nominal offer?
Plaintiff's Position
[26] Mr. Moores argues that the offer of the defendant in the amount of $2,000.00 was a nominal offer only. Counsel refers to the decision in Garofolo v. Canada Safeway Ltd.[3] where the Court rejected the defendant's claim for post-offer solicitor and client costs as follows:
"... the offer in the herein case cannot be viewed as a
truly significant offer, especially when viewed in
terms of the overall claim. If anything, it can be
looked upon as a token or nominal offer, which was
calculated to gain a costs advantage as opposed to
settling the action."
[27] In further support of his argument Mr. Moores cites the case of Mega Roofing and
Waterproofing Ltd. v. Dobbin (N.D.) Ltd. et al.[4]
"...when dealing with the costs consequences of an
unaccepted offer that requires the receiving party to
capitulate or that offers a merely nominal amount,
there should be no presumptive rule which entitles
the offeror to post-offer costs on some other basis
than party and party.
[49] While such an offer may technically be an
offer to settle for the purposes of rule 20A, the making of
nominal offers or offers requiring capitulation,
generally solely for the purpose of gaining a costs
advantage, is not to be encouraged.
Defendant's Position
[28] Mr. Stamp argues that the offer to settle was not a nominal but a substantial one. The defendant offered to pay $2,000.00 in cash and a waiver of the defendant's costs which had been incurred to the date of the offer. He mentions that as of September 7, 2000 the following steps had been taken:
the expenses, including travelling expenses of Mr. Smith and of
counsel to attend examinations for discovery in St. John's;
participation at a Pre-Trial Conference and at a motion to
amend the statement of claim;
cost of $1,200 to obtain copies of the discovery transcript;
an extensive amount of photocopying required for the
affidavit of documents; and
the preparation of expert evidence.
Mr Stamp estimates that between $8,000 and $10,000 had been incurred by the defendant up to that point. In his view the defendant's offer to settle was reasonable because his client wanted to avoid a trial which had been scheduled for ten (10) days. Moreover, counsel points out that the actual claim alleged by the plaintiff was only $31,000 after Mr. Moores withdrew the amount of $28,000 at the commencement of the trial and that the offer to settle was a substantial offer at that stage of the proceedings.
My Conclusions
[29] Mr. Stamp has shown, to my satisfaction, that his client's offer to settle, inclusive of the defendant's out of pocket expenses to the date of the offer was in excess of $8,000. In the circumstances of this case I think this sum represented a substantial offer which I believe was meant to invite a potential settlement without going through the expense of a trial.
B) Effect of the Absence of Compromise
Plaintiff's Position
[30] Mr. Moores points out that under the provisions of the Newfoundland Rules [Rule 20A.04(1)] the offer to settle shall be deemed to be an offer of compromise and he adds the offer of the Crown could not, in his view, be taken as a genuine offer of compromise in the context of the plaintiff's overall claim.
Defendant's Position
[31] Mr. Stamp argues that the jurisprudence cited by Mr. Moores in the case of Burton, supra, establishes that an element of compromise is not necessary for an offer to settle to be valid. Reference is made to paragraph 36 of the Judgment of the Newfoundland Court:
"For the reasons I have outlined, an element of compromise
is not a necessary element of an offer to settle under Rule
20A. That is, an offer with no element of compromise is
nonetheless an offer to settle".
My conclusions
[32] This issue was also dealt with by Mr. Justice Lemieux in Canadian Olympic Association v. Olymel, Société en Commandite et. al. (Court file no. T-1564-97)[5] at paragraph 6:
"The question whether an offer to settle must contain an element
of compromise was considered by the Ontario Court of Appeal
dealing with a somewhat analogous provision under the Ontario
Rules of Civil Procedure in the cases of Data General (Canada)
Ltd. v. Molnar Systems Group Inc. et al. (1991), 6 O.R. (3d) 409
and recently in Walker Estate et al. v. York Finch General
Hospital et al., 169 D.L.R. (4th) 689. Those two cases stand for
the proposition that, under the Ontario Rules, an element of
compromise is not an essential feature of an offer to settle but its
absence can be a relevant factor to be taken into account in
ordering otherwise under the words "unless the Court orders
otherwise" under Ontario Rule 49."
[33] Mr. Stamp has already shown that the offer to settle, inclusive of the forgiveness of the defendant's out of pocket expenses to the date of the offer, amounted to between $8,000 and $10,000. In my opinion the offer very likely contained an element of compromise when we take into account that plaintiff's claim was for unliquidated damages only, that is a claim which had not been finally determined either as to liability or amount of damages. As stated by the Court at paragraph 29 in Burton, supra,
"Having regard to the nature of unliquidated claims,
it is difficult to apply any certain measure to an offer
to determine whether it contained an element of
compromise and, if it did, how much".
Moreover, should a party feel obligated to compromise if it is of the view that the opposition' case lacks merit?
C) Onus of defendant to inform plaintiff of escalating costs of the litigation
Plaintiff's Position
[34] The plaintiff's lawyer says he was surprised when served with the defendant's bill of costs which was in excess of $40,000. According to him, this was completely unexpected and, in his view, the onus was upon the defendant to provide an account of the mounting costs of the litigation at the time the offer to settle was made.
