T-4656-75
Delbert Guerin, Joseph Becker, Eddie Campbell,
Mary Charles, Gertrude Guerin and Gail Sparrow
suing on their own behalf and on behalf of all other
members of the Musqueam Indian Band (Plain-
tiffs)
v.
The Queen (Defendant)
Trial Division, Collier J.—Vancouver, August 4
and 11, 1981.
Practice — Interest — Whether plaintiffs are entitled to
interest on the damages assessed from the date of the breach
of trust to the day before judgment — Whether the post-judg
ment rate of interest should be increased — Whether costs and
disbursements should be taxed on a solicitor and client basis
— Motion dismissed — Federal Court Act, R.S.C. 1970 (2nd
Supp.), c. 10, ss. 35, 40 — Exchequer Court Act, R.S.C. 1970,
c. E-11, s. 47 — Lord Tenterden's Act, 1833 (3 & 4 Wm. IV),
c. 42, s. 28 — Crown Liability Act, R.S.C. 1970, c. C-38, s.
3(1)(b) — Indian Act, R.S.C. 1970, c. I-6, s. 61(2) — Interest
Act, R.S.C. 1970, c. I-18, ss. 3, 13 — Federal Court Rule
344(1),(7), Tariff B.
Plaintiffs move for interest on the judgment and costs. The
first question is whether the plaintiffs were entitled to interest
on the damage award from, the effective date of the breach of
trust to the day before the effective date of the formal judg
ment. The plaintiffs submitted that since the Federal Court Act
only came into existence in 1971, section 47 of the Exchequer
Court Act applies. Section 47 restricted the Court's power to
grant interest only in cases involving breach of contract. The
plaintiffs contended that therefore they had a vested right to
interest; that section 35 of the Federal Court Act was substan
tive legislation which purported to take away that vested right
and therefore it could not be given retrospective effect unless
that intention was apparent from the amending legislation.
Alternatively the plaintiffs contended that Lord Tenterden's
Act, paragraph 3(1)(b) of the Crown Liability Act and the
Indian Act allowed interest to be awarded. Paragraph 3(1)(b)
provides that the Crown is liable in tort for damages in respect
of a breach of duty attaching to the ownership, occupation,
possession or control of property. The plaintiffs submit that
their claim arose out of a breach of duty attaching to owner
ship, possession or control of the reserve. Subsection 61(2) of
the Indian Act provides that interest on monies held in the
Consolidated Revenue Fund shall be allowed at a rate to be
fixed from time to time by the Governor in Council. It was
argued that the Crown "has been deemed to have borrowed the
amount of the award from the plaintiffs so that the award is
`Indian monies' which have been held in the Consolidated
Revenue Fund". The plaintiffs then argued that the trust
became a contract arising out of the surrender document
between the Band and the Crown. The second question is
whether the post-judgment interest rate of five per cent should
be increased. Section 40 of the Federal Court Act provides that
unless otherwise ordered, a judgment bears interest from the
time of giving the judgment at the rate prescribed by section 3
of the Interest Act. The plaintiffs submitted that section 40
permits the Court to vary the rate of interest provided in the
Interest Act. The final question is whether the costs and
disbursements should be taxed on a solicitor and client basis
because of the volume of work required and the difficulty and
importance of the case. Rule 344 provides that the Court may
direct a payment of a fixed or lump sum in lieu of costs and
that the Court may make a special direction to increase or
decrease tariff costs.
Held, the motion is dismissed. Section 35 of the Federal
Court Act is a provision defining the jurisdiction of the Court in
respect of what interest, if any, may be awarded against the
Crown. Even if the plaintiffs' submission as to section 35 were
sound, they are confronted with the Canadian common law
principle that "interest may not be allowed against the Crown,
unless there is a statute or a contract providing for it". Lord
Tenterden's Act is not in force in Canada as a federal statute.
