Docket: CACV2420 MFI AG Services Ltd. Prospective Appellant (Plaintiff) - v. -, 2014 SKCA 69

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 201 4 SKCA 69 Date: 2014-06-20 Between: Docket: CACV2420 MFI AG Services Ltd. Prospective Appellant (Plaintiff) - and - Lyndon Joseph Sotkowy and Warren James Sotkowy Prospective Respondents (Defendants) - and - Nicholas P. Robinson and Merchant Law Group LLP Prospective Respondents (Defendants) Before: Ottenbreit J.A. (in Chambers) Counsel: Khurrum R. Awan and Joanne V. Colledge for the prospective appellant Kevin A. Clarke for the prospective respondents Lyndon Joseph Sotkowy and Warren James Sotkowy Application:

From: September 23, 2013, Fiat of the Registrar Heard: November 13, 2013 Disposition: Dismissed Written Reasons: June 20, 2014 By: The Honourable Mr. Justice Ottenbreit Ottenbreit J.A. [ 1 ] This is an application to review a decision of the Registrar with respect to the taxation of costs. The authority for the review is derived from Rule 567(1) of The Queen’s Bench Rules (“ QB Rules ”), which provides that “A person with a pecuniary interest in the result of an assessment of costs who is dissatisfied with an assessment may apply to the Court for a review of the assessment of costs”.

Rule 567 is made applicable to Court of Appeal practice by virtue of Rule 54 of The Court of Appeal Rules (“ CA Rules ”). Rule 54(2) provides that the reference to “the court” in Rule 567(1) is a reference to a “judge”. Judge is defined by the CA Rules to mean “a judge of the Court of Appeal acting under

section 20 of The Court of Appeal Act ”. For the reasons that follow, the decision of the Registrar stands. I cannot find that she erred in the result. [ 2 ] The Court of Queen’s Bench revised its Rules in July 2013.

Part 11 of the current 2013 QB Rules corresponds substantially with Part Forty-Six of the QB Rules in force prior to July 1, 2013. For the purposes of this decision, I will refer to the QB Rules as they were before the revision although my comments apply with equal force to the revised QB Rules as well. [ 3 ] The background of this matter is as follows. MFI AG Services Ltd. (“MFI”) unsuccessfully applied for an order in Queen’s Bench Chambers to add certain parties as defendants and to make certain amendments to its statement of claim in its action against Lyndon Sotkowy and Warren Sotkowy (the “Sotkowys”).

MFI sought leave to appeal the QB Chambers decision. In a decision dated June 19, 2013, and cited as MFI AG Services Ltd. v. Sotkowy , 2013 SKCA 67 , 414 Sask. R. 313 , MFI’s application for leave was dismissed with “costs in the usual way” to the Sotkowys. [ 4 ] A dispute arose over what “costs in the usual way” meant. The Sotkowys then took out an appointment for taxation. At the taxation, the parties agreed on the amount claimed as taxable costs and that “costs in the usual way” go to the Sotkowys as the successful party. However, they disagreed as to when costs were payable and sought an

interpretation of the phrase “costs in the usual way” from the Registrar of this Court. MFI argued that the QB Rules respecting costs applied to the costs on the application for leave by virtue of Rule 54 of the CA Rules . MFI submitted that since the decision denying leave made no express direction as to when costs need be paid, Rules 553 and 554 of the QB Rules apply and costs need be paid only after the final determination of the action or proceeding in the court appealed from; in short, only after the conclusion of the action in Queen’s Bench.

The Sotkowys argued that that Rules 553 and 554 did not apply and costs of the leave application were payable forthwith. [ 5 ] The Registrar held that the phrase “costs in the usual way” in this application meant costs were both taxable and payable forthwith. The Registrar determined that QB Rule 553 was inapplicable for two reasons. First, the leave application which was dismissed was a final decision and therefore could not be characterized as “interlocutory” within the meaning of Rule 553(1) because no appeal was ever filed in this Court with respect to the matter.

