Case Name:

Authorson (Litigation guardian of) v. Canada (Attorney

General)

Between

Joseph Patrick Authorson, by his Litigation guardian, Lenore

Majoros, plaintiff (respondent), and

The Attorney General of Canada, defendant (appellant)

[2002] O.J. No. 2182

215 D.L.R. (4th) 544

160 O.A.C. 136

35 C.P.C. (5th) 203

114 A.C.W.S. (3d) 398

Docket Nos. C35254 and C35835

Ontario Court of Appeal

Toronto, Ontario

Weiler, Austin and Goudge JJ.A.

Heard: October 1-5, 2001.

Judgment: June 5, 2002.

(26 paras.)

Practice -- Costs -- Appeals -- Costs of appeal -- Payable by the Crown -- Novel questions.

Application by the respondent, Authorson, for costs of a successful appeal. Authorson brought an action against the Crown for the non-payment of interest to war veterans for over 70 years. Authorson sought costs on a substantial indemnity basis, consisting of $433,000 for fees, GST of $30,000, disbursements of $17,600 and GST on the disbursements of $1,300. The Crown argued that costs should be awarded on a partial indemnity scale, and should be referred to an assessment officer. Alternatively, the Crown argued that Authorson was entitled to $151,000 for fees, $12,000 for disbursements and GST of $11,300.

HELD: Application allowed in part. This was an exceptional case where the quantum of costs should be assessed rather than fixed by the court. The proper scale of costs was partial indemnity. This case involved a serious breach of fiduciary duty which occurred over many years and involved people who had significant disabilities. The lower scale of costs was warranted because the Crown raised serious and important issues that merited appellate consideration. A fiduciary who sought to make legitimate use of the appellate process did not have to face cost consequences of the higher scale.

Statutes, Regulations and Rules Cited:

Financial Administration Act.

Ontario Rules of Civil Procedure, Rules 57.01(3), 57.01(3.1), 58.

Appeal from:

On appeal from the judgment of Justice John H. Brockenshire dated October 11, 2000.

[Quicklaw note: Original reasons for judgment were released March 13, 2002. See [2002] O.J. No. 962.]

Counsel:

John C. Spencer, William A. Knights, Peter Hajecek and Cynthia Koller, for the appellant.

David G. Greenaway, Peter Sengbusch and Raymond G. Colautti, for the respondent.

Reason for judgment were delivered by Weiler and Goudge JJ.A. Separate reasons were delivered by Austin J.A.

1 AUSTIN J.A. (dissenting):-- These reasons deal with the costs aspect of an appeal heard October 1-5, 2001. The merits of the appeal were dealt with and the appeal dismissed in our reasons released March 13, 2002. In those reasons counsel were invited to make submissions in writing with respect to costs and in particular to deal with the scale and quantum and whether the costs should be determined by this court or an assessment officer.

2 Those submissions have been received. The successful respondent submits that costs should be awarded to him on a "substantial indemnity" basis in the amount of $481,411.36. This total is made up of $432,283 for fees, GST of $30,259.81 on those fees, $17,634.16 for disbursements and GST of $1,234.39 on those disbursements.

3 The Crown's position is that costs should be awarded on a partial indemnity scale and that they should not be determined by this court but rather that they should be referred to the Assessment Officer in Toronto. The Crown submits, in the alternative, that costs should be fixed at a total of $173,315.94, made up of $151,000 for fees, $11,977.51 for disbursements and GST on both of $11,338.43.

4 As to the scale of costs:

Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. Young v. Young (1993), 108 D.L.R. (4th) 193 (S.C.C.) per McLachlin, J. at p. 283.

5 In Leung v. Leung (1993), 15 C.P.C. (3d) 42 (B.C.S.C.), Esson C.J.B.C. said at p. 44.

... "reprehensible" is a word of wide meaning. It can include conduct that is scandalous, outrageous or constitutes misbehaviour: but it also includes milder forms of misconduct. It means simply "deserving of reproof or rebuke".

6 The Oxford Encyclopedia English Dictionary (1991), (Clarendon Press, Oxford) defines "reprehensible" as "deserving censure or rebuke: blameworthy".

7 I agree with the comment of Binks, J. in Beaver Lumber Co. v. 222044 Ontario Ltd., [1996] O.J. No. 3294 at para. 8, that:

Ontario courts have awarded costs on a solicitor and client scale throughout in cases that have involved breach of fiduciary duty, breach of trust, conspiracy, misrepresentation and other similar forms of reprehensible conduct.

Maximilan v. M. Rash & Co. Ltd. et al (1987), 62 O.R. (2d) 206 (Ont. Dist. Ct.) at pp. 211-212.

Claiborne Industries Ltd. et al v. National Bank of Canada et al (1989), 69 O.R. (2d) 65 (C.A.) at p. 109.

8 More recently, this court decided in Barry et al v. Chief and Council of the Garden River Band of Ojibways et al (1997), 33 O.R. (3d) 782 at p. 799 that "[s]ince the appellants are beneficiaries of a trust who were obliged to sue their trustees, they should receive costs on a solicitor and client basis here and below".

9 As against an award of costs on the substantial indemnity scale, the Crown argues that there is nothing in the conduct of the Crown which would warrant such an award, that breach of a fiduciary duty is not in and of itself sufficient, that the impugned conduct amounts to a technical breach of duty and that there must be an element of intentional dishonesty or culpability found in the conduct of the party to justify such an award.

10 I do not subscribe to the proposition that there must be an element of intentional dishonesty or culpability found in the conduct of the party in order to justify such an award.

