Docket: T-877-22
T-901-22
Citation: 2025 FC 335
Ottawa, Ontario, February 20, 2025
PRESENT: The Honourable Mr. Justice Southcott
Docket: T-877-22
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BETWEEN:
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SEA TOW SERVICES INTERNATIONAL, INC.
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Plaintiff (Defendant by Counterclaim)
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and
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C-TOW MARINE ASSISTANCE LTD.
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Defendant (Plaintiff by Counterclaim)
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Docket: T-901-22
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AND BETWEEN:
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C-TOW MARINE ASSISTANCE LTD.
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Applicant
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and
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SEA TOW SERVICES INTERNATIONAL, INC.
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Respondent
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SUPPLEMENTARY JUDGMENT AND REASONS
I. Overview
[1] This decision determines costs related to the two above-referenced and related proceedings (one a motion for summary judgment in an action and the other an application), in which the Court has adjudicated various disputes between the parties arising from their use of similar trademarks. C-Tow Marine Assistance Ltd. [C-Tow] has prevailed in both proceedings and will be awarded costs on a lump sum basis in each proceeding, calculated as explained in these Reasons.
II. Background
[2] Sea Tow Services International, Inc. [Sea Tow] is a company, incorporated in the State of New York, which asserted in these proceedings ownership of trademarks [the Sea Tow Marks], respectively a design mark and a word mark, with Canadian Trademark Registration Nos. TMA870561 (SEA TOW & DESIGN) and TMA870562 (SEA TOW) [the Registrations].
[3] C-Tow is a Canadian-based company, which has pending applications for registration of the trademarks, respectively a word mark and a design mark, C-TOW and C-TOW & DESIGN [together, the C-Tow Marks], which it asserted in these proceedings it and its predecessors in title have used in Canada since 1984.
[4] On April 21, 2022, C-Tow filed a Notice of Application in Court File No. T-901-22 [the Application], contesting the validity of the Sea Tow Marks and seeking an order pursuant to section 57 of the Trademarks Act, RSC 1985, c T-13 [the Act], striking the Sea Tow Marks from the Register of Trademarks [the Register]. The Application asserted three grounds of invalidity:
- Sea Tow was not the person entitled to secure the registration of the Sea Tow Marks (relying on paragraph 18(1)(d) of the Act);
- Sea Tow filed the application for registration of the Sea Tow Marks in bad faith (relying on paragraph 18(1)(e) of the Act); and
- The Sea Tow Marks were not distinctive at the time the Application was commenced (relying on paragraph 18(1)(b) of the Act).
[5] On April 28, 2022, Sea Tow filed a Statement of Claim, commencing an action against C-Tow in Court File No. T-877-22, alleging that C-Tow has infringed Sea Tow’s rights in the Sea Tow Marks [the Action]. C-Tow filed a Defence and Counterclaim, in which it contests the validity of the Sea Tow Marks on the same basis as in the Application.
[6] On September 29, 2023, Sea Tow filed a Notice of Motion in the Action, seeking summary judgment on components of C-Tow’s Defence and Counterclaim and, as a consequence, striking certain paragraphs thereof [the Motion]. C-Tow agreed that the issues raised by Sea Tow were suitable for summary judgment but argued that the Court should grant judgment in C-Tow’s favour on those issues.
[7] On October 5, 2023, Associate Judge Trent Horne [AJ Horne], who has been case managing both the Action and the Application, ordered that the Application and the Motion be heard together. However, in the course of the parties preparing their respective records on the Application and then the Motion, the following events occurred, resulting in an evidentiary dispute that was addressed by AJ Horne and that, as explained later in these Reasons, Sea Tow argues remains relevant to the adjudication of costs.
[8] C-Tow served Sea Tow with its evidence in the Application, including evidence in support of its chain-of-title narrative, in November 2022 and April 2023. This evidence included an affidavit sworn on November 18, 2022, by C-Tow’s owner and Chief Executive Officer, Mr. Andrew Cardiff [the First Cardiff Affidavit] and an affidavit of Mr. Wayne Skinner, the former majority shareholder of C-Tow, affirmed on April 11, 2023 [the First Skinner Affidavit]. It was evident from those affidavits, and was not in dispute, that Mr. Cardiff purchased C-Tow from Mr. Skinner and two minority shareholders of C-Tow in late 2008.
