|
Civil Litigation Cases - Costs - Fairness. NCS Multistage Inc. v. Kobold Corporation
In NCS Multistage Inc. v. Kobold Corporation (Fed CA, 2025) the Federal Court of Appeal allowed a patent appeal, here brought against a successful patent infringement counterclaim.
Here the court allows an appeal from an extensive trial costs award [$1.8 million]:[83] There is no doubt that the Federal Court has broad discretion in awarding costs: Rule 400(1); Nova Chemicals Corporation v. Dow Chemical Company, 2017 FCA 25 at para. 10 (Nova Chemicals). In addition, lump sum costs awards are permissible and commonly used by the courts in both simple and complex proceedings: Nova Chemicals at para. 11. The jurisprudence generally supports lump sum awards between 25% and 50% of actual fees depending on the circumstances of the case (Nova Chemicals at para. 17), with awards of between 25% and 33% as the norm: Shire at para. 22.
....
[89] Appeal courts properly defer to the trial judge who has "“wide latitude in assessing what is an appropriate lump sum”" (Shire at paras. 17-18) but a trial judge’s broad discretion in awarding costs must be exercised in a procedurally fair manner and the award must be supported by evidence and reasons sufficient to permit appellate review. In Exeter, the question before the Court was whether the absence of a request for costs on an interlocutory motion by the successful party precluded an award of costs. The Court’s answer that a court could not award costs when not requested was based squarely on the principles of procedural fairness (Exeter at para. 12):To award costs in these circumstances would be a breach of the duty of fairness because it would subject the party against whom they are awarded to a liability when the party had had no notice or an opportunity to respond: see, for example, Nova Scotia (Minister of Community Services) v. Elliott (Guardian ad litem of) (1995), 141 N.S.R. (2d) 346 (N.S.S.C.) at para. 5.
(See also Chen v. Canada (Public Safety and Emergency Preparedness), 2019 FCA 170 at para. 60.) ....
[91] I find that NCS was denied procedural fairness when the Federal Court awarded costs in form and amount that had not been requested. Effectively, NCS was subjected to a liability of which it had no notice and to which it had no opportunity to respond. Once the Federal Court determined that Kobold’s requested lump sum inadequately reflected the nature of the litigation, notice should have been provided to the parties requesting further costs submissions based on legal fees incurred, together with evidence of actual legal fees.
....
[94] I now address NCS’s more significant and related concern. NCS submits that the Federal Court erred in law in awarding sizeable lump sum costs without evidence, citing this Court’s decision in Nova Chemicals. NCS argues the Federal Court’s reliance on Kobold’s one statement that its fees totalled over four million dollars was procedurally unfair. Had NCS been afforded the opportunity to respond, it could have tested the fee estimate and provided submissions regarding the absence of a proper evidentiary record.
....
[96] It is well established that a lump sum costs award must be supported by sufficient evidence to ensure predictability and fairness to the other party: Nova Chemicals at para. 18; Shire at para. 24. NCS and Kobold acknowledge the need for evidence but differ on whether Kobold provided the Federal Court with any or sufficient evidence of the nature and extent of its legal fees. NCS submits that the provision of a bill of costs and the court docket is not, without more, evidence of actual fees incurred. In response, Kobold argues that there is no requirement for counsel’s accounts or for an affidavit in support of costs, and that the Federal Court and this Court regularly accept submissions of counsel as to actual legal fees when determining a lump sum award.
[97] Justice Rennie set out a framework for assessing the nature of the evidence required to properly support a lump sum award in Nova Chemicals:[18] When a party seeks a lump sum award based on a percentage of actual legal fees above the amounts provided for in the Tariff, as a matter of good practice the party should provide both a Bill of Costs and evidence demonstrating the fees actually incurred. As well, a sufficient description of the services provided in exchange for the fees should be given to establish that it is appropriate that the party be compensated for those services. [98] To place Justice Rennie’s framework in its factual context, Dow Chemical had sought costs representing 30% of its legal fees, or costs based on Column V of Tariff B in the alternative. It provided the Federal Court "“with both a Bill of Costs, as well as a summary of Dow’s actual solicitor-client fees”": Nova Chemicals at para. 22.
[99] There is no rule that requires a party to provide its accounts and dockets in order to be entitled to a lump sum costs award. Courts have accepted bills of costs as support for a lump sum award based on a percentage of fees incurred in circumstances where a party has requested such an award. In those cases, the trial judge had before them the party’s written and oral submissions regarding fees incurred and, very often, additional evidence of total fees incurred as in Nova Chemicals. There are many cases in which the requesting party filed an affidavit in support of its request for a lump sum costs award (as did NCS in this case), itemized amounts claimed, provided billable rates and/or gave a summary explanation of its legal costs.
[100] The Federal Court had Kobold’s statement that its legal fees totalled over $4,000,000, Kobold’s bill of costs, and the court docket. Kobold provided no affidavit, explanation or summary of its actual legal fees or its accounts and its reference to total fees was made solely in support of its request for costs at the high end of Column V of the Tariff. There was no oral argument to inform the Federal Court regarding Kobold’s legal fees and provide an opportunity for the Federal Court, and NCS, to test those fees. The Federal Court had no information on which it could assess Kobold’s fee estimate against the bill of costs which summarizes the steps of the proceeding but does not explain the fees incurred. Similarly, the court docket is extensive and demonstrates the complexity of the litigation but provides very limited support for Kobold’s stated legal fees.
[101] In these circumstances, I find that there was insufficient evidence of Kobold’s actual legal fees before the Federal Court to enable it to determine whether the approximate $4 million of legal fees claimed was reasonable in the context of the proceeding.
[102] The absence of evidence in support of Kobold’s legal fees underlines the fairness issues with the process for costs submissions in this proceeding and the Federal Court’s departure from the resulting submissions. Kobold had no opportunity to support its quantum of legal fees and NCS had no opportunity to challenge the lump sum award and test Kobold’s fees.
[103] For these reasons, I conclude that the Federal Court made a reversible error in awarding lump sum costs to Kobold and Promac of $1,800,000.
|
