Date: 20050525
Docket: T-1459-97
Citation: 2005 FC 744
Ottawa, Ontario, May 25, 2005
Present: The Honourable Madam Justice Danièle Tremblay-Lamer
BETWEEN:
ITV TECHNOLOGIES, INC.
Plaintiff
AND
WIC TELEVISION LTD.
Defendant
AND:
WIC TV AMALCO INC. and
GLOBAL COMMUNICATIONS LIMITED
Plaintiffs by Counterclaim
AND
ITV TECHNOLOGIES, INC.
Defendant by Counterclaim
REASONS FOR ORDER AND ORDER
[1] In the Order dated September 10, 2003, the claim for expungement made by the plaintiff, defendant by counterclaim, ITV Technologies Inc. (ITV), was dismissed with costs. The counterclaim for passing off, trademark infringement and depreciation of goodwill attached to registered trademarks made by the defendant, plaintiff by counterclaim, WIC Television Ltd./Global Communications Limited (WIC), was also dismissed with costs.
[2] ITV now seeks an Order directing the assessment officer to award ITV costs for the proceedings until November 13, 2002, which is the date of service of ITV's offer to settle, and double costs for the proceedings after November 13, 2002. ITV is also seeking an order directing the assessment officer to award WIC costs of the claim only for a period to:
a) October 24, 1997, the date of filing of WIC's Statement of Defence and Counterclaim; or
b) November 14, 1997, the date when WIC found unacceptable ITV's suggestion to resolve the dispute by relocating its corporate offices from Vancouver to the United States; or
c) March 4, 1998, the date when ITV sought a settlement meeting conceding that WIC possessed a trademark for ITV in Canada but stating that the crux of the issue was whether that trademark could be used to negate and garner ITV.net; or
d) September 2000, the date when WIC abandoned its ITV trademarks in any event of the Claim; or
e) November 13, 2002, the date of service of ITV's Offer to Settle.
[3] This motion also seeks an order that the high end of Column IV of Tariff B be used in assessing costs.
ANALYSIS
1. Doubling costs after the offer to settle
[4] Rule 420(1) of the Federal Court Rules, 1998, SOR/98-106 reads as follows:
| 420. (1) Unless otherwise ordered by the Court, where a plaintiff makes a written offer to settle that is not revoked, and obtains a Order as favourable or more favourable than the terms of the offer to settle, the plaintiff shall be entitled to party-and-party costs to the date of service of the offer and double such costs, excluding disbursements, after that date. |
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420. (1) Sauf ordonnance contraire de la Cour, le demandeur qui présente par écrit une offre de règlement qui n'est pas révoquée et qui obtient un jugement aussi avantageux ou plus avantageux que les conditions de l'offre a droit aux dépens partie-partie jusqu'à la date de signification de l'offre et, par la suite, au double de ces dépens, à l'exclusion des débours. |
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[5] The rule explicitly establishes two preconditions for awarding double costs to the party that made an offer to settle: the offer must be in writing and it must not be revoked (see Halford v. Seed Hawk Inc., [2004] F.C.J. No. 1541 (F.C.)(QL); Francosteel Canada Inc. v. African Cape (The), [2004] 4 F.C. 284 (F.C.A.)). Here, there is no question that these two preconditions have been met.
[6] What is in question is whether the offer made by ITV was truly an offer to settle as contemplated by the rule. WIC submits it was not such an offer because it lacked an element of compromise, and therefore the double cost consequences of Rule 420 do not come into play.
[7] With increasing frequency, this search for an ingredient of compromise has become an explicit component of this Court's task when reviewing offers to settle (see Canadian Olympic Assn. v. Olymel, Societe en Commandite (2000), 8 C.P.R. (4th) 429 (F.C.T.D.); Monsanto Canada Inc. v. Schmeiser, [2002] F.C.J. No. 566 (F.C.T.D.)(QL); Champion International Corp. v. Sabina (The), [2003] F.C.J. No. 64 (F.C.T.D.)(QL); Kirgan Holding S.A. v. Panamax Leader (The), [2003] F.C.J. No. 124 (F.C.T.D.)(QL)). Conceptually though, adding this "ingredient of compromise" requirement to the analysis under Rule 420 is somewhat counterintuitive. By definition, it seems to me, an offer to settle is an implicit compromise - neither party gains or loses what it would have if completely successful or unsuccessful at trial.
[8] That is in essence what I believe was the underlying concern in the above cases. An offer to settle is not a true offer to settle, that is, an offer within the meaning of Rule 420, if the benefits of that offer are wholly one-sided.