Paragraph 3(1)(b) of the Crown Liability Act deals with tort,
not trust or breach of trust. It has reference to the tort liability
of the Crown arising out of occupiers' liability law. Subsection
61(2) of the Indian Act has reference to monies actually held in
the Consolidated Revenue Fund. It has no application to this
case. A trust is not a contract in the legal sense. There is
neither evidence nor law to support the plaintiffs' contention
that an implied contract arose when the trust was created. With
respect to post-judgment interest, the only discretion given to
the Court is to vary the time at which post-judgment interest
would otherwise run. Finally, the length, complexity and dif
ficulty of a case are not sufficient to warrant a special direction
as to costs.
Smerchanski v. Minister of National Revenue [1979] 1
F.C. 801, followed. R. v. Carroll [1948] S.C.R. 126,
followed. McNamara Construction (Western) Ltd. v. The
Queen [1977] 2 S.C.R. 654, applied. Upper Canada Col
lege v. Smith (1921) 61 S.C.R. 413, referred to. Dixie v.
Royal Columbian Hospital [1941] 2 D.L.R. 138, referred
to. MacMillan Bloedel (Saskatchewan) Ltd. v. Consol -
board Inc., unreported, A-266-78, judgment dated May
29, 1981, referred to. R. v. Nord-Deutsche Versicherungs-
Gesellschaft [1971] S.C.R. 849, distinguished.
MOTION.
COUNSEL:
M. R. V. Storrow, S. R. Schachter and J.
Reynolds for plaintiffs.
Ian Binnie, Q.C. and Cindy Roth for
defendant.
SOLICITORS:
Davis & Company, Vancouver, for plaintiffs.
Deputy Attorney General of Canada for
defendant.
The following are the supplementary reasons
for judgment rendered in English by
COLLIER J.: In the reasons for judgment in this
action [page 385 supra], I directed the plaintiffs to
bring on a motion for judgment. The motion was
to include consideration of questions of interest on
the damages assessed, and of any matters or sub
missions pertaining to costs.
The motion was heard on August 4, 1981.
The plaintiffs contended they were entitled to
interest on the damage award from at least Janu-
ary 22, 1958 to July 12, 1981. The first date is the
date of the golf club lease. It was said to be the
effective date of the breach of trust and the com
mencement of the loss suffered, as a result, by the
Band. The second date is the day before the effec
tive date of the formal judgment. This claim for
interest was, in argument, referred to as pre-judg
ment interest. I shall use that term.
The plaintiffs further submitted the post-judg
ment interest rate of 5%, as set out in the Interest
Act', be increased to coincide with present day
interest rates.
In respect of costs, the plaintiffs sought a direc
tion that their costs and disbursements, recover
able from the defendant, be taxed on a full solici
tor and client basis.
At the end of argument, I dismissed all of the
plaintiffs' motions. I did, however, make some
directions in respect of relatively minor matters:
the applicable costs tariff and the taxation of
expert witness charges.
I said I would put my brief oral reasons in
slightly expanded written form. These are those
reasons.
' R.S.C. 1970, c. 1-18, s. 13.
Prejudgment interest
Section 35 of the Federal Court Act e provides:
35. In adjudicating upon any claim against the Crown, the
Court shall not allow interest on any sum of money that the
Court considers to be due to the claimant, in the absence of any
contract stipulating for payment of such interest or of a statute
providing in such a case for the payment of interest by the
Crown.
The plaintiffs argued the Federal Court Act,
and section 35, came into force effective June 1,
1971; under the Exchequer Court Act 3 , which was
repealed effective June 1, 1971, the plaintiffs had,
as of January 22, 1958, a vested right to pre-judg
ment interest in respect of their cause of action for
breach of trust; the predecessor provision to sec
tion 35, (section 47 of the Exchequer Court Act),
restricted the Exchequer Court's power to grant
interest against the Crown only in cases involving
breach of contract; there was, therefore, a vested
right in the plaintiffs in this case; section 35 was
substantive, not procedural legislation; it purport
ed to take away that vested right; legislation of
that kind cannot be given retrospective effect
unless that intention is clearly apparent from the
"amending" legislation itself.
