Nat. Bk. v. Potter, (2008) 267 N.S.R.(2d) 339 (SC)

• Jurisdiction: Nova Scotia
• Judge: Warner, J.
• Neutral Citation: 2008 NSSC 213
• Citation: (2008), 267 N.S.R.(2d) 339 (SC),2008 NSSC 213,[2008] NSJ No 291 (QL),267 NSR (2d) 339,(2008), 267 NSR(2d) 339 (SC),[2008] NS.J. No 291 (QL),267 N.S.R.(2d) 339,267 NSR(2d) 339
• Date: 26 June 2008
• Court: Supreme Court of Nova Scotia (Canada)

Nat. Bk. v. Potter (2008), 267 N.S.R.(2d) 339 (SC);

    853 A.P.R. 339

MLB headnote and full text

Temp. Cite: [2008] N.S.R.(2d) TBEd. JL.013

National Bank Financial Ltd. (plaintiff) v. 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 and Knowledge House Inc. (defendants)

Bruce Clarke, Fiona Imrie, Gramm & Company Incorporated, 2532230 Nova Scotia Limited, 3020828 Nova Scotia Limited, Calvin Wadden, Bernard Schelew, Daniel Potter, Knowledge House Inc., Starr's Point Capital Incorporated, Donald Snow, Meg Research.com Limited, 3027748 Nova Scotia Limited and Raymond Courtney (plaintiffs by counterclaim) v. National Bank Financial Ltd., National Bank of Canada, Real Raymond, Jean Turmel, Michael LaBonte, Lorie Haber, Guy Roby, Eric Hicks, Barry Morse, David Mack and Bruce Clarke (defendants by counterclaim) and Daniel Potter, Blois Colpitts, Stewart McKelvey Stirling Scales, and Bruce Clarke (defendants by cross-claim)

Knowledge House Inc. and Daniel Potter (plaintiffs) v. Stewart McKelvey Stirling Scales, Andrew W. Burke, R. Blois Colpitts and James R. Cruickshank (defendants)

(206439; 174293; 193842; 208293; 216543; 227347; 2008 NSSC 213)

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

Nova Scotia Supreme Court

Warner, J.

July 2, 2008.

Summary:

A complex series of multi-party actions arose out of the collapse of a publicly traded company, Knowledge House Inc. (KHI). National Bank Financial Ltd. (NBFL) applied to amend its statement of claim in the main action and defences, cross-claims, counterclaims and third party claims in the other related actions to remove any material fact allegations that its former employee, Clarke, participated in the alleged conspiracy to manipulate the stock price of KHI between 1999 and September 2001, or committed other wrongful acts.

The Nova Scotia Supreme Court, in a decision reported (2008), 265 N.S.R.(2d) 67; 848 A.P.R. 67, dismissed the application. The successful respondents (i.e., KHI et al.) sought solicitor and client costs.

The Nova Scotia Supreme Court rejected the respondents' claim for solicitor and client costs. Rather the court held that a lump sum award under the pre-September 24, 2004 Tariff was appropriate.

Practice - Topic 7020.1

Costs - Party and party costs - Entitlement to party and party costs - Successful party - Quantum - A complex series of multi-party actions arose out of the collapse of a publicly traded company, Knowledge House Inc. (KHI) - National Bank Financial Ltd. (NBFL) applied to amend its statement of claim in the main action and defences, cross-claims, counterclaims and third party claims in the other related actions to remove any material fact allegations that its former employee, Clarke, participated in the alleged conspiracy to manipulate the stock price of KHI between 1999 and September 2001, or committed other wrongful acts - An applications judge dismissed the application - The successful respondents (i.e., KHI et al.) sought costs - The Nova Scotia Supreme Court held that a lump sum award under the pre-September 24, 2004 Tariff was appropriate in this case - The court stated that "a reasonable but substantial contribution to each of the six respondents' costs, considering the complexity, importance and length of the application, and the need to discourage this kind of application, is $7,000.00, plus reasonable disbursements ..." - See paragraphs 39 to 42.

Practice - Topic 7116

Costs - Party and party costs - Special orders - Gross or lump sum in addition to party and party costs - A complex series of multi-party actions arose out of the collapse of a publicly traded company, Knowledge House Inc. (KHI) - National Bank Financial Ltd. (NBFL) applied to amend its statement of claim in the main action and defences, cross-claims, counterclaims and third party claims in the other related actions to remove any material fact allegations that its former employee, Clarke, participated in the alleged conspiracy to manipulate the stock price of KHI between 1999 and September 2001, or committed other wrongful acts - An applications judge dismissed the application - The successful respondents (i.e., KHI et al.) sought costs - NBFL argued that if costs were to be awarded, they should be party and party costs under the pre-September 24, 2004 Tariff (Old Tariff) adjusted for inflation and should be discounted in respect of the respondents' arguments that were not accepted by the court - No party disputed that the Old Tariff applied - The Nova Scotia Supreme Court held that costs should not be limited to the table amount under the Old Tariff - The court stated that the philosophy of the Nova Scotia tariff was to provide a substantial contribution to the successful party's reasonable expenses, and that where the tariff did not represent a reasonable recovery, it was preferable to augment the tariff figure by a lump sum rather than by artificially manipulating the "amount involved" - The court held that a lump sum award under the Old Tariff was appropriate in this case by reason of the application of the principle of substantial indemnification, and as a disincentive to parties making unnecessary, improper and unreasonable applications that unduly prolong the litigation - The court rejected the argument that costs should be discounted because the court did not adopt the respondents' arguments - See paragraphs 29 to 38.

