1.2: Purpose and intention of these rules
5.1: Purpose of this Part (Disclosure of Information)
5.4: Appointment of corporate representatives
5.6: Form and contents of affidavit of records
6.6: Response and reply to application
10.29: General rule for payment of litigation costs
10.31: Court-ordered costs award
10.33: Court considerations in making costs award
10.35: Preparation of bill of costs
10.48: Recovery of goods and services tax

Case Summary

The Defendants successfully appealed from the Decision of a Master dismissing their Application to summarily dismiss the claims against them. Their Appeals were allowed, and the claims against them were summarily dismissed. The parties could not agree as to Costs, so they provided written submissions to Renke J. The Defendants were wholly successful on Appeal and therefore entitled to Costs – but they also sought elevated Costs, Costs respecting an uncontested third-party production Order, extra Costs on account of a “late filed” Affidavit by a witness for the Plaintiff, Costs for second counsel on Appeal, disbursements for a transcript, and repayment of the Costs awarded by the Master in the Decision below. The Plaintiff also questioned whether GST was payable on the Defendants’ Costs under Rule 10.48.

At the outset, Renke J. noted that the Plaintiff had either expressly or implicitly conceded that Costs were owed to the Defendants as they had been wholly successful on Appeal, that second counsel Costs on Appeal should be allowed, that the Defendants should recover the Costs they paid pursuant to the Master’s Order in the Decision below, and that disbursements for Transcripts should be included. However, the parties could not agree on the elevated Costs sought by the Defendants, Costs respecting an uncontested third-party production Order, or the Defendants’ entitlement to extra Costs relating to a “late filed” Affidavit by a witness for the Plaintiff.

Renke J. considered the Plaintiff’s assertion that the Defendants were not entitled to GST as part of their Costs. Pursuant to Rule 10.48(2), GST cannot be claimed where the amount is rebate-able or refundable under the Excise Tax Act, RSC 1985, c E-15. Renke J. also referenced the warranty under the GST claim in a Form 44 Bill of Costs contemplated by Rule 10.35(1). His Lordship noted that the Defendants had not been able to respond to this assertion, and ordered the Defendants to do so within 45 days, failing which they would be deemed to have conceded that GST was not payable.

Renke J. did not agree with the Plaintiff’s assertion that the Defendants should not be awarded Costs relating to an uncontested third-party production Order because the information sought through the Order was “duplicative”, and Renke J. therefore awarded those Costs.

His Lordship then considered whether the Defendants were entitled to extra Costs on account of the Plaintiff’s “late filed” Affidavit, and noted that pursuant to Rules 6.6(1) and (3), Affidavits (and other evidence) are to be served on the other parties “a reasonable time before the [A]pplication is to be heard or considered”, and that “the Court may impose [C]osts on the party who did not give reasonable notice”. Renke J. held that the Affidavit had been filed within a reasonable period of time before the Application was heard, and therefore the Defendants were not entitled to Costs relating to it.

Renke J. next considered the Defendants’ claims for elevated Costs. Both Defendants claimed for Costs based on Column 5 of Schedule C, with different multipliers. One Defendant also alternatively sought Costs on a partial indemnity basis at 54% of its legal fees. The Plaintiff argued that the Defendants should be entitled to Costs based on Column 4 of Schedule C, with a multiplier of 1.5 to account for inflation. His Lordship noted that the Rules were amended on March 17, 2020 to substitute a new Division 2 tariff for Schedule C, which adjusted the column ranges upward, and which relieved “some of the inflationary pressure motivating different approaches to [C]osts”. However, the matter before Renke J. was required to be decided under the unamended Schedule C.

Renke J. reviewed the purposes behind the Costs regime, including that Costs should “justly” be allocated to the unsuccessful litigant under Rule 10.29(1), and that Costs should be proportionate, promote efficiency, and remain in line with the Foundational Rules, including Rule 1.2. His Lordship considered the framework for considering Costs awards described through Rules 10.31 and 10.33, noting that they ask the Court to consider several factors in assessing Costs. His Lordship emphasized that the decision to award Costs is discretionary, but that discretion must be exercised judicially and in line with the factors set out in Rule 10.33. His Lordship further noted that the tariff in Schedule C was set in 1998 and was not revised by the new Rules in 2010. While they were intended to partially reimburse litigants “in the neighbourhood of 30-50% of actual costs”, they no longer do so.

His Lordship also considered several policy concerns respecting whether an adjustment for inflation should be made, or any other tools should be used to arrive at a just and fair Costs Award. Renke J. noted that Rules 10.31(1) and (3) expressly permit “an array of tools or mechanisms for arriving at a reasonable costs award”, and that previous cases have permitted the use of an “inflationary factor”, Costs multipliers, or awards based on a percentage of the actual legal fees incurred by the successful party.

Renke J. noted that the Defendants were “completely successful” and that the Plaintiff’s claim was “not significantly above” the Column 5 threshold and the proceedings were not unusually long, but were “at least moderately […] complex”. Further, His Lordship considered the parties’ conduct in the litigation which lengthened the Action, per Rule 10.33(2)(g), and noted the Defendants’ concerns that the Plaintiff had withheld some important records until after the Applications before the Master were heard — some of which were disclosed “only about 2 weeks before the appeal”. The Plaintiffs argued that their corporate representatives had not intentionally withheld the records, and that the Defendants were partially responsible for their failure to disclose them as they had failed to cross-examine a witness on his Affidavit of Records. Renke J. disagreed and noted that even if the Plaintiff’s principals had not intentionally acted improperly, they had acted “unreasonably” and engaged in “misconduct” within the meaning of Rule 10.33(2)(g). Pursuant to Rule 5.1, one of the purposes of Part 5 of the Rules is to encourage early disclosure of facts and records. Pursuant to Rule 5.6(1), an Affidavit of Records is required to disclose all relevant and material records. Further, under Rule 5.4(2) corporate representatives are required to “inform themselves of relevant and material records” and information. Renke J. also considered the Defendants’ legal fees, the reasonableness of the Plaintiff’s claim, the parties’ relative economic imbalances, the Plaintiff’s concession respecting inflation, and the reputational impact of the litigation as part of His Lordship’s analysis of “any other matter” under Rule 10.33(1)(g). His Lordship ultimately awarded Costs under Column 5 of Schedule C, adjusted for inflation using a 1.5 multiplier, with a further multiplier of 1.5 for certain steps taken in the Action.

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Related to 1.2

Related to 5.1

Related to 5.4

Related to 5.6

Related to 6.6

Related to 10.29

Related to 10.31

Related to 10.33

Related to 10.35

Related to 10.48