T-395-80
John A. Carruthers (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Walsh J.—Ottawa, December 20,
1982.
Practice — Costs — Expert witness — Application for
special direction and under R. 337(5) to extend time therefor
— Whether "matter that should have been dealt with [but
was] ... overlooked or accidentally omitted" — Direction
would have been granted — Court's rejection of report not
justifying non-payment of expert's fees — S. 4(1) Tariff A
allowance inadequate and unreasonable — Necessity for
expert evidence — Payment of realistic fee customary —
Denial of special direction injustice as depriving successful
plaintiff of litigation benefits — Although bringing of applica
tion delayed without excuse Rule to be liberally interpreted —
Distinction made between special direction regarding expert's
as opposed to counsel fees — Application granted — Federal
Court Rules, C.R.C., c. 663, RR. 324, 337(5), 344(7), 1204;
Tariff A, ss. 1(3)(b),(c), 4; Tariff B, s. 2(2)(a).
The plaintiff had been partially successful at trial. His
taxable capital gain was reduced by $5,966 although, with
respect to the valuation of certain shares, the approach of the
defendant's experts was preferred to that of the plaintiffs
expert. Judgment was rendered on December 3, 1981. No
special direction regarding costs was made, none having been
sought. On December 30, the plaintiff filed a notice of appeal
(dated December 24). On June 28, 1982, the plaintiff received
an account in the amount of $7,684 for the services of his
expert witness. The appeal was discontinued on October 12,
1982, and this application was filed the same day. The plaintiff
applied, pursuant to Rule 324, for a special direction relating to
the costs of his expert witness, and for an extension of the time
for requesting such a direction.
Held, the extension of time and the special direction are
granted. Rule 337(5), which is referred to in Rule 344(7), is
the governing provision with respect to the application for an
extension. It may be invoked to obtain an extension and vary
the pronouncement of judgment only on certain grounds—
notably (in Rule 337(5)(b)) "that some matter that should
have been dealt with has been overlooked or accidentally
omitted". If a special direction regarding the costs of the expert
witness had been requested at trial, His Lordship would
undoubtedly have granted it. The fact that an expert's report is
rejected by the Court, in whole or in part, does not justify
non-payment of the fees for preparation of the report, unless it
was entirely unnecessary or useless—which was not the case
here. Furthermore, the payment for an expert witness provided
for by paragraph 4(1) of Tariff A is completely inadequate and
unreasonable. Nevertheless, since the Trial Judge is not
required to decide whether a special direction relating to the
costs of an expert witness should be made, it is difficult to
conclude that such a direction meets the criterion in Rule
337(5)(b). On the other hand, the action did involve an issue
which necessitated the calling of expert evidence. Moreover,
even where no special direction is made, it is customary to pay
an expert witness a realistic fee. Finally, it would be unjust to
deprive a successful plaintiff of the gain achieved by his
litigation, by saddling him with his expert's bill. True, the
plaintiff was guilty of an inexcusable delay in the bringing of
this application; his appeal did not jeopardize any costs already
awarded him, and therefore affords no excuse. All the same, a
liberal interpretation of Rule 337(5)(b) is called for, and the
special direction will be considered to come within the scope of
the provision's wording. A clear distinction should be made,
though, between a special direction regarding expert's costs,
and one regarding counsel fees (and between extensions of time
relating to these respective matters). It is only in exceptional
cases that the Tariff, even if inadequate, should be departed
from in party and party taxations, and His Lordship would
have rejected the application if an increase in counsel fees had
been the objective.
CASES JUDICIALLY CONSIDERED
DISTINGUISHED:
Spur Oil Limited v. The Queen, [1983] 1 F.C. 244
(T.D.).
CONSIDERED:
Smerchanski v. Minister of National Revenue, [ 1979] 1
F.C. 801 (C.A.); Hillsdale Golf & Country Club Inc. v.
The Queen, [ 1979] I F.C. 809 (T.D.).
COUNSEL:
J. A. Giffen, Q.C. for plaintiff.
Ian S. MacGregor for defendant.
SOLICITORS:
Giffen, Pensa, London, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
WALSH J.: Plaintiff moves pursuant to Rule 324
[Federal Court Rules, C.R.C., c. 663], for an
order extending the time to make the application,
and for the Court to make a special direction
concerning costs, to the effect that the action be
considered as a Class III action within the mean
ing of Tariff B, and that payments to the expert
witness called by the plaintiff be increased to
$7,684.
The motion is supported by an affidavit, and
written representations have been filed. Answering
representations, together with an affidavit in sup
port of same, have also been filed by defendant.
