Court of Appeal for Ontario
Judges: Doherty, Benotto and Huscroft JJ.A.
Between
James Jeffery and D'Alton S. Rudd Plaintiffs (Respondents)
and
London Life Insurance Company and The Great-West Life Assurance Company Defendants (Appellants)
Between
John Douglas McKittrick Plaintiff (Respondent)
and
The Great-West Life Assurance Company and Great-West Lifeco Inc. Defendants (Appellants)
Counsel
For the Appellants: Crawford Smith, James Gotowiec and Shalom Cumbo-Steinmetz
For the Respondents: Jonathan C. Lisus, Ian C. Matthews, Jonathan Foreman, Paul Bates, David Williams and Michela Gregory
For the Law Foundation of Ontario: J. Thomas Curry and Paul-Erik Veel
Heard: December 20-21, 2017
On appeal from: The orders of Justice Johanne N. Morissette of the Superior Court of Justice, dated August 31, 2016, with reasons reported at 2016 ONSC 5506, and July 21, 2017, with reasons reported at 2017 ONSC 4480.
A. Overview
1This is the third time this class action has been before this court. The issues this time relate to the trial judge's determinations regarding class counsel fees and costs.
2The class action arose from the Great-West Life Assurance Company's ("Great-West Life") acquisition of London Life Insurance Company ("London Life"). As part of the acquisition, the companies used funds from their respective participating policy ("PAR") accounts through a series of PAR account transactions. The plaintiff class – holders of Great-West Life and London Life participating policies – alleged that these transactions were not in compliance with the Insurance Companies Act, S.C. 1991, c. 47 ("ICA").
3The certification judge certified four common issues and a lengthy trial ensued. The trial judge ultimately found several breaches of the ICA. On appeal, this court upheld the trial judge's findings (except in one limited respect) but ordered a rehearing with respect to the remedy section of the judgment (the "first appeal").
4The trial judge conducted the re-hearing as directed. On appeal from the re-hearing, this court ordered that $56.43 million be paid back to the PAR accounts (the "second appeal").
5The parties then returned to the trial judge on the issue of class counsel fees and costs. She: approved class counsel fees of $16.4 million; placed a first charge for the fees over the $56.43 million to be returned to the PAR accounts; found that the class plaintiffs were entitled to partial indemnity costs at $4 million; and imposed a levy in favour of the Law Foundation of Ontario (the "Foundation") on the $56.43 million to be returned to the PAR accounts.
6On a subsequent motion, the trial judge clarified a portion of an earlier judgment, holding that it meant the companies could not charge or allocate any legal costs or expenses, whenever incurred, to the PAR accounts at any time without leave of the court and on notice.
7The companies appeal from the trial judge's decision on class counsel fees, costs and the imposition of a levy. They also appeal from her order clarifying her earlier judgment. The Foundation cross-appeals on the basis that additional disbursements should have been awarded to the respondents and subject to the levy.
B. Facts
8In 1997, Great-West Lifeco Inc. and its wholly owned subsidiary Great-West Life acquired London Insurance Group Inc., which owned London Life. As part of the acquisition, the companies used funds from Great-West Life's and London Life's respective PAR accounts through a series of PAR account transactions. An understanding of PAR accounts and the PAR account transactions is crucial to the issues raised in this appeal.
(1) PAR Accounts
9Life insurance policies are either participating or non-participating policies. Participating policies are, in essence, life insurance contracts and investment contracts. They permit the policyholder to "participate" in the profits of the insurance company. Prior to the death of an insured, the owner of the policy may terminate the insurance contract and receive its cash surrender value, which is fixed in advance. The owner is also entitled to receive dividends. Participating policyholders pay significantly higher premiums than non-participating policyholders.
10Life insurance companies that issue participating policies are required, pursuant to s. 456 of the ICA, to maintain PAR accounts for the participating policies separately from the accounts maintained in respect of non-participating policies. Under ss. 457 and 458 of the ICA, the income and expenses of the company are required to be divided between PAR accounts and shareholder accounts according to an approved "allocation method". This is designed to ensure that the company's income and expenses are fairly and equitably divided between PAR accounts and shareholder accounts.
11Section 461(b) of the ICA provides that dividends to participating policyholders are paid out of the profits of a PAR account in accordance with the dividend policy established pursuant to s. 165(2)(e) of the ICA. The source of participating policy dividends is the earnings in the PAR account. Directors of companies with participating policyholders exercise their discretion in good faith to determine the quantum of dividends to be paid. Dividends are not a fixed amount per policy.
12The capital in a PAR account may only be invested in accordance with the ICA and for the benefit of participating policyholders.
(2) PAR Account Transactions
13When Great-West Life acquired London Life, the PAR accounts of both companies contributed to the acquisition. The total contribution was $220 million: $180 million from the London Life PAR accounts; and $40 million from the Great-West Life PAR accounts.
14The $220 million was transferred from the respective PAR accounts to the companies' shareholder accounts. London Life's shareholder account then loaned Great-West Life the $180 million in order for Great-West Life to acquire London Life. Great-West Life repaid the shareholder loan with interest to London Life's shareholder account within months of the transaction. However, the $180 million was not repaid to the PAR accounts.