Second, she observed that the predecessor to Rule 553, which was Rule 566(o), contained a reference to an appeal in interlocutory proceedings but this reference was removed when the QB Rules were amended in 2003. She determined that if the drafters of Rule 553 had intended it to apply to an application for leave to appeal an interlocutory decision, they would have said so as they did in former Rule 566(o). [ 6 ] The Registrar gave two reasons why Rule 554 did not apply. She determined that she was bound by this Court’s decision in Phipps v. Phipps , 2013 SKCA 49 , 414 Sask.

R. 135 , which determined that Rule 554(1) “applies only in the context of an appeal brought before the Court of Queen’s Bench qua appellate court against the decision of an inferior tribunal” and not an appeal in this Court.

The Registrar also determined that even if Rule 554(2) applies, it only applies to the costs of an appeal that does not finally dispose of the matter and the decision on the leave application finally disposed of the matter. [ 7 ] The Registrar also addressed the policy reasons for her determination but I need not address that aspect in view of what follows. [ 8 ] MFI now applies to review the decision of the Registrar. As an initial matter, the Sotkowys oppose MFI filing its material before me arguing that it was out of time and not in accordance with the CA Rules . I need not decide if it was filed late.

Even if it was not filed in accordance with the Rules , the issues respecting this matter were well known by the parties and there is no prejudice to the Sotkowys regarding any filing irregularity. To the extent necessary, leave is granted to MFI to file its material. [ 9 ] MFI makes a number of arguments in support of its submission that the Registrar has erred in her determination.

Firstly, MFI submits that previous authorities in this Court and other appellate courts have held where costs in any event of the cause are ordered on an interlocutory application that payment of costs forthwith is exceptional and that the usual case is that such costs are not payable until the underlying action in the Queen’s Bench is concluded. MFI argues that Rules 553 and 554 as they are incorporated into the CA Rules by CA Rule 54 should be interpreted to comport with this case authority.

MFI also submits that Phipps interpreted Rule 554 in the context of an order for costs made by a Queen’s Bench judge and that such an

interpretation is inapplicable to an order for costs in the Court of Appeal.

[10] I begin my analysis by observing that the

interpretation of the Rules is informed by several key principles. In Coulthard v.Coulthard (1952), (SK CA), 5 W.W.R. (N.S.) 662 (Sask. C.A.), at p. 669, this Court indicated that the “Rules of Courtare the servants … of the Court, whose faculty it is to interpret those Rules in the manner most likely to do justice between the parties…”. As well, the Rules, because they are technically a regulation by virtue of s. 2 of The

Interpretation Act, 1995, S.S. 1995, c. I-11.2,stand to be interpreted as being remedial and to best ensure the attainment of their objects in accordance with s. 10 of that Act. Additionally, they must be interpreted in accordance with the modern approach to statutory

interpretation appearing in Rizzo & RizzoShoes Ltd. (Re), (SCC), [1998] 1 S.C.R. 27, which requires that the words of every enactment are to be read in theirentire context and in their grammatical and ordinary sense harmoniously with the scheme and purpose of the enactment and the intentionof the Legislature (in this case the drafters of the Rules). It is with these three points in mind that I turn now to the arguments of MFI. [11] The provisions of CA Rule 54(2) make Part Forty-Six of the QB Rules applicable, with necessary modification to the taxation ofcosts on appeal under s. 54(1). These Rules read as follows: Taxation of costs 54(1) Unless otherwise ordered: (

a) the costs of an appeal or application shall be taxed as between party and party by the registrar in accordance with the fees set out inthe appropriate column of