[9] However, Mr. Cardiff’s evidence also set out his understanding of the history of the business preceding the 2006 incorporation of C-Tow. Paragraphs 4 to 7 of the First Cardiff Affidavit explained that history as follows:
4. The C-Tow business was started in 1984 by Captain Jim MacDonald and his business partner Steve Ackles. Around 1993, Jim MacDonald bought out Steve Ackles, and in 1997 incorporated the business under the corporate name “C-Tow Marine Assistance Ltd.” (the business and incorporated entity hereinafter collectively referred to as “C-Tow”).
5. In 2022, Jim MacDonald passed away, and Paul Dupres purchased C-Tow.
6. In 2005, Paul Dupres sold C-Tow to Wayne Skinner.
7. In or around November 6, 2006 the corporation was dissolved for failure to file. C-Tow Marine Assistance Ltd. was re-incorporated in or around November 23, 2006 and remains active to this day. Corporate registry searches for C-Tow are attached as Exhibit A hereto.
[10] Following receipt of C-Tow’s evidence in the Application, Sea Tow served its Motion for summary judgment in the Action on September 29, 2023. In significant measure, the Motion seized upon Mr. Cardiff’s evidence identifying the company incorporated in 1997 under the name C-Tow Marine Assistance Ltd. (a different corporation with the same name as C-Tow) [the 1997 Corporation] as being in the chain of title to the C-Tow Marks. Noting Mr. Cardiff’s evidence that the 1997 Corporation was dissolved on November 6, 2006, and in the absence of any record of an assignment of trademark assets before that dissolution, the Motion asserted that, pursuant to section 344 of the British Columbia Business Corporations Act, SBC 2002, c 57, those trademark assets vested in the government of British Columbia upon that dissolution. As such, Sea Tow asserted that the earliest possible use of the C-Tow Marks by C-Tow was the date of C-Tow’s incorporation on November 23, 2006.
[11] The Motion also asserted that, by virtue of section 3 of the Act, the latest possible date of adoption by Sea Tow of the Sea Tow Marks was December 20, 2002, the date on which it had filed its first application for registration of those marks. Sea Tow argued that the validity of the Sea Tow Marks was therefore incontestable under subsection 17(2) of the Act, because Sea Tow could not have had knowledge of C-Tow’s use of the C-Tow Marks on Sea Tow’s 2002 adoption date, given that C-Tow’s use did not begin until 2006. Sea Tow therefore sought summary judgment and an order striking the portions of C-Tow’s Defence and Counterclaim that were based on that ground of invalidity.
[12] On November 3, 2023, C-Tow served the evidence it intended to rely on in opposing the Motion. This evidence included the First Cardiff Affidavit and the First Skinner Affidavit, plus further affidavits from both those witnesses. Each of the further affidavits was in turn (for reasons that are not material) subsequently replaced by another, such that the record in the Motion included an affidavit by Mr. Cardiff affirmed December 4, 2023 [the Subsequent Cardiff Affidavit] and an affidavit by Mr. Skinner affirmed December 1, 2023 [the Subsequent Skinner Affidavit]. When C-Tow served its evidence in response to the Motion, it advised Sea Tow that it also intended to rely upon these new affidavits in the context of the Application.
[13] Significantly, in the Subsequent Cardiff Affidavit, Mr. Cardiff revisited the history of the C-Tow Marks and stated that his earlier evidence about the role of the 1997 Corporation was incorrect “due to a certain degree of inadvertent carelessness on my part.”
He instead stated that the 1997 Corporation was unrelated to the C-Tow business that he now owns and that the 1997 Corporation may have been registered by a disgruntled former C-Tow captain, by the name of Mitch Rivest, out of spite or in retaliation for some disagreements he had with Mr. MacDonald. The Subsequent Skinner Affidavit did not alter Mr. Skinner’s previous evidence but added some additional detail.