15The plan was that the contributing PAR accounts would receive a pre-paid expense asset ("PPEA") of an equal amount over a 25-year period. As described by this court in the second appeal, the investment in the acquisition fund bought the PAR accounts the right to receive a stream of anticipated expense savings as a result of the merger – the equivalent of a revenue stream – over the next 25 years. The estimated value of that stream of savings was expected to equal a return of the original investment, plus a 6.91% annual rate of return.
(3) The Class Action
16Three representative plaintiffs launched two actions, which proceeded in tandem, against London Life and Great-West Life on behalf of 1.8 million participating policy holders. They alleged that the PAR account transactions were not in compliance with the ICA.
17The following common issues were established and certified:
Did the PAR account transactions constitute a breach of ss. 331(4), 456, 458, 462, or 521 of the ICA?
Did the companies' directors or officers breach ss. 166(1), 166(2), 211, or 212 of the ICA?
Were the companies unjustly enriched by the PAR account transactions?
If the answer to any of the above is yes, what remedies, if any, are just and appropriate under ss. 215 and 1031 of the ICA?
Support from the Class Proceeding Fund
18After certification but shortly before the common issues trial, the class plaintiffs applied for financial support from the Class Proceeding Fund (the "Fund") under s. 59.3 of the Law Society Act, R.S.O. 1990, c. L.8. The Fund provided a total of $1,520,346.50 in funding to cover disbursements in the action.
(4) Trial, First Appeal, Rehearing and Second Appeal
19The matter was tried over 45 days between September 2009 and January 2010. The trial judge released her reasons in October 2010. She found that the PAR account transactions had breached the following sections of the ICA:
a. Section 462, which states that only certain transfers may be made from a PAR account;
b. Section 331(4), which states that an insurance company's financial statements must comply with generally accepted accounting principles ("GAAP");
c. Section 458, which states that certain expenses of the company may be debited from a PAR account given approval by a resolution of the directors and a written opinion of an actuary that doing so is fair and equitable to the participating policyholders; and
d. Section 166(2), which requires directors, officers and employees to comply with the ICA.
20London Life and Great-West Life appealed. This court upheld the trial judge's findings with respect to the breaches, with one exception. It found that she erred in her s. 166(2) analysis, since the actions were against the companies and no directors, officers or employees had been sued.
21However, the court did not agree with the remedy the trial judge crafted regarding the breaches. In place of the remedy ordered by the trial judge, the court substituted an order unwinding the PAR account transactions as of an "effective date" to be determined by the trial judge together with the amounts according to a specified formula.
22The matter returned to the trial judge, who conducted the rehearing as directed.
23London Life and Great-West Life appealed again, alleging that the trial judge erred in interpreting the formula developed by the court in the first appeal. Following the second appeal, this court ordered that the PAR account transactions be unwound and $56.43 million returned to the PAR accounts.
(5) Class Counsel Fees, Costs and the Imposition of a Levy
24The parties returned to the trial judge on the issue of costs, class counsel fees and a levy in favour of the Foundation.
25Class counsel sought approval of $16.4 million in fees after succeeding on the common issues at trial. They further sought to charge the "monetary award" obtained in the underlying action with the payment of these fees, pursuant to s. 32(3) of the Class Proceedings Act, 1992, S.O. 1992, c. 6 ("CPA"). Finally, they sought costs on a full indemnity basis from London Life and Great-West Life.
26London Life and Great-West Life sought partial indemnity costs on the basis that they – not the class plaintiffs – had achieved substantial success in the action. The plaintiffs had not achieved a distributive damages award and, in unwinding the PAR account transactions, the PAR accounts had been deprived the benefits of the savings associated with the merger. As a result, the unwinding was in fact revenue neutral.
27The Foundation sought a levy on the $56.43 million "monetary award" to repay the financial support the Fund provided the class plaintiffs.
28The trial judge approved class counsel's retainer agreement and the $16.4 million quantum of fees sought. She found that the $56.43 million judgment in favour of the PAR accounts was a "monetary award" for the benefit of the class, and imposed a first charge over it for class counsel fees.
29The trial judge found that London Life and Great-West Life were not entitled to costs. She awarded $4 million in partial indemnity costs in favour of the class plaintiffs.
30Finally, the trial judge granted the Foundation's request for a levy. However, she refused to grant an additional $118,000 in disbursements to the class plaintiffs on the basis that they were largely for appeal matters that had already been the subject matter of costs awards.
(6) The r. 59.06 Motion
31The plaintiff class subsequently moved before the trial judge under r. 59.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. They sought clarification of a prohibition order contained in a judgment she released in 2010, after the first trial (the "2010 Prohibition Order"). Specifically, the 2010 Prohibition Order enjoined the defendants "…from debiting, expensing or otherwise deducting from the participating accounts any costs or expenses incurred by the defendants in the defence of these actions, except by leave of the court on notice to the class representatives."
32It turned out that London Life and Great-West Life had already charged nearly $7 million in legal fees and disbursements to the PAR accounts between the commencement of the litigation and the imposition of the 2010 Prohibition Order. The plaintiff class submitted that the 2010 Prohibition Order precluded this, since it applied retroactively to all costs and expenses related to the proceedings.
33The trial judge agreed and ordered that the companies apply for leave to charge their legal fees, including those incurred before the 2010 Prohibition Order, to the PAR accounts.
C. Issues Now Before the Court
34London Life and Great-West Life appeal from the trial judge's order on class counsel fees, costs and the levy. They also appeal from her decision with respect to the r. 59.06 motion. The Foundation cross-appeals from her failure to order the additional disbursements and include them in the levy in favour of the Fund.