Practice - Topic 7364

Costs - Costs of interlocutory proceedings - Costs of motions or applications - A complex series of multi-party actions arose out of the collapse of a publicly traded company, Knowledge House Inc. (KHI) - National Bank Financial Ltd. (NBFL) applied to amend its statement of claim in the main action and defences, cross-claims, counterclaims and third party claims in the other related actions to remove any material fact allegations that its former employee, Clarke, participated in the alleged conspiracy to manipulate the stock price of KHI between 1999 and September 2001, or committed other wrongful acts - An applications judge dismissed the application - The successful respondents (i.e., KHI et al.) sought costs - NBFL argued that absent a reference to costs in the written decision, costs should be costs in the cause as per Civil Procedure Rule 63.05(1) (i.e., the rule respecting costs on interlocutory applications) - The Nova Scotia Supreme Court disagreed - The court stated that it was not functus on release of the written decision, but only by issuance of the order - Here the order provided that costs of the application would be determined after further submissions - This hearing constituted the further submissions - The court declined to award costs as costs in the cause - The court ordered that costs were payable forthwith - See paragraphs 5 to 14.

Practice - Topic 7364

Costs - Costs of interlocutory proceedings - Costs of motions or applications - [See Practice - Topic 7020.1 ].

Practice - Topic 7372

Costs - Costs of interlocutory proceedings - Payment forthwith - The Nova Scotia Supreme Court stated that "While at one time it may have been usual to defer costs of interlocutory applications to the end of the case, the length and complexity of modern litigation has led to a reversal of that trend except in those circumstances where the primary issue in the interim application is the same as that intended in the ultimate hearing, or where to award costs at an interim stage may prevent the matter from being determined on its merits at a later date. Generally the parties are better able to argue and the Court is better able to make the appropriate costs determination at the time of the application. Unless the costs award may be improved with the benefit of hindsight (after trial), the award should be paid when ordered." - See paragraph 13.

Practice - Topic 7372

Costs - Costs of interlocutory proceedings - Payment forthwith - [See first Practice - Topic 7364 ].

Practice - Topic 7401

Costs - Solicitor and client costs - General principles - General - The Nova Scotia Supreme Court referred to the statement by Orkin in the "Law of Costs" that an award of costs on a solicitor and client scale would be ordered only in rare and exceptional cases to mark the court's disapproval of the conduct of a party in the litigation - The court noted that while that statement had been repeatedly adopted by courts, most decisions did not examine what would constitute rare and exceptional circumstances - The court stated that many decisions had adopted the statement by McLaughlin, J. (as she then was), in Young v. Young (SCC 1993): "Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. Accordingly, the fact that an application has little merit is no basis for awarding solicitor-client costs ..." - The court cautioned that to state that generally reprehensible conduct should result in an award of solicitor-client costs did not mean that reprehensible conduct should always result in an award of solicitor-client costs - It did not foreclose the requirement of an inquiry into the nature of the reprehensible conduct - See paragraphs 17 to 22.

Practice - Topic 7454

Costs - Solicitor and client costs - Entitlement to solicitor and client costs - Improper, irresponsible or unconscionable conduct - [See Practice - Topic 7401 ].

Practice - Topic 7454

Costs - Solicitor and client costs - Entitlement to solicitor and client costs - Improper, irresponsible or unconscionable conduct - A complex series of multi-party actions arose out of the collapse of a publicly traded company, Knowledge House Inc. (KHI) - National Bank Financial Ltd. (NBFL) applied to amend its statement of claim in the main action and defences, cross-claims, counterclaims and third party claims in the other related actions to remove any material fact allegations that its former employee, Clarke, participated in the alleged conspiracy to manipulate the stock price of KHI between 1999 and September 2001, or committed other wrongful acts - An applications judge dismissed the application - The successful respondents (i.e., KHI et al.) sought solicitor and client costs - NBFL argued that solicitor and client costs were reserved for rare and exceptional circumstances and not every time that the applicant's conduct was found reprehensible - The Nova Scotia Supreme Court noted that the court's application of the legal test for denying the pleadings amendment led to a finding of bad faith - The court stated however that the term "bad faith" was not monolithic - Its meaning was circumscribed by the legal test for amending pleadings and by the context in which it was applied - The use of the term "bad faith" differed from the use in other contexts - The court held that NBFL's bad faith conduct in this case should not attract solicitor and client costs - See paragraphs 15 to 29.