I do not accept that submission.
I agree with the contention of the defendant:
section 35 of the Federal Court Act is a provision
defining the jurisdiction of this Court in respect of
what interest, if any, may be awarded against the
Crown. The cases relied on by the plaintiffs, such
as Upper Canada College v. Smith 4 and Dixie v.
Royal Columbian Hospitals are not applicable.
The plaintiffs brought their action in this Court.
It is true they had no other choice of forum. But
this is a statutory Court. Its jurisdiction, in respect
of the subject-matter of claims, and over persons,
and its jurisdiction in respect of the remedies and
other relief it can grant, must be found in existing
federal statute or federal common law 6 .
2 R.S.C. 1970 (2nd Supp.), c. 10.
3 R.S.C. 1970, c. E-11.
4 (1921) 61 S.C.R. 413.
5 [1941] 2 D.L.R. 138.
6 McNamara Construction (Western) Ltd. v. The Queen
[1977] 2 S.C.R. 654 at p. 658.
Here the jurisdiction of the Court, in respect of
interest, is specifically spelled out, and limited, by
section 35.
Even if the plaintiffs' submission as to section 35
were sound, they are confronted with the Canadi-
an common law principle as laid down by the
Supreme Court of Canada:
It is settled jurisprudence that interest may not be allowed
against the Crown, unless there is a statute or a contract
providing for 4. 7
Counsel for the plaintiffs contended there was
no such rule; the Supreme Court of Canada deci
sions were either incorrectly decided or distin
guishable.
The principle laid down by the Supreme Court
of Canada, whether it be correct or incorrect, is
clear. As a Trial Judge I am bound to follow the
decisions of the Supreme Court.
The plaintiffs relied heavily on The Queen
v. Nord-Deutsche Versicherungs-Gesellschaftg.
That case is, in my opinion, distinguishable on its
facts. It was found, in the circumstances of that
particular case, provisions of the Crown Liability
Act furnished a statutory foundation for the
awarding of interest against the federal Crown.
The plaintiffs went on to contend, before me, if
section 35 of the Federal Court Act, or the
Supreme Court principle, applied, then there were
relevant statutory provisions for the allowing of
interest in this case. The statutes relied on were:
Lord Tenterden's Act, 9 Crown Liability Act, 10
Indian Act."
7 The King v. Carroll [1948] S.C.R. 126, per Taschereau J.
at p. 132, where earlier decisions of the Supreme Court of
Canada were cited: The King v. Roger Miller & Sons Ltd.
[1930] S.C.R. 293, Hochelaga Shipping & Towing Co. Ltd. v.
The King [1944] S.C.R. 138, The King v. Racette [1948]
S.C.R. 28.
8 [1971] S.C.R. 849. The trial judgment is reported at [1969]
1 Ex.C.R. 117.
9 1833 (3 & 4 Wm. IV), c. 42, s. 28.
10 R.S.C. 1970, c. C-38.
1 R.S.C. 1970, c. I-6, subs. 61(2).
Lord Tenterden's Act is not in force in Canada,
as a federal statute. It has been held to be part of
the law of British Columbia. But that does not
mean it can somehow apply in respect of a claim
or action brought by a British Columbia litigant
against the federal Crown.
The plaintiffs rely on paragraph 3(1)(b) of the
Crown Liability Act, as providing a statutory basis
for the awarding of interest. Subsection 3(1) was
relied upon by the Trial Judge in the Nord-
Deutsche case. His reasons, in respect of interest,
were approved by the Supreme Court of Canada.
I set out subsection 3(1):
3. (1) The Crown is liable in tort for the damages for which,
if it were a private person of full age and capacity, it would be
liable
(a) in respect of a tort committed by a servant of the Crown,
or
(b) in respect of a breach of duty attaching to the ownership,
occupation, possession or control of property.
