Mclaine v. London Life Insurance Company, 2008 CanLII 28442 (ON SCDC)

COURT FILE NO.: 305/06, 306/06, 307/06, 308/06, 309/06, 310/06, 311/06, 312/06

DATE: 20080611

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

GREER, JENNINGS and McCOMBS JJ.

B E T W E E N:

IAN McLAINE,

Appellant

• and -

LONDON LIFE INSURANCE COMPANY,

Respondent

AND B E T W E E N:

Linda Rothstein, Margaret Waddell, Odette Soriano, Kirk M. Baert and Celeste Poltak, Counsel for all of the Appellants in the 8 cases before the Court

Wendy Matheson and Andrew Gray, Counsel for the London Life Insurance Company, one of the Respondents

JOANNE LUMSDEN,

Appellant

CANADIAN IMPERIAL BANK OF COMMERCE,

Respondent

AND B E T W E E N:

STEWART GREGG,

Appellant

• and -

CANADA TRUSTCO MORTGAGE CORPORATION,

Respondent

AND B E T W E E N:

ROBERT SMITH AND FAY SMITH,

Appellants

• and -

LAURENTIAN BANK OF CANADA,

Respondent

AND B E T W E E N:

PAUL RYAN,

Appellant

• and -

NATIONAL BANK OF CANADA,

Respondent

AND B E T W E E N:

MAAROUF ARABI,

Appellant

• and -

THE TORONTO-DOMINION BANK,

Respondent

AND B E T W E E N:

THOMAS JOHN CONWAY, RITA FUNG and MIRIAM RODE,

Appellants

• and -

THE BANK OF NOVA SCOTIA and SCOTIA MORTGAGE CORPORATION,

Respondents

AND B E T W E E N:

RALPH WAKIM,

Appellant

• and -

BANK OF MONTREAL,

Respondent

THE LAW FOUNDATION OF ONTARIO,

Appearing on Costs issue only

Patricia D.S. Jackson and Stuart Svonkin, Counsel for CIBC, one of the Respondents

F. Paul Morrison and David Leonard, Counsel for Canada Trustco, one of the Respondents

J. Brian Casey and John Pirie, Counsel for Laurentian Bank, one of the Respondents

Paul Steep and Lisa Constantine, Counsel for National Bank, one of the Respondents

F. Paul Morrison and David Leonard, Counsel for the TD Bank

Martin Sclisizzi, Freya Kristjanson and

Heather Pressione, Counsel for the Bank of Nova Scotia and Scotia Mortgage

Martin Sclisizzi, Freya Kristjanson and

Heather Pressione, Counsel for the Bank of Montreal, one of the Respondents

Scott C. Hutchison, and Brennagh Smith, Counsel for the Foundation

WRITTEN SUBMISSIONS ON COSTS

REASONS: BY THE COURT

1In our Reasons of December 18, 2007, we denied the Appeal of the Plaintiffs, who were appealing the decision of the Certification Motion Judge, who did not certify this action under the Class Proceeding Act, 1992, S.O. 1992, c.C.61 (the "CPA").

2The Defendants are eight major financial institutions, namely:

1. London Life Insurance Company ("LL")

2. Canadian Imperial Bank of Commerce ("CIBC")

3. Canada Trustco Mortgage Corporation ("CT")

4. Laurentian Bank of Canada ("LBC")

5. National Bank of Canada ("NB")

6. Toronto-Dominion Bank ("TD")

7. The Bank of Nova Scotia ("BNS") and Scotia Mortgage Corporation ("SMC")

8. Bank of Montreal ("BMO")

All eight Defendants were sued separately by individual Plaintiffs. The appeal was extremely complex and lasted 4 days. It is the position of the Defendants, as the successful parties in the Appeal, that they are entitled to their Costs on a partial indemnity basis, with the exception of LBC, which asks for its Costs on a substantial indemnity basis, for the reasons set out in its written submissions.