35There are essentially four issues on appeal:
Did the trial judge err in ordering payment of the class counsel fee from, and ordering a charge over, the PAR accounts?
Did the trial judge err by ordering the levy in favour of the Foundation or by refusing to award the respondents the additional disbursements?
Did the trial judge err in awarding costs to the respondents?
Did the trial judge err by assuming jurisdiction to hear the r. 59.06 motion and then interpreting the 2010 Prohibition Order retroactively?
D. Analysis
(1) Did the Trial Judge Err in Ordering Payment of the Class Counsel Fee From, and Ordering a Charge Over, the PAR Accounts?
36The appellants do not take issue with the trial judge's approval of class counsel's fees. However, they argue that there was no basis in the ICA, CPA, or the law of contract to charge the PAR accounts with payment of those fees.
37The appellants submit that the trial judge erred in ordering class counsel's contingency fees to be paid from the PAR accounts and then placing a charge on the PAR accounts. They say this because: (i) the order effectively binds the appellants to the retainer agreement to which they were not party; (ii) the award made in this action is not a "monetary award" for the purposes of s. 32(3) of the CPA; and (iii) even if the award is a "monetary award", the charge contemplated by s. 32(3) of the CPA can only attach to an award payable to class counsel's clients.
38I will address each of these arguments in turn. First, I do not agree that, as alleged by the appellants, the trial judge's order binds them to another entity's contract and thereby effectively breaches the doctrine of privity of contract. The trial judge was clear that class counsel's fees were payable from the PAR accounts by virtue of s. 32(3) of the CPA, not by virtue of the retainer agreement itself. At paras. 71 and 79-80 of the Costs Reasons she explained:
The monetary relief achieved on behalf of the class in this case is a "monetary award" for the purposes of s. 32(3) of the CPA and it is also an "aggregate assessment of monetary relief" for the purposes of the CPA.
For these reasons, the fee request of class counsel is approved under s. 32(2) of the CPA. As a result, an imposition of a first charge for class counsel fees over the monetary award of $56.43 million in the sum of $16.4 million is granted.
Class counsel has made an alternative claim for fees by virtue of section 1031 of the ICA. Given that I have found a charge under s. 32(3) of the CPA, I need not deal with that submission.
39On my reading of her reasons, the trial judge ordered the appellants to pay the amount subject to the charge as a corollary to the charge itself. Given the statutory basis upon which the trial judge ordered a first charge on the PAR accounts, the appellants' first argument cannot succeed. To the extent that the CPA secures a contractual debt against the appellants' assets, the Legislature is free to interfere with the common law doctrine of privity of contract.
40I turn to the appellants' submission with respect to the definition of monetary award. Section 32(3) of the CPA provides:
Amounts owing under an enforceable agreement are a first charge on any settlement funds or monetary award. [Emphasis added].
41There is no dispute that the agreements between class counsel and the representative plaintiffs constitute "enforceable agreements" pursuant to that section. The only question is whether the order in this action constitutes a "monetary award."
42The appellants submit that the trial judgment does not qualify as a "monetary award" because it did not order the transfer of money directly to the class plaintiffs. In their view, the purpose of s. 32(3) is one of administrative convenience: it supports a class action regime where collecting legal fees from a disparate class is difficult. As a result, it only permits a charge to attach to monetary awards made payable to class members, such that counsel can secure their existing debts against assets belonging to the class. They argue that this section does not, and ought not be interpreted to transform retainer agreements into obligations enforceable against third parties. Here, although the class members have an interest in the PAR accounts, they have no right to the funds. In the appellants' view, the order by the court amounted to nothing more than an order directing the appellants to re-arrange their books.
43I do not accept this submission for three reasons. First, the words "payable to" are absent from s. 32(3) of the CPA. Instead, the section refers to "any … monetary award." The plain wording of the section does not support the appellants' contention.
44Second, s. 32(3) of the CPA should be interpreted generously, with a view to the overarching purposes of the CPA. The most fundamental of these is encouraging access to justice. The appellants' proposed limitation on s. 32(3) has the potential to discourage meritorious class actions seeking remedies other than a distributive damages award, or to encourage class counsel to frame class actions in terms of distributive damages awards even when other remedies may be more beneficial to the class. As the trial judge noted at paras. 68-69 of the Costs Reasons, in the report which gave rise to the CPA, the Law Reform Commission recommended using the term "monetary award" rather than "damages", recognizing that there were various forms of relief that could be beneficial to class members in a class proceeding.
45Third, in Hislop v. Canada, 2009 ONCA 354, 95 O.R. (3d) 81, this court considered the meaning of "monetary award" under s. 32(3) of the CPA. At paras. 41-44, Watt J.A. said:
The term "monetary award" in s. 32(3) of the CPA is not defined anywhere in the statute or elsewhere in any statute incorporated by reference or of general application. It follows that the term, more broadly, the words of the subsection, must be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, its object and the intention of a legislature: Bell ExpressVu v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, at para. 26.
The CPA is a procedural statute, one adopted by the legislature to ensure that the courts had a procedural tool sufficiently refined to allow them to deal efficiently, and on a principled rather than an ad hoc basis, with increasingly complicated modern litigation: Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, at para. 14; Ontario New Home Warranty Program v. Chevron Chemical Co. (1999), 46 O.R. (3d) 130, (S.C.), at para. 50.