Judgment of the first instance [not reported,
T-395-80] was rendered herein on December 3,
1981, and a notice of appeal dated December 24,
1981, was filed on or about December 30, 1981. It
was stated in the notice of appeal that the sole
question to be raised by the plaintiff was the issue
that, in establishing the fair market value of the
shares of Griffith Saddlery and Leather Limited
on December 31, 1971, disposed of by the plaintiff
in 1976, the agreements and the terms of the
agreements referred to in the reasons for judgment
should be considered. Written submissions were
made by appellant [plaintiff] dated January 6,
1982, pursuant to Rule 324, for an order limiting
the contents of the case under appeal, so that the
appellant [plaintiff] would not be required to pre
pare copies of the transcript of the verbal testimo
ny or of the documentary exhibits filed during the
hearing, other than the agreements referred to in
the reasons for judgment. The respondent [defend-
ant] filed answering representations pursuant to
Rule 324, dated February 26, 1982, to which
plaintiff replied on March 16.
By judgment rendered on April 8, 1982, by
Ryan J., the application was dismissed without
prejudice to the making of an agreement between
the parties, under Rule 1204, as to the contents of
the case.
Plaintiff received an account from Price Water-
house on June 28, 1982, for the services of its
expert witness, Mr. Phillip W. Bowman, for prepa
ration for and attendance in court to give evidence,
in the amount of $7,684, which included $334 for
out-of-pocket expenses. The trial lasted two days.
On the issue of the class of the action, plaintiff
points out that on May 31, 1978, John Carruthers
was assessed tax in the amount of $34,951.69, with
interest of $2,564.40. Interest is calculated there
after, bringing the amount to $50,018.26 as of
December 3, 1981. Some five months after the
judgment of Ryan J. refusing to limit the contents
of the appeal case, plaintiff on October 12, 1982,
filed a notice of discontinuance of the appeal, as
did Emma Carruthers in the associated case bear
ing Court No. A-873-81.
No matter what date is taken, it appears that
this motion has been filed too late. Rule 344(7) of
the Rules of this Court reads as follows:
Rule 344. ...
(7) Any party may
(a) after judgment has been pronounced, within the time
allowed by Rule 337(5) to move the Court to reconsider the
pronouncement, or
(b) after the Court has reached a conclusion as to the
judgment to be pronounced, at the time of the return of the
motion for judgment,
whether or not the judgment includes any order concerning
costs, move the Court to make any special direction concerning
costs contemplated by this Rule, including any direction con
templated by Tariff B, and to decide any question as to the
application of any of the provisions in Rule 346. An application
under this paragraph in the Court of Appeal shall be made
before the Chief Justice or a judge nominated by him but either
party may apply to a Court composed of at least three judges to
review a decision so obtained.
Rule 337(5), to which reference is made, reads as
follows:
Rule 337. ...
(5) Within 10 days of the pronouncement of judgment under
paragraph (2)(a), or such further time as the Court may allow,
either before or after the expiration of that time, either party
may move the Court, as constituted at the time of the pro
nouncement, to reconsider the terms of the pronouncement, on
one or both of the following grounds, and no others:
(a) that the pronouncement does not accord with the reasons,
if any, that may have been given therefor;
(b) that some matter that should have been dealt with has
been overlooked or accidentally omitted.
In the judgment under appeal, no special direction
was sought or made respecting costs, which were
not spoken to. Had this been done, I would no
doubt at the time have made a special direction
with respect to the costs of Mr. Bowman of Price
Waterhouse. The fact that in the reasons for judg
ment I indicated a preference for the approach to
evaluation of the shares by Mr. Dalgleish, defend
ant's expert, and in fact based my decision on an
earlier report of Mr. Clayton made for the defend
ant, should not be considered as detracting from
the usefulness of Mr. Bowman's report, nor is it
any reflection on his competence. In cases in which
experts are called by both parties and they give
conflicting opinions, the Court has to choose the
opinion of one of the experts as preferable to the
other, unless the Court chooses to reject both
opinions and substitute its own based on the evi
dence, but the fact that one expert's report is
rejected, or not accepted in full, would not justify
non-payment of his fees for the preparation of
same, unless the Court finds that the requisitioning
of such a report was entirely unnecessary or the
contents useless. That was not the case here, where
an intricate and difficult question of evaluation of
shares was involved, in which the assistance of
accounting experts was valuable and necessary. It
is generally accepted that the payment for an
expert witness of $35 pursuant to paragraph 4(1)
of Tariff A is completely inadequate and unrea
sonable. Paragraph (2) provides that there may be
paid to a witness who appears to give evidence as
an expert a reasonable payment for the services
performed by the witness in preparing himself to
give evidence and giving evidence.