[9] Where, for example, the party purporting to make an offer is in effect inviting the other party to capitulate without making any concessions of its own, the benefits are one-sided. Baker Petrolite Corp. v. Canwell Enviro-Industries Ltd., [2002] F.C.J. No. 1710 (F.C.A.) illustrates this. There, the alleged "offer" was found by Strayer J.A. to be "for all practical purposes¼a demand for complete surrender with regard to the enforcement of the plaintiffs' patent rights vis à vis these defendants". Therefore, Strayer J.A. refused to award double costs.
[10] Although emanating from a different context, I also find Independent Multi-Funds Inc. Bank of Nova Scotia (2004), 130 A.C.W.S. (3d) 912 (Ont. S.C.J.) helpful as an example. In that case, the Court declined to order double costs pursuant to the rule in Ontario analogous to Rule 420, because the defendant's offer totalled $25,000 whereas the claim was estimated at $17,000,000.
[11] In sum then, I agree that an element of compromise is necessary to trigger the cost consequences of Rule 420. Unless, however, the benefits of the offer are in practical terms wholly one-sided, this element will be met in my view assuming the offer in question is "clear and unequivocal in the sense [that] it leaves the opposite party to decide only whether to accept it or reject it": Syntex Pharmaceuticals International Ltd. et al. v. Apotex Inc. (2001), 12 C.P.R. (4th) 413 at 416 (F.C.A.).
[12] With these principles in mind, I am satisfied that double costs should be awarded in the instant case subsequent to the offer to settle made by ITV.
[13] While I recognize that the offer does not explicitly state whether ITV would stop pursuing its claims for trademark expungement it does mention specifically that if WIC agreed to dismiss its counterclaim, ITV would immediately request permission to follow up on WIC's undertaking as to damages. However, an order by Prothonotary Hargrave's dated November 7, 2002, clearly states that any such request to follow up by ITV cannot occur until after judgment on the issues raised in the pleadings. Therefore, it follows that ITV would have stopped pursuing its claims for expungement in order to follow up on WIC's undertaking.
[14] Moreover, the benefits of this offer are not, in my opinion, one-sided: in exchange for an agreement from WIC to halt its infringement and passing off counterclaim, ITV was willing to cease its efforts to expunge WIC's trademarks.
[15] In light of this, the mere fact that the offer did not include a concession concerning costs does not militate in favour of departing from the double cost consequences contemplated by the rule.
[16] I therefore award costs to ITV for the counterclaim until Novermber 13, 2002, and double costs thereafter.
2. Limiting WIC's costs
[17] The second and third forms of relief sought by ITV in this motion raise the same issue, namely, whether, and to what extent, the Court can vary its order relating to costs. The following preliminary remarks will therefore also be relevant to whether the scale of costs can be altered, which is addressed below.
[18] In the present action, I dismissed both ITV's claim and WIC's counterclaim "with costs". ITV now seeks to limit WIC's award of costs and at the same time increase its own costs by adjusting the applicable scale under Tariff B. In response to both, WIC argues that this Court is not empowered to do either under the guise of special directions made pursuant to Rule 403 because the order concerning costs has already been granted. Rule 403 provides:
| 403.(1) A party may request that directions be given to the assessment officer respecting any matter referred to in rule 400,
(a) by serving and filing a notice of motion within 30 days after judgment has been pronounced; or
(b) in a motion for judgment under subsection 394(2).
(2) A motion may be brought under paragraph (1)(a) whether or not the judgment included an order concerning costs.
(3) A motion under paragraph (1)(a) shall be brought before the judge or prothonotary who signed the judgment. |
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403.(1) Une partie peut demander que des directives soient données à l'officier taxateur au sujet des questions visées à la règle 400 :
a) soit en signifiant et en déposant un avis de requête dans les 30 jours suivant le prononcé du jugement;
b) soit par voie de requête au moment de la présentation de la requête pour jugement selon le paragraphe 394(2).
(2) La requête visée à l'alinéa (1)a) peut être présentée que le jugement comporte ou non une ordonnance sur les dépens.
(3) La requête visée à l'alinéa (1)a) est présentée au juge ou au protonotaire qui a signé le jugement. |
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[19] In my view, the general starting point to resolving these issues should be this: provided the special directions for the assessment of costs are not inconsistent with the original order, this Court has the jurisdiction, indeed the discretion, to make the same.[1] As Rothstein J.'s comments in Consorzio del Prosciutto di Parma v. Maple Leaf Meats Inc., [2003] 2 F.C. 451 at para. 3 (F.C.A.), underscore: "a motion under Rule 403 must be considered a statutorily sanctioned procedure for the amendment or variation of a judgment."
