Ottawa, Ontario, this 11th day of October, 2005
PRESENT: The Honourable Madam Justice Snider
BETWEEN:
Plaintiff
- and -
ROCKY MOUNTAIN SPRING (ICEWATER 02) INC. and KEN HON KIN KWOK
Defendants
REASONS FOR ORDER AND ORDER
Costs
[1] The defendants, Ken Hon Kin Kwok and Rocky Mountain Spring (Icewater 02) Inc., were served with a Statement of Claim on December 29, 2004. Fibremann Inc. was the plaintiff. Neither of the defendants responded and, by Order of this Court dated February 11, 2005, default judgment was granted against the defendants, in the amount of $24,000.00 in damages and $32,500.00 in solicitor-client costs. On April 19, 2005, Mr. Kwok filed a motion to set aside the default judgment against him. On July 14, 2005, I dismissed Mr. Kwok's motion and ordered costs of the motion to the plaintiff (Fibremann Inc. v. Rocky Mountain Spring (Icewater 02)Inc. and Ken Hon Kin Kwok, 2005 FC 977). I invited parties to make submissions on costs. They have now done so.
Plaintiff=s Submissions
[2] The plaintiff requests a lump sum costs award of $45,000.00 or, in the alternative, a percentage of their solicitor-client costs (which total $48,986.80). It is submitted that the solicitor-client costs related to the defendant's motion to set aside default judgment break down as follows:
- $41,438.00 for legal fees,
- $4,337.51 for disbursements, and
- $3,211.29 in GST.
[3] The plaintiff emphasizes that solicitor-client costs were awarded by this Court when granting default judgment against the defendants, and submits that such an award should not be "eroded" by the costs of responding to Mr. Kwok's unsuccessful motion (Fraser v. Bank of Nova Scotia, [2001] F.C.J. No. 1404, 2001 FCA 267). The plaintiff also submits that Mr. Kwok's conduct which gave rise to this action was reprehensible, and that Mr. Kwok unnecessarily lengthened the proceedings.
[4] The plaintiff submits that, since this proceeding is already unnecessarily protracted, lump-sum costs should be awarded (Consorzio del Prosciutto di Parma v. Maple Leaf Meats Inc., [2003] 2 F.C. 451 (F.C.A.); Volkswagen Canada Inc. v. Access International Automotive Ltd., [2004] F.C.J. No. 614, 2004 FC 508 (F.C.)).
[5] In response to Mr. Kwok's suggestion of much lower costs, the plaintiff contends that Mr. Kwok's proposal would account for only 3.5% of the plaintiff's solicitor-client costs, and that even the highest awards drawn from Tariff B of the Federal Court Rules (SOR/98-106) would only account for less than 25% of their costs. The plaintiff submits that the Court should depart from Tariff B in order to achieve adequate compensation.
Defendant=s Submissions
[6] Mr. Kwok submits that it is appropriate to award party-and-party costs on this motion, in accordance with Tariff B. Given the small judgment amount in this case, an assessment should be made from the lower end of Column III of Tariff B. Mr. Kwok submits that the total costs that should be awarded are 13 units under Tariff B, amounting to $1,560.00, plus disbursements.
[7] It is also submitted that the amount requested by the plaintiff is not appropriate, for several reasons:
- The judgment was only for $24,000.00. Combined with the costs awarded upon default judgment, the plaintiff is seeking $77,500.00 in costs, which is excessive.
- An award of $45,000.00 in costs is eight times higher than the maximum amount possible under Tariff B.
- Solicitor-client costs should only be awarded in exceptional circumstances, where a party has displayed reprehensible, scandalous, or outrageous conduct (Rice, P.C.J. v. N.B. (2002), 282 N.R. 201 at para. 86 (S.C.C.)) which is not the case here.
- Mr. Kwok's conduct in the main action has already been addressed by an award of solicitor-client costs as part of the default judgment, and should not be a factor here.
Analysis
[8] I am grateful for the extensive guidance provided by the Federal Court of Appeal in Consorzio, supra, concerning cost awards. In that case, the issue was whether this Court or the Court of Appeal could direct an assessment officer, under Rule 403 of the Federal Court Rules, to assess increased costs, on a party-and-party basis, as a lump-sum award. Despite differences from the case at bar, the majority's reasoning in regard to the appropriateness of increased costs applies here. I have distilled the following relevant guidelines from the majority decision:
- Tariff B is merely a default, arbitrary provision in regards to costs, and applies only where the Court does not make a specific order otherwise (at para. 9).
