http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/110218/index.do
The Standard Life Assurance Company of Canada v. The Queen (June 5, 2015 – 2015 TCC 138, Pizzitelli J.).
Précis: This is the costs decision in the
Standard Life appeal. The Crown asked for costs at a rate of 50% of solicitor and client costs up to the date of a written settlement offer and 80% thereafter, plus reasonable disbursements. The would have amounted to $529,163, consisting of $491,345.61 in fees and $37,818 in disbursements. The Court reduced the hourly rate of one of the junior Crown counsel from $219.60 (which was objected to by counsel for the appellant as being too high) to $140 (as suggested by counsel for the appellant) and reduced his time at trial by 20 hours since he did not present at trial. This led to an overall reduction of $54,500.20 with a final award of $474,663.
Despite the modest reduction this is one of the largest reported costs awards in the Tax Court in some time.
Decision: The Crown asked for enhanced costs based on a written settlement offer:
[1] The Respondent has made a request for an increased cost award following complete success, with costs, on the merits at trial. The Respondent requests a total cost award of $529,163, consisting of $491,345.61 in fees and $37,818 in disbursements, be awarded against the Appellant based on 80 percent of the Respondent’s solicitor and client costs from January 27, 2014 being the date of its offer of settlement and 50 percent of its solicitor and client costs before that date, plus all reasonable disbursements throughout.
The appellant argued for a lump sum award of $125,000 inclusive of disbursements.
The Court review Rules 147(1), (3) and (3.2) dealing with costs generally and with settlement offers. The respondent’s settlement offer and its aftermath had been as follows:
[7] The Respondent’s settlement offer of January 27, 2014 contained the following:
a) The Standard Life of Canada, Bermuda branch, was not carrying on an insurance business in Bermuda in 2006;
b) The Standard Life of Canada, Bermuda branch, was carrying on an insurance business in Bermuda in 2007;
c) Subsection 138(11.3) first applies to Standard Life of Canada’s 2008 year; that is 2008 is the first year that Standard Life of Canada had designated property in the preceding taxation year; and
d) Each party shall bear their own costs.
[8] The issues at trial were directly and my decisions were directly related to the terms of the settlement offer above. The Appellant had sought to obtain a decision that provided it was carrying on business in Bermuda via its Bermuda branch, SLAC, in both 2006 and 2007 and that subsection 138(11.3) of the Income Tax Act (the “Act”) first applied to its 2006 year, effectively arguing it did not have to carry on business in Bermuda in 2005 as a precondition to the applicability of that provision in 2006.
[9] The Judgment clearly found that the Appellant was not carrying on business in Bermuda in either of 2006 nor 2007 and that in effect the earliest the Appellant would be able to avail itself of the provisions of subsection 138(11.3) was in 2009. The settlement offer granted the Appellant the relief it sought to confirm it was carrying on business in Bermuda in 2007. Accordingly it is abundantly clear to me that the Appellant has proven, by the results, that the Judgment was less favourable than the terms of the settlement to offer.
The appellant argued that the settlement offer was not of the type contemplated by Rule 147(3.2) in that it offered no element of compromise. The Court rejected this line:
[13] In any event, based on the clear wording of Rule 147(3.2), the Respondent needs only establish that the Judgment was as favourable as the terms of the settlement offer to succeed. It won completely on all the issues before the Court, so clearly a Judgment acknowledging same prima facie meets that threshold test.
Moreover the Court held that it was entitled to make an enhanced award under its general discretion as to costs under Rule 147(3) and, in fact, was somewhat scathing in describing the appellant’s conduct:
[16] When considering the relevant factors in Rule 147(3), I am strongly of the view that the circumstances of this case support a basis for increased costs in favour of the Respondent and refer to the relevant factors by their paragraph in the Rule below:
(a) The Respondent was 100 percent successful on all the issues in dispute, including the issue of who bore the burden of establishing whether the Appellant carried on business in Bermuda, having regard to the Appellant’s position that the Respondent did not assume it did not carry on business, which I disagreed with, as well as the issues of interpretation of subsection 138(1), which the Appellant suggested automatically meant the Appellant was carrying on business in Bermuda and which I also disagreed on.
(b) The amounts in issue were in my opinion extremely large. The Appellant sought to bump up the cost base of certain of its assets by over $1.16 billion dollars, save over $12 million in taxes for 2006 and save over $200-250 million over a 5 year period.
(c) The Appellant suggested the importance of the issues was limited to the taxpayer and is of interest only to the small community of life insurers. This is quite a bald assertion in my view and no evidence was presented to back it up. I would think it is common knowledge that life insurers in the country are generally large corporations, many of them multi-national, that are major players in our country’s financial, investment and insurance industries and the interpretation of provisions that deal with both the reserves they carry, as well as their contribution to the country’s tax base, are in my view of interest to the general public as well, not to mention the Respondent. I would also think the development of jurisprudence on whether one “carries on business” is of wide import.
…
While I certainly agree the trial itself was conducted in an efficient and professional manner by both sides, I cannot ignore that my decision found that the Appellant’s actions led me to conclude that it was engaged in window dressing to enable it to argue it met the factual criteria of the judicial tests for carrying on business when it did not; to give the illusion of doing so as the Respondent pleaded and argued. While this type of conduct is different than the type of conduct referenced in Merchant v The Queen, [1998] TCJ No. 278, 98 DTC 1734, relied upon by the Appellant, which awarded solicitor and client costs where the Appellant therein did “everything possible to obstruct the Crown from putting its case forward in an orderly way”, the conduct of the Appellant in acting in such a manner as to create the illusion it did, which it relied upon to make and further its appeal, is nonetheless conduct that is, in my view, reprehensible and should be discouraged. In the case at hand of course, the Respondent is only seeking a percentage of solicitor and client costs, a position that I feel is quite reasonable on its part having regard to such conduct.
In the end the only concession to the appellant was a modest reduction in the hourly rate of one of the junior Crown counsel from $219.60 (which was objected to by counsel for the appellant as being too high) to $140 (which was suggested by counsel for the appellant) and a reduction of his time at trial by 20 hours since he did not present at trial. This led to an overall reduction of $54,500.20 with a final award of $474,663.
Comment: The Court appears to have been very generous in agreeing to reduce the Crown’s junior counsel’s hourly rate to $140 as suggested by counsel for the appellant. One can only speculate as to the last time a Bay Street firm charged $140 per hour for any lawyer working on a piece of major commercial litigation.