SUPREME COURT OF Nova Scotia
Citation: Innotech Aviation v. Skylink Express Inc., 2018 NSSC 268
Date: 20181024
Docket: Hfx No. 454660
Registry: Halifax
Between:
Innotech Aviation, a division of IMP Group Limited
Applicant
v.
Skylink Express Inc.
Respondent
__________________________________________________________________
Costs Decision
__________________________________________________________________
| Judge: |
The Honourable Justice D. Timothy Gabriel |
|
Heard:
|
By written submissions
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| Final Written Submissions: |
July 25, 2018 |
| Corrected Decision: |
The text of the original decision has been corrected according to the attached erratum dated November 2, 2018
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| Counsel: |
John Shanks and Jeff Waugh, for the Applicant Patrick O’Neill, for the Respondent |
By the Court:
[1] The following reasons will address the issue of the quantum of solicitor/client costs to be awarded to Innotech following my decision in Innotech Aviation v. Skylink Express Inc., 2018 NSSC 93. Counsel have referred to this as “the damages decision” and I will continue to do so in these reasons.
[2] The damages decision followed a liability decision reported in Innotech Aviation v. Skylink Express, 2017 NSSC 176. This liability decision had been appealed by Skylink and the appeal was dismissed in Skylink Express v. Innotech Aviation, 2018 NSCA 32. Again, in conformity to the format chosen by counsel, these decisions (rearranged in chronological order) will be referred to herein as:
1) “the liability decision”;
2) “the appeal decision” and;
3) “the damages decision”.
Perhaps predictably, the present reasons will become “the costs decision”.
Background
[3] The hearing was bifurcated. This was necessitated by the Applicant’s counsel’s request to provide the court with an updated calculation of the damages being sought, after an error in the initial calculation became evident during closing submissions in the liability hearing. When the Respondent requested an opportunity to respond to the revised calculation of damages, a separate date was set in order that the court could hear argument on that issue.
[4] The liability decision was rendered on June 29, 2017. The hearing with respect to damages was heard on January 15, 2018, and the damages decision was rendered on April 16, 2018.
[5] One of the issues which was addressed in the damages decision was whether Innotech was entitled to claim solicitor/clients costs in this proceeding on the basis of clause xii(c) of the original lease. After an analysis of the authorities I concluded at paras. 73 to 75 as follows:
The Respondent received considerable benefit by entering into a five year term. I have noted this in the quote from my earlier decision excerpted above. The result of the Respondent’s decision has to been essentially to deprive the Applicant of the principal benefit for which it had bargained. There are no circumstances to which I have been referred which ought to vitiate the cost consequences that the contract itself specifies was to follow such a breach.
… the lease speaks to the recovery of:
…the sums so paid by the Owner to the extent that same is reasonable…shall be deemed to be additional rent hereunder.
[Emphasis added]
According to the plain contractual language employed by the parties, in clause XII(C), the bill must be reasonable. As such, the bill will be taxed. The Court must determine whether the bill is reasonable if allowed against Skylink as presented. This is the extent of the Court’s discretion (as to costs) which will or should be exercised in this case.
[6] I then continued in para. 77 and stated:
In the specific constellation of circumstances encountered in this case, I have determined that it would be both appropriate and fair to hold the parties to their contractual bargain … IMP shall … receive its costs from Skylink to be agreed, or, failing that, to be taxed on a solicitor/client basis. If the latter, the Court will determine, upon taxation and upon review of the detailed account entries, whether IMP’s bill as presented is a “reasonable” amount to be recovered against Skylink.
[7] I have since been provided with Innotech’s solicitor/client bill of costs as well as submissions by counsel for each of the parties with respect to that issue.
[8] The Applicant’s position is summarized in para. 5 of its brief:
IMP is seeking to recover $143,725.13 [corrected to $154,322.39 – per affidavit of Jeff Waugh sworn June 1, 2018, para. 17] in solicitor/client costs from Skylink, inclusive of both HST and disbursements, arising from the legal work necessary to conduct both Application hearings as well as the Appeal hearing. IMP respectfully submits that the amount billed is reasonable in light of the work required, including providing initial advice to IMP and pre-litigation collection attempts, the procedural steps required to bring this matter to a hearing, as well as the preparation for two Application hearings and an Appeal hearing.
[9] The filed materials in support of its costs position were set out by the Applicant in Mr. Waugh’s affidavit, filed with this court on June 1, 2018.
