Court File and Parties

Citation: 2038724 Ontario Ltd. v. Quizno’s Canada Restaurant Corporation, 2011 ONSC 859 Divisional Court File No.: 501/10 Date: 2011-02-08

Ontario Superior Court of Justice Divisional Court

Between: 2038724 Ontario Ltd. and 2036250 Ontario Inc. Plaintiffs (Applicants)

– and –

Quizno’s Canada Restaurant Corporation, Quiz-Can LLC, The Quizno’s Master LLC, Canada Food Distribution Company, Gordon Food Services, Inc. and GFS Canada Company Inc. Defendants (Respondents)

Counsel: Allan D.J. Dick & David Sterns, for the Plaintiffs/Applicants Geoffrey B. Shaw & Jason Beitchman, for Quizno’s Canada Restaurant Corporation, Quiz-Can LLC, The Quizno’s Master LLC and Canada Food Distribution Company, Defendants/Respondents Katherine L. Kay & Mark E. Walli, for Gordon Food Services, Inc. & GFS Canada Company Inc., Defendants/Respondents

Heard at Toronto: February 1, 2011

Reasons for Decision

LEDERER J.:

Introduction

[1] This application seeks leave to appeal the cost award made in respect of a motion to certify a class proceeding.

[2] One of the policy determinants of the Class Proceedings Act, 1992, S.O. 1992, c. 6 (hereinafter referred to as “CPA”) is access to justice. It may be that the considerations that go into an award of costs in this situation are given different weight to adjust the balance between the parties.

[3] Certainly, in the cases to which it applies, s. 31(1) of the CPA adds new factors to be considered.

[4] None of this detracts from the discretionary nature of a cost award or limits the ability of judges to makes use of the available tools in applying that discretion.

Background

[5] Mr. Justice Perell heard a motion by which the plaintiffs sought to certify their action. He refused to do so. Following this decision, in separate reasons, he dealt with the costs of the motion.

[6] The plaintiffs appealed to the Divisional Court. It overturned the decision of Mr. Justice Perell and certified the action. The Court directed the re-consideration of costs back to the motions judge.

[7] The defendants appealed to the Court of Appeal which upheld the decision of the Divisional Court.

[8] The issue of certification having been finally determined, Mr. Justice Perell returned to the issue of costs, received further submissions, and rendered his decision.

[9] The award of costs he made is summarized, in his reasons, as follows:

To be more precise, subject to the offsets, described below:

(a) for counsel fees, I award the Representative Plaintiffs $251,023.35 payable forthwith, plus GST to be calculated;

(b) for counsel fees, costs claims totaling $35,008 the $2.50 are deferred;

(c) for counsel fees, $121,985 of costs are disallowed;

(d) for disbursements, I award $21,778.12 inclusive of GST, payable forthwith; and,

(e) for disbursements $81,348.88 inclusive of GST are in the cause.

(2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation 2010 ONSC 5390 at para. 33)

[10] This is the order from which the plaintiffs seek leave to appeal.

[11] Costs are at the discretion of the court (see: Courts of Justice Act, s. 131). This applies to actions under the CPA. The approach to fixing costs is the same for class proceedings as it is for ordinary actions. The only specific direction is that the court should give special weight to whether the class action was a test case, raised a novel point of law or involved a matter of public interest (see: CPA, s. 31 (1)).

[12] Counsel for the plaintiff submitted that the reasons which support the award demonstrate that Mr. Justice Perell did not adhere to established principles and relied on novel values that, until his decision, had not been identified.

[13] It is the view of counsel that the principles utilized in coming to the award should be the subject of consideration by the Divisional Court.

[14] Among the principles which counsel submitted the judge ignored are:

• that costs should follow the event; and,

• that the quantum of costs should be determined bearing in mind what an unsuccessful party could reasonably have expected to pay.

[15] The unknown or novel values are demonstrated by the observation of the judge that:

• access to justice, at least as it is directed by the CPA, applies to the defendants and not just the plaintiffs.

[16] These principles and values were each considered by Mr. Justice Perell.

Costs Should Follow the Event

[17] At the outset, it is difficult to understand how it is that counsel could suggest that the judge did not respect the principle that costs should follow the event. After all, the decision awarded costs of $251,023.35 and disbursements of $21,770.12 to the plaintiffs, payable forthwith. It is the view of counsel that more should be caught by this general directive. In his view, it offends the principle that any part of the fee is paid in the cause or deferred.

[18] Mr. Justice Perell noted that: "… in class actions, the ordinary rule is the costs will follow the event". He referred to this in his decision on costs made following his decision not to certify the action, and repeated it in the decision that is the subject of this motion (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 14 (17)). He continued by accounting for the considerations imposed by s. 31(1) of the CPA. He determined that, for the purposes of motion, it did not apply. He completed this examination by reminding himself, that, nonetheless, the court should not exercise its discretion concerning costs without having regard to the context, being that the plaintiffs commenced their action under the CPA.

What an Unsuccessful Party Could Reasonably Have Expected to Pay

[19] In his submissions, counsel for the plaintiffs submitted that no, or scant, attention was paid to the idea that costs should reflect the amount that the unsuccessful party could reasonably be expected to pay (see: Rule 57.01(1)(0.b) of the Rules of Civil Procedure).

[20] The judge did not forget that this is among the factors that may be considered in applying the discretion called for by s. 131 of the Courts of Justice Act. He made specific reference to it in his consideration of four of the items of costs he awarded (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at paras. 37 and 39).