Despite its procedural nature, the CPA is to be construed generously: Hollick, at para. 14. The phrase "generous construction" is not, however, a licence to run amok and to confer on statutory language a meaning that it does not reasonably bear, but neither can it sponsor a triumph of form over substance.
In ordinary speech, "monetary" means "of or pertaining to money," said otherwise, pecuniary. In similar discourse, "award" refers to a payment or penalty imposed by judicial authority. A monetary award is a payment of money imposed by judicial authority.
46This court clearly considered the return of the $56.43 million to the PAR accounts as a payment of money, imposed by judicial authority, for the benefit of the class members. At para. 211 of the First Appeal Reasons the court ordered:
d) That the monetary relief provided for in paras. 28 and 29 be varied to provide for the payment into the PAR accounts of the sum of $220 million, plus foregone investment income to the effective date, less an amount agreed to by the parties or to be determined by the trial judge in accordance with the formula set out in para. 200 above.
e) That the monies returned to the PAR accounts be dealt with in the ordinary course in accordance with the dividend policies of Great-West Life and London Life.
f) That the monies returned not include the tax gross up of $63 million ordered by the trial judge. [Italics in original, underlining added.]
47The appellants submit that Watt J.A.'s words in Hislop are obiter since the court resolved the appeal without resort to the definition of the phrase. While true, the court's direction aligns both with a generous interpretation of the words in s. 32(3) and – as set out above – the nature of the award made at trial in this case. I see no reason to ignore the guidance it provides.
48The appellants also submit that Hislop is distinguishable because there the class was enriched by the class proceeding, albeit indirectly. In that case, the trial judge had declared certain provisions of the Modernization of Benefits and Obligations Act, S.C. 2000, c. 12, which denied class members their CPP survivors pensions, unconstitutional. As a result, each class member would receive the survivors pensions denied to them. I do not agree with this distinction. The payments made here increased the surplus in the PAR accounts available for distribution to the class by way of dividends, bonuses or other benefits. The fact that the appellants later disallowed the PAR accounts from participating in the savings associated with the merger, such that the PAR accounts remained in a revenue neutral state does not affect the nature of the order, standing alone. The award benefitted the class and is not distinguishable from Hislop on that basis.
49In sum, the order below involved a payment of money and benefitted the class. It is a monetary award and the trial judge did not err.
50Finally, I turn to consider whether a charge under s. 32(3) of the CPA may properly be attached to the $56.43 million ordered returned to the PAR accounts.
51The appellants submit that even if the order in this case was a monetary award, the trial judge erred in ordering a charge on the PAR accounts. They submit that a charge under the CPA, like a lien under the Solicitors Act, R.S.O. 1990, c. S.15 or at common law, can only attach to property owned by a debtor – in this case, the class. The class has no right to the funds in the PAR accounts and has no right to demand that the funds allocated to the PAR accounts be paid out. While policyholders have a contractual right to be paid dividends, they have no ownership right to any of the assets in the PAR accounts. None of the allocated amounts have been paid out to the class as dividends and they may never be. This court, on the first appeal, ordered that "no monies" were "to be paid to individual class members". Further, many members of the class are no longer policyholders and have no connection to the appellants.
52Again, I disagree. The issue is whether there was a monetary award over which the trial judge could impose the statutory first charge for the fee.
53The plain language of the CPA does not support the argument that the class must have an ownership interest in property before the first charge is put against it. The trial judge reasonably found that there was a payment of money. In the First Appeal Reasons, this court referred to the remedy as an amount to be paid to the PAR accounts. The trial judge also reasonably found that the monetary award benefitted class members. For a monetary award to benefit a class, it is not necessary for class members to secure cash directly in their pockets. The PAR accounts are a fund available for the benefit of the class members if and when the directors declare a dividend.
54Even if a requirement is read into the CPA that class members have some right to the funds to ground a first charge, the plaintiff class members do have a right in this case. They were awarded the right to have the $56.43 million repaid to the PAR accounts. This right would not have been possible but for the work of class counsel. Further, the PAR accounts are not money that the appellants can use however they see fit. The ICA imposes restrictions. As participating policy holders, the class members have the right to expect fair and equitable treatment and full compliance with the provisions of the ICA. The class sought judicial recourse in furtherance of this right and achieved their objective.
(2) Did the Trial Judge Err by Ordering the Levy in Favour of the Foundation and Refusing to Award the Respondents Additional Disbursements?
55The appellants argue that the trial judge erred in imposing a levy in favour of the Fund. They submit that the Foundation has no entitlement to a levy from them. In a manner similar to their first ground of appeal, they argue that the levy cannot attach to their property and must be paid by the respondents.
56The Foundation argues by cross-appeal that the trial judge erred in not ordering that the appellants pay additional disbursements to the respondents. They submit that the effect of her order is that the class members' disbursements are paid from the PAR accounts, which contain the class members' own funds, rather than by the appellants. They argue that this outcome is not supported in law or equity.
57Pursuant to ss. 10(2) and (3) of Ontario Regulation 771/92: Class Proceedings, passed under the Law Society Act, a levy is payable in favour of the Fund when a monetary award is made in favour of one or more persons in a class that includes a plaintiff who received financial support from the Fund. Section 59.5(5) of the Law Society Act states that "[a] levy … against a … monetary award is a charge on the … award."