[20] Clearly, some suggested variations such as completely denying a party costs when they had previously been granted go too far - they are utterly inconsistent with the Court's initial order. However, I can see no difference in principle, in the context of a motion for directions pursuant to Rule 403, between limiting one party's costs to a certain time frame versus granting a lump sum increase to one party versus adjusting the scale of costs. Whether these purported variations are to be considered inconsistent with the original order and thus in my opinion outside the scope of the Court's discretion under Rule 403, is a question to be determined in the particular circumstances of each case, and in light of the specificity of the original order that was rendered. As Rule 400 confirms after all, costs are primarily a matter of discretion.
[21] Nevertheless, I do not agree with this proposed variation by ITV to limit WIC's costs. While WIC waited over two years before withdrawing its counterclaim for injunctive relief, delivery up, relinquishment and transfer of the domain name ITV.net, WIC also proposed going to trial on the counterclaim alone thus narrowing the issues to be determined considerably. There was some degree of overlap between the evidence relating to invalidity and the evidence relating to infringement, but a significant portion of the time and expense associated with the former could have been avoided. Moreover, even though WIC's abandonment of the trademarks in question rendered the claim for expungement moot, ITV continued to pursue this claim.
[22] In these circumstances, WIC's award of costs in relation to ITV's dismissed claim should not be limited to any of the timeframes proposed by ITV.
[23] I would add also that ITV's reliance on Rule 399 and the holding in Saywack v. Canada (Minister of Employment and Immigration), [1986] 3 F.C. 189 (F.C.A.), is misplaced. An offer to settle cannot be considered something that is discovered after judgment necessitating a change to the Court's order. By virtue of Rule 422 such offers cannot be disclosed to the Court prior to judgment, and are therefore clearly outside the type of unexpected circumstance, which would merit the application fo Rule 399.
3. Assessing costs according to the high end of Column IV of Tariff B.
[24] ITV states that the case raised many issues relating to trademark rights and their relationship to domain names as well as novel evidentiary issues regarding the use of the internet at trial. Voluminous documentary and opinion evidence was filed and there were many issues of admissibility which rendered the case complex. Therefore, costs should be assessed at the high end of column IV of Tariff B.
[25] Again, WIC claims that the Court cannot adjust the scale of costs (from column III to column IV of Tariff B) upon a motion for special directions pursuant to Rule 403. I would like to add the following to my remarks above regarding the scope of the Court's discretion where an order dismissing the parties' claims "with costs" has already been made.
[26] WIC relies on Justice O'Keefe's comments in Caricline Ventures Ltd. v. ZZTY Holdings Ltd., [2002] F.C.J. No. 756 (F.C.T.D.). There, O'Keefe J. reasoned that because he had ordered that the plaintiff "shall have its costs", and not "otherwise", column III of Tariff B applied, citing Rule 407, which makes column III the default scale for party-and-party costs. On a motion for special directions, O'Keefe J. continued, the Court is not empowered to alter its order, which is what directing the assessment of costs at the high end of column IV would entail.
[27] With respect, I am not ready to construe my discretion in such a restrictive fashion. Though departing from column III of the tariff is the exception, the basic principle in relation to costs, including in the context of a motion under Rule 403, is that the Court has full discretionary power. Accordingly in my view, the Court has jurisdiction to increase costs, whether by lump sum or adjusting the column, on such a motion. The jurisprudence supports this.
[28] In Consorzio del Prosciutto di Parma v. Maple Leaf Meats Inc., [2002] 2 F.C.J. No. 656 (F.C.A.), the Court of Appeal dismissed the appeal, argued incidentally by Mr. Edmonds (counsel to WIC), "with costs". Subsequently, in the same proceeding (Consorzio del Prosciutto di Parma v. Maple Leaf Meats Inc., [2003] 2 F.C. 451 (F.C.A.)), Rothstein J.A. summarized the principles applicable to a rule 403 motion as follows:
[2] Rule 403 provides:
403.(1) A party may request that directions be given to the assesment officer respecting any matter referred to in rule 400,
(a) by serving and filing a notice of motion within 30 days after judgment has been pronounced; or
(b) in a motion for judgment under subsection 394(2).
(2) A motion may be brought under paragraph (1)(A) whether or not the judgment included an order concerning costs.
(3) A motion under paragraph (1)(a) shall be brought before the judge or prothonotary who signed the judgment .