[14] C-Tow then moved under Rule 312 of the Federal Courts Rules, SOR/98-106, seeking leave to file the Subsequent Cardiff Affidavit and the Subsequent Skinner Affidavit in the Application. AJ Horne addressed this motion in a decision dated January 22, 2024 (C-Tow Marine Assistance Ltd v Sea Tow Services International, Inc, 2024 FC 101 [the Horne Decision]). The Court found that Sea Tow would be prejudiced if the further evidence was admitted, as Sea Tow had undoubtedly made decisions on its evidence in the Application and on its position on the Motion based on the evidence that C-Tow had served in the Application. AJ Horne described Sea Tow as having a reasonable expectation that C-Tow’s evidence in the Application, particularly in respect of its corporate history, was “in the can”
(at para 54). The Court agreed with Sea Tow’s position that C-Tow revisiting and revising its corporate history in further affidavits looked more like case splitting than addressing new or unexpected issues (at para 56).
[15] Nevertheless, AJ Horne observed that the Application was “joined at the hip”
with the Motion, both in that they would be heard together and in that there was overlap in the issues to be decided therein, including C-Tow’s corporate history. In particular, AJ Horne was concerned that a judge deciding both matters on their merits not be expected to make findings of fact in closely related proceedings on different, and perhaps conflicting, evidence from the same witnesses. Rather, having the same evidentiary record in the two Court files served the interests of justice (see paras 63–64).
[16] As such, the Court granted C-Tow’s motion, including affording Sea Tow an opportunity to serve and file reply evidence in both the Application and the Motion. Notwithstanding that C-Tow obtained its requested relief on the Rule 312 motion, AJ Horne awarded and quantified costs against it. That award related only to preparation and attendance for the Rule 312 motion. Costs associated with any further affidavits by Sea Tow, cross-examinations, and all other steps up to and including the hearing of both the Application and the Motion, including any costs thrown away, were reserved to be in the discretion of the judge presiding at the hearing.
[17] On July 9 and 10, 2024, I heard oral argument on first the Application and then the Motion, based on the records filed by the parties, followed by submissions on costs in both proceedings. I subsequently released my Judgment and Reasons dated January 6, 2025, addressing both the Application and the Motion (Sea Tow Services International, Inc v C-Tow Marine Assistance Ltd, 2025 FC 27) [Judgment].
[18] The Judgment allowed the Application (in part), concluding that the Registrations were invalid based on paragraphs 18(1)(b) and 18(1)(d) of the Act and that C-Tow was entitled to an order pursuant to section 57 of the Act that the Registrations be struck from the Register. The Judgment dismissed C-Tow’s allegation under paragraph 18(1)(e) of the Act that Sea Tow’s applications for the Registrations had been filed in bad faith. Similarly, the Judgment granted summary judgment in C-Tow’s favour on the Motion, upholding C-Tow’s defence and counterclaim positions that the Registrations were invalid owing to C-Tow’s previous use of the C-Tow Marks. However, the Judgment reserved adjudication of the issue of costs, for the following reasons.
[19] At a case management conference [CMC] held in the weeks before the hearing of these proceedings, it was decided that both parties would argue their positions on costs, related to both proceedings, at the conclusion of the hearing, with written submissions and any supporting material to be filed by the day before the commencement of the hearing. Both parties provided written submissions in support of the adjudication of costs on a lump-sum basis, calculated as a percentage of their actual solicitor-client costs. At the conclusion of the hearing, the parties also provided to the Court materials intended to establish those actual costs. Although those materials were filed later than contemplated by the decision at the CMC, the Court permitted those filings as both parties were in the same position.
[20] One of the arguments advanced by C-Tow in its oral costs submissions was that, in the event that the Court granted relief in its favour in the Motion, this would effectively bring the Action to an end, such that it should be awarded costs related to the Action as a whole. As the parties had not otherwise spoken to the question whether there were components of the Action that would survive such a decision, I sought Sea Tow’s position on this aspect of C-Tow’s costs submissions. Sea Tow’s counsel argued that it was difficult to answer that question, without knowing the details of the Court’s decision on the merits of the Motion. Sea Tow therefore suggested that, in the event the Court decided (and granted relief) in C-Tow’s favour on the Motion, the parties be afforded an opportunity to make further but limited written submissions on the effect of that decision upon the Action and costs consequences thereof.
[21] In my Judgment, I agreed with this suggestion, preferring to have the benefit of such further submissions before addressing C-Tow’s submission that the Court should now adjudicate costs on the Action itself. My Judgment therefore afforded the parties that opportunity, first to Sea Tow as the Plaintiff in the Action and then to C-Tow. As I was reserving my decision on that aspect of costs, I also reserved my decision on costs of the Application and the Motion, explaining that with the benefit of the submissions and materials already received and the further written submissions that the parties would provide pursuant to the Judgment, I would then render a supplementary decision on costs in relation to both proceedings.
