Citation: Downey v. Cranston, 2010 NSSC 270
Date: 20100714
Docket: Hfx No. 177887
Registry: Halifax
Between:
Terrence Downey
Plaintiff
and
David Cranston, Robert Fisher, Board of Trustees Halifax Port International, International Longshoremen’s Association, Halifax Employers Association Pension Plan and Halifax Employers Association Welfare Trust Plan
Defendants
DECISION ON COSTS
Judge: The Honourable Justice Glen G. McDougall
Heard: January 15 - 18, 2008
Final Written
Submissions: January 27, 2010, February 23, 2010
Counsel: Bruce W. Evans, on behalf of the Plaintiff
John C. MacPherson, Q.C., on behalf of the Defendants
By the Court:
[1] The plaintiff was unsuccessful in his claim for disability pension benefits and medical and dental benefits against the Trustees of the Pension Plan and the Welfare Trust Plan of the Halifax Port International Longshoremen’s Association / Halifax Employers’ Association.
[2] The plaintiff was also unsuccessful in his alternative claims for damages for breach of contract and breach of fiduciary duty.
[3] It was left to the parties to try to reach an agreement on costs. They were unable to do so leaving it to the Court to decide.
[4] The Court has received written submissions from counsel for each of the parties. Counsel for the defendants has also filed rebuttal submissions in response to the submissions of counsel for the plaintiff.
Applicable Law
[5] The plaintiff’s action was commenced and heard under the Nova Scotia Civil Procedure Rules (1972) – the, so-called, “Old Rules”. Any reference to rules or to any particular rule in this decision is a reference to the 1972 rules.
[6] Rule 63.02(1) clearly states that costs are in the discretion of the Court. The exercise of discretion must be done judicially. In other words, it must be based on reason and principle and not simply by arbitrary means.
[7] Rule 63.04(1) indicates that
“unless the court otherwise orders, the costs between the parties shall be fixed by the court in accordance with the Tariffs....”
In this particular instance the appropriate tariff is Tariff A. In order to apply the Schedule, the Court must first determine the “amount involved”. In calculating costs under Tariff A, the Court is required to add an additional amount of $2,000.00 for each day of trial to the amount determined under the appropriate Scale be it 1, 2 or 3.
Defendants’ Position:
[8] The trial was for the purpose of determining the plaintiff’s eligibility for benefits. In the event of a favourable ruling for the plaintiff, the parties undertook to determine any amount owed to the plaintiff by agreement or through arbitration, if necessary, thereby alleviating the Court of this responsibility.
[9] In his written submissions, counsel for the defendants estimated the plaintiff’s damages at $181,605.00 based on an Actuarial Report. Using this as the “amount involved” and adding an additional $2,000.00 per diem for each of the four days of trial in accordance with Tariff A, the defendants would be entitled to: $16,750.00 (based on Scale 2 of Tariff A) + $8,000.00 (i.e., $2,000.00/day x 4 days) = $24,750.00.
[10] The defendants submitted that “an award of damages in the above amount would be out of step with the reasonable costs of litigation incurred by the Defendants to defend this claim.” Relying on Rule 63.02(1)(a), the defendants seek a lump sum either in lieu of or in addition to any taxed costs awarded.
[11] In arguing for a “substantial contribution” (reference: Williamson v. Williams, [1998] N.S.J. No. 498 (C.A.), (1998) 223 N.S.R. (2d) 78) towards actual legal fees and disbursements, counsel for the defendants suggests that an appropriate amount for costs and disbursements would be $90,000.00.
Plaintiff’s Position:
[12] The plaintiff, it its submission:
...requests the court to exercise its discretion in the circumstances of this case, to depart from the normal rule that costs follow the event and to award both Mr. Downey and the Defendant trustees, costs payable on a full indemnity basis (solicitor and client basis) from the trust fund supporting the pension and the welfare plans, for principled reasons including the following:
(a) Public interest in proper administration of pensions;
(b) Common law duty of Trustees to apply for court directions on notice to beneficiary;
(c) Common law duty of Trustees to apply for court directions in a neutral manner;
(d) Wording of Pension Plan and Welfare Plan Caused Inconsistent Interpretations by the Trustees administrators and it is just that the Plans should pay the full costs of obtaining the court decision;
(e) Action by Downey Only Practical Way to Clarify His Pension Rights;
(f) Dominant character of this action was not adversarial but if it was, this resulted from failure of Trustees to make neutral application for directions (see section c above).
[13] Counsel for the plaintiff offers further alternative arguments for why the defendants should be denied the costs that are generally awarded to successful litigants. They include the financial circumstances of the plaintiff; errors made by former Plan administrators retained by the Trustees; conduct on the part of the plaintiff that helped to shorten the proceeding; and, conversely, conduct on the part of the Trustees that tended to lengthen the proceeding.
Discussion:
[14] It was admitted that previous Plan administrators made certain mistakes in interpreting the terms and conditions for eligibility in the Pension Plan and the Welfare Plan. As a result of these mistakes the plaintiff actually received certain benefits that he was not entitled to. The Trustees, when made aware of this, decided not to seek reimbursement of the amount previously paid to the plaintiff in error.
[15] In an effort to convince the plaintiff not to seek further benefits – benefits that they had determined he was not eligible to receive in the first place – the Trustees, for compassionate reasons, offered to reimburse him for certain additional welfare benefits for the period from March 15, 1996 to April 25, 2000. The plaintiff did not accept their offer and, instead, commenced this action.
[16] The plaintiff attempts to characterize this litigation as non-adversarial. I am not persuaded to accept this proposition. The plaintiff was not simply a nominal party seeking an interpretation of pension and other benefit plan documents on behalf of a number of other group members.