58The trial judge awarded the Fund a levy totalling of $4,430,000. She declined to grant further disbursements of $118,000, which she found were largely for appeal matters that had already been the subject of costs awards.
59Here, the trial judge's conclusion that a levy was chargeable in favour of the Fund is supported by the text of the Regulation, the legislative context and the purpose of the Regulation and the Fund.
60Section 10(2) of the Regulation sets out the circumstances where a levy is payable in favour of the Fund. I have already agreed with the trial judge that the relief is a 'monetary award' made 'in favour of the Plaintiff Class' in my reasons above. Words in similar statutory regimes should be given consistent interpretations. I will not repeat my analysis. I have interpreted the phrase 'monetary award' in the context of the CPA as "a payment of money imposed by judicial authority." The same definition should be given to 'monetary award' in the Regulation.
61Here again, the appellants argue that the PAR account transactions were revenue-neutral with respect to the PAR accounts. They argue that the cash used to fund the merger was replaced by the PPEA, which turned out to be an accurate reflection of the amount the PAR accounts saved by way of the merger; when the respondents succeeded at trial, the PPEA (and the ability of the PAR accounts to share in the savings associated with the merger) were extinguished, and replaced by cash. They submit that – given its revenue neutral nature – the reversal of this transaction cannot be considered to be "in favour of" the class.
62This argument turns on how the orders reversing the PAR account transactions ought to be construed. Those orders required the appellants to cancel the PPEA in the PAR accounts and re-pay $56.43 million. This effectively represented the original cash withdrawal minus the actual savings received by the PAR accounts by December 31, 2011. What the orders did not do is direct the appellants to alter the allocation of savings going forward so as to deprive the PAR accounts of the benefits (savings) associated with the merger.
63While this alteration to the allocation mechanism was ultimately made, it was not ordered by the court. And viewing the order isolated from this subsequent business decision, the order was undoubtedly in favour of the class. It increased the amount of money in the PAR accounts available for distribution to the class by way of dividends.
64The ordinary meaning of the phrase 'in favour of' means 'to the advantage of'. This does not require that specific amounts be paid directly to class members.
65The appellants also argue that not all class members continued to be participating policyholders at the time the order was made. How then can that order be said to be in their favour? In my view, class action proceedings often result in a settlement fund or monetary award that is payable to a circumscribed group within the class as a whole. The fact that an award benefits some, but not all members of the class does not remove that award from the ambit of s. 10 of the Regulation. Indeed, s. 10(3) contemplates such an award, where it states: "10 per cent of the amount of the award … to which one or more persons in a class … is entitled" (emphasis added).
66The appellants are incorrect in arguing that only plaintiffs can be required to pay the levy. First, given that the levy is in fact a charge, my earlier analysis on charges under the CPA is equally applicable to this issue. Second, the plain language of the Regulation contemplates payment of the levy from either plaintiffs or defendants depending on what is appropriate in the circumstances. The appellants' interpretation would require additional language to be read into the Regulation, as follows: "A levy is payable by the plaintiff(s) in favour of the Fund …" An interpretation which requires the insertion of extra wording should not be accepted where there is another acceptable interpretation which does not require additional wording.
67This interpretation best serves the purposes of s.10, one of which is to ensure that the Foundation gets compensated for the risk it undertakes in funding class actions. The wording of s. 10(2) indicates that the monetary award may not necessarily be physically received in the hands of a class member when the levy is determined and payable, such as where a monetary award is ordered payable into a trust or pension plan.
68Finally, as cross-appellant, the Foundation argues that the trial judge ought to have ordered the defendants to pay additional disbursements incurred by the plaintiffs. It says the trial judge provided no reasons for her decision to decline to order the appellant companies to pay the disbursements. I do not agree. The trial judge specifically addressed the issue and concluded that the disbursements in issue were related to a prior appeal and the costs of that appeal had already been awarded.
69In any event, I also agree with the respondents by cross-appeal that the Foundation does not have standing to argue that the class ought to have received further disbursements, given that the class did not appeal this aspect of the trial judge's order.
70I would dismiss the appeal and the cross-appeal with respect to the levy.
(3) Did the Trial Judge Err in Her Costs Award in Favour of the Respondents?
71The appellants seek leave to appeal the trial judge's costs award. They claim that she erred in two respects.
72First, they submit she judge erred by ordering partial indemnity costs in favour of the respondents. They note that the relief the class members claimed – over $2 billion in damages and extensive changes to the governance of the companies – was rejected. Instead, the respondents obtained the "limited" relief of an internal transfer of funds from one account to another. They argue that the respondents should not have been awarded their costs of the action.
73Second, the appellants submit that the trial judge erred by assessing the costs of the rehearing at nil. However, during oral submissions the appellants clarified that they do not ask for those costs now.
74Costs awarded by a judge at first instance attract considerable deference on appeal. A reviewing court will only interfere where there has been an error in principle or if the costs award is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.
75The reason for this standard is well-recognized: the judge at first instance has lived with the case, understands its subtleties and is best placed to determine the parties' entitlement to costs. As this court explained in McNaughton Automotive Ltd. v. Co-operators General Insurance Co., 2008 ONCA 597, 95 O.R. (3d) 365, at para. 27:
I am also mindful that a costs award is a discretionary order and that the judge of first instance is in the best position to determine the entitlement, scale and quantum of any such award. In this case, the motions judge, a trial judge of great experience, has lived with these cases for more than six years. He knows and understands all the subtleties of the cases. I must grant him considerable deference unless I conclude that there are obviously strong grounds of appeal.
