A-492-75
IBM Canada Limited-IBM Canada Limitée
(Appellant)
v.
Xerox of Canada Limited, and Xerox Corporation
(Respondents)
Court of Appeal, Heald, Urie and Ryan JJ.—
Ottawa, April 1 and 12, 1976.
Practice—Appeal from taxation of costs—Bills for motion
in Trial Division and appeal therefrom combined—Whether
taxation premature—Discretion of taxing officer—Review of
decision in allowing certain items—Federal Court Rules
3(1)(c), 344(1)—Tariff B, s. 2(2)(6).
Appellant applied under Rule 346(2) to review the taxation
of costs for an interlocutory motion and appeal therefrom. The
bills were combined in this application. Respondents argued
that appellant was out of time, whether this proceeding be seen
as an appeal from a judgment, from an order of a prothonotary
or from an interlocutory order. Appellant challenged respond
ents' right to tax its bill at this stage, arguing that taxation was
premature. The Trial Division dismissed appellant's motion
"with costs", as did the Court of Appeal, and appellant argued
that "with costs" means "with costs to the plaintiff in the
cause". Claiming that if this were not so, the Trial Judge would
have made some other disposition, appellant submitted that
costs must follow the final action of the litigation, and, since
the action has not yet come to trial, there has been no determi
nation of the issues, and the bill cannot yet be taxed.
Held, while no formal application was made to enlarge the
time under Rule 3(1)(c), the matters raised are sufficiently
important to extend the time.
Appellant's argument that the taxation was premature is not
supported by Rule 344(1), regardless of the meaning of "with
costs". Rule 344(1) does not exclude an interlocutory proceed
ing and since the word "action" was not used, the phrase "shall
follow the event unless otherwise ordered" must mean here
"shall follow the result of each interlocutory proceeding unless
otherwise ordered". If correct, since in neither order was there
a contrary disposition of costs, they were to follow the result of
the interlocutory motion and appeal. Appellant lost in each
case; respondents were thus entitled to tax the bill following
dismissal of the motion, and subsequently, their costs on appeal.
As to the propriety of allowing the disbursements for prepa
ration of certain affidavits made by U.S. attorneys in answer to
those filed by appellant in support of its motion, the authority
for allowing such disbursements derives from Tariff B, section
2(2)(6). The affidavits in question were essential for respond-
ents to rebut opinions of attorneys in affidavits filed for appel
lant, and the accounts were paid. The taxing officer's discretion
in allowing specific items ought not to be interfered with unless
the amounts are so inappropriate or his decision so unreason
able as to suggest that an error in principle was the cause. The
District Administrator erred, in that, while apparently accept
ing the essentiality of the affidavits, he did not examine the
quality of the proof submitted to justify each disbursement as
one which could be chargeable to an adverse party as being
reasonable. The proof falls short of that necessary to justify the
considerable variations in expenditures of time and fees
charged. On the face of inadequate proof, it was clear that the
problems confronting each depondent were identical, yet widely
different sums were allowed. Since there was a common
denominator in the nature of the opinion sought, there should
be, in fairness, at least some relationship between the fees. The
principle may be different on a solicitor-client taxation, but in a
party and party bill, acceptance without inquiry of the proprie
ty of the disbursements is wrong, and the Court can, in such
case, review the allowance.
APPLICATION.
COUNSEL:
W. R. Edgar for appellant.
R. T. Hughes for respondents.
SOLICITORS:
Smart & Biggar, Ottawa, for appellant.
Donald F. Sim, Q.C., Toronto, for
respondents.
The following are the reasons for judgment
rendered in English by
URIE J.: This is an application pursuant to Rule
346(2) to review the bill of costs for an interlocu
tory motion before the Trial Division and an
appeal to this Court therefrom, taxed by the Dis
trict Administrator at Toronto on the 24th day of
February 1976. The bills of costs from the Trial
Division and this Court were combined and in
hearing this application we do not wish it to be
taken that we consider that combining bills of two
different divisions of the Federal Court is proper
procedure. In fact, we seriously question the pro
priety of proceeding in that way.
Counsel for respondents in a preliminary objec
tion argued that the appellant was out of time in
bringing the present applicatiorr to review, whether
such a proceeding is viewed as an appeal from a
trial judgment, or from an order of a prothonotary
or one from an interlocutory order, since it was
brought after a period of time had elapsed which
was longer than the time limit applicable for an
appeal from any of the orders made in any one of
those proceedings. While no formal application
was made by the appellant to enlarge the time
pursuant to Rule 3(1)(c) of the Rules of this
Court, I am of the opinion the matters raised on
the application are of sufficient importance that
time to bring the application should be extended.
The preliminary objection should be, therefore,
dismissed.
Counsel for the appellant indicated from the
outset that he was not attacking the quantum of
the bill as taxed or any particular item or items
therein, but was challenging the right of the
respondents to tax its bill at this stage of the
proceedings or, in other words, he argued that the
taxation was premature. The order of the Trial
Division dismissed the appellant's motion "with
costs". Similarly, the appellant's appeal from that
order was dismissed "with costs". Counsel's argu
ment, as I understand it, was that the expression
"with costs" must mean "with costs to the Plaintiff
in the cause". He argued that if this were not so
the learned Trial Judge who heard the motion
would have made some other disposition of the
costs such as "costs to the Plaintiffs in any event of
the cause" or "costs forthwith after taxation there
of". Since no such direction was given, he submit
ted that the costs must follow the final outcome of
the litigation and since the action has not yet come
to trial, there has been no determination of the
issues between the parties and thus the bill cannot
yet be taxed.