[22] As directed by the Judgment, Sea Tow and C-Tow filed their further written submissions on costs on February 5, 2025, and February 17, 2025, respectively.
III. Issues
[23] Based on the parties’ written submissions in advance of the hearing, their oral submissions at the hearing, and further written submissions provided pursuant to the Judgment, the issues to be adjudicated by the Court in relation to costs are as follows:
- Is the Court now in the position to adjudicate costs of the Action as a whole? If so, to which party should costs be awarded?
- Which party should be awarded costs of the Application and costs of the Motion?
- How should the Court’s costs awards be quantified?
IV. Analysis
A. Is the Court now in the position to adjudicate costs of the Action as a whole? If so, to which party should costs be awarded?
[24] In relation to the Action itself (as distinct from the Motion in the Action), Sea Tow takes the position in its post-Judgment submissions that no costs should be awarded at this juncture, as the Judgment on the Motion did not bring an end to the Action. Sea Tow argues that, as the Court’s findings that the Registrations were invalid under paragraphs 18(1)(b) and 18(1)(d) of the Act did not render the Registrations void ab initio, it remains available to Sea Tow to pursue its claim against C-Tow for damages arising from C-Tow’s infringement of the Registrations while they were in force.
[25] Sea Tow asserts that, in addition to representing a shield protecting Sea Tow from being liable to pay any compensation to C-Tow during the period when the Registrations were in effect (see, e.g., Group III International Ltd v Travelway Group International Ltd, 2020 FCA 210 at para 39, leave to appeal to SCC refused, 39576 (29 September 2021)), the monopoly that the Registrations afforded it under section 19 of the Act represents a sword entitling it to claim damages for any infringing use during the period the Registrations were in effect.
[26] Sea Tow therefore takes the position that the Action should now proceed to the discovery phase to explore quantification of its claim for damages or, if it so elects, C-Tow’s profits.
[27] In response, C-Tow asserts that Sea Tow’s position is wholly unsupported by law, as invalidity is a complete defence to claims of infringement under sections 19 or 20 of the Act and to a claim for depreciation of goodwill under section 22 of the Act (see, e.g., TLG Canada Corp v Product Source International LLC, 2014 FC 924 at para 34, aff’d 2016 FCA 31; Milano Pizza Ltd v 6034799 Canada Inc, 2018 FC 1112 at para 134).
[28] However, C-Tow recognizes that the parties’ costs submissions do not represent the proper forum for arguing the merits of Sea Tow’s position regarding the Action. C-Tow therefore explains that it agrees that costs relating to the Action as a whole cannot be addressed until such time as C-Tow can seek summary disposal of the remaining issues. C-Tow asks that, should the parties reach a negotiated solution requiring any adjudication of costs, this Court remain seized of the issue of costs for the Action as a whole.
[29] I express no view on this late-surfacing issue related to the Action, other than to agree that it should not be adjudicated in the context of a costs award. As such, my Supplementary Judgment below will not address costs of the Action (other than in relation to the Motion). In the event the parties reach a negotiated solution requiring any adjudication of costs, without the Action having advanced to a stage at which another judge is better equipped to perform that adjudication, the parties are at liberty to approach the Registry of the Court to request that I be assigned to do so.
B. Which party should be awarded costs of the Application and costs of the Motion?
[30] Each of the parties claimed costs, in the event of its success, in connection with the Application and the Motion. As C-Tow has been largely the successful party (other than in respect of its bad faith allegation under paragraph 18(1)(e) of the Act), the usual result would be that costs follow the event and therefore be awarded to C-Tow. However, Sea Tow takes the position that it should be awarded costs against C-Tow regardless of which party has prevailed.
[31] Sea Tow’s position draws upon the events surrounding and following the Rule 312 motion. It asserts that C-Tow’s chain of title evidence evolved throughout these proceedings, as a reaction to other evidence and arguments advanced, even after the Rule 312 motion.
[32] In support of its position, Sea Tow emphasizes that, while the Horne Decision awarded it costs of the Rule 312 motion (notwithstanding C-Tow’s success on the motion), AJ Horne also observed that costs associated with any further affidavits by Sea Tow, cross-examinations, and all other steps up to and including the hearing of both the Application and the Motion, including any costs thrown away, were reserved to be in the discretion of the judge presiding at the eventual hearing on the merits.
