Date: 20100426
Docket: T-555-08
Citation: 2010
FC 448
Ottawa, Ontario, April 26, 2010
PRESENT: The Honourable Mr. Justice Phelan
BETWEEN:
RYAN
MURPHY et al
Applicant
and
MINISTER
OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER AND ORDER
[1]
This is a
motion for a lump sum award of costs in excess of Tariff B or alternatively, an
order for costs to be assessed under either Column V of Tariff B or under a
combination of Columns IV and V of Tariff B. There was also a request for an
extension of time to bring the motion for directions.
[2]
The
underlying judicial review was a challenge to Requests for Information (RFIs)
issued by officials of the Canada Revenue Agency (CRA) in Vancouver. The Court found that the
RFIs were unlawful because of improper delegation of authority and because the
RFIs were not issued for the purpose of the administration and enforcement of
the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1. In
so concluding, the Court found that specific actions taken by or on behalf of
CRA officials were highly improper (Murphy v. Canada (Minister of
National Revenue – M.N.R.), 2009 FC 1226). Costs were awarded in favour of
the Applicants.
[3]
The
Applicants primarily seek a lump sum award of $250,000 plus disbursements which
is approximately 80% of the actual solicitor-client costs.
[4]
There
are a number of points upon which the parties agree:
- that a
lump sum award is preferable to a detailed taxation; however, the basis and
quantum is much in dispute;
- a two counsel
award is appropriate;
- the extension of
time to seek Directions is appropriate; and
- there
is no conduct during the litigation by counsel which gives rise to a basis for an
increased costs award.
[5]
On
all of these points, the Court is in agreement.
[6]
The
Respondent contends that costs should be based on the high end of Column III of
the Tariff, and that in view of the Applicants’ Offer to Settle, these costs
should be doubled pursuant to Rule 420 from the date of the Offer. The result
would be a cost award of approximately $102,000 including taxes and
disbursements. Assuming the $13,000 (approximate) of disbursements claimed by
the Applicants is included in the Respondent’s calculation, the fees would
constitute approximately $90,000.
[7]
The Court
has a broad discretion under Rule 400 in setting the amount of costs. However,
that discretion is to be tempered by reference to the Tariff and the principles
for awarding costs.
[8]
The fact
that the Applicants were successful does not entitle them, per se, to
reimbursement of their legal fees and disbursements. They are entitled to costs
under the Tariff and the Rules unless it can be shown that there is egregious
conduct which justifies a higher award.
[9]
It is
important to bear in mind that solicitor-client costs are to be awarded only in
exceptional circumstances where there is reprehensible, scandalous or
outrageous conduct during or closely connected to the litigation (see Baker
v. Canada (Minister of Citizenship and
Immigration),
[1999] 2 S.C.R. 817).
[10]
There is
nothing in this litigation or the conduct of it which approaches this
threshold. An award of solicitor-client costs in these circumstances would
require something akin to a finding of bad faith on the part of CRA officials. While
such a claim may be open to the Applicants, the appropriate way to deal with
this type of conduct and the punitive nature of relief would be by an action
based upon a finding of the unlawful issuance of the RFIs.
[11]
The Offer
to Settle made by the Applicants early in this litigation is not per se
a factor justifying the higher end of party and party costs. The Respondent
recognizes that the Applicants are entitled to double party-party costs from
the date of the offer, April 11, 2008.
[12]
Absent
such a finding or such conduct, the appropriate starting place for
consideration is the Tariff. The question is which Column more closely reflects
the basis for a lump sum award. As indicated earlier and as reflected in Dimplex
North
America
Ltd. v. CFM Corp.,
2006 FC 1403, lump sum awards are becoming more readily accepted as an
efficient and fair way to dispose of costs.
[13]
There are
a number of factors which justify an award at the high end of the highest
column in the Tariff without granting the Applicants an indemnity of legal
costs:
(a) the
Respondent’s attempt to downplay the importance of this case to the public as a
“one-off”, “unique to its facts” case, does a disservice to its own forceful
arguments that s. 244 (13) acts as a shield against any challenge by the public
to the exercise of delegated powers.
(b) The
Respondent’s position would have foreclosed any legal challenge to the
authority of matters delegated by the Minister to his/her officials. The
Respondent’s position also ignores the debate as to whether the proper legal
test for a challenge to RFIs generally was a “serious and genuine inquiry” or
“predominant purpose”.
(c) the
Respondent advances, with no evidence, that the issues in the case related only
to the Vancouver office – the prospect that
this office could or would operate at such variance from other CRA offices
across the country raises other issues about the control of the significant and
invasive powers of CRA officials.
(d) the
Respondent’s suggestion that the case did not deal with complex legal and
constitutional issues ignores the arguments advanced by the Respondent to
justify the legal basis for the specific conduct at issue and ignores the
constitutional/Charter arguments raised. These issues did not have to be
decided only because the Court could resolve the issues on other legal
principles.
(e) while
the Respondent’s conduct might not rise to the level justifying
solicitor-client costs, there was an air of disregard for the citizen’s legal
rights, including confidentiality obligations imposed on CRA officials, which
elevate the unlawful conduct to one deserving of some reprobation.
[14]
Having
determined that the cost award should reflect the above factors including the
seriousness of the Respondent’s conduct, the Court has concluded that
party-party costs at the higher end of the Tariff are appropriate. Therefore,
Column 5 is the appropriate measure for awarding costs.
[15]
There is
no magic formula to establish a lump sum amount. However, the Court is mindful
that the Respondent’s starting point was the high end of Column III and that
the fees component reflecting the doubling effect of the Offer to Settle is
approximately $90,000.
[16]
In coming
to that figure, the Respondent was unduly parsimonious in recognizing time
allocated to cross-examinations and similar matters. For example, the
Respondent allowed, albeit on a rounding-up basis, time for cross-examinations
based upon the start-up and shut-down of the court reporter’s machine rather
than the actual time consumed by counsel in appearing for a cross-examination.
An undefined increase in the Respondent’s $90,000 figure is required.
[17]
Having found
that the high end of Column V is the proper basis for calculating fees, by
rough measure the difference in units assigned under Column III and those under
Column V respectively is approximately 2:1. This results in a doubling of the
adjusted costs award (see paragraph 16).
[18]
Therefore,
the Court awards the Applicants fees of $200,000 plus disbursements of
$13,986.92. The Applicants shall have their costs of this motion of $3,000 plus
disbursements of $500.
ORDER
THIS COURT ORDERS that the Applicants are awarded
fees of $200,000 plus disbursements of $13,986.92. The Applicants are to have
their costs of this motion of $3,000 plus disbursements of $500.
“Michael
L. Phelan”
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