[17] There have been instances in which courts have refused to award costs in cased that were determined to be adversarial in nature. In the Supreme Court of Canada decision in Nolan v. Kerry, [2009] S.C.J. No. 39; [2009] 2 S.C.R. 678, Rothstein, J.,writing for the majority which also included Binnie, Deschamps, Abella and Charron, JJ., (LeBel and Fish, JJ., dissenting in part) stated this at para. 127:
¶127 Courts have refused to award costs when they considered litigation ultimately adversarial. In reaching this conclusion, they have noted the following factors: the litigation included allegations by the unsuccessful party of breach of fiduciary duty (White v. Halifax (Regional Municipality) Pension Committee, 2007 NSCA 22, 252 N.S.R. (2d) 39); the litigation only benefited a class of members and it would impose costs on other members should the plaintiff be successful (Smith, Lennon v. Ontario (Superintendent of Financial Services) (2007), 87 O.R. (3d) 736 (Div. Ct.), and Turner v. Andrews, 2001 BCCA 76, 85 B.C.L.R. (3d) 53); the litigation had little merit (Smith, White and Lennon).
[18] In Nolan, supra, the Supreme Court had this to say regarding awarding costs from a trust fund, at paras. 118 to 121 and 124:
¶118 On the second issue, I would not interfere with Gillese J.A.'s decision not to order costs payable to the Committee from the Fund.
¶119 Gillese J.A. identified two authorities setting out the proper approach to follow in deciding when to award an unsuccessful litigant its costs from a trust fund. The English case Buckton v. Buckton, [1907] 2 Ch. 406, notes three categories of cases in the wills and estate context. The first category is comprised of cases in which the trustees apply to a court to construe the terms of the trust deed so that they may determine the proper administration of the trust. The second category is comprised of similar cases seeking to determine the proper administration of the trust, but brought by the beneficiaries of the trust rather than the trustees. In both these cases, costs may rightfully be paid from the trust fund. However, costs will not be paid from the fund in cases that fall under the third category, that is, where a beneficiary makes a claim which is adverse to other beneficiaries of the trust.
¶120 In Sutherland v. Hudson's Bay Co. (2006), 53 C.C.P.B. 154 (Ont. S.C.J.) ("Sutherland (2006)") , Cullity J. set out the situations where he finds that costs may be payable from a trust fund. His approach appears similar to the first two categories of Buckton. At para. 11, he writes:
Orders for the payment of costs out of trust funds are most commonly made in either of two cases. One is where the rights of the unsuccessful parties to funds held in trust are not clearly and unambiguously dealt with in the terms of the trust instrument. In such cases, the order is sometimes justified by describing the problem as one created by the testator or settlor who transferred the funds to the trust. The other case is where the claim of the unsuccessful party may reasonably be considered to have been advanced for the benefit of all of the persons beneficially interested in the trust fund.
¶121 I think these cases helpfully define the circumstances in which costs should be awarded from a pension trust fund. The rules in both Buckton and Sutherland (2006) would allow a court to award its costs out of the fund where there is a legitimate uncertainty as to how to properly administer the trust and where the dispute is not adversarial.
****
¶124 In Smith v. Michelin North America (Canada) Inc., 2008 NSCA 107, 271 N.S.R. (2d) 274, the Nova Scotia Court of Appeal addressed the question of costs with the benefit of the Ontario Court of Appeal's decision in this case. It agreed with Gillese J.A.'s finding that the key question is whether the litigation is adversarial rather than aimed at the due administration of the pension trust fund. Claims that are adversarial amongst beneficiaries will not qualify for a costs award from the fund. However, not even every claim in which the beneficiaries have a common interest in the litigation will entitle them to their costs from the fund. A claim might still be adversarial, even if it is not adversarial amongst beneficiaries. Costs will only be awarded from the fund where the proceedings are necessary for the due administration of the trust.
[19] In the case that is before me, I see no reason why the successful party should not be awarded costs payable by the unsuccessful plaintiff. The defendant Trustees owe a fiduciary duty to all eligible plan members to defend against the claims of an individual who , although he might think he is entitled to benefits, is in actual fact, ineligible. The plaintiff’s action was adversarial and ultimately unsuccessful. To order the payment of costs to each of the parties, on a solicitor and client basis, out of the funds in the two Plans is not warranted in the circumstances of this case.
Decision:
[20] Based on the foregoing and considering the nature and complexity of this case, the Court feels it is appropriate to order the plaintiff to contribute to the costs of the defendants in a lump sum amount.
[21] In doing so, the Court is not unmindful of the plaintiff’s relative financial circumstances as compared to that of the Trustees of the Pension and Welfare Plans. Nonetheless, the plaintiff was unsuccessful in his action and the defendants, as the successful party, are entitled to costs. There are no special circumstances that would disentitle them to what a successful litigant should normally expect to receive.
[22] The strict application of Tariff A to the actuarially determined “amount involved” would not produce a substantial contribution to the defendants’ actual cost of litigation (reference: Williamson, supra, D.W. Matheson & Sons Contracting v. Canada (A.G.), [1999] N.S.J. No. 267 (S.C.), and Founders Square Ltd. v. Nova Scotia (A.G.), [2000] N.S.J. No. 220 (S.C.)). A considerable amount of time was spent reaching an agreement regarding certain factual issues. If not for this the actual trial would have taken significantly longer than four days. This out-of-court time should be considered in arriving at a reasonable yet significant contribution towards the defendants’ costs.
[23] In order to make a substantial contribution, the plaintiff must pay to the defendants a lump sum of $45,000.00 which is all inclusive of costs and disbursements including all applicable taxes. Unless the parties mutually agree on other more favourable terms of payment, the amount ordered shall become due and payable within 90 days of the date of release of this decision.
Justice Glen G. McDougall