Date: 20100528
Docket: T-1377-04
Citation: 2010 FC 585
BETWEEN:
RACHALEX HOLDINGS INC. and
TYRONE NAGTHALL
Plaintiffs
and
W
& M WIRE & METAL PRODUCTS LTD. and
921410 ONTARIO
Ltd. c.o.b. THE DISPLAY BANK
Defendants
ASSESSMENT OF
COSTS – REASONS
Johanne Parent
Assessment Officer
[1]
On
May 28, 2009, the Plaintiffs wholly discontinued their action against the Defendants
with regards to the infringement of Canadian Patent No. 1,275,282. On January
29, 2010, the Defendants filed their Bill of Costs. A revised Bill of Costs,
only addressing Federal Court matters, was filed on February 22, 2010. An
appointment for the hearing of the assessment was issued on March 12, 2010 and
the hearing took place via conference call on April 16, 2010. Prior to the
hearing, the Defendants filed the affidavit of Paul Pacheco and the Plaintiffs,
the affidavit of Lori-Anne DeBorba along with written representations.
[2]
The Defendants claim that this case dealt with a complex Patent
matter that involved a number of preliminary issues for which real costs, well
in excess of the amounts claimed in the Bill of Costs, were incurred. Aggravation
costs are claimed by the Defendants in consideration for the timing of the
Discontinuance. More specifically, the Defendants contend that this Court file
generated no less than two decisions that were appealed to the Court of Appeal,
which influenced the Plaintiffs’ decision to discontinue this matter. The
Orders in question were rendered by Mr. Justice Hugessen who dismissed with costs
a motion on behalf of the Defendants for leave to file and serve the affidavit
of Dr. Robert G. Fenton together with its exhibit which was the intended Expert
Report of Dr. Fenton and Mr Justice Kelen’s Order granting, in part, the Plaintiffs’
motion for Summary Judgment with each party to bear its own costs.
[3]
In
their decision of March 5, 2008, the Court of Appeal set aside both decisions,
making the Fenton Report admissible “to the extent that it is relevant to the
issue of ambiguity and any other defences which the appellants (Defendants) are
permitted to raise in the event that they are successful in amending their
Statement of Defence”. In addition, the Court of Appeal dealt with costs while
granting leave to the Defendants to seek amendments to their Statement of
Defence with the provision that: “the taxed party and party costs of the
respondent (Plaintiffs) at level three, or such costs as the parties may agree
upon, relating to the motion for leave to introduce the Fenton Report, the
motion for Summary Judgment, and the motion for the stay are paid by the
appellant (Defendants) prior to the hearing of the motion”. In an Order dated
April 22, 2008, Madam Prothonotary Milczynski allowed the filing of the Amended
Statement of Defence as set out in her Order.
[4]
It
is the Plaintiffs’ position that this file was not discontinued as a result of
the Court of Appeal decision. They further add that this action which commenced
in 2004 deals with a non-complex Patent infringement matter save for the
numerous activities involved. From counsel’s view point, it started with a
short Statement of Claim in relation to a shelving system followed by a short
Defence of non-infringement arguments and the Plaintiffs’ motion for Summary
Judgment. When the parties were finally ready to proceed, the Defendants
retained new counsel who in turn moved to obtain leave from the Court to serve
and file supplementary responding material. As mentioned earlier, that motion
was dismissed with costs by the Court (Hugessen J.) with the Defendants’ motion
to have the proceeding stayed also dismissed by the Court of Appeal (Létourneau
J.). The motion for Summary Judgment was granted in part and overturned by the
Court of Appeal with costs to the Plaintiffs thrown away. Counsel mentioned
during the assessment hearing that the Court of Appeal was very sympathetic to
the Plaintiffs with regards to the Defendants’ conduct and the delays involved.
In consideration of the costs that would have been incurred following the filing
of the Amended Defence and the fact that the Patent had expired, Plaintiffs’
counsel submits that, the action was discontinued. Plaintiffs’ counsel agreed
with Defendants’ counsel that the Defendants had to pay a large sum of money in
this case but so did the Plaintiffs who, they submit, should not be penalized
for filing the discontinuance. In support they referred to the decisions of Dark
Zone Technologies Inc. v. 1133150 Ontario Ltd., 2002 FCT 1 and Fournier
Pharma Inc. v. Canada, 2007 FC 433, 2008 FC 369 and 2009 FC 1004.
[5]
In
assessing costs, my role is clearly defined by Rules 402, 405 and 407 and
Tariff B of the Federal Courts Rules. In the absence of a specific Court
decision ordering otherwise or an agreement by the parties, Rule 402 allows the
Defendants to have its costs assessed. As stated in Rule 409 of the Federal
Courts Rules, the assessment officer in assessing costs may consider the
factors referred to in subsection 400(3).
