National Bank Financial Ltd. v. Potter et al., 2014 NSSC 264

• Judge: Warner, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: July 10, 2014
• Jurisdiction: Nova Scotia
• Citations: 2014 NSSC 264;(2014), 348 N.S.R.(2d) 58 (SC)

Nat. Bk. v. Potter (2014), 348 N.S.R.(2d) 58 (SC);

    1100 A.P.R. 58

MLB headnote and full text

Temp. Cite: [2014] N.S.R.(2d) TBEd. JL.037

National Bank Financial Ltd. (plaintiff/defendant by counterclaim) v. Daniel Frederick Potter, Gramm & Company Incorporated, Starr's Point Capital Incorporated, 2532230 Nova Scotia Limited, 3020828 Nova Scotia Limited, Ronald D. Richter, Solutioninc Limited, John Francis Sullivan, Linda Fay Sullivan, Calvin W. Wadden, Craig Anthony Dunham, Douglas George Rudolph, Gerard B. McInnis, Janine M. McInnis, Lowell R. Weir, Blackwood Holdings Incorporated, and Staffing Strategists International Inc. (defendants/plaintiffs by counterclaim) and Daniel Potter, Starr's Point Capital Incorporated, Fiona Imrie, Gramm & Company Incorporated, 2532230 Nova Scotia Limited, 3020828 Nova Scotia Limited, Ronald Richter, Donald Snow, Meg Research.com Limited, 3027748 Nova Scotia Limited, Calvin Wadden, Raymond Courtney, Bernard Schelew, Blois Colpitts, Stewart McKelvey Stirling Scales, Bruce Clarke, 2317540 Nova Scotia Limited, Knowledge House Inc., The Estate of the Late Michael Barthe, represented by his Executrix Barbara Barthe, Lutz Ristow, Derek Banks and Plastics Maritime Ltd. (third parties)

(Hfx. 206439 (Main Action); Hfx. 208293 (Barthe Action); Hfx. 246337 (National Bank/Weir Action); Hfx. 174294 (Debit Action); 2014 NSSC 264)

Indexed As: National Bank Financial Ltd. v. Potter et al.

Nova Scotia Supreme Court

Warner, J.

July 10, 2014.

Summary:

A complex series of multi-party actions arose out of the collapse of a publicly-traded technology company, Knowledge House Inc. (KHI). National Bank Financial Ltd. (NBFL) started a number of actions against clients and former clients for unpaid margin debt arising from the collapse. Some of NBFL clients defended those claims by alleging that they had been the victims of a conspiracy by NBFL's employee, Clarke, and others, to manipulate KHI share prices. NBFL issued a statement of claim, in what became the main action, against Potter (a lawyer), Clarke, and others, alleging that they conspired to manipulate the price of KHI shares and that the conspiracy resulted in a fraud being committed against NBFL. Counterclaims and third party claims were filed involving, among others, Dunham, the Weirs, Blackwood Holdings (a Weir company), Barthe Estate and Wadden (collectively referred to as the "Dunlop clients" as they were all represented by a lawyer named Dunlop). Wadden also commenced a separate action against BMO Nesbitt Burns Inc. respecting the handling of his margin accounts. By the time of trial, the only remaining parties were the Dunlop clients, NBFL and its parent the National Bank of Canada, and BMO Nesbitt Burns Inc.

The Nova Scotia Supreme Court, in a decision reported (2013), 333 N.S.R.(2d) 60; 1055 A.P.R. 60, allowed the claims by Dunham, the Weirs and Blackwood Holdings and assessed damages, including punitive damages. Barthe Estate's claim was allowed in part, for the time up to when Barthe became aware of the stock manipulation scheme. The court dismissed Wadden's claim against NBFL and BMO Nesbitt Burns Inc. considering him to be an insider who actively participated in the stock manipulation scheme. NBFL's third party claim against Wadden was allowed. The matter moved to a determination of costs.

The Nova Scotia Supreme Court determined the costs issues accordingly. (For a summary of costs awarded - see paragraph 253.)

Practice - Topic 6923.1

Costs - General principles - What rules applicable - A complex series of multi-party actions arose out of the collapse of a publicly-traded technology company - In that context, Dunham, Weir, Blackwood Holdings and Barthe Estate were successful in their claims against National Bank Financial Ltd. - The successful parties sought costs - The Nova Scotia Supreme Court held that the 2004 Tariff applied, even though the litigation was commenced before that time - The court stated that "While technically CPR [Civil Procedure Rule] 77 indicates the starting point of tariff costs is the tariff in effect on the start day of the litigation, this fact is secondary in importance to the requirement to do justice between the parties. The 1989 tariff is not reflective, by a long stride, of the reasonable costs of litigation in the 21st century. They are not a fair starting point for determination of party and party costs respecting this litigation. For the purposes of determining tariff costs, the starting point for this analysis is the 2004 tariff, not the 1989 tariff" - See paragraph 127.