Tariff B, paragraph 2(2)(a) provides that all
disbursements made under Tariff A may be
allowed, except that payments to a witness under
paragraph 4(2) may only be allowed to the extent
directed by the Court under Rule 344(7).
As already stated, Rule 344(7) refers back to
Rule 337(5), which requires that such an applica
tion be made within 10 days from the pronounce
ment of the judgment, although it contains a provi
sion that this may be extended to such further time
as the Court may allow, either before or after the
expiration of that time. Rule 337(5) is precise,
however, as to the grounds on which the pro
nouncement may be varied, including that some
matter which should have been dealt with has been
overlooked or accidentally omitted. It is difficult to
conclude that a special direction respecting costs
of an expert witness is something which was over
looked or accidentally omitted, as there is no
requirement that the Court should decide whether
such an order should be made when rendering
judgment.
However, defendant itself concedes that the
action involved an issue of some importance and
difficulty which necessitated the calling of expert
evidence, which is by no means unusual in this
Court. I find it somewhat surprising, therefore,
that defendant does not consent to the payment to
plaintiff's expert of "a reasonable payment for the
services performed by the witness in preparing
himself to give evidence and giving evidence" pur
suant to paragraph 4(2) of the Tariff. In the
absence of a direction pursuant to Rule 344(7),
defendant is not of course obliged to, but it is
nevertheless customary, in cases where an expert
has been called, to pay him a realistic fee, and this
is frequently done by consent.
In the present case, plaintiff succeeded only to
the extent that the valuation-day evaluation of his
shares was increased from $7.45, as found by the
Tax Review Board, to $11. This had the result of
reducing his taxable capital gain by $5,966, and it
would be most unjust if he were to benefit pursu
ant to the judgment only to the extent of a reas
sessment reducing his taxes by the tax on this
$5,966 only to be obliged to pay $7,684 for his
expert, more than wiping out any gain from the
judgment which upheld his contentions, at least in
part. It is clearly a case where the discretion of the
Court under Rule 344(7) would have been exer
cised, and it is perhaps not going too far to give a
liberal interpretation to Rule 337(5)(b) and find
that this is a matter which should have been dealt
with but was overlooked.
The discretion of the Court as to costs was
greatly inhibited by the judgment of Chief Justice
Jackett in appeal in the case of Smerchanski v.
Minister of National Revenue;' and in particular,
at page 807 in the Appendix to it, the learned
Chief Justice stated:
Rule 344(7) authorizes applications for special directions to be
carried out on the taxation of costs. It does not authorize
applications to change a "pronouncement" of judgment or a
judgment after it has been signed.
' [1979] 1 F.C. 801 (C.A.).
In the case of Hillsdale Golf & Country Club Inc.
v. The Queen, 2 I considered the effects of the
Smerchanski case in detail, stating at page 814:
Reading Rule 344(7) with Rule 337(5) it is contemplated that
an application for a direction increasing costs should be made
while the matter is sufficiently fresh in the mind of the Court
that the Court is in a position to appreciate whether there were
present in the particular case circumstances justifying a depar
ture from the normal tariff amount.
Aside from the fact that there had been no
unreasonable delay, the judgment specifically
pointed out that defendant's counsel acquiesced, so
that no formal motion under Rule 337 was neces
sary. In the present case, there has not only been
no consent to the fixing of the expert's fee at a fair
and reasonable figure by counsel for the defend
ant, but the present motion is totally opposed.
Reference was made by plaintiff to the decision
of my brother Cattanach J. in Spur Oil Limited v.
The Queen [[1983] 1 F.C. 244 (T.D.)]. In it, the
Trial Division had rendered a judgment [[1981] 1
F.C. 461] maintaining the action only in part,
otherwise dismissing it, and awarding costs to be
taxed to the defendant. It was appealed by plain
tiff and the Appeal Division allowed the appeal on
July 3, 1981 [[1982] 2 F.C. 113], ordering that
plaintiff should have its costs in both the Trial
Division and the Appeal Division. The summer
recess intervened and leave to appeal to the
Supreme Court, applied for on September 9, was
refused on September 30, 1981. Cattanach J.
found that expiration of the time to move for
increased costs pursuant to the judgment of the
Court of Appeal was on September 10 but on
September 9 defendant had applied for leave to
appeal to the Supreme Court of Canada. The first
draft of plaintiff's bill of costs was not presented to
the Attorney General until January 20, 1982, at
which time the Attorney General took exception to
some items, but apparently not to the expert's fees,
so the only question remaining was counsel's fees.
