T-388-74
Consolboard Inc. (Plaintiff)
v.
MacMillan Bloedel (Saskatchewan) Limited
(Defendant)
Trial Division, Cattanach J.—Ottawa, May 20
and 26, 1982.
Practice — References — Appeals by both parties from
report of Referee concerning assessment of damages resulting
from patent infringement — Report varied by Court, on
motion for judgment, with respect to royalty rate and applica
bility of statute of limitation — Quantum of damages reduced
in favour of defendant — Success divided on issues in appeals
— Issue turns on date from which post-judgment interest
should accrue: date of report, date of appeal of report or date
of judgment — Issue also turns on costs of reference and of
appeals — Costs of reference to be segregated from costs of
appeal — Interest at prescribed rate to run from date of
judgment according to s. 40 of Act — Each party awarded its
costs on appeal — Subject to percentage apportionment of
divided success on appeals — Plaintiff entitled to its costs on
reference — Exchequer Court Rule 186 — Federal Court Act,
R.S.C. 1970 (2nd Supp.), c. 10, s. 40 — Federal Court Rules
344(1), 505, 506, 507.
CASE JUDICIALLY CONSIDERED
DISTINGUISHED:
Lightning Fastener Company Limited v. Colonial Fas
tener Company Limited et al., [1936] Ex.C.R. 1.
MOTION.
COUNSEL:
A. Creber for plaintiff.
R. Hughes and K. D. McKay for defendant.
SOLICITORS:
Gowling & Henderson, Ottawa, for plaintiff.
Sim, Hughes, Toronto, for defendant.
The following are the reasons for judgment
rendered in English by
CATTANACH J.: In my reasons for judgment on
appeals pursuant to Rule 506 by each of the
parties from the report dated October 28, 1981 of
the Referee to whom the matter had been referred
to assess the damages consequent upon the
infringement by the defendant of claims in certain
patents owned by the plaintiff I directed that
counsel for the plaintiff should prepare a draft of
the judgment to implement the conclusions therein
reached together with a schedule indicating the
computation of the amount of the damages in
accordance with those conclusions to which coun
sel for the defendant should indicate his agreement
or, in the event of disagreement, the particulars
therefor.
On this being done counsel for the plaintiff was
to move for judgment on notice to counsel for the
defendant.
There were matters remaining to be spoken to
on that motion being:
(1) the date from which post-judgment interest should accrue
at the rate prescribed by section 40 of the Federal Court Act by
reference to section 3 of the Interest Act, i.e., from
(a) October 28, 1981 the date of the reports of the Referee,
as recommended by the Referee,
(b) April 6, 1982 the date upon which the report of the
Referee was appealed, or
(c) the date of the judgment.
By Rule 505 the Referee is obliged to make a
report of his findings for or against any party but
he is precluded from giving judgment thereon. The
report is forthwith transmitted to the Registry and
the Registry gives notice to the parties.
Within 14 days after service of the notice of the
report any party may by motion appeal to the
Court against the report as provided in Rule 506.
This was done by both parties; there were, in
effect, an appeal by the defendant, a defence to
that appeal and a counter appeal by the plaintiff.
On such appeal the Court may:
(1) confirm,
(2) vary or reverse the findings of the Referee,
(3) refer the matter back to the Referee for further consulta
tion, or
(4) deliver judgment.
I opted to deliver judgment.
By Rule 507 the report of the Referee becomes
absolute if not appealed within the time prescribed
by Rule 506 but in that event judgment will not be
delivered except by motion for judgment to the
Court on eight days' notice.
Rule 507, except for minor variations in lan
guage dictated by the introduction of the term
"referee" in the revision of the Rules, is identical
in language and substance to Rule 186 of the
Exchequer Court Rules.
In Lightning Fastener Company Limited v.
Colonial Fastener Company Limited et al., [1936]
Ex.C.R. 1, Maclean J., subject to a minor deduc
tion, affirmed the report of a Referee as to the
amount of damages to which the plaintiff was
entitled and gave judgment therefor [at page 12]
"with interest from the date of the Report of the
Referee".
In that instance Maclean J. affirmed the report
of the Referee. In the present instance I have made
a very substantial variation to the report of the
Referee with respect to the rate of royalty and the
applicability of a statute of limitation which result
ed in a reduction of the damages in the amount of
approximately $1,200,000 to approximately $400,-
000, a difference of $800,000 or 66 2 / 3 %.
Section 40 of the Federal Court Act, R.S.C.
1970 (2nd Supp.), c. 10, provides that unless
otherwise ordered a judgment bears interest from
the date of giving judgment.