[10] The Respondent, on the other hand, argues that Innotech’s account, as presented, is unreasonable. It cites the following bases for that position (costs brief):
13. Invoices included as exhibits “A” to “K” of the affidavit of Jeff Waugh, submitted by Innotech, identify legal fees incurred from July 2016 to April 17, 2017 (two weeks after the conclusion of the haring on liability. These accounts provide $84,434 in legal fees submitted for a relatively straightforward, expedient application, heard just over eight months from the application’s filing.
…
17. Second, as Innotech conceded at paragraph 16 of its brief, both parties had prepared for the March hearing dates to argue both liability and damages. Notwithstanding the acknowledgement the preparation vis-à-vis damages in anticipation of a single hearing to address both liability and damages, Innotech subsequently incurred an exorbitant amount of legal fees in relation to damages after received Invoice 90583803 on April 17, 2017.
…
21. With respect to costs related to the Appeal hearing, which was heard on March 19, 2018, Skylink submits that any costs associated with the Innotech’s preparation, attendance or submissions at the Court of Appeal are res judicata, having already been awarded in the decision of Justice Farrar, delivering the judgment of the Court of Appeal in the Appeal Decision.
22. In the Appeal Decision, Farrar, J.A. awarded the Applicant $5,000.00 in costs, inclusive of disbursements. In our submission, to permit the Applicant to recover solicitor/client costs for expenses incurred relating to the Court of Appeal – despite not seeking solicitor/client costs at the Court of Appeal, would be to allow the Applicant to do an end run around the costs awarded by the Court of Appeal.
Issues
[11] I propose to deal with the issues that have been raised by the parties in the following order:
A. Are the costs incurred by the Applicant in relation to the appeal decision res judicata?
B. What portion of the Applicant’s bill would it be reasonable for it to recover on a solicitor/client basis?
Analysis
A. Are the costs incurred by the Applicant in relation to the appeal decision res judicata?
[12] The Respondent determined that it would appeal the liability decision. A brief review of the applicable provision of the contract at issue in the liability and damages decisions is in order.
[13] Para. XII(C) of the contract at issue (in its entirety) stated:
XII. DEFAULT
C. If the Occupant continues in default of any covenant (except the covenant to pay rent) for ten days the Owner may perform the same for the account of the Occupant and may enter upon the Premises for the purpose and shall not be liable to the Occupant for any loss or damage to the Occupant’s supplies, equipment or business caused by acts of the Owner. If the Owner is compelled or elects to pay any sum of money to do any acts which would require the payment of any sum of money by reason of the failure of the Occupant to comply with any provisions or this Agreement, or if the Owner is compelled or elects to incur any expense, including legal fees, in instituting, prosecuting or defending any action of proceeding instituted by reason of any default of the Occupant hereunder, the sums so paid by the Owner to the extent that same is reasonable, with all interest, costs and damages, shall be deemed to be additional rent hereunder and shall be paid by the Occupant to the Owner upon demand.
[Emphasis added]
[14] Certainly, the wording of the above is broad enough to capture legal fees (which is to say “reasonable legal fees”) incurred as a result of the appeal which was initiated by the Respondent.
[15] That said, the damages hearing was held on January 15, 2018, and the reserved decision was not handed down until April 16, 2018, approximately three days after the Court of Appeal decision (on liability) was rendered. Earlier, on the date that the appeal was heard (March 19, 2018), the court record (at 10:22 thereof) references a question asked of counsel for the Appellant by the panel as to whether the Applicant was seeking solicitor/client costs on appeal pursuant to the contract. Counsel was further asked if there had been a ruling on the costs and damages issue. Counsel advised that the ruling had not yet been rendered. At 10:24:47, of the record, at the outset of its closing submissions, the Appellant is found to reiterate that a decision on damages (including, inter alia, whether it would be awarded costs on a solicitor/clients basis) had not yet been rendered and that as a result “we’re going to look for costs on a different basis [in this appeal] and will address this below”.
[16] The record at 10:53 reveals that counsel for the Applicant indicated that it would be seeking costs of $5,000.00 and that “in the circumstances, $5,000.00 inclusive of disbursements is appropriate”, if it was successful on the appeal. As noted, the appeal decision was initially reserved, and then delivered on April 13, 2018.
[17] When it was handed down three days later, the damages decision concluded, inter alia, that the Applicant was entitled to its reasonable costs as stipulated in the contract, on a solicitor/client basis. They were to be calculated in accordance with XII(C) of the original contract between the parties.
