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Offer to Settle Must Stay Open To Start of Trial To Engage Double Costs

Offer to Settle Must Stay Open To Start of Trial To Engage Double Costs

On May 8, 2017, the Federal Court of Appeal dismissed Venngo’s appeal of an Order finding that Concierge Connection’s use of the the PERKOPOLIS mark did not infringe any one of a number of Venngo’s marks (see our previous post here).

In a subsequent unreported Order, dated January 7, 2016, Justice Manson, following the decision of the Court of appeal in  Phillip Morris v. Marlboro, held that when dealing with sophisticated commercial parties, it is not uncommon for a lump sum to be awarded based on a percentage of the actual costs incurred. Justice Manson awarded Concierge $231,000, representing approximately 50% of fees and $25,000 for disbursements. In fixing the lump sum, Justice Manson noted that the Plaintiff had abandoned many of its claims at trial. Justice Manson also relied on the Defendant’s offer to settle the matter for 75% of the Defendant’s costs under column III of Tariff B  to conclude that the Defendants were entitled, pursuant to Rule 420(2)(b), to double costs from the date of the offer.

Venngo then appealed Justice Manson’s finding on the merits and the cost award.

Merits

On appeal, Venngo effectively sought to have the Court of Appeal perform a de novo re-assessment of the evidence, something the Court of Appeal refused to do:

[43] In many respects, as is apparent from the discussion that follows, Venngo is asking this Court to intervene and conduct a de novo confusion assessment and to substitute our assessment of the evidence for that of the Federal Court. However, that is something that we cannot do on appeal. We can only intervene in factual issues or issues of mixed fact and law from which a legal issue cannot be extricated if the Federal Court made a palpable and overriding error and in legal issues if the Federal Court applied an incorrect legal principle.

Finding that Justice Manson had not committed any palpable and overriding error, the Court of Appeal dismissed Venngo’s appeal.

Costs

The Court of Appeal held that engagement of the double cost regime under Rule 420 requires the following elements:

  1. The offer must be clear and unequivocal;
  2. the offer must contain an element of compromise;
  3. the offer must comply  with the timing requirements provided by the Rule; and
  4. the offer must bring the litigation to an end.

Here, since Concierge’s offer had to be accepted more than a week before the trial was to begin, the Court of Appeal held that the offer to settle did not meet the timing requirements of Rule 420:

[89] The operative portion of CCI’s offer provided for the dismissal of Venngo’s action, the dismissal of CCI’s defensive counterclaim (that the Federal Court found no need to adjudicate) and payment of only 75% of the respondent’s costs pursuant to column III of Tariff B if the offer were accepted by October 30, 2015, which was more than a week before the commencement of the trial. Thereafter, presumably, the normal rules regarding costs would have become effective.

[90] Even if it is possible to assume the latter point, CCI’s offer still fails to meet the requirements of Rule 420(3). As its counterclaim was purely defensive, the only element of compromise contained in the offer was the provision on costs. However, the compromise on costs was not open until the commencement of trial. Thus, the offer did not comply with Rule 420(3) and the trial judge was incorrect in holding otherwise.

Since Justice Manson’s cost Order did not set out what impact Rule 420 had on the $231,000 lump sum award, the Court of Appeal remanded the issue back to Justice Manson for redetermination in accordance with its reasons.

Prostscript

In a further Order dated May 18, 2017, Justice Manson ordered a lump sum cost award of $192,000. Whereas the initial cost award provided 50% of the fees to Concierge’s original counsel, following the principles in Nova Chemicals, Justice Manson held that there was insufficient evidence to properly establish those fees and limited the costs to approximately 50% of the legal fees charged by Concierge’s trial counsel.

In coming to $192,000, Justice Manson further confirmed that Concierge’s offer to settle played no role in the awarded amount.

A copy of the Court of Appeal’s decision may be found here.