Counsel for the plaintiffs contended paragraph
(b) applied to the plaintiffs' case; their claim arose
out of a breach of duty attaching to the ownership,
possession or control of 162 acres of the reserve.
The paragraph of the statute cannot, in my
view, be interpreted in that way. The matter dealt
with is tort, not trust or breach of trust. Paragraph
(b), to my mind, has reference to the tort liability
of the Crown arising out of what is commonly
termed occupiers' or owners' liability law.
The final statutory basis for allowing interest is
found, it is said, in subsection 61(2) of the Indian
Act:
61... .
(2) Interest upon Indian moneys held in the Consolidated
Revenue Fund shall be allowed at a rate to be fixed from time
to time by the Governor in Council.
It was argued the Crown "has been deemed to
have borrowed the amount of the award from the
plaintiffs so that the award is `Indian monies'
which have been held in the Consolidated Revenue
Fund".
I do not accept this notional argument as some
how authorizing the allowance of interest in the
circumstances of this case. Subsection 61(2) has
reference to monies actually held in the Con
solidated Revenue Fund. It has, in my opinion, no
application to this case.
The plaintiffs then argued the trust which Ij
found to have been created, somehow, for the
purpose of allowing interest, became a contract.
The submission was put this way: "One of the
terms of the contract implied by law is that, if the
Crown breached its duty as a trustee causing loss
to the beneficiaries, it would compensate them by
way of interest." This was the first time it had ever
been alleged, or argued, by the plaintiffs there was
some kind of contract, arising out of the surrender
document, between the Band and the Crown.
A trust is not, generally speaking, a contract in
the legal sense. Nor is breach of trust a breach of
contract, again in a legal sense. There is neither
evidence nor law to support the plaintiffs' conten
tion an implied contract to pay interest arose when
the trust in this case was created.
The various contentions fail. The plaintiffs have
not made out, in my view, any case for the allow
ing of pre-judgment interest.
Post-judgment interest
In respect of post-judgment interest, certain
statutory provisions are relevant.
Section 40 of the Federal Court Act 12 provides:
40. Unless otherwise ordered by the Court, a judgment,
including a judgment against the Crown, bears interest from
the time of giving the judgment at the rate prescribed by
section 3 of the Interest Act.
Sections 3 and 13 of the Interest Act" provide:
3. Except as to liabilities existing immediately before the 7th
day of July 1900, whenever any interest is payable by the
agreement of parties or by law, and no rate is fixed by such
agreement or by law, the rate of interest shall be five per cent
per annum.
12 Earlier cited.
13 R.S.C. 1970, c. I-18.
13. Every judgment debt shall bear interest at the rate of five
per cent per annum until it is satisfied.
The plaintiffs argue section 40 of the Federal
Court Act permits this Court to vary the rate of
interest as provided in the relevant sections of the
Interest Act. I do not accept that submission.
Section 40 cannot, as I see it, be interpreted that
way. The only discretion given to the Court is to
vary the time at which post-judgment interest
would otherwise run. There is no power to vary the
rate.
The judgment in favour of the plaintiffs in this
case will bear the statutory rate of interest from
the date of pronouncement: July 13, 1981.
Costs
The normal rule in this Court is the successful
party is entitled to costs. In the usual situation,
those costs are on a party and party basis, and in
accordance with the amounts set out in Tariff B.
Rule 344(1) provides the Court may direct a
payment of a fixed or lump sum in lieu of taxed
costs.
Rule 344(7) provides the Court may make a
special direction concerning costs, including a
direction contemplated by Tariff B.
Section 3 of Tariff B provides:
3. No amounts other than those set out above shall be
allowed on a party and party taxation, but any of the above
amounts may be increased or decreased by direction of the
Court in the judgment for costs or under Rule 344(7).