[18] When before the Court of Appeal, the Applicant did not reserve the right to make further written submissions on the point of costs in relation to the appeal after the decision of damages and costs had been rendered by myself. Instead, the Applicant elected, in its oral submissions to the Court of Appeal, to pursue appeal costs on a “different basis”.
[19] As the successful party the Applicant was awarded costs (when the appeal decision was rendered) on the “different basis” that it had proposed during oral submissions ($5,000.00 inclusive of disbursements).
[20] Under the circumstances, it would therefore not be appropriate for me to award the Applicant its costs on the appeal, calculated on a solicitor/client basis. This is, in my view, a logical extension of the comments in Smith’s Field Manor Developments v. Campbell, 2002 NSSC 248, aff’d 2004 NSCA 41 where at para. 18 and 19, Justice Goodfellow noted:
18. Five of the orders were made by the Court of Appeal. In four of these orders, the Court of Appeal specifically addressed and fixed the amount of costs payable to Mr. Campbell. In the fifth order, Justice Bateman November 3rd, 1997 ordered the appellants' appeal to stay an order of costs, granted by this court, dismissed with costs to be in the appeal.
19. With respect to the orders of the Court of Appeal relating to the costs issue, there is no authority or jurisdiction in the trial judge to alter or vary a costs discretion exercised by the Court of Appeal unless there is a specific direction from the Court of Appeal giving such jurisdiction to this court by way of referral. In my view, it is an error in law for the Small Claims adjudicator to have included in the taxation of the bill of costs on a solicitor and client basis, as directed by Justice Hood, any professional services directly related to the applications for which the Court of Appeal gave orders as to costs and this necessitates a review and deletion of any such items of professional services that were included.
[21] As I proceed with my determination of the reasonableness of the solicitor/client bill which has been rendered, I will not consider any work done in relation to, preparation for, or attendance at, the appeal of the liability decision. Those costs are res judicata.
B. What portion of the Applicant’s bill would it be reasonable for it to recover on a solicitor/client basis?
[22] In Apotex Inc. v. Egis Pharmaceuticals (Gen. Div.), 1991 Carswell Ont 3149, the court summarized the applicable principles:
13. The general principle that guides the court in fixing costs as between parties on the solicitor and client scale, as is provided in my order, is that the solicitor and client scale is intended to be complete indemnification for all costs (fees and disbursements) reasonably incurred in the course of prosecuting or defending the action or proceeding, but is not, in the absence of a special order, to include the costs of extra services judged not to be reasonably necessary.
14. This principle flows from the case law which is synthesized in Orkin, The Law of Costs, 2nd ed., p. 1-8 (insert October 1990). I refer particularly to the two decisions highlighted by the author -- Magee v. Ottawa (Separate School Board), [1962] O.W.N. 83, 32 D.L.R. (2d) 162 (H.C.J.), per McRuer C.J.H.C.; and Re Solicitors, [1967] 2 O.R. 137 (H.C.J.), per Jessup J., which are the main authorities for the foregoing principle. I also have found most helpful the analysis by Master McBride in Singer v. Singer (1975), 11 O.R. (2d) 234 (T.O.) [affd (1975), 11 O.R. (2d) 775 (H.C.J.), leave to appeal to Div. Ct. refused (1976), 11 O.R. (2d) 775n (Div. Ct.)], wherein he canvasses in depth the development of the case law and the "woolly thinking" and confusing expressions which have characterized it. My statement above of the principle is derived from the headnote in the Singer decision. As Orkin puts it at p. 1-9, such an award was described as "costs ... on a scale which would most closely indemnify them [the parties] for their real out-of-pocket expenses". He cites Janigan v. Harris (1989), 70 O.R. (2d) 5, 62 D.L.R. (4th) 293 (H.C.J.). The limits on the indemnity are related not to discretion but to the exclusion of services that are not reasonably necessary for the proper presentation of the client's case; for the latter the opposite party ought not in fairness to pay.
[Emphasis added]
[23] I conclude from the above and the other authorities to which I have been referred that “reasonableness” is a context specific concept, and that it relates to the nature of the work done in relation to the tasks which counsel were required to discharge on behalf of their client, given the parameters of the case at bar. Complete indemnification for all costs and disbursements reasonably incurred is to be my frame of reference.
[24] Throughout the course of this matter, a total of nine individuals generated fees which were billed to the Applicant on this file. The overwhelming majority of the work involved was provided by Christa Brothers, Q.C. (as she then was, now Justice Brothers of this Court), John Shanks (partner), and Jeff Waugh (associate). Two other associates, a paralegal, and three articled clerks all contributed work on the file as well.