[3] A preliminary question is whether the words of subsection 403(3) permit the motion to be determined by the judge who signed the judgment, or whether it should be decided by the panel that heard the appeal. I am of the view that interpreted in context, subsection 403(3) intends that a motion brought under rule 403 be decided by the panel of the Appeal Division who heard the appeal. Paragraph 403(1)(a) provides for a motion for directions after judgment has been pronounced.
[4] A motion under rule 403 is for directions to an assessment officer. Nothing in rule 403 precludes the prothonotary or judge of the Trial Division or panel of the Appeal Division from directing the assessment officer to assess increased costs on the basis of a lump- sum award. Therefore, I interpret rule 403 as permitting the panel of the Appeal Division to make a lump-sum award of costs as is requested in this motion and direct the assessment officer to assess costs on that basis.
[5] The respondent has submitted that 12 issues were raised on appeal and each required a full response. The issues involved complex questions of fact, including having to deal with expert evidence and survey methodology. The argument in the appeal lasted close to a whole day.
[6] I am satisfied in the circumstances of this case, that the respondent should be awarded increased costs. This is an intellectual property matter involving sophisticated clients. Where, as here, numerous issues are raised on appeal and the issues involve complex facts and expert evidence, the amount of work required of respondent's counsel justifies increased costs. To the argument that the complexity of this case was no greater than that of most intellectual property cases that come before this Court, I would say that such cases frequently present complex facts and give rise to difficult issues.
[7] The increased costs to be awarded are party-and-party costs. They do not indemnify the successful party for its solicitor-client costs and they are not intended to punish the unsuccessful party for inappropriate conduct.
[8] An award of party-and-party costs is not an exercise in exact science. It is only an estimate of the amount the Court considers appropriate as a contribution towards the successful party's solicitor-client costs (or, in unusual circumstances, the unsuccessful party's solicitor-and-client costs). Under rule 407, where the parties do not seek increased costs, costs will be assessed in accordance with column III of the table to Tariff B. Even where increased costs are sought, the Court, in its discretion, may find that costs according to column III provide appropriate party-and-party compensation.
[9] However, the objective is to award an appropriate contribution towards solicitor-client costs, not rigid adherence to column III of the table to Tariff B which is, itself, arbitrary. Subsection 400(1) makes it clear that the first principle in the adjudication of costs is that the Court has "full discretionary power" as to the amount of costs. In exercising its discretion, the Court may fix the costs by reference to Tariff B or may depart from it. Column III of Tariff B is a default provision. It is only when the Court does not make a specific order otherwise that costs will be assessed in accordance with column III of Tariff B.
[10] The Court, therefore, does have discretion to depart from the Tariff, especially where it considers an award of costs according to the Tariff to be unsatisfactory. Further, the amount of solicitor-and-client costs, while not determinative of an appropriate party-and-party contribution, may be taken into account when the Court considers it appropriate to do so. Discretion should be prudently exercised. However, it must be borne in mind that the award of costs is a matter of judgment as to what is appropriate and not an [page458] accounting exercise. [Emphasis added]
[29] The underlined comments by Rothstein J.A. cannot, in my view, be taken to mean that the presence of the word "otherwise" is a necessary condition for departing from column III. On the contrary, while the appeal was dismissed "with costs", the Court of Appeal ordered a lump-sum increase in costs (see also for e.g., Halford, supra).
[30] Furthermore, this argument that the Court has no jurisdiction to entertain a motion for an increase in costs once an order of costs has been made was specifically rejected by the Federal Court of Appeal in CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] F.C.J. No. 1399 (F.C.A.).
13 Second, the publishers say that even if this Court is the proper forum for an application for increased costs, an order by the Supreme Court of "costs throughout" leaves no discretion to this Court to order costs other than under Column III of Tariff B. The publishers rely on Consorzio del Prosciutto di Parma v. Maple Leaf Meats Inc. (2002), 22 C.P.R. (4th) 177 at para. 9 (F.C.A.):
In exercising its discretion, the Court may fix the costs by reference to Tariff B or may depart from it. Column III of Tariff B is a default provision. It is only when the Court does not make a specific order otherwise that costs will be assessed in accordance with Column III of Tariff B.
As the Supreme Court did not make a specific order for increased costs, the publishers argue that costs must be assessed in accordance with Column III.
[...]