76In my view, this passage aptly applies to the trial judge in this case. She was involved in the matter for many years. She presided over the common issues trial and the rehearing. She was in the best position to make a determination as to success in the action.
77The trial judge was principled in the exercise of her discretion. She determined that the respondents were successful in challenging the PAR account transactions, whereas the appellants were unsuccessful on the majority of the core factual battles. Moreover she recognized, under s. 31(1) of the CPA, that the case raised a series of novel questions and was the first to consider and apply the ICA and its compliance remedy. Finally, she found that the case had a public interest component since it afforded an efficient means to obtain collective redress on the legality of a transaction in a federally regulated company.
78There is no basis to disturb the trial judge's conclusion that the litigation was a success. Success is defined in s. 33(2) of the CPA as including judgment on common issues in favour of some or all class members. It is defined in the representative plaintiffs' retainer agreements as "[a] judgment or settlement that … benefits some or all of the class members." Such a judgment was obtained. The respondent class gained much: confirmation of the illegality of the appellants' conduct, the unwinding of the PAR account transactions and the return of $56.43 million to the PAR accounts.
79There is no basis to conclude that the trial judge, who presided over this case for many years, was plainly wrong in ordering partial indemnity costs in favour of the respondents.
(4) Did the Trial Judge Err by Assuming Jurisdiction to Hear the r. 59.06 Motion and Then Interpreting the 2010 Prohibition Order Retroactively?
Jurisdiction to Hear the Motion
80The appellants submit that the trial judge was functus officio and had no jurisdiction to hear the motion. They submit that once a final decision has been issued and entered, the judgment cannot be reopened with two exceptions: where there has been a slip in drawing it up; and where there was an error in expressing the manifest intention of the court as reflected in the reasons. They argue that neither circumstance exists here.
81The appellants further submit that r. 59.06 does not provide an independent source of jurisdiction. They argue that the purpose of r. 59.06 is to ensure that a formal order or judgment accurately sets out the intention of the court that pronounced it. That, they say, is the scope of the inquiry.
82The respondents disagree. They submit that r. 59.06(2)(c) gave the trial judge jurisdiction to hear the motion and make the order under appeal. They submit that the doctrine of functus officio yields to the independent source of jurisdiction provided by r. 59.06(2)(c).
83Rule 59.06(2)(c) provides:
(2) A party who seeks to,
(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made;
(b) suspend the operation of an order;
(c) carry an order into operation; or
(d) obtain other relief than that originally awarded,
may make a motion in the proceeding for the relief claimed. [Emphasis added.]
84This rule clearly states that a judge can give directions or make an order to carry an order into operation. In my view, this is precisely what the trial judge did; her 2017 order clarifies the 2010 Prohibition Order to carry it into operation.
85The 2010 Prohibition Order – at para. 33 of the trial judge's October 2010 judgment – provided as follows:
THIS COURT ORDERS AND DECLARES that the defendants shall be enjoined from debiting, expensing or otherwise deducting from the participating accounts any costs or expenses incurred by the defendants in defence of these actions or any other amounts except those arising in the ordinary course of business, except by leave of the court on notice to the class representative.
86At the r. 59.06 motion, the trial judge was called upon to determine whether, according to this prohibition, the appellants were enjoined from charging fees to the PAR accounts irrespective of when they occurred, or whether the prohibition only commenced on the date of the judgment. She was entitled to do so through the prism of r. 59.06(2)(c) and clarify the prohibition to carry it into operation. She ultimately confirmed that the 2010 Prohibition Order was meant to capture any costs or expenses relating to these legal proceedings, not only to those costs incurred after her judgment in 2010. This fell within the jurisdiction provided under r. 59.06(2)(c).
87Consequently, she was not functus officio. As this court affirmed in D.G. v. A.F., 2015 ONCA 290, 333 O.A.C. 5, at para. 24, citing Doucet-Boudreau v. Nova Scotia (Minister of Education), 2003 SCC 62, [2003] 3 S.C.R. 3:
[T]he functus officio doctrine yields to the rules of civil procedure insofar as they allow courts "to vary or add to their orders so as to carry them into operation or even to provide other or further relief than originally granted".
Retroactive Application
88The appellants further argue that even if the trial judge had jurisdiction, she erred in interpreting the 2010 Prohibition Order to have retroactive application. They make various submissions in support of this position, including that the ordinary meaning of the prohibition is forward looking; it was reasonable for the PAR accounts to fund a portion of the legal costs in the same way that it is reasonable for the PAR accounts to be allocated the costs of defending an ordinary action related to a participating policy; certain paragraphs of the judgment provided dates by which the defendants were required to take a particular action, but the prohibition specified no date and contained no language providing that it should take effect before the date on which it was made; and the prohibition is clearly an injunction, which is future looking.
89I would not accept any of these submissions. In my view, it was up to the trial judge to interpret her order to carry it into operation.
90In the r. 59.06 reasons, the trial judge was clear that she did not know the appellants had been allocating 50% of their legal costs to the PAR accounts throughout the action. At para. 25, she stated:
The trial proceeded without a whisper of evidence that the defendants had decided to allocate 50% of defence legal costs to the Par accounts. Both sides acknowledged that no disclosure was made of the allocation throughout the litigation.