[25] The hourly rate charged in relation to each of the people who contributed work on the file is covered in paras. 14 and 15 of Mr. Waugh’s affidavit dated June 1, 2018. It states as follows:
14. Initially, Christa Brothers, Q.C. (as she then was) was solicitor of record for IMP in this matter. Ms. Brother’s [sic] billing rate was $360 in 2016 and $375 in 2017. In August 2017, after the conclusion of the liability hearing but before the commencement of the damages hearing or the liability appeal, Ms. Brothers was appointed to the bench of the Nova Scotia Supreme Court. At that time John Shanks of Stewart McKelvey became solicitor of record. Mr. Shanks was billing IMP at a rate of $370 in 2017 and $390 in 2018.
15. Throughout the life of this file, I had been assisting Ms. Brothers and Mr. Shanks. My billing rates for the time periods that I worked on this file were: $210 in 2016, $230 in 2017, and $250 in 2018.
[26] Each interim bill rendered to the Applicant by its counsel is separately itemized and marked as an exhibit to Mr. Waugh’s affidavit.
[27] The Respondent submits, among other things, that Innotech’s cumulative account as presented is unreasonable. Specific instances are singled out. For example, with respect to the invoices shown as Exhibits “A” to “K” covering a time period from July 2016 to April 17, 2017 (which latter date is pointed out to be two weeks after the conclusion of the hearing on liability) it is contended that these accounts total $84,343.00 in legal fees “…for a relatively straightforward, expedient application, heard just over eight months from the application’s filing”.
[28] The Respondent continues that the Applicant’s affidavit evidence, while at first blush appearing to be voluminous, is actually quite repetitive. They cite the affidavit of Joel Bedard dated November 28, 2016 and state that it is really only a 12 page affidavit with a two page index. The exhibits, however, run the affidavit to over 160 pages in length. They point out that the amended affidavit of Mr. Bedard contains virtually the same evidence and information and merely amends para. 10 by inclusion of the words “as most recently amended”.
[29] The Respondent goes on to point out that the initial two-day hearing was originally set down to deal with both liability and damages. Both counsel concede that they had been prepared to deal with both topics at once, and the only reason that this did not occur was because a bifurcation was necessitated to enable counsel for the Applicant to address a quantification error in its initial calculation of damages, which error only became apparent during closing submissions in the initial hearing.
[30] The Respondent concludes (para. 17, costs brief, para. 17) that despite this “…Innotech subsequently incurred an exorbitant amount of legal fees in relation to damages after receiving invoice 90583803 on April 17, 2017”. He concludes (paras. 19 and 20, costs brief):
19. Invoices between May 16, 2017 and May 14, 2018 outline legal fees of at least $18,930.27 in relation to damages; additionally, there are several time entries which appear to consist of legal fees for both damages and the appeal (discussed further below).
20. Given that the parties had been previously prepared to make submission on damages at the liability hearing, the extent of the legal fees submitted relating to damages – in excess of $18,000 – is unreasonable and therefore, we submit, warrant a reduction by Your Lordship.
[31] Finally, the Respondent points out that many of the entries shown on the various invoices presented by the Applicant “post-liability decision”, did not contain sufficient detail so as to support a determination whether or not they relate to work on the appeal.
[32] It would appear that invoices attached as Exhibits “O” to “T” to the Waugh affidavit either mention specifically some work done in relation to the appeal or it is clear from the context of the entries that work on the appeal was involved.
[33] Certain portions of time noted on those invoices are clearly related to the appeal, and are therefore separable. For example, with respect to the invoice rendered on September 14, 2017 (Waugh affidavit, tab “O”) I note that entries on August 2nd, August 10th and August 22nd, 2017 refer specifically to work performed with respect to the appeal. Of this, 0.2 of an hour was performed by Mr. Waugh and 0.4 was performed by Mr. Shanks.
[34] Turning to the November 20, 2017 invoice (Exhibit “P”), 4.6 hours is clearly identified as being referable to the appeal, and it is all time spent by Mr. Shanks.