Schedule I; and (

b) Column 2 of

Schedule I “A” applies to the taxation of costs where non-monetary relief is involved. (2) “PART FORTY-SIX” of The Queen’s Bench Rules shall apply, with any necessary modification, to a taxation of costs pursuantto this rule. For the purpose of applying that PART to the taxation of costs under these rules, any reference in that PART to “the court”shall be interpreted as a reference to a judge. [12] Thus, QB Rules taken in the context of their incorporation are modified to the extent necessary to assist the taxation of costspursuant to CA Rule 54(1). The reference in CA Rule 54(1)(

a) to the “costs of an appeal or application” can only mean an appeal orapplication in this Court. Once incorporated, the terms of the QB Rules are intended to speak to the taxation process in this Courtrespecting the appeal or application to the extent that the QB Rule is amenable, with necessary modification if required. [13] The incorporated QB Rule which governs the timing of the assessment of costs is found in Division 3 of Part Forty-Six. It is Rule557 and reads as follows: Time for assessment of costs 557 Unless provided otherwise by rule or an order of the court, costs may be assessed at any time after: (

a) the judgment or order entitling a party to costs has been entered or issued, or (

b) an action is dismissed with costs or a motion is refused with costs. R. 557. Gaz. Dec. 13, 2002. New. [14] To the extent that Rule 557 is incorporated into the CA Rules, it sets out the default process governing the timing of assessmentand payment of costs in this Court. Unless provided otherwise by rule or court order, costs awarded in an application can be taxed anytime after (

i) the order for costs is issued, or (ii) the motion is refused with costs. MFI acknowledges that the decision denying leave doesnot explicitly speak to the timing of the payment of costs. Rule 557, therefore, applies in this case unless a rule provides otherwise. [15] MFI submits that Rules 553 and 554 are such rules. These Rules read as follows: Costs in interlocutory proceedings 553(1) The costs of any interlocutory motion or application: (

a) shall follow the outcome of the motion or application; (

b) shall be assessed on the same scale as the general costs of the action or proceeding; and (

c) are not payable until final determination of the action or proceeding.

(2) No ex parte order shall contain any directions as to costs. R. 553. Gaz. Dec. 13, 2002. New. Costs on appeal 554(1) The costs of an appeal, and of the proceeding appealed from, shall follow the event of the appeal.

(2) The costs of an appeal that does not finally dispose of the matter shall not be assessed or payable until the final determination ofthe action or proceeding in the court appealed from. R. 554. Gaz. Dec. 13, 2002. New. Given my previous comments, the words in both QB Rules 553 and 554, once incorporated into the CA Rules, must be read to referenceproceedings in this Court mutatis mutandis. [16] I turn first to Rule 553. On incorporation into the CA Rules, the words “interlocutory motion or application” in the

preamble ofRule 553(1) and “final determination of the action or proceeding” in Rule 553(1)(

c) must refer to such matters in this Court and not theQueen’s Bench. [17] The argument of MFI that costs of the leave application in this Court must await the determination of the QB action, which is notyet final by virtue of Rule 553(1)(c), must fail for two reasons. Firstly, it disregards the principle that once incorporated into the CARules, the QB Rules and the terms set out therein speak to the process in this Court and not the Queen’s Bench.

That Rule cannot, by itsterms, apply to processes in this Court and at the same time, by its terms, i.e. “action or proceeding”, also refer to the Queen’s Bench.Secondly, MFI mischaracterizes the award of costs and the issue in this matter as when costs “in any event of the cause” are to be paidand then argues that such orders are historically and, as a matter of practice, generally not payable forthwith. The decision denying leavemade no such order. The order was “costs in the usual way” after a final determination.

In fact, after the dismissal of the leaveapplication, there is no “cause” the “event” of which is left to be determined in this Court. MFI then argues that even if the references inQB Rule 553 to “action or proceeding” are to be read to refer to matters in this Court, that I should place no weight on the fact that in thisCourt there is no underlying proceeding.