The plaintiffs request a direction the costs be
taxed on the basis of the plaintiffs being complete
ly reimbursed for all their legal fees and disburse
ments. To put it another way, they seek a direction
,their costs be taxed against the defendant on a full
solicitor and client basis.
A number of considerations were advanced as to
why the costs in this case should be increased as
requested. I do not intend to set them out. Some of
the points put forward had to do with the volume
of work required and the difficulty and importance
of this case.
In Smerchanski v. M.N.R. 14 , Jackett C.J. said
this:
Finally, 1 should say on this point that the material submit
ted in support of this application does not, in my opinion,
provide a reasonably arguable case for an exercise of judicial
discretion increasing the fees for services of solicitors and
counsel in connection with this appeal. Such a direction must
be based on relevant considerations and must not be made on
an arbitrary basis. All that has been established here is that the
respondent incurred a very large solicitor and client bill in
connection with the appeal, which would have been relevant if
costs had been awarded on a solicitor and client basis but is not
ordinarily relevant to the determination of costs on a party and
party basis. Nothing has been put forward to suggest that there
was anything in the conduct of the appeal to warrant any
increase in the party and party tariff. While there is no
principle with reference to the basis for ordinary party and
party costs that is apparent to me from a study of the relevant
Rules, it does seem to be clear that party and party costs are
not designed to constitute full compensation to the successful
party for his solicitor and client costs. (This must certainly be
so in a case such as this where the successful party has chosen
to instruct counsel whose base of operations is elsewhere than
the appropriate place for the hearing of the appeal.)
Reference was made to some four or five decisions of the
Trial Division where Tariff B items were increased apparently
"having regard particularly to the great volume of work done in
preparation ...". I have difficulty in accepting volume of work
in preparation considered alone, or in conjunction with such
factors as the difficulty or importance of the case, as constitut
ing a basis for exercising the judicial discretion to increase
Tariff B costs items. It must be obvious that such items are so
low in relation to what is involved in a very substantial propor
tion of the matters that come before the Court that they are not
designed to provide complete compensation to the successful
party for the costs incurred by him in the litigation. (Indeed,
what is sought in this case is an increase that would still leave
the successful party largely uncompensated for solicitor and
client costs.) If Federal Court party and party costs are not
designed to provide full reimbursement, as it seems to me, what
is intended is that they be made up of the completely arbitrary
amounts fixed by or in accordance with the rules subject to
variations (where authorized) based on factors arising out of
the conduct of the particular proceeding. As it seems to me, the
vague basis put forward on behalf of the respondent would put
the Court in the position, in a very substantial proportion of
proceedings, of weighing imponderable factors, or factors that
are not capable of determination, with a view to making an
allowance of an undefined portion of solicitor and client costs.
In my view, such an approach is not acceptable as a basis for
exercising a judicial discretion under Tariff B and would open
the way for an unseemly complication of our practice.
I refer also to MacMillan Bloedel (Saskatche-
wan) Ltd. v. Consolboard Inc. 15 where the Federal
14 [1979] 1 F.C. 801 at pp. 805-806.
15 Unreported, A-266-78, judgment dated May 29, 1981.
Court of Appeal followed the Smerchanski princi
ples and refused to make a direction increasing
costs. Both the Smerchanski and Consolboard
cases, at trial and appeal, were lengthy, complicat
ed and difficult. So was this case. But those factors
are not sufficient, in my mind, to warrant a special
direction as to costs. Undoubtedly the tariffs in the
Federal Court, which were set in 1971, are,
because of the tremendous increase in inflation
and cost of living in the last 10 years, very low.
The remedy is, in my view, to increase the tariffs,
not to make arbitrary increases in individual cases
to try and compensate for past economic and
inflationary increases.
There will, however, be two directions in respect
of costs:
1. All the steps in this action shall be classified
as Class III steps.
2. The payments made by the parties to expert
witnesses shall be taxed having regard to the
provisions of paragraph 4(2) of Tariff A.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.