[35] I would comment upon the remaining invoices, in tabular form, as follows:
| Date |
Exhibit # (Waugh Affidavit) |
Portion spent on appeal work (hours) |
Lawyer(s) |
| Dec. 31, 2017 |
Q |
1.9 |
Shanks – 1.6 Waugh – 0.3 |
| Feb. 7, 2018 |
R |
28.8 |
Shanks – 6.3 Waugh – 22.5 |
| Mar. 7, 2018 |
S |
2.7 |
Shanks – 2.7 |
| May 14, 2018 |
T |
29.9 |
Shanks – 7.7 Waugh – 22.2 |
|
|
|
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|
[36] Accordingly, I reduce the Bill of Costs submitted by the Applicant by the amounts referable to the work noted above in relation to the appeal. Using the hourly rates applicable to the lawyers performing those portions of the time which is implicated in this calculation, it yields the amount of $20,239.00 for legal fees. Application of 15% HST on this amount adds the further sum of $3,035.85. The total reduction of the Applicant’s bill, referable to work performed in relation to the appeal, is therefore $23,274.85.
[37] Next, with respect the actual work performed in relation to the remaining aspects of the bill, overall I note that there was some reasonably minimal overlap between work performed by the various counsel in this matter. For example, in preparation for the hearing with respect to damages, many different counsel incurred time repeating a review of the liability decision. However, given that this involves the taxation costs on a solicitor/client basis, very different considerations apply than those which would be applicable if we were involved in a consideration of the allowable costs, for example, pursuant to the tariffs contained in the Civil Procedure Rules.
[38] Most notably, if I were reviewing this bill on a basis other than solicitor/client, it would be very relevant to consider the necessity for the involvement of two or more counsel in relation to a particular file and whether that should have an impact on the amount awarded, and (in appropriate cases), whether such a consideration should influence whether a departure from the stipulated tariffs should be considered.
[39] However, when the bill is reviewed on a solicitor/client basis, the number of counsel working on the file is part of the agreement between the Applicant and its client. It is part of the costs actually incurred by the Applicant pursuant to the arrangement with its counsel and, provided that the involvement of multiple counsel, and the costs of their services rendered were reasonable in the overall sense, they should not be interfered with.
[40] Here, as I have said, there were some marginal amounts of overlap in relation to some of the work performed. A small amount of overlap is inevitable where multiple counsel are involved. It is, also, a necessary evil, in the sense that it enables junior counsel, whose fees are not as high as the more senior ones, to become involved and perform some of the work which otherwise would all have to be performed by the latter at a higher hourly rate.
[41] In this case, I was satisfied that the manner in which counsel were “deployed” in relation to the various increments of work that were required in order to see this matter through to fruition, was reasonable. Overall, this likely resulted in the total bill being somewhat less than if senior counsel had shouldered the entire load.
Conclusion
[42] I reduce the overall bill submitted by the Applicant by the amounts noted above (legal fees and applicable HST) which were incurred in responding to the appeal. The photocopying charges (0.25¢ per page) and the charges for the use of the scanner in conjunction with the appeal are difficult to separate, as well as copier and binding fees, since the interim bills which are implicated contain a mixture of work performed which is both appeal and non-appeal in nature. I reduce the overall fees by a further $500.00, inclusive of HST, to reflect those types of additional charges which would have been related to the appeal.
[43] As to non-appeal work, first with respect to photocopies, these are routinely charged for and overall the sum of .25¢ is not unreasonable. I say the same with respect to the charges for scanning and the other “soft” charges entered by counsel for the Applicant.
[44] As to charges for online legal research, however, this is part of a fixed cost which the Applicants pay for access to this service on a monthly basis. Accordingly, I deduct any amount referable to same noted as disbursements on the various interim bills rendered. This amounts to $691.58, plus 15% HST, for a total of $795.32.
[45] As a consequence, the Applicant’s bill is allowed as against the Respondent on a solicitor/client basis in the amount of $129,752.22 inclusive of disbursements. An order will issue accordingly.
Gabriel, J.
SUPREME COURT OF Nova Scotia
Citation: Innotech Aviation v. Skylink Express Inc., 2018 NSSC 268
Date: 20181024
Docket: Hfx No. 454660
Registry: Halifax
Between:
Innotech Aviation, a division of IMP Group Limited
Applicant
v.
Skylink Express Inc.
Respondent
|
|
|
|
|
|
ERRATUM
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|
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| Judge: |
The Honourable Justice D. Timothy Gabriel |
| Final Written Submissions: |
July 25, 2018 |
| Counsel: |
John Shanks and Jeff Waugh, for the Applicant Patrick O’Neill, for the Respondent |
|
Erratum Date: |
November 2, 2018 |
Para. 8, line 2 – Addition of “[corrected to $154,322.39 – per affidavit of Jeff Waugh sworn June 1, 2018, para. 17]”