3All the Defendants worked closely together to minimize overlapping submissions during the Appeal. They have also done so in their written submission on Costs. They point to the proposition that successful parties are normally entitled to Costs and that Costs should follow the event, even in CPA actions. They adopt the reasoning of the Supreme Court of Canada in Kerr v. Danier Leather Inc., 2077 S.C.C. 44 in this regard. There Mr. Justice Binnie said"...those who inflict [litigation] on others in hope of significant gain and fail can generally expect adverse cost consequences.", as quoted by Mr. Justice Perell in paragraph 56 of his Reasons in Ruffalo v. Sun Life Assurance Company of Canada, released February 20, 2008, Court File No. 03-CV-261231CP (O.S.C.J.). Also they say, as in Danier, supra, that where a case does not raise a novel issue of law, the litigation by definition is not a "test case" within the meaning of the CPA. Even if this were a case with a strong public interest factor, which the Defendants say it is not, the interests of the Defendants cannot be ignored. All Defendants submit that this action is not one of public interest. Instead, they say, it is an action concerning commercial disputes involving individual mortgages/contracts made between each Plaintiff and individual Defendant. The Defendants also say that even if there are access to justice issues, this is not sufficient on the particular facts of these various actions, to warrant departure from the usual cost consequences in Danier, supra. Finally, they say there is nothing novel in any of these causes of action, since they all involve "purely an issue of contractual interpretation."

4A significant amount of money was at stake in this Appeal no matter who won or lost. The number of mortgages and mortgagees in question over the 6-year period, claimed by the Plaintiffs as applying to their claims, is over one million. The quantum being claimed was about $30,000,000 or more in damages, plus interest, in each individual action started. This was not a case of a class action again one individual financial institution. It deliberately brought in eight of the major banks and insurance companies with offices across all provinces in Canada. The amount of legal fees the Plaintiffs would have asked for, had they been successful, would be in the millions of dollars.

5The proceeding was extremely complex, given the number of Defendants and the number of mortgages each estimated it would have to examine, given the different terms found in the various institutional mortgages. For example, CIBC said it would have to examine 105,401 mortgages issued during the 6-year period, TD said it issued 190,000 such mortgages, CT said it issued 125,000 and NT said it issued 200,000. We found, in our Reasons, that there was no "standard mortgage" as claimed by the Plaintiffs, not even within each individual institution. The Defendants, in order to properly defend the Appeal, had to examine in detail, the "factual matrices of its unique mortgage documents", and its own internal record-keeping processes.

6LBC maintained that the action again it was both "improper and frivolous", given the facts surrounding the two Smith mortgages. LL proved, on the facts surrounding the McLaine and Wilson claims, that Farah was in a conflict of interest throughout and never should have put these persons forward as representative Plaintiffs. Farah, as the original solicitor of record for the Plaintiffs, conjured all claims from his own personal solicitor's files, without any client ever having come forward with a complaint. The Defendants say all actions originated from Farah's "archived files." See: paragraphs 23, 29 and 27 of our Reasons. The litigation was clearly driven by the class counsel and not the litigants. One Defendant summarized it as follows: "...these actions, like the others, were the brainchild of Mr. Farah, no doubt principally for his financial gain." The Defendants saw the appeal as being "ill-advised."

The Position of the Plaintiffs/Appellants

7The Plaintiffs say that it was logical to have all eight actions heard together and that the Court set down both the schedule and timetable for the hearing. They say this did not add to the complexity of the Appeal.

8The Plaintiffs' position is that there is well-established law in class action proceedings that no costs should be awarded to the Defendants. They point to the fact that on the original Motion, the certification Judge recognized this and awarded no Costs to the Defendants.

9The Plaintiffs say their claims were reasonable, were commenced in the public interest and with the objective of increasing access to justice. They say it is only in the rarest of circumstances that Costs should be awarded against representative plaintiffs. Such Costs, say the Plaintiffs, would choke off the access to justice by representative plaintiffs and have a "chilling effect" on them in class proceedings cases, thereby frustrating the fundamental objectives of the CPA.