Defendant's Position
[35] Mr. Stamp submits that the plaintiff was fully aware that extensive steps had been taken in the litigation process up to the time of the offer and that plaintiff should have been aware of the provisions of Tariff B and of Rule 420 to appreciate the extent of the costs potentially assessable following a trial. In his view plaintiff's counsel had the obligation to inform himself of the estimated costs and the risks involved of refusing the offer to settle.
My Conclusion
[36] I accept Mr. Stamp's arguments. At the time the offer was made the plaintiff was aware of all the steps both parties had taken to that point in the litigation and should have known that substantial expenses had been incurred by the defendant. Moreover, I believe the plaintiff was responsible to assess these expenses and accept the risks of any costs consequences resulting from a non-revoked offer to settle.
D) Applicability of Federal Court Rules v. Newfoundland Rules
Plaintiff's Position
[37] Mr. Moores contends it would be contrary to the intention of the Federal Court Rules to apply the presumptive rule in this case because the plaintiff's claim was not frivolous and to further penalize the plaintiff whose claim was not devoid of merit would be unfair. Counsel submits the amount of the offer does not even match the "nuisance effect" caused to the defendant and maintains that the intention of the Crown's offer was solely to gain a cost advantage. Finally, Mr. Moores points out that the Newfoundland and Ontario rules regarding offers to settle are comparable to the Federal Court Rules and that Rule 420(2)(b) should be applied in a fair and equitable manner. In his view allowing double costs is not appropriate in the circumstances of this case.
Defendant's Position
[38] In reply counsel for the defendant holds that the provisions of the Newfoundland Rules are different from the Federal Court Rules in that the former Rules provide that where the plaintiff obtains a judgment no more favourable than the terms of the offer to settle, the defendant shall be entitled to taxed disbursements plus, from the date of service of the offer, costs on a party and party or some other greater basis as the Judge deems appropriate. The Federal Court Rule by contrast, specifically provides that where the plaintiff fails to obtain Judgment and the defendant has made an offer of settlement, the defendant shall be entitled to "double such costs, excluding disbursements, from that date to the date of the Judgement". As far as the applicability of the presumptive rule, Mr. Stamp insists the presumption in the Federal Court is all the more compelling and should apply unless otherwise ordered by a Judge.
My Conclusion
[39] I am of the view that the provisions regarding offers to settle under the Ontario and Newfoundland Rules are helpful to understand the concepts and extent of offers to settle in those jurisdictions. However, I think the provisions of Rule 420(2)(b) of the Federal Court are operative and clearly applicable to the present action. Before effectively disposing of this matter I wish to cite two passages from Mr. Justice Orsborn of the Newfoundland Supreme Court in Burton, supra. His reasoning has greatly helped me decide this whole issue in favour of the defendant.
At paragraph 10 he writes:
"After reviewing decisions from other jurisdictions I noted,
at paras. 21-22:
It is clear that, across Canada, the imposition of severe and
adverse cost consequences is seen as necessary in order to
encourage the making and acceptance of reasonable settle-
ment offers prior to trial."
and at paragraph 11:
"Faced with an offer to settle, a party must objectively
assess the economics of proceeding further. As Pattison
phrased it, this "... is where the substantive and economic
analyses of the value and risk of seeing a lawsuit though
to judgment converge. A party may decide to accept the
offer or to itself make an offer. If, having assessed the
offer, it chooses to do nothing, that choice carries with
it the implicit determination that the party is satisfied that
it will achieve a better result at trial. This is the party's
own determination to make - it knows the strengths and
weaknesses of its case. But such a determination also
indicates that the party is willing to accept the risk of
proceeding further. There is a willingness to accept the
consequences of being wrong. A party who has offered
to settle should not bear the expense of proceeding to
trial because of the other party's over-optimistic assess-
ment of its case."
DISPOSITION
[40] I have determined that the costs of the defendant between the service of the offer to settle (September 7, 2000) and the last day of the trial (October 20, 2000) will be doubled. In effect this means doubling the costs already assessed at paragraphs 9 and 10 above which totalled 114.5 units for an amount of $11,450.00. That sum is hereby added to the costs of the defendant.
[41] The bill of costs of the defendant, presented at $41,251.72 is assessed and allowed in the amount of $35,349.23.
"François Pilon"
François Pilon
Assessment Officer
Dated at Halifax Nova Scotia on May 9th, 2001.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
Docket: T-1420-96
Sun Construction Company Limited
v.
Her Majesty the Queen
PLACE OF HEARING: Teleconference between St. John's NF and Halifax, NS
DATE OF HEARING: March 22 and April 10, 2001
ASSESSMENT OF COSTS - REASONS BY: F. Pilon
DATED: May 9, 2001
APPEARANCES:
David C. Moores for the Plaintiff
Kevin F. Stamp, Q.C. for the Defendant
SOLICITORS OF RECORD:
Ronald A. Cole Law Offices
St. John's, NF for the Plaintiff
Martin, Whalen, Hennebury & Stamp
St. John's, NF for the Defendant
[1] Whyte v. Canada, [2000] C.T.C. 258 (Taxing Officer)
Kibale v. Canada, [1991] 2 F.C. D-9 (Taxing Officer)
[2] [1999]m 183 Nfld. & P.E.I. 86; 556 A.P.R. 86
[3] [1998], O.J. No. 901; 66 O.T.C. 241 (Gen. Div.)
[4] [1996], 143 Nfld. & P.E.I. R. 14; 448 A.P.R. 14 (Nfld. T.D.)
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