91The trial judge clarified that the aim of the 2010 Prohibition Order was to prevent the appellants from allocating legal costs and expenses to the very accounts they were accused of mismanaging and were at the heart of the litigation. She explained that to hold that the prohibition only has a prospective application (permitting the appellants to allocate $6,858,466.88 in legal fees and expenses to the PAR accounts) would ignore the prohibition's subject matter and render it virtually moot. She stated, at para. 23:
To hold that the judgment only has prospective application would ignore the subject matter of the prohibition order and render it virtually moot, or at least would substantially undermine its effect. The vast majority of the defendants' costs and expenses, 80% of the total costs to date, were incurred before the date of the judgment.
92While the trial judge might have worded the 2010 Prohibition Order slightly differently had she known that the appellants had been charging legal costs and expenses to the PAR accounts all along, this does not detract from the fact that a retroactive interpretation better accords with the intention of the prohibition. Further, the trial judge's interpretation is consistent with her trial order, the impetus of which was to restore the PAR accounts to the position they would have been in had the PAR account transactions never occurred.
93I see no basis to interfere with the trial judge's interpretation.
E. Conclusion
94For these reasons, I conclude that:
The order that the appellants return $56.43 million to the PAR accounts is a monetary award and the trial judge did not err in ordering a charge over the PAR accounts.
The trial judge did not err in ordering a levy in favour of the Fund, nor did she err by not including additional disbursements.
The trial judge did not err in her determination of costs.
The trial judge had jurisdiction to hear the r. 59.06(2) motion and did not err in interpreting the 2010 Prohibition Order to have retroactive effect.
F. Disposition
95I would grant London Life and Great-West Life leave to appeal the trial judge's costs award but I would dismiss both of their appeals in their entirety. I would also dismiss the Foundation's cross-appeal.
96I would order costs to the respondents in the agreed upon amount of $50,000 inclusive of disbursements and HST.
"M.L. Benotto J.A."
"I agree Doherty J.A."
Dissenting Opinion
97This case presents a straightforward question: Are class counsel entitled to be paid their contingency fee from the appellants' PAR accounts?
98My colleague concludes that they are so entitled. With respect, I cannot agree for two reasons.
99First, the plain wording of s. 32(3) of the CPA does not support this interpretation. The CPA permits charges only on money awarded to a class (or settlement funds, not relevant here), and no money has been awarded to the class in this case. Although class counsel succeeded in establishing regulatory breaches of the ICA that this court's order has remedied, that is the end of the matter. The class has not received – and is not entitled to receive – any money as a result of the litigation.
100Second, the class plaintiffs have neither a legal nor a beneficial interest in the PAR accounts that entitles them to any monies within those accounts. Class counsel can have no greater entitlement to monies in the PAR accounts than the class. In my view, there is no basis to impose a statutory charge over third-party property. Even assuming that this promotes the purpose of the CPA, sanctioning a statutory charge over third-party property in this case could have unintended consequences outside of the class action context.
101The result is unfortunate for class counsel, who have engaged in complex litigation over the better part of a decade, but they are not entitled to payment for this reason, still less to payment from the appellants' PAR accounts.
102I would allow the appeal on issues 1 and 2 and would dismiss the cross-appeal. I agree with my colleague's decision on issues 3 and 4 and would dismiss the appeal on these issues.
(1) Did the Trial Judge Err in Ordering Payment of the Class Counsel Fee From, and Ordering a Charge Over, the PAR Accounts?
103The answer to this question depends upon the interpretation of s. 32(3) of the CPA, and in particular the concept of a "monetary award" under that section. In my view, this court's order requiring the respondents to return $56.43 million to the PAR accounts is not a monetary award and no charge under s. 32(3) may attach to it.
104My colleague proffers three reasons in support of her conclusion that the order requiring the respondents to return $56.43 million to the PAR accounts is a monetary award. First, she argues that on a plain reading of s. 32(3), there is no requirement that a monetary award be "payable to" the class in order for a charge to attach. Second, a generous interpretation of s. 32(3) is required in order to promote the overarching purpose of the CPA, encouraging access to justice. Third, she cites this court's decision in Hislop for the proposition that a monetary award is simply a payment of money imposed by judicial authority, and holds that the return of the monies to the PAR accounts benefitted the class members.
105I address each of these arguments in turn.
The Plain Reading of s. 32(3)
106In my view, a plain reading of the section supports the appellants' position rather than the respondents'. The absence of the words "payable to" from s. 32(3) is irrelevant: it is implicit in the concept of an award that it must be awarded. No money has been awarded in this case. On the contrary, the trial judge's decision to award damages to the class was overturned by this court in the first appeal.
107The second appeal resulted in an order unwinding the PAR account transactions and requiring the return of monies to the PAR accounts. This court's order does not require a payment to the class. Instead, it requires the return of monies to the PAR accounts – essentially a transfer between the appellants' own accounts. In no sense can this accounting exercise be understood as an award of monies to the class.
108I appreciate that the order requiring the return of the monies to the PAR accounts might enure to the benefit of the class members: some of the funds may, in the future, be distributed to class members in the form of dividends. But this benefit is speculative; the distribution of dividends is a matter of the appellants' discretion.