Practice - Topic 7003

Costs - Party and party costs - General principles and definitions - Amount involved - The Nova Scotia Supreme Court held that the complexity of litigation could be taken into account in determining the amount involved (AI) under Civil Procedure Rule (CPR) 77 if the other steps of the analysis did not "do justice" between the parties - The court stated that "... the calculation of the AI (at the first step in the tariff analysis) is not restricted to 'having regard to' the amount claimed, awarded, provisionally assessed or successfully defended. While restricting the analysis to the amount claimed or awarded may be the common application of the term AI in most civil litigation in this province, the definition in CPR 77 expressly directs that in the determination of the AI, the Court shall have regard to AI (and in a successful defence, the damages claimed or provisionally assessed) together with the complexity of the proceeding and the importance of the issues" - See paragraphs 120 and 128.

Practice - Topic 7003

Costs - Party and party costs - General principles and definitions - Amount involved - The Nova Scotia Supreme Court rejected an argument that the complexity of the proceeding and the importance of the issues were restricted to the picking of the appropriate scale at the second step in the tariff analysis - The court stated that "The three scales in Tariff A are adequate to deal with complexity in most proceedings. The limited range for the adjustment of the AI (plus or minus 25%) in the second step may not result in 'doing' justice between the parties in all cases, especially one as unusual as these proceedings. While complexity is a primary factor in the determination of the appropriate scale at step two, the range of options afforded by the three scales does not fully recognize the complexity to the successful plaintiffs in these proceedings" - See paragraph 129.

Practice - Topic 7003

Costs - Party and party costs - General principles and definitions - Amount involved - In the context of a complex series of multi-party actions, Dunham was successful in his claim against National Bank Financial Ltd. (NBFL) - Dunham sought costs - The amount involved (AI) was $885,314.91 - Applying Tariff A, Scale 3, would result in Tariff fees of $81,000 - The Nova Scotia Supreme Court held an award of simple Tariff costs, without considering the complexity of the proceedings as well as the expense caused by NBFL would be unfair - The court, therefore, awarded costs based on the 2004 Tariff A Scale 3 on an AI that was increased by 2 because of the complexity of the proceedings and further increased by reason of the factors enumerated in Civil Procedure Rule 77.07(2)(e), (f) and (h), and reduced by the fact that Dunham's counsel represented other litigants both before and at trial - The award recognized that Dunham had already paid his counsel $241,500 - Costs of $300,000 were awarded to Dunham - The court used a similar analysis in awarding costs to other litigants - See paragraphs 189 to 200.

Practice - Topic 7003

Costs - Party and party costs - General principles and definitions - Amount involved - In the context of a complex series of multi-party actions, Barthe Estate was awarded damages of $2,360,799 against National Bank Financial Ltd. (NBFL) - It successfully defended a counterclaim from NBFL and third party claims - Potential exposure was $10,000,000 - The Nova Scotia Supreme Court, applying Scale 3 of the 2004 Tariff to an amount involved (AI) of $12,360,799, awarded costs of $1,004,001 - The court declined to increase the AI to take into account the factors of complexity and importance because Barthe had shared legal expenses with another litigant - See paragraphs 201 to 206.

Practice - Topic 7004

Costs - Party and party costs - General principles and definitions - Scale of costs - Fixing of - [See second Practice - Topic 7003 ].

Practice - Topic 7115

Costs - Party and party costs - Special orders - Increase in scale of costs - Difficulty and complexity of proceedings - [See second, third and fourth Practice - Topic 7003 ].

Practice - Topic 7117

Costs - Party and party costs - Special orders - Lump sum in lieu of taxed costs - In the context of a complex series of multi-party actions, Dunham was successful in his claim against National Bank Financial Ltd. - Dunham sought lump sum costs - The Nova Scotia Supreme Court declined to award a lump sum pursuant to Civil Procedure Rule (CPR) 77.08 because that rule was primarily aimed at fulfilling the underlying goal of awarding substantial indemnity for reasonable legal expenses - In this case, the absence of some evidence as to what actual solicitor-client costs were, was an impediment to an award under CPR 77.08 - See paragraph 194.

Practice - Topic 7131.3

Costs - Party and party costs - Disbursements - Interest paid on litigation loans - A successful plaintiff (Weir) claimed interest paid on litigation loans as a disbursement - The Nova Scotia Supreme Court found that it was necessary for Weir to take out loans at high rates of interest in order to continue the litigation - The court approved the interest claim of $80,405.82 - See paragraphs 216 to 221.

Practice - Topic 7133.4

Costs - Party and party costs - Disbursements - Assistance and support provided to counsel by parties (e.g., IT services) - In a complex series of multi-party actions, several plaintiffs were represented by the same lawyer - They were successful in their claim against National Bank Financial Ltd. - As a disbursement, the plaintiffs claimed $151,093.75 for assistance and support provided to counsel by one of the plaintiffs, Dunham, of an IT nature respecting the litigation - The Nova Scotia Supreme Court held that while there was a lack of evidence respecting quantum, the litigation mandated specialized technical assistance in sorting, categorizing and storing the electronic information - Dunham's speciality was in that field - The lawyer could not have pursued the litigation on behalf of the successful plaintiffs without the kind of technical assistance that Dunham provided - The court allowed $25,000 - See paragraphs 222 to 225.