10The Plaintiffs accuse the Defendants of "overkill" in their defence of these actions, pointing to the economic power of such financial institutions to do so. They rely on the findings of Mr. Justice Cullity in Joanisse v. Barker, [2003] O.J. No. 4081 (S.C.J.) at paragraph 7, in this regard.

The Role of the Law Foundation

11The Law Foundation of Ontario made Submissions only on the issue of Costs in the appeal pursuant to Rule 12.04(2) of the Rules of Civil Procedure. It was not a party nor an Intervenor in the Appeal. The Foundation supports the position of the Plaintiffs that no Costs should be awarded in this Appeal.

12The Foundation came into being under s.53 of the Law Society Act, R.S.O. 1990 c.L.8 (the "Act") and it administers the Class Proceeding Fund ("the Fund") as its core function. It was established by the Legislature in conjunction with the enactment of the CPA. It provides financial support for plaintiffs to class proceedings and proceedings commenced under the Act, in respect of disbursements in such proceedings. It also makes payments to defendants in such proceedings in respect of Costs awards made in their favour against plaintiffs who have received financial support from the Fund.

13In the Appeal before us, the Plaintiffs in all eight actions had their disbursements funded by the Fund. There is a Committee, which vets how such disbursements are given and to whom, under the terms as set out in the Act. See: Ruffalo and LePage v. Sun Life Assurance Company of Canada, a Costs Endorsement of Mr. Justice Perell; released February 20, 2008, Court File No.: 03-CV-261231 C.P. paragraphs 15-24. For a more detailed outline of how the Foundation operates in such proceedings, S.59.4(1) of the Act sets out how a successful defendant to a proceeding may apply to the Board of the Foundation for payment from the Fund in the circumstances of an appeal such as this.

Section 31 of the CPA

14Section 31(1) of the CPA governs the issue of Costs. It reads:

(1) In exercising its discretion with respect to costs under subsection 131(1) of the Courts of Justice Act, the court may consider whether the class proceedings was a test case, raised a novel point of law or involved a matter of public interest.

Section 31(2) and (3) read:

(2) Class members other than the representative party, are not liable for costs except with respect to the determination of their own individual claims.

(3) Where an individual claim under section 24 or 25 is within the monetary jurisdiction of the Small Claims Court where the class proceedings was commenced, costs related to the claim shall be assessed as if the claim had been determined by the Small Claims Court.

The Plaintiffs say that Section 31(1) of the CPA applies, as the proceeding was a "test case", and involved a matter of public interest. The Defendants say neither of these criteria apply, given that the proceeding was of no public interest, was a commercial/contract matter and was not a test case in any respect.

15We do not see this as a "test case" within the meaning of the CPA. The matter was not one of public interest. As Mr. Justice Perell said in Ruffalo, supra, in paragraphs 72 and 73 of his decision"A matter of public interest is something more than might interest the public..." and it must have some"...specific, special significance for, or interest to, the community at large beyond members of the proposed class." See also: Pearson v. Inco. Ltd. (2006), 2006 7666 (ON CA), 79 O.R. (3d) 427 (C.A.). Mortgagees are traditionally not seen as a disadvantaged group in our society, which may not have access to justice. Nor would behaviour modification have arisen out of these eight law suits.

16The cases involved individual mortgage contracts made between borrowers and lenders. This is hardly a novel point of law.

17We find that none of the three factors as set out in S.31(1) of the CPA apply in determining the issues of Costs.

Other factors respecting Costs

18Costs are in the discretion of the Court under s.131 of the Courts of Justice Act; R.S.O. 1990 c.C.43 and Rule 57.01 of the Rules of Civil Procedure. Rule 57.01 sets out the various factors the Court may look at in determining Costs. In this appeal all of the counsel representing both Plaintiffs and Defendants were very experienced senior counsel. Their hourly rates and times are set out in their Bills of Costs.