109Plainly, class members have no entitlement to monies in the PAR accounts, nor can they force the payment of dividends from those funds. The PAR accounts are not monies held by the appellants on their behalf – for example, in trust. The class has neither a legal nor an equitable interest in the PAR accounts. The funds representing the PAR accounts remain the property of the appellant insurance companies until and unless company directors declare dividends payable to the policyholders.
110Class counsel can have no greater entitlement to the PAR accounts than the class. In the absence of an entitlement, my colleague's interpretation of s. 32(3) imposes a statutory charge over third-party property.
A Generous Interpretation of s. 32(3)
111I agree with my colleague that the promotion of access to justice is a fundamental purpose of the CPA. But a statement of purpose at a high level of generality cannot alter the plain meaning of the terms of the statute.
112The term "monetary award" was chosen rather than "damages" because there are various forms of monetary relief that may benefit class members – for example, compensatory damages, punitive damages, and restitution. But all of these forms of relief have in common the idea that they are awarded to and received by the class. Regardless of the nature of the monetary relief the court orders, in order to constitute a monetary award it must be relief that is awarded to the plaintiff class.
Hislop
113The order that the appellants return monies to the PAR accounts is a victory for the class, but nothing follows from this. It is important to emphasize that the class members have no entitlement to receive all or any part of the PAR funds. The victory that has been achieved – an order requiring statutory compliance with the ICA – leaves no money in hands of the class, now or in the future. Any "benefit" that may flow to the policyholders in the future is speculative. That distinguishes this case from Hislop, because in Hislop success in establishing the unconstitutionality of the legislation – achieving constitutional compliance – resulted in an entitlement of individual class members to receive a monetary award by establishing eligibility under the Canada Pension Plan.
114In the absence of a monetary award, there is nothing to which class counsel's contingency fee arrangement can attach. But this was a risk class counsel chose to bear in taking on the litigation. It must be remembered that the primary goal of class counsel was to obtain damages for the class, from which they would have claimed significant fees. As this court stated in the first appeal, at paras. 151-2:
Here, in spite of the protestations of the respondents to the contrary, the gravamen of the relief sought by [the class] is the type of relief normally associated with an oppression remedy claim. They want to be "fully compensated," individually, for the wrong they say was done to them as a result of the PAR accounts being debited the $220 million in exchange for reputed "savings"; in substance, they want the money back as if it were theirs plus a return on investment (and this is what the trial judge gave them). In short, they want – and were granted – the relief contemplated by an oppression remedy action.
The problem is that an oppression remedy claim is not available to them under the ICA.
115Thus, although the class succeeded in establishing breaches of the ICA, this court overturned the trial judge's award of damages to the class.
116This court's order unwinding the PAR transactions was a victory for the class: regulatory compliance was achieved. But success of this nature does not entitle class counsel to realize on its contingency fee from the funds transferred between the appellants' accounts. Whatever else might be said about this court's order, it is not a monetary award to the class.
Can the Contingency Fee be Paid Pursuant to s. 1031 of the ICA?
117The respondents suggest that s. 1031 of the ICA provides an alternative means of securing payment of class counsel's contingency fees by imposing a charge over the PAR accounts. For the reasons set out above with respect to s. 32(3) of the CPA, I am not persuaded that it is either possible or appropriate to exercise the court's discretion under insurance legislation in this manner to impose a charge over third-party property.
(2) Did the Trial Judge Err by Ordering the Levy in Favour of the Foundation or by Refusing to Award the Respondents the Additional Disbursements?
118I agree with my colleague that words in similar statutory regimes should be given consistent interpretations and that, therefore, the analysis of the phrase "monetary award" in the CPA context applies to the Regulation. It follows from what I have said with respect to the CPA that the Foundation is not entitled to a levy. There is no monetary award that can be levied.
119My colleague focuses on the words "in favour of" in s. 10(2) of the Regulation, which establishes the levy, as additional support for the conclusion that the Regulation does not require that specific amounts be paid directly to class members.
120However, the words of the Regulation must be read as a whole. Interpretation of the phrase "monetary award" is also informed by the wording of s. 10(3), which provides that the levy is composed of 10 per cent of the amount of the award to which one or more persons in the class is "entitled". In other words, the Regulation presumes the payment of money to class members. In this way, the Regulation is consistent with my interpretation of the CPA, which affords class members no "entitlement" to the PAR accounts, or to any dividend benefit.
121In short, as with class counsel, the Foundation has no entitlement to be compensated for having taken on a risk in funding the litigation.
122I agree with my colleague's analysis on the cross-appeal and would not disturb the trial judge's decision.
Summary
123In summary, I conclude:
The order requiring the appellants to return $56.43 million to the PAR accounts is not a monetary award, and the trial judge erred in ordering a charge over the PAR accounts in favour of class counsel.
The trial judge erred in ordering a levy in favour of the Foundation.
The trial judge did not err in her determination of costs.
The trial judge had jurisdiction to hear the r. 59.06 motion and did not err in interpreting the 2010 Prohibition Order to have retroactive effect.
Conclusion
124I would allow the appeal on issues 1 and 2, and dismiss the cross-appeal. I would dismiss the appeal on issues 3 and 4.
125I would order costs to the appellants in the amount of $50,000, inclusive of taxes and disbursements.
"Grant Huscroft J.A."
Released: August 31, 2018