Because the report of the Referee was not con
firmed (contrary to the circumstance before
Maclean J.), but rather there was a substantial
reduction in the quantum of damages it appears
incongruous that interest on that lesser amount
should be made retroactive to a date when a report
was made for a greater amount but when there
was no judgment. There does not appear to be any
circumstance which would warrant ordering other
wise than that interest at the prescribed rate shall
run from the date of the judgment.
The defendant appealed on three basic grounds
that the Referee erred:
(1) in fixing the rate of royalty at 1 1 / 2 % rather than 1 / 2 of 1%;
(2) in not excluding direct car allowances as a reduction in the
selling price rather than a marketing commission which
reduced the profit as a cost of selling, and
(3) in fixing the period of limitation at two years rather than
six.
The defendant was successful on the first
ground but failed in the other two.
The plaintiff contended that:
(1) the royalty rate should have been fixed at 31% rather than
1'/%;
(2) the direct car allowance was a commission and not a
discount, and
(3) no limitation period applied.
The plaintiff succeeded on the second and third
contentions but failed on its first contention.
The plaintiff also appealed on the grounds that
the Referee erred in not awarding:
(1) pre-judgment interest,
(2) exemplary damages,
(3) damages for loss of corporate opportunities,
and that he erred in not deducting:
(4) 2% from the net mill return with respect to 3 A in. wafer-
board (this contention was abandoned after leave to apply to
the Supreme Court of Canada to amend its judgment was
refused but this was after the conclusion of the appeal before
me where the matter was argued),
(5) that the Referee made clerical or mathematical errors in
the computation of the amount of damages, i.e.,
(a) in not deducting the opening inventory as at April 15,
1965 in computing the net mill return, and
(b) a correction in the figure of the closing inventory,
(6) the plaintiff asked for post-judgment interest at a rate to be
fixed by the Court greater than that provided in section 40 of
the Federal Court Act.
The mathematical errors set forth in the plain
tiff's ground of appeal numbered (5) above were
settled by agreement.
The plaintiff's ground of appeal numbered (4)
was ultimately abandoned but not before exhaus
tive argument thereon.
The defendant was successful on the properly
applicable royalty rate and unsuccessful on the
direct car allowance and the period of limitation.
The plaintiff was successful on the direct car
allowance and the period of limitation.
Two contentions by the plaintiff were settled by
agreement and one abandoned.
In all other issues which were the subject of
appeal the plaintiff was unsuccessful.
The defendant enjoyed marked monetary suc
cess in reducing the amount of damages awarded
by the Referee from $1,045,893 to $391,386.
In very broad figures this amounts to a reduc
tion in damages of about 60%.
I would estimate that about %5 of the time on
appeal was devoted to the issues upon which the
plaintiff was successful and the balance of 4 / 5 to the
issues upon which the defendant was successful and
the plaintiff was unsuccessful. This is very roughly
approximate to the monetary success of the respec
tive parties.
Rule 344(1) provides in part that 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.
This sets forth the generally accepted rule sub
ject always to the discretion in the Court.
But when success has been divided upon issues
in which there were concurrent appeals it appears
to me to be proper that in circumstances such as
this each party should be awarded its costs as a
percentage of the whole corresponding to the suc
cess of each related to the appeals as a whole.
Added to this is the relative time devoted to
each of the several issues.
This is what I have done—that is by construing
the word "event" in Rule 344(1) distributively.
This results in a percentage apportionment of
divided success on appeals.
It was brought to my attention that on July 6,
1981 immediately before the beginning of the
reference before the Referee the defendant paid
into Court the amount of $300,000 in satisfaction
of the plaintiff's damages. This the plaintiff did
not accept.
Had the damages ultimately fixed been less than
the amount so deposited I would have deprived the
plaintiff of its costs. But conversely since the dam
ages ultimately awarded exceeded the amount
deposited the plaintiff shall be entitled to its costs
subject to the apportionment as above determined.
I do have some difficulty in looking upon the
reference as part and parcel of one continuous
proceeding bearing in mind that the report of the
Referee is subject to appeal and in this instance
was appealed.
The costs of the reference can be readily segre
gated from those of the appeal.
Since the reference is part and parcel of the trial
as a whole, and even though the success at trial
was divided and costs of the trial as to liability
apportioned, the reference is the first determina
tion of the damages susceptible of crystallization
into a judgment in the absence of an appeal. I
therefore accept the Referee's recommendation
that the plaintiff should be entitled to its costs of
the reference before him.
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.