[6]
The
Defendants claim seven units under Item 2 for the preparation of a Defence and
seven more units under the same Item for a Reply to a demand for particulars.
Both documents were filed and served. Considering my findings in Abbott
Laboratories v. Canada (Minister of Health), 2009 FC 399, the adjective
“all” used in Item 2: “ Preparation and filing of all defences, replies,
counterclaims or respondent’s records or materials” embraces all material
prepared by the Defendants in response. Therefore, both the Defence and Reply to
the demand for particulars are considered as one service under Item 2. I am
satisfied that the proceedings in this file involved a substantial amount of
work. However, after having read the pleadings, I agree with counsel for the Plaintiffs
that this was not a Patent case of great complexity. Five units are allowed
under Item 2.
[7]
Six
units are claimed under Item 3 for the Amended Statement of Defence filed further
to the Order of Madam Prothonotary Milczynski of April 22, 2008. Item 3 is
intended to address “Amendment of document, where the amendment is necessitated
by a new or amended originating document, pleading, notice or affidavit of
another party”. I agree with the Plaintiffs that the amendment to the Defence
in this case was not generated by a new or amended originating document but was
the result of a Court Order. Item 3 is, therefore, disallowed.
[8]
With
regard to all claims for the preparation and filing of motions in the
Defendants’ Bill of Costs (Items 5 and 6), they were withdrawn at the hearing
of the assessment.
[9]
The
Plaintiffs did not take issue with the Defendants’ claim under Item 7 for
Discovery of documents but questioned the number of units claimed, based on the
fact that the document produced was not very large. Considering the pleadings
and the slight degree of complexity of this matter, I allow three units.
[10]
At
the hearing of the assessment of costs, the Defendants amended their Bill of
Costs to claim four units under Item 26 for the Assessment of Costs in addition
to the two units already claimed under Item 28 for the services by a law clerk
in the preparation for the assessment. I acknowledge that a certain amount of
work was performed in the preparation of the assessment of costs and as such the
four units claimed are allowed under Item 26. However, I consider that it would
be a duplication of fees if the costs associated with the above mentioned
service would be allowed again under a different Item. Item 28 will, therefore,
be disallowed.
[11]
In
support of the disbursements claimed, the Defendants filed the affidavit of
Paul Pacheco sworn March 30, 2010. As a result of their withdrawal of all
claims under Items 5 and 6, the Defendants reduced the photocopy charges from
$361.37 to $143.46 at the hearing. Plaintiffs’ counsel submit that the two
invoices supporting the photocopy claim justify very little of the documents
that were photocopied.
[12]
In
Diversified Products Corp. v. Tye-Sil Corp., [1990] F.C.J. No. 1056, the Court indicated that:
… It is therefore necessary for the party
claiming photocopying disbursements to give satisfactory evidence to the Taxing
Officer that the photocopying disbursements being claimed was essential for the
conduct of the action....The item of photocopies is an allowable disbursement
only if it is essential to the conduct of the action...
[13]
In Carlile v. Canada (Minister of
National Revenue), [1997] F.C.J. No. 885, my colleague mentions that:
… Taxing Officers are often faced with less
than exhaustive proof and must be careful, while ensuring that unsuccessful
litigants are not burdened with unnecessary or unreasonable costs, to not
penalize successful litigants by denial of indemnification when it is apparent
that real costs were indeed incurred. This presumes a subjective role for the
Taxing Officer in the process of taxation...
The two invoices submitted in support of this claim do not provide
information
on the actual photocopies made. Consequently, I have no evidence on which to
determine whether they were reasonable and necessary. It is, however, evident that actual photocopy expenses were incurred in the
conduct of this proceeding and, therefore, I allow the amount of $50.00.
[14]
The
courier charges were withdrawn at the hearing. The miscellaneous charges for
parking and public transit were not substantiated and are, therefore,
disallowed.
[15]
At
the hearing of the assessment, the amount claimed for the Expert Report of Dr.
R.G. Fenton was amended by counsel to $9,752.00. Defendants’ counsel stated that the purpose
of Dr. Fenton’s Report was for use on the Summary Judgment motion. However, in
view of the Order of Mr. Justice Hugessen of January 12, 2007 preventing its
use, the Report was never brought into play. As previously mentioned in the
first paragraphs of these reasons, said Order was later set aside by the Court
of Appeal. It is the Defendants’ position that Dr. Fenton’s Report could have
been found admissible, had the matter not been discontinued and had the motion
for Summary Judgment gone ahead. On the actual costs, it was argued that the
total amount was not extravagant for a Patent case. Counsel mentioned that Dr.