[33] The events surrounding the Rule 312 motion are set out earlier in these Reasons and need not be repeated. However, I note that after AJ Horne granted C-Tow leave to serve and file the Subsequent Cardiff Affidavit and the Subsequent Skinner Affidavit, along with leave to Sea Tow to serve and file reply evidence, Sea Tow did prepare and filed a reply affidavit sworn by its principal, Capt. Frohnhoefer. Sea Tow argues that, as C-Tow’s chain of title narrative evolved, the proceedings between the parties became lengthier, more complex, and therefore more costly, including requiring Sea Tow to prepare that reply evidence. Sea Tow also emphasizes that it initiated the Motion, seeking summary judgment in the Action, based on the original evidence that C-Tow served in the Application.
[34] Sea Tow further emphasizes the broadly similar issues raised in the Action and the Application and submits that C-Tow should have recognized the evidentiary limitations of proceeding by way of application and therefore discontinued its Application in favour of having the parties’ respective positions adjudicated through the Action and its more robust pretrial procedures.
[35] I agree that there was considerable overlap between the issues adjudicated in the Application and on the Motion. However, I am not convinced that this overlap is a basis to depart from the usual practice of awarding costs to the successful litigant. C-Tow brought the Application, Sea Tow brought the Action and eventually the Motion, each proceeding was defended, and each party bore the risk that, if it was unsuccessful on the broadly similar issues in both proceedings, it would face cost consequences in accordance therewith.
[36] As for Sea Tow’s arguments as to the evolving nature of C-Tow’s chain of title narrative, I accept this characterization, at least at the stage of the Rule 312 motion. However, my Judgment made the following findings, to the effect that much of Mr. Cardiff’s evidence proved not to be material to the outcome of the proceedings, and that it was not his intent to mislead the Court (at para 98–99):
98. In arriving at the conclusion that C-Tow’s chain of title narrative is sound, I have considered Sea Tow’s position that the narrative cannot be trusted, because it changed multiple times over the course of these proceedings. For the most part, it is unnecessary for me to canvass the details of those changes. The changes are a function of Mr. Cardiff’s evidence, and I take Sea Tow’s point that, if C-Tow were depending on his evidence to establish the chain of title, his frequent re-visitation of the details of that chain (as well as Sea Tow’s hearsay objections) would raise concern about the reliability (and indeed the admissibility) of that evidence. However, C-Tow has wisely decided not to rely on Mr. Cardiff’s evidence to establish the chain of title prior to his acquisition of the company in 2008.
99. I accept C-Tow’s counsel’s submission that, in the absence of first-hand knowledge of the history of the business, Mr. Cardiff was making an effort to piece together the chain of title through corporate records and the evidence of other witnesses, and he made mistakes in doing so. It appears to me that Mr. Cardiff was too eager to seize upon events about which he had no knowledge and incorporate those events into his own evidence, which would indeed cast doubt upon his reliability as a witness if C-Tow were depending on that evidence to establish the historical chain of title. However, it is not my conclusion that Mr. Cardiff deliberately set out to mislead the Court.
[37] My finding that the evolution of Mr. Cardiff’s evidence did not represent a deliberate effort to mislead the Court is favourable to C-Tow but is not necessarily determinative of the question whether it should be penalized through costs. Rather, I find compelling C-Tow’s submission that, once Sea Tow had the benefit of C-Tow’s updated evidence (and in particular C-Tow’s abandonment of the 1997 Corporation as a link in its chain of title), it was available to Sea Tow to withdraw the Motion that had been premised on the earlier version of C-Tow’s chain of title narrative. However, Sea Tow chose not to do so and rather continued to pursue the Motion and its defence of the Application to adjudication. Having failed to prevail in these proceedings, I am not convinced that the history of the proceedings militates in favour of a result other than costs awards in C-Tow’s favour.