11 On the other hand, I cannot agree that the conduct complained of amounts to a technical breach of duty. The conduct complained of is the non-payment of interest, extending in some cases, to a period of over 70 years in breach of a fiduciary duty. The conduct complained of also includes the realization at least as early as 1970 that there was a duty to invest, a prolonged study to find a "solution" and the adoption of a solution which would cut off any possible claim ex post facto. That course of conduct cannot under any circumstances be described as a technical breach.

12 It is also argued that the conduct in question cannot constitute conduct capable of supporting an award of costs on a punitive scale because that same conduct was found lawful and appropriate by Joyal J. in Callie v. Canada, [1991] 2 F.C. 379 (F.C.T.D.).

13 The matter in issue has to do with the scale of costs to be awarded. It is not a question of punishment but of determining the appropriate scale having regard to all of the circumstances including those of the plaintiff as well as those of the defendant.

14 The question of the appropriate scale of costs did not arise in Callie, supra, as the claim was dismissed. More to the point, Joyal J. did not have before him the factual record before Brockenshire J. or the even larger record before this court. In particular, it does not appear that Joyal J. was made aware of the facts that:

(a) from the very beginning, the legislative scheme in question authorized the payment of interest on treatment allowances administered by DVA;

(b) from 1951 on, the Financial Administration Act explicitly allowed the payment of interest in respect of monies held in any special purpose account in the Consolidated Revenue Fund;

(d) for some time interest was credited on the accounts of all the veterans at St. Anne de Bellevue Hospital near Montreal;

(e) on the other hand, where veterans raised the matter of interest, they were told by department officials that such arrangements were not possible;

(f) from at least the early 1970s on, DVA and others were aware of their duty to invest funds under their administration;

(g) amongst the proposed "solutions" to the "problem" of not paying interest or investing were "keeping quiet" and "eliminating the old liability";

(h) the "solution" chosen was to prohibit action; and

(i) on the evidence, neither the "problem" nor the "solution" was drawn to the attention of Parliament.

15 In these circumstances it can not be said that Joyal J. would have come to the conclusion he did if he had been faced with the record which was before Brockenshire J. and this court.

16 Brockenshire J. referred to s. 5.1(4) of the 1990 amendments to the DVA Act as a "pernicious subsection". According to the Shorter Oxford English Dictionary on Historical Principles 3rd ed., (1986), Oxford University Press, "pernicious" means "destructive or wicked, villainous". Doubtless Brockenshire J. meant that s. 5.1(4) was intended to block any claims that veterans might raise in review of DVA. If the conduct in issue falls short of being "scandalous, outrageous or reprehensible", it is, in my respectful view, in all of the circumstances, such as to justify an award of costs on a substantial indemnity scale.

17 Those circumstances include the fact that costs reasonably incurred by counsel for a successful party, to the extent they are not recovered from the losing side, will in the normal course of events, be recovered from the client or clients. The clients in this case will, in many if not most cases, not be in position to pay such costs. Having regard to the nature of the claim and the reasons for its existence, it is my view that the appropriate award of costs is on a scale of substantial indemnity.

18 As to whether this court should determine the quantum, Rule 57.01(3) and (3.1), as amended effective January 1, 2002, provide as follows:

57.01(3) Fixing Costs: Tariffs - When the court awards costs, it shall fix them in accordance with subrule (1) and the Tariffs.

(3.1) Assessment in Exceptional Cases - Despite subrule (3), in an exceptional case the court may refer costs for assessment under Rule 58.

19 I am are of the view that this is an "exceptional case" within the meaning of those words in Rule 57.01(3.1) and accordingly would refer the costs herein for assessment under Rule 58. What makes it exceptional is the scope of the action in many respects - the time it spans, the number of potential claimants, the nature of the claims and the vast amount of research required. In this regard I would make one comment for the guidance of the assessment officer. One of the objections made to the costs as presented is to the use of three senior counsel. This court benefited from that practice as those counsel were able to provide immediate and thorough answers to the many questions we had before and during the hearing.

20 The Crown asks specifically that the reference be to the Assessment Officer in Toronto. No reason has been suggested for the making of such an order; accordingly I would decline to make it.

21 I would therefore refer the costs of the respondent to an assessment officer to be assessed on a basis of substantial indemnity.

AUSTIN J.A.

22 WEILER and GOUDGE JJ.A.:-- We have read the reasons on costs by our colleague, Austin J.A. and entirely agree with him that this qualifies as an exceptional case in which the quantum of costs of the appeal should be assessed rather than fixed by the court.

23 With great respect, however, we differ as to the scale of those costs.

24 While the trial judge appropriately exercised his discretion to fix costs of the trial on a solicitor client basis, in our view the proper scale of costs for the appeal is the lesser scale of what is now known as partial indemnity.

25 We agree that many of the considerations affecting costs at trial remain relevant, in particular that this case is about a serious breach of fiduciary duty which although it is not continuing, took place over many years and affected people who had significant disabilities.

26 However, in our view, one new factor is sufficiently different that, in the particular circumstances, the lower scale is warranted: namely, that the appellant raised a number of serious and important issues of law warranting consideration by this court. In our view, a fiduciary seeking to make legitimate use of the appellate process ought not to face the automatic cost consequences of the higher scale. The focus is no longer entirely on the fiduciary's pre-appeal conduct. We would therefore order that costs of the appeal to the respondent to be assessed on a partial indemnity basis including the costs of the motion before McMurtry C.J.O.

WEILER J.A.

GOUDGE J.A.

cp/e/nc/qlhcc