Fenton’s hourly rate, although not showing on the actual invoice, was $200.00
per hour and that 46 hours were required.
[16]
Plaintiffs’
counsel submits that the lack of detailed information on the expert’s invoice
regarding the work performed, the actual tasks undertaken, the expert’s hourly
rate and the actual amount of hours involved is critical. Considering the
absence of such evidence to support the reasonableness test set out in Section
1(4) of Tariff B of the Federal Courts Rules, the costs related to the
expert should be disallowed or reduced taking into account the factors
specified in Rule 400(3). In addition, Plaintiffs’ counsel mentions that the
costs of the Fenton Report had already been dealt with in the Judgment of the
Court of Appeal of March 5, 2008 in which the Plaintiffs were awarded costs
thrown away relating, among other things, to the motion for leave to introduce
the Fenton Report and the motion for Summary Judgment while the Defendants were
not allowed any costs on these motions. Dr. Fenton did not have the opportunity
to testify in Court, was never acknowledged by the Court as an expert and was
not cross-examined. The action did not reach the expert evidence stage since it
was discontinued before discoveries commenced.
[17]
Section
1(4) of Tariff B of the Federal Courts Rules specifies that: “No
disbursements, other than the fees paid to the Registry, shall be assessed or
allowed under the Tariff unless it is reasonable and it is established by
affidavit or by the solicitor appearing on the assessment that the disbursement
was made or is payable by the party”.
[18]
In
AlliedSignal Inc. v. DuPont Canada Inc., [1998] F.C.J. No. 625, the Assessment
Officer established guidelines to assist in
determining whether expert costs are allowable disbursements:
(1) The hiring of an expert must, in the
circumstances existing at the time, be prudent and reasonable representation of
the client;
(2) The hiring of an expert must not constitute
a blank cheque for an award;
(3) What reliance was placed on the expert's
testimony by the trial judge?
[19]
With
regard to Dr. Fenton’s Report, I consider the test on prudence and
reasonableness met. At the time the disbursement was made, Dr. Fenton’s Report
was to serve to support the Defendants’ position on the motion for Summary
Judgment. The fact that a discontinuance was filed and that this motion did not
ultimately proceed should not have an impact on costs recovery.
Although it is admitted that the Fenton Report
was to be used specifically on the motion for Summary Judgment, I do not agree
that its costs were included in the costs covered by the Court of Appeal
judgment of March 5, 2008. In its judgment, the Court made the Fenton Report
admissible within certain parameters. Had this matter not been discontinued,
the motion for Summary Judgment could have proceeded and the Fenton Report
could have been utilized. Whether or not the Report was necessary to the final
outcome of this file should not be considered in hindsight.
In support of this position, I rely on the
Court’s decision in Apotex Inc. v. Egis Pharmaceuticals, 4 O.R.
(3d) 321 at 331 (Ont. Ct. Gen. Div.) which determined that experts costs should not be
assessed in hindsight but considering the circumstances existing at the time
the disbursements were made.
[20]
Further,
in Rothmans, Benson & Hedges Inc. v. Imperial
Tobacco Ltd., [1993] F.C.J. No.
659, Mister Justice Rouleau held that:
“There
are two
comments I wish make concerning the applicant's request for the fees,
disbursements and living expenses of their witnesses. First, the Court should
not disallow the costs of a witness as unnecessary unless it is satisfied that
the party could not reasonably have considered the witness' evidence to be
relevant to and supportive of the case. The Court must consider what would have
appeared rational to the parties at the time of the trial.”
[21]
On
the second part of the test, the evidence submitted on the costs incurred for
the Fenton’s Report is rather scarce. In support, the Defendants provided one
invoice “for professional services rendered in connection with the above
mentioned litigation” along with counsel’s submissions to establish the number
of hours worked and the hourly rate charged. Counsel did not, however, provide
any evidence as to the actual services provided or the number of hours spent by
Dr. Fenton on the preparation of the Report. Having reviewed the Report and the
file of the proceedings, I am satisfied that the work performed by Dr. Fenton
in relation to the Report was necessary. However, I have reduced the number of
hours claimed specifically for the preparation of the Report to thirty-five. I
find the hourly rate invoiced reasonable for an expert testifying in a Patent
case and therefore allow the sum of $7,350.00.
[22]
The
Bill of Costs is allowed for a total amount of $8,912.00.
“Johanne Parent”
Toronto, Ontario
May 28, 2010
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