Practice - Topic 7134

Costs - Party and party costs - Disbursements - Photocopies, scanning or printing - Successful litigants claimed $50,000 for disbursements for photocopies (250,000 copies at $.20 per copy) - The Nova Scotia Supreme Court noted that the court had previously expressed its skepticism respecting claims that the actual cost to the lawyer for photocopying was greater than $.10 per copy - Absent evidence of a higher actual cost to the successful plaintiffs' counsel for each photocopy, the court did not accept or approve of a disbursement greater than $.10 a page - The court also held that the plaintiffs' claim lacked detail - The court approved photocopy costs of $10,000 - See paragraphs 211 and 215.

Practice - Topic 7241

Costs - Party and party costs - Offers to settle - General (incl. what constitutes and validity) - A complex series of multi-party actions arose out of the collapse of a publicly-traded technology company - In that context, Dunham, Weir, Blackwood Holdings and Barthe Estate were successful in their claims against National Bank Financial Ltd. (NBFL) - The successful parties sought costs - NBFL relied on settlement offers - The Nova Scotia Supreme Court held that the offers did not comply with Civil Procedure Rule (CPR) 10.05 - The court stated that "The subsection is clear, before the offer can be considered a formal offer to settle, it must include a specific and express term with respect to costs. Three options are provided for in the Rule. The offers made by NBFL were either without costs (in the case of dismissal of the counterclaims and third party claims) or inclusive of interest and costs (in the case of claims). These offers do not comply with CPR 10.05(1) because they include neither 'an amount', nor an amount to be determined by a judge, nor an option to choose between the two" - See paragraphs 148 to 159.

Cases Noticed:

Wadden v. BMO Nesbitt Burns (2014), 341 N.S.R.(2d) 94; 1081 A.P.R. 94; 2014 NSSC 11, refd to. [para. 14].

Chaddock v. Chaddock (1993), 121 N.S.R.(2d) 274; 335 A.P.R. 274 (T.D.), refd to. [para. 32].

Turner-Lienaux v. Nova Scotia (Attorney General) et al. (1992), 115 N.S.R.(2d) 200; 314 A.P.R. 200 (T.D.), refd to. [para. 32].

Landymore et al. v. Hardy et al. (1992), 112 N.S.R.(2d) 410; 307 A.P.R. 410 (S.C.), refd to. [para. 32].

Leddicote v. Nova Scotia (Attorney General) et al. (2002), 203 N.S.R.(2d) 271; 635 A.P.R. 271; 2002 NSCA 47, refd to. [para. 32].

Bevis et al. v. CTV Inc. et al. (2004), 228 N.S.R.(2d) 34; 723 A.P.R. 34; 2004 NSSC 209, refd to. [para. 34].

Giffin v. Soontiens et al. (2012), 322 N.S.R.(2d) 325; 1021 A.P.R. 325; 2012 NSSC 354, refd to. [para. 34].

Creighton v. Nova Scotia (Attorney General) et al. (2011), 309 N.S.R.(2d) 317; 979 A.P.R. 317; 2011 NSSC 437, refd to. [para. 34].

Wall v. 679927 Ontario Ltd. et al. (2008), 262 N.S.R.(2d) 70; 839 A.P.R. 70; 2008 NSSC 4, refd to. [para. 34].

Williamson v. Williams et al. (1998), 223 N.S.R.(2d) 78; 705 A.P.R. 78 (C.A.), refd to. [para. 46].

Hayward v. Young (2012), 313 N.S.R.(2d) 115; 990 A.P.R. 115; 2012 NSSC 56, refd to. [para. 67].

Hayward v. Young (2013), 330 N.S.R.(2d) 267; 1046 A.P.R. 267; 2013 NSCA 65, refd to. [para. 67].

LeBlanc v. Doucet et al. (2012), 394 N.B.R.(2d) 228; 1020 A.P.R. 228; 2012 NBCA 88, refd to. [para. 88].

Smith's Field Manor Development Ltd. v. Campbell, [2002] N.S.J. No. 492, refd to. [para. 114].

Statutes Noticed:

Civil Procedure Rules (N.S.), rule 10.05(4) [para. 151]; rule 77 [para. 119].

Rules of Civil Procedure (N.S.) - see Civil Procedure Rules (N.S.).

Rules of Court (N.S.) - see Civil Procedure Rules (N.S.).

Counsel:

Augustus M. Richardson, Q.C., for Craig Anthony Dunham, Lowell R. Weir, Blackwood Holdings Incorporated, Carol MacLaughlin-Weir and the Estate of Michael Barthe;

David G. Coles, Q.C., James Hodgson and Robert Blair, for National Bank Financial Limited and National Bank of Canada;

Calvin Wadden, unrepresented.

This costs matter was dealt with by way of written submissions by Warner, J., of the Nova Scotia Supreme Court, who delivered the following decision on July 10, 2014.