This dispute led to a notice of motion dated May
10, 1982, long after October 10, 1981, when the
period of 10 days after September 30, 1981, when
leave to appeal was refused by the Supreme Court,
would have expired. However, Cattanach J. point
2 [1979] 1 F.C. 809 (T.D.).
ed out that the delay from October 10, 1981, to
May 10, 1982, was not made an issue, but rather
merely that the application should have been made
prior to October 10, 1981. In view of the interven
tion of the Long Vacation before the application
was appealed to the Supreme Court, this constitut
ed special circumstances of an exceptional nature
to warrant the delay of the application for
increased costs.
That judgment is not of much assistance to
plaintiff, however. Plaintiff's appeal in this case
was not met by any counter-appeal, so there was
no danger of his losing costs already awarded.
While the judgment of Mr. Justice Ryan on April
8, 1982, respecting the contents of the appeal
book, did not dispose of the appeal, it appears
probable that it was the reason for plaintiff's
decision to discontinue the appeal on September
20, 1982. The present motion was dated Septem-
ber 23, 1982, although neither it nor the discon
tinuance was filed until October 12. Over 10
months had elapsed since the judgment of
December 3, 1981, and there do not appear to
have been any delays which could be attributable
to defendant.
While there is no excuse for the delay in seeking
reconsideration of the pronouncement so as to
make a special direction with respect to the
expert's costs, I am nevertheless prepared to exer
cise my discretion pursuant to Rule 337(5) and
extend the delay for reconsidering the pronounce
ment of judgment on the basis that this is a matter
which should have been dealt with but which was
overlooked, and that it would be most inequitable
and contrary to the normal practice not to make
such a direction.
I might add that, in exercising this discretion to
extend the delay for making this motion, and in
making a special direction pursuant to Rule
344(7) for expert's costs, I am of the view that a
clear distinction should be made between an order
making special directions respecting expert's costs,
and an order increasing counsel fees beyond those
fixed by the Tariff or awarding a lump sum in lieu
of taxed costs. The current view of the Court of
Appeal, following the Smerchanski judgment
(supra), is that it is only in very exceptional
circumstances that the Tariff, even if inadequate,
should be departed from in the party and party
taxation of costs. Had plaintiff sought an increase
in the counsel fees provided for in the Tariff, I
would have rejected this, and had this been the
only issue I .would not have exercised my discretion
to excuse the delay in seeking a modification of the
pronouncement of judgment.
It should not be concluded that I consider that
the amount of $7,684 is necessarily reasonable and
proper under the circumstances, for this is a
matter to be determined by agreement, or on
taxation followed by an appeal from it if neces
sary. Defendant submits that much of the account
was not properly incurred in preparation for trial,
but had previously been incurred for an earlier
report prior to the hearing before the Tax Review
Board.
With respect to plaintiff's request that the
matter be considered as a Class III action: this is
dismissed. Paragraphs 1(3)(b) and (c) of Tariff A
read as follows:
1. ...
(3) Unless the Court otherwise directs in respect of a particu
lar step in a proceeding, or in respect of all steps in a particular
proceeding,
(b) where a step is a step in a proceeding that is, or was in its
inception, an appeal to the Trial Division or any other
proceeding in the Trial Division where no judgment is being
sought for payment of an ascertained amount, it shall be
classified as a Class II step;
(c) where a step is a step in a proceeding in which there is an
amount involved on the face of the proceedings that is $5,000
or more and less than $50,000, it shall be classified as a Class
ll step;
The present proceedings can hardly be considered
as seeking a judgment for payment of an ascer
tained amount, and even if they were, the amount
involved is less than $50,000. Defendant's
representations include various calculations and
accompanying affidavits, but even if the shares
had been valued at $44.70 (the figure plaintiff
sought), rather than at $7.45 a share (the amount
established by the Tax Review Board), the differ
ence in taxable capital gain would have been the
difference between $3,460.81 and $66,059.44, the
amount of tax being $30,798.23. Unless interest is
taken into consideration, and in my view it should
not be, and even taking plaintiff's own figure for
reassessment of tax of $34,951.69 and if interest
were included to the date of institution of proceed
ings in January 1980, the total would still be less
than $50,000.
I therefore find the proceedings to be a Class II
action.
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.