- The Court has full discretionary power to award the appropriate costs (at para. 10).
- The fact that the successful party's legal costs are far in excess of the amounts set out under Tariff B is not a factor for awarding increased costs (at para. 11).
- The length and complexity of a case, including the number of issues raised and amount of work required, is a relevant consideration (at para. 6).
[9] In Consorzio, supra, the respondent's total solicitor-and-client fees and disbursements were $80, 707.59. The respondent sought $40,000.00 in a lump sum award on a party-and-party basis. The majority granted an award of $25,000.00.
[10] In considering the appropriate level of costs, I have considered the factors listed under R. 400(3). Those factors of particular relevance to this matter are discussed below. Given that Mr. Kwok's motion to set aside default judgment had little, if any, merit, other than as a reactionary measure to the amount of costs awarded upon default judgment, I am satisfied that he has unnecessarily lengthened the proceedings (R. 400(3)(i)). Further, Mr. Kwok's motion was unnecessary (R. 400(3)(k)(i)), given my finding that his only motivation was to avoid paying costs (Fibremann, supra, at para. 24). In addition, several of his claims in the motion were untruthful or misleading (for example, that he was an unsophisticated and unknowing defendant). These factors suggest increased costs.
[11] The judgment amount in this case was quite small (R. 400(3)(b)). At $24,000.00, it was less than the costs awarded on default judgment. The plaintiff's request for, essentially, a full indemnification of costs, threatens to balloon the global costs awarded against Mr. Kwok to an amount which is, relative to the damages, ridiculously large. This factor militates against increased costs.
[12] I am mindful of the history of this case and the Federal Court of Appeal's ruling in Fraser, supra, at paragraph 11, that a party's conduct in the first instance, leading to a costs award, can be considered on judicial review or on appeal. This Court found that Mr. Kwok's conduct was sufficiently reprehensible to require an award of costs, upon default judgment, on a solicitor-client basis. However, the award of solicitor-client costs on the default judgment was intended to account for Mr. Kwok's behaviour up to the time of judgment; there should not be double counting.
[13] I commented above on the meritless nature of Mr. Kwok's motion in response to the judgment. It would be unfair to suggest that the plaintiff should shoulder a significant portion of the burden of defending that motion. To echo the words of Justice Sexton, from paragraph 12 of Fraser, supra, the plaintiff should not have been put in the position of defending the motion.
[14] The sheer enormity of the costs potentially facing Mr. Kwok, relative to the damages amount in this case, causes me some pause. Nonetheless, Mr. Kwok's needless protraction of this case, and his questionable motives in this motion, lead me to the conclusion that his conduct has been improper and outrageous. Given the exceptional circumstances of this case, solicitor-client costs are appropriate.
[15] As stated in Consarzio, supra, I should not consider whether the plaintiff's actual costs are in excess of the Tariff amounts, which I take to mean that my principle concern, even when deviating from the Tariff amounts, should not be whether the plaintiff will be fully compensated for their legal fees.
[16] As regards to lump-sum awards, the Federal Court of Appeal in Consorzio,supra, recognized the full discretion of this Court, under R. 400(3), to award lump-sum costs as appropriate and in particular to avoid further costs stemming from the assessment process (at para. 12). Mr. Kwok has not contested the plaintiff's request for a lump-sum award. Given that this case has already been unnecessarily protracted, a lump-sum award is appropriate.
[17] In conclusion, having considered the foregoing and in exercising my discretion, I would assess costs against Mr. Kwok at $15,000.00 plus GST and disbursements.
ORDER
This Court orders that costs, in a lump sum amount of $15,000.00 plus disbursements and GST, be awarded to the plaintiff payable by Mr. Kwok.
"Judith A. Snider"
______________________________ Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-2270-04
STYLE OF CAUSE: FIBREMANN INC. v. ROCKY MOUNTAIN SPRING
(ICEWATER 02) INC. et al
DEALT IN WRITING: Ottawa, Ontario
REASONS FOR ORDER: Snider J.
DATED: October 11, 2005
SOLICITORS ON THE RECORD:
Burnet, Duckworth & Palmer LLP FOR THE PLAINTIFF
Barristers and Solicitors
Calgary, Alberta
Bennett Jones LLP FOR THE DEFENDANTS
Barristers and Solicitors
Calgary, Alberta