This argument is not supported by what I deem
to be the correct interpretation of Rule 344(1),
irrespective of the meaning attributed to the
phrase "with costs". The applicable portion of that
Rule reads as follows:
(1) The costs of and incidental to all proceedings in the
Court shall be in the discretion of the Court and shall follow
the event unless otherwise ordered. [The emphasis is ours]
Clearly this definition does not exclude an inter
locutory proceeding and since the word "action"
was not . used in Rule 344(1), the phrase "shall
follow the event unless otherwise ordered" must
mean in this instance, "shall follow the result of
each interlocutory proceeding unless otherwise
ordered". If I am correct in this view, since in
neither the order of the learned Trial Judge nor
the order of this Court was there a disposition of
the costs in a contrary manner, the costs were to
follow the result of the interlocutory motion and
subsequent appeal. In each case the appellant lost
and thus the respondents were entitled to tax their
bill of costs following the dismissal of the motion
and subsequently their costs on the appeal.
While the appellant's counsel did not seek to
contest any of the items in the bill of costs as
taxed, the Court invited both counsel to argue the
propriety of allowing the disbursements for the
preparation of certain affidavits made by attorneys
in the United States in answer to affidavits filed by
the appellant in support of its motion. An analysis
of the attorneys' statements of account annexed to
the affidavit of Paul Bourque filed on behalf of the
respondents, reveals a wide disparity between the
hours spent in legal research and in the hourly
rates charged in the research as to how section
1782(a) of Title 28 of the United States Code
respecting assistance to foreign and international
courts is applied in the Districts in which the
various deponents practised. Each attorney had to
express his opinion on exactly the same problem
yet the hours spent in such research varied from as
little as 8 1 / 2 hours for an attorney in Northern
California to 43 hours for the deponent from the
State of New York.
The authority for allowing such disbursements is
derived from Tariff B, section 2(2)(b) which
states:
(b) such other disbursements may be allowed as were essen
tial for the conduct of the action.
There is no doubt that the affidavits in question
were essential to enable the respondents to rebut
the opinions of attorneys expressed in the affida
vits filed on behalf of the appellant. Furthermore,
there is no question that the accounts were in fact
paid. The jurisprudence on the question of the
extent to which a taxing officer's discretion in
allowing specific items on a taxation is reviewable
clearly indicates that the discretion ought not to be
interfered with unless the amounts allowed are so
inappropriate or his decision is so unreasonable as
to suggest that an error in principle must have
been the cause. (see: Rickwood v. Aylmer'; Kauf-
man v. New York Underwriters Insurance Co. 2 )
The sole question thus remaining to be settled in
this appeal is whether or not the District Adminis
trator proceeded on a wrong principle in allowing
the disbursements made for the affidavits to which
reference has previously been made without regard
to the wide differences in the amount of the fees
paid or, to put it another way to allow such
disbursements simply because those were the
amounts in fact paid, apparently without question,
by the respondents.
In my opinion, the District Administrator erred
in two ways. Firstly, while apparently accepting
the essentiality of the affidavits, he did not exam
ine the quality of the proof submitted to him in
support of the submission that each disbursement
itself was justified in the sense that it was one
which could be chargeable to an adverse party as
being reasonable, on a taxation of a party and
party bill of costs. The nature of the proof submit
ted to him in this case falls substantially short of
that which should be submitted to justify • or
explain the necessity for the considerable varia
tions in expenditure of time and fees charged (in
one case four lawyers were involved each with
different billing rates).
Secondly, on the face of the inadequate proof
here submitted it was clear that the legal problem
with which each deponent was confronted was
identical, the only differences being in the ascer-
tainment of how the United States federal courts
in each of several districts applied the same provi
sions of the United States Code. Notwithstanding
this the taxing officer allowed widely different
sums for their respective opinions. In my view,
since there was a common denominator in the
nature of the opinion sought, as a matter of princi
ple there ought to be at least some relationship
between the fees allowed in payment for them, if
fairness is to be accorded the adverse party liable
for their payment. The principle may be different
' [1954] O.W.N. 858.
2 [1955] O.W.N. 496.
in the taxation of a solicitor-client bill of costs but
in a party and party bill, acceptance without inqui
ry of the propriety of the disbursements is wrong
in principle and this Court is entitled to review the
taxing officer's allowance in such case.
The statements of account for the affidavits of
the deponents from northern California district
and the southern California district show roughly
the same amount of time expended in research so
that in the absence of any explanation as to the
necessity for the much greater time spent by the
deponent from New York, I would reduce the sum
allowed on the bill of costs for the statement of
account of Kenyon and Kenyon, Reilly, Carr and
Chapin to $650 which was the amount billed in the
higher of the two California deponents.
While we were informed that, in the case of the
account of Kaufman and Kramer, from the State
of Connecticut, it covered not only the legal
research and preparation of the affidavit but also
attendances on the cross-examination of the depo-
nent on his affidavit, there is absolutely no indica
tion in any of their three statements of account as
to what portion thereof relates to that cross-exami
nation. I would, therefore, also reduce the amount
allowed for their accounts to $650 for fees plus the
disbursements made by that firm in the sum of
$78.35 or a total allowance of $728.35.
Due to the failure of the appellant to bring its
motion for review within the time limited by the
Rules there ought not to be any costs allowed on
this application.
* * *
HEALD J.: I concur.
* * *
RYAN J.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.