C. How should the Court’s costs awards be quantified?
[38] In their respective pre-hearing written submissions, each of the parties took the position that the Court should adjudicate costs on a lump-sum basis in its favour in the event of its success, and each party argued that such costs should be quantified at 40% of its actual legal fees and disbursements inclusive of applicable taxes. Given this alignment between the parties as to quantification, and the authorities advanced by both parties supporting the quantification of lump-sum costs awards as a percentage of fee recovery in the range of 25% to 50%, I am prepared to adopt the 40% figure and award costs of the Motion and the Application in approximately that amount.
[39] I will apply that percentage to the fee and disbursement figures reflected in the documentation that C-Tow’s counsel filed with the Court at the conclusion of the hearing. Before turning to the particular amounts, I note that that this documentation was not provided to the Court in affidavit form. However, both parties provided their fee and disbursement documentation without the benefit of supporting affidavits, and neither party objected to the Court relying on the other’s documentation or raised objections as to the figures reflected therein.
[40] I also note that, in oral costs submissions at the conclusion of the hearing, C-Tow’s counsel advised the Court that its documentation was not necessarily complete, in capturing all fees and disbursements to the date of the hearing, and requested an opportunity to provide further material post-hearing. I declined to grant C-Tow that opportunity, as Sea Tow was prepared to rely upon its own material as filed with the Court at the conclusion of the hearing and, as noted earlier in these Reasons, both parties were at that juncture already late in providing the material supporting their costs submissions, which had been decided at the CMC would be filed by the day before the commencement of the hearing.
[41] As such, I appreciate that the figures to which I am applying the 40% may be somewhat less than C-Tow’s actual fees and disbursements. However, given that the 40% level is higher than the middle of the 25% to 50% range identified in the authorities advanced by the parties, I am satisfied that the resulting costs quantification is appropriate.
[42] Turning to the figures themselves, first in relation to the Motion, C-Tow’s material includes an Invoice Register, capturing invoices dated from June 6, 2023, to June 30, 2024, plus subsequent work-in-progress [WIP], together totaling $205,801.50 (exclusive of taxes). However, recognizing the need to identify only costs that relate to the Motion (as opposed to the broader Action), C-Tow explained that the first invoice (dated June 6, 2023 in the amount of $10,344.00) should not be included. The effect is that the earliest relevant invoice (no. 3419319) is dated October 23, 2023, and the overall fees figure is reduced to $195,457.50 (exclusive of taxes).
[43] However, C-Tow’s materials also include a Summary of Fees spreadsheet, showing the same figures for the WIP and the invoices identified above, with the exception of invoice no. 3419319, which is identified in the spreadsheet to be in the amount of $27,939.50, rather than the amount of $32,870.00 identified in the Invoice Register. As C-Tow has not provided any explanation for this discrepancy, I will employ the lesser of the two figures, reducing the overall fees figure from $195,457.50 to $190,527.00 (exclusive of taxes).
[44] The Summary of Fees spreadsheet identifies that GST of 5% and British Columbia PST of 7% apply to the fees. Adding the cumulative 12% taxes to the $190,527.00 figure produces an overall fees figure (inclusive of taxes) of $213,390.24 in relation to the Motion. C-Tow has not identified any disbursements incurred in connection with the Motion. My Judgment will therefore award C-Tow costs of the Motion quantified at approximately 40% of the fees figure, rounded to $85,000.00.
[45] In relation to the Application, C-Tow has similarly provided an Invoice Register, capturing invoices dated from June 9, 2022, to June 30, 2024, plus subsequent WIP, together totaling $718,027.25 (exclusive of taxes). While the Invoice Register does not calculate applicable taxes, I accept that (as with the Motion) GST of 5% and British Columbia PST of 7% apply to the fees. Adding the cumulative 12% taxes to the $718,027.25 figure produces an overall fees figure (inclusive of taxes) of $804,190.52 in relation to the Application.
[46] C-Tow has provided spreadsheets identifying disbursements incurred in connection with the Application, together totaling $36,527.52. However, C-Tow has also provided a draft Bill of Costs related to the Application, which identifies disbursements totalling $13,331.78. As C-Tow has not provided any explanation for this discrepancy, I will employ the lesser of the two figures. As the spreadsheets do not identify whether the disbursement figures are inclusive or exclusive of taxes, I will employ the $13,331.78 amount without any addition for taxes. Adding the disbursements to the fees generates a total figure of $817,522.30.
[47] My Judgment will therefore award C-Tow costs of the Motion quantified at approximately 40% of that figure, rounded to $327,000.00.