16 Turning to the publishers' second argument, when the matter of costs is remitted to this Court after a judgment of the Supreme Court awarding costs, the only fetter on the discretion conferred upon this Court in respect of costs is that this Court may not exercise its discretion in a manner inconsistent with the award of costs by the Supreme Court of Canada. This approach was succinctly explained by Strayer J.A. in Eli Lilly and Co. v. Novopharm Ltd. (1998), 85 C.P.R. (3d) 219 at paragraph 5 (F.C.A.):
Clearly there are some discretionary powers under Rule 400 which cannot be exercised in the face of an award of costs ordained by the Supreme Court. For example, this Court could not, in the face of such a direction, refuse costs or award them instead to the unsuccessful party. But, in my view, any discretionary power granted by the Federal Court Rules whose exercise is not inconsistent with the award of costs by the Supreme Court can be exercised in giving effect to an award of costs in this Court by the Supreme Court on appeal.
17 In my view, when the Supreme Court makes an award of "costs throughout," the direction to this Court is neutral, in the sense that, as long as costs are awarded, the Supreme Court is leaving it to this Court to decide on the appropriate amount of costs. Under such a direction, when the matter of costs is remitted to this Court, costs are to be assessed in accordance with the Rules of this Court which allow for the awarding of increased costs (see rules 400(1) and (4)).
[31] The same situation occurred in Ludco Enterprises Ltd. v. Canada, [2002] F.C.J. No. 1622 (F.C.A.)(QL): the Supreme Court ordered "costs throughout" and the Federal Court of Appeal subsequently adjusted the scale of costs pursuant to Rule 403.
[32] The circumstances in CCH, supra and Ludco, supra admittedly differ from the present case in that the Court of Appeal was faced with a motion regarding the assessment of costs after the Supreme Court of Canada had decided the merits of the appeal. Nevertheless, it seems to me that the same logic should apply here by extension: provided adjusting the scale of costs from column III to column IV is not considered "inconsistent" with the Court's order that the appeal be dismissed "with costs", then the Court has jurisdiction to consider a motion for such directions. As CCH, supra explains, subsequently refusing to order costs altogether or granting them to the other party would be inconsistent with the original order. But increasing costs to a certain extent, whether in the form of a lump sum or by using a different tariff column, appears to be in line with what is contemplated by Rule 403.
[33] Perhaps awarding costs on a solicitor-client scale would be "inconsistent" with the original order because such awards are reserved for the rarest of circumstances. However, though he ultimately did not make such an award, Lemieux J. held that there was no jurisdictional bar to making a award of costs on a solicitor-client scale after the application had been dismissed with costs in AB Hassle v. Apotex Inc., [2004] F.C.J. No. 1910 (F.C.)(QL).
[34] The decision of Layden-Stevenson J. in AB Hassle et al. v. Genpharm Inc., et al., [2004] F.C.J. 1087 (F.C.)(QL), referred to by Lemieux J., supports the same general conclusion: provided such a variation of costs is not inconsistent with the initial order, such a variation can in theory be granted. Layden-Stevenson J., in marked contrast to the present case as well as the circumstances facing Lemieux J., was constrained by order with "such costs to be taxed on the ordinary scale". As a result, to change which column of the tariff applied would have been inconsistent with the Court's order in that case.
[35] Based on the jurisprudence considered as a whole then, and given the general nature of the Court's order concerning costs, it is open to this Court to adjust the scale of costs. And in my view, it is appropriate to do so here. The questions of law and the evidentiary issues relating to the internet tied to both the claim and counterclaim were novel and of similarly complex.
[36] Costs to both WIC and ITV should therefore also be assessed pursuant to Column IV of tariff B.
ORDER
THIS COURT ORDERS that
[1] Costs are awarded to ITV for the counterclaim until November 13, 2002 and double costs thereafter.
[2] Costs to both WIC and ITV are to be assessed according to the high end of column IV of Tariff B.
"Danièle Tremblay-Lamer"
J.F.C.
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1459-97
STYLE OF CAUSE: ITV Technologies, Inc.
and
WIC Television Ltd.
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: May 3, 2005
REASONS FOR ORDER
AND ORDER OF Tremblay-Lamer J.
APPEARANCES:
Mr. Paul Gornall FOR PLAINTIFF
Mr. Brian Edmonds
Mr. Barry Fraser FOR DEFENDANT
SOLICITORS OF RECORD:
Lawyer - Reg'd Patent & TM Agent
1820-355 Burrard Street
Vancouver, British Columbia
V6C 2G8 FOR PLAINTIFF
McCarthy Tétrault
Toronto, Ontario and
Vancouver, British Columbia FOR DEFENDANT
[1] The Federal Court of Appeal has at least twice underscored this notion of inconsistency: see CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] F.C.J. No. 1399 (F.C.A.) and Eli Lily and Co. v. Novopharm Ltd. (1998), 85 C.P.R. (3d) 219 (F.C.A.), discussed and quoted below.