Cases Noticed:

North American Trust Co. et al. v. Salvage Association (1998), 173 N.S.R.(2d) 249; 527 A.P.R. 249 (C.A.), refd to. [para. 5].

Nova Scotia Real Estate Commission v. Lorway MacEachern (2006), 246 N.S.R.(2d) 369; 780 A.P.R. 369; 2006 NSSC 256, refd to. [para. 5].

Brown v. Metropolitan Authority et al. (1996), 150 N.S.R.(2d) 43; 436 A.P.R. 43 (C.A.), refd to. [para. 18].

Campbell v. Lienaux et al. (2001), 195 N.S.R.(2d) 220; 609 A.P.R. 220; 2001 NSSC 44, affd. (2002), 208 N.S.R.(2d) 277; 652 A.P.R. 277; 2002 NSCA 104, refd to. [para. 18].

Campbell v. Lienaux et al. (1997), 165 N.S.R.(2d) 356; 495 A.P.R. 356 (S.C.), refd to. [para. 18].

Young v. Young et al., [1993] 4 S.C.R. 3; 160 N.R. 1; 34 B.C.A.C. 161; 56 W.A.C. 161, refd to. [para. 19].

Petten et al. v. E.Y.E. Marine Consultants et al. (1998), 179 Nfld. & P.E.I.R. 94; 546 A.P.R. 94; 1998 CarswellNfld 351 (T.D.), refd to. [para. 21].

Scott Maritimes Pulp Ltd. v. Goodrich (B.F.) Canada Ltd. and Day & Ross Ltd. (1977), 19 N.S.R.(2d) 181; 24 A.P.R. 181 (C.A.), refd to. [para. 24].

Stacey v. Electrolux Canada (1986), 76 N.S.R.(2d) 182; 189 A.P.R. 182 (C.A.), refd to. [para. 24].

Jeffrey v. Naugler (2006), 248 N.S.R.(2d) 372; 789 A.P.R. 372; 2006 NSCA 117, refd to. [para. 24].

Tildesley v. Harper (1878), 10 Ch. D. 393, refd to. [para. 24].

Steward v. North Metropolitan Tramways (1886), 16 Q.B. 556 (C.A.), refd to. [para. 24].

2301072 Nova Scotia Ltd. v. Lienaux et al., [2004] N.S.R.(2d) Uned. 123; 2004 NSSC 234, refd to. [para. 26].

Toronto-Dominion Bank v. Lienaux - see 2301072 Nova Scotia Ltd. v. Lienaux et al.

National Bank Financial Ltd. v. Potter et al. (2005), 237 N.S.R.(2d) 48; 754 A.P.R. 48; 2005 NSSC 264, refd to. [para. 26].

Landymore et al. v. Hardy et al. (1992), 112 N.S.R.(2d) 410; 307 A.P.R. 410 (T.D.), refd to. [para. 34].

Campbell-MacIsaac et al. v. Deveaux et al. (2005), 230 N.S.R.(2d) 304; 729 A.P.R. 304 (S.C.), refd to. [para. 34].

Campbell v. Jones et al. (2001), 197 N.S.R.(2d) 212; 616 A.P.R. 212; 2001 NSSC 139, refd to. [para. 35].

Knox v. Maple Leaf Homes et al. (2008), 264 N.S.R.(2d) 213; 847 A.P.R. 213; 2008 NSSC 114, refd to. [para. 35].

Statutes Noticed:

Civil Procedure Rules (N.S.), rule 63.02(1), rule 63.02(3), rule 63.03(1), rule 63.03(2), rule 63.04(2), rule 63.05(1) [para. 3].

Authors and Works Noticed:

Orkin, Mark M., The Law of Costs (2nd Ed.) (2007 Looseleaf Supp.), c. 2 [para. 16]; §§ 201 [paras. 17, 34]; 219.1 [para. 17].

Counsel:

David G. Coles, Q.C., Joshua J. Santimaw and Steven McCardy, for National Bank Financial Ltd. et al. ("NBFL");

W. Dale Dunlop, for Michael (Ben) Barthe, Lutz Ristow, Craig Dunham, Derek Banks, Plastics Maritime Ltd., Lowell Weir, Blackwood Holdings, Helical Corporation, Carole McLauchlin-Weir, Calvin Wadden, Michael Mahoney and 3031775 Nova Scotia Ltd.;

John F. Rook, Q.C., for Stewart McKelvey Stirling Scales ("SMSS"), Andrew V. Burke, and James K. Cruickshank;

George W. MacDonald, Q.C., and Cheryl Hodder, for 3058703 Nova Scotia Ltd. ("Keating");

Robert G. Belliveau, Q.C., for Staffing Strategists International;

Daniel Potter, for himself, Knowledge House Inc. ("KHI") and Starr's Point Capital Inc.;

Mary Jane McGinty, for Gary Blandford, Julia Blandford and 3017804 Nova Scotia Ltd.

This matter was heard on June 26, 2008, in Halifax, Nova Scotia, before Warner, J., of the Nova Scotia Supreme Court, who delivered the following decision on July 2, 2008.