19The amount claimed in these uncertified actions was in the tens of millions of dollars given the number of institutions sued and the number of mortgages involved. The proceeding was exceedingly complicated, as pointed out in our Reasons. The issue was important to all parties.

20In our view, the proceeding was lengthened by the fact that Farah chose to make eight separate claims against eight financial institutions across the country, covering a 6-year period during which such mortgages were individually entered into. Given the nature of mortgages and the variety of same, and the permutations and combinations available to individual mortgagees, the Defendants had no choice but to examine hundreds of documents and files to try to determine, which mortgagees the Plaintiffs were saying were in the individual law suits. Since there were eight actions, there are now eight separate sets of Costs, which vary in amount, depending on the complexity of what each set of counsel had to do for their clients. Further, counsel's hourly rates differ according to the number of years in practice and the various firms' billing rates.

21Our Court has said that class proceedings"...should not be accorded any special treatment in the disposition of costs." See: Gariepy v. Shell Ore Co., [2002] O.J. No. 3495 (S.C.J.). This, however, was followed by more recent findings of the Court of Appeal in Pearson, supra, where Mr. Justice Rosenberg said that although s.31(1) of the CPA does not replace the broad discretion given to Judges under s.131 of the Courts of Justice Act, one must look at the factors in s.31(1) of the CPA as well. For an extensive analysis of this issue and the case law governing this, see Ruffalo, supra, paragraphs 38 to 52 inclusive. In particular, Mr. Justice Perell, in Ruffalo, supra, cites paragraph 32 of the decision of Mr. Justice Winkler, as he then was, in Caprito v. Imperial Tobacco Ltd. (2005), 2005 63806 (ON SC), 74 O.R. (3d) 728 (S.C.J.) where he finds that "special weight" must be given to the factors in s.31(1) of the CPA. We have weighed those factors and in reaching our conclusion, have balanced this with the factors to be considered under Rule 57.01 and our discretion in s.131 of the Courts of Justice Act.

Conclusion

22This was a case, which was driven by Farah, where the Court has found that the so-called representative Plaintiffs were not proper representatives before the Court. None of the amounts questioned in each individual mortgage transaction amounted to any substantive amount, since each depended on the then current principal balance of a mortgage in the six (6) year window, which was put forward by the Plaintiffs as an appropriate time-frame.

23In exercising our discretion in determining what Costs should be awarded, we have concluded that the Defendants are entitled to some Costs on a modified partial indemnity scale. The eight (8) sets of Costs range from $35,268.72 to $49,181.68 for the seven asking for Costs on a partial indemnity basis. The eighth is LBC, asking for substantial indemnity Costs at $70,963.13. The total of all Costs asked for is $365,631.97.

24In our view this is not an appropriate case to make no order as to Costs. The Defendants are entitled to modified Costs, which we fix at $20,000.00 per Defendant as set out in our list of eight (8). This means one set of Costs only for Bank of Nova Scotia and Scotia Mortgage Corporation, and no differentiation in Costs for Laurentian Bank. These Costs are inclusive of disbursements and GST.

25In our view these are reasonable in the circumstances of this case. While the losing party hoped that no such Costs would be awarded, in the ordinary course of litigation, the Defendants would have had their full partial indemnity Costs. Given the role of the Law Foundation of Ontario, which helped fund the Plaintiffs in these proceedings, the amount has been reduced to reflect what is reasonable in the circumstances.

Greer J.

Jennings J.

McCombs J.

Date Released: June 11, 2008

COURT FILE NO.: 305/06, 306/06, 307/06,

308/06, 309/06, 310/06,

311/06, 312/06

DATE: 20080611

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

GREER, JENNINGS and McCOMBS JJ.

B E T W E E N:

IAN McLAINE et al.

• and -

LONDON LIFE INSURANCE COMPANY et al.