This is clearly wrong since Rule 553(1)(c), if it is to have any meaning in this Court, clearlycontemplates the finalization of the action or proceeding as a determiner of when costs are payable. [18] I need not decide the meaning of “interlocutory” as used in Rule 553 and whether the leave application was not interlocutory as theRegistrar found. This is because the leave application, whether interlocutory or not, was, as observed by the Registrar, a “finaldetermination of the … proceeding” in this Court as set forth by Rule 553(1)(c).

After the dismissal of the leave application there was nofurther lis (or proceeding) in this Court respecting the parties. It may be inferred, on a fair reading of the subrule, that once theproceeding is finally determined there is no impediment to costs being payable forthwith. This dovetails with Rule 557 regarding thetiming of taxation. [19] It may be observed that Rule 553(1)(

c) is no more than the codification of the general practice respecting when costs must be paid,long applied in both the Queen’s Bench and this Court and as explained in Ford v. Canadian National Railways, (SKCA), [1937] 2 W.W.R. 216 (Sask. C.A.).

Absent exceptional circumstances when it is appropriate to make the costs payable forthwithor payable before a party is allowed to proceed, costs for interim applications in the court which do not finally determine the action orappeal, as the case may be, generally await the outcome of the underlying action or appeal in that respective court. [20] In light of the foregoing, Rule 553 is not a rule which prevents the application of the default provisions of Rule 557 and, in fact,supports it. [21] I turn now to Rule 554.

As observed by Caldwell J.A. in Phipps, Rule 554(1) is meant to apply to costs in the Queen’s Bench andto that court sitting as an appeal court. A short digression into some of the Rule’s history illustrates that point.

This Rule in 1942 read asfollows: 564(5) In case of an appeal to the court from a district court judge sitting in chambers, the costs of such appeal shall unless otherwiseordered be taxed on the district court scale of the Tariff of Costs, but unless ordered to be paid forthwith shall not be taxed and shall notbe payable until the final determination of the action or proceeding in the court appealed from. [emphasis added] [22] In 1942 the Queen’s Bench sat in appeal of District Court decisions.

The predecessor to Rule 554 was directed to that function.Although the District Court merged with the Queen’s Bench in 1981, the Court of Queen’s Bench nevertheless still retains civil appellatejurisdiction with respect to Small Claims and Residential Tenancies. Presumably this is why Rule 554 continued to exist and why itsrevised July 2013 successor, Rule 11-9, continues to exist. [23] The Registrar concluded that because of Phipps, Rule 554 does not apply to an appeal in this Court.

MFI argues that Phipps isdistinguishable because the court there never dealt with the application of Rule 554 as it is incorporated into the CA Rules. It submitsthat the references in Rule 554 to the costs of an appeal not being assessed or payable until final determination of the action orproceeding in the court appealed from, once incorporated into the CA Rules, must necessarily mean that it is the default provision andapplies to and governs appeals/proceedings in this Court. [24] I need not determine the extent to which this Rule applies to appeals in this Court.

Taking the ordinary meaning of the word“appeal” in Rule 554(2) into consideration and considering Rule 6 of the CA Rules which states that all “appeals” shall be initiated bynotice of appeal, it is clear that in this case, even if Rule 554(2) did apply, there was no “appeal”. At most there was an application. The

timing of taxation of the costs of an application is governed by Rule 553 as dealt with earlier. In short, I agree with the conclusion of the Registrar that Rule 554 is inapplicable to this matter. It does not, therefore, prevent the operation of the default provisions in Rule 557. [ 25 ] In

summary, where an application for leave to appeal is dismissed with “costs in the usual way” to the successful party, QB Rule 557 and the normal or “usual” practice of the court applies and becomes the default provision. In such a case, the costs may be taxed forthwith in the absence of another rule to the contrary. In conclusion, after review, the decision of the Registrar is confirmed. The Sotkowys shall have their costs of this review taxable and payable forthwith. DATED at the City of Regina, in the Province of Saskatchewan, this 20 th day of June, A.D. 2014. “Ottenbreit J.A.” Ottenbreit J.A.