Access to Justice

[21] One of the fundamental goals of the CPA, is to provide access to justice. Counsel for the plaintiffs understands this to apply to his clients but not the defendants.

[22] In considering access to justice, Mr. Justice Perell identified that plaintiffs and defendants in class proceedings are subject to the same law that guides the court's discretion in awarding or in declining to award costs. He thought this "obvious and fundamental". He found that the court should be aware that the procedure of a class action is meant to level the playing field. It is not intended to tilt the field in favour of the plaintiffs (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at paras. 16 and 18). In this, he did not agree with counsel for the plaintiff but, to my mind, it cannot be said that this is inconsistent with the policy behind the Act. Surely, it is to provide access to justice, but not to the advantage of one side over the other.

[23] To my mind, none of this disrespects or ignores any of the established principles regarding the awarding of costs.

The Exercise of Discretion

[24] The exercising of the discretion of the court to award costs can be a complex process. It is not merely directed to distributing money. It can have a more diverse purpose. Mr. Justice Perell observed that “the court should be prepared to exercise its discretion about costs creatively and flexibly using all of the discretionary tools available. This may mean developing some hybrid and complex orders that preserve access to justice…” (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 14 (20)).

[25] In looking at how Mr. Justice Perell exercised the court’s discretion, it is worthwhile to remember that he was uniquely able, in the circumstances, to assess costs. In sending the matter back to him, the Divisional Court said:

Perell, J. is in the best position to deal with the costs of the certification motion. It was heard over 4.5 days. In support of the certification motion, there were expert reports and cross-examinations. There were many motions leading up to it. Justice Perell’s careful and detailed reasons for costs following the certification motion, demonstrate that he is in the best position to evaluate the claim.

(Cost Endorsement of the Divisional Court as quoted in: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 29)

[26] The judge did not give the plaintiffs everything they wanted, but in respect of each of the amounts that he (a) reduced; (b) deferred; (c) denied; or (d) ordered paid in the cause, he applied the court’s discretion through thoughtful consideration and the application of accepted principles and values.

(a) Costs that were reduced

[27] There were elements of the costs for which Mr. Justice Perell was not prepared to order the amounts requested. It is hardly unusual for a judge, having reviewed submissions as to costs, to exercise his or her discretion to reduce some of the amounts asked for. In this case, the judge considered and reduced the following four requests:

• The defendants, Quizno’s Canada Restaurant Corporation, Quiz-Can LLC, The Quizno’s Master LLC and Canada Food Distribution Company (the “Quizno’s defendants”) brought a motion for security for costs. The plaintiffs were successful in opposing the motion. It was refused by Madam Justice Hoy. The plaintiffs sought costs in the amount of $29,645. In his submissions to this court counsel was candid to reveal his actual expectations. As the successful party, he anticipated receiving $25,000. Mr. Justice Perell examined the request. In his decision he observed that this motion was heard at the same time that the defendants Gordon Food Services, Inc. and GFS Canada Company Inc. (the "Gordon defendants") brought a similar motion. Unlike the Quizno’s defendants they succeeded. Madam Justice Hoy awarded the Gordon defendants, as the successful party, $1500. After considering this history, Mr. Justice Perell found this to be the appropriate amount. He awarded the plaintiffs $1500 payable forthwith (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 38).

• The Quizno’s defendants brought a motion to strike the Statement of Claim and to strike portions of an affidavit. The plaintiffs requested costs for this motion of $30,572.50. Mr. Justice Perell observed that the plaintiffs were successful on this motion after five lawyers had expended 127.2 hours "on what amounts to an interlocutory motion about pleadings". He found this to be excessive and beyond the reasonable expectations of the losing party. He awarded $5000 payable forthwith (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 39).

• The Gordon defendants brought a motion to dismiss the claim. The plaintiffs were successful in opposing the motion. They sought $21,765. Mr. Justice Perell noted that when he considered costs following the refusal to certify the proceeding he had awarded the plaintiffs "a $20,000 set-off for their success…". He concluded that there was no reason to change that award.

• The plaintiffs asked for costs associated with the drafting of the certification and cost orders on the certification motion. They requested $3,940. They were awarded $1,500. The judge recognized that these were costs associated with the certification motion and determined that they should be dealt with as were other costs related to it. He did not question the hours worked and considered what the unsuccessful party might reasonably have expected to pay. He decided to reduce the quantum.

[28] In respect of each of these amounts, Mr. Justice Perell has considered the circumstances and applied the discretion of the court.

(b) Costs that were deferred

[29] The judge deferred counsel fees in the amount of $35,882.50. These costs were associated with case conferences. He pointed out that such meetings are not always adversarial. A case conference “may turn out to be a co-operative meeting designed to advance the class proceeding”. Mr. Justice Perell considered that “the outcome of the litigation may be a relevant factor in determining whether costs should be awarded for a case conference”. He acknowledged that “in some situations it would be appropriate to order costs of a case conference immediately”, but found that this case was not one of them. With all of this in mind, he concluded it would be appropriate, in this proceeding, to defer this decision (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 44).

(c) Costs that were denied

[30] Mr. Justice Perell denied costs totalling $121,985.00. In this case, the costs he refused are made up of five separate items, each one of which he examined and analyzed before deciding not to make the award sought:

• Consistent with the approach in his cost decision, made following his determination that the proceeding should not be certified, the judge concluded that each party should bear its own costs in respect of the cross-examinations on the certification motion ($68,410.00 asked for). The judge did this, notwithstanding that under Rule 39.02(4), “the presumptive approach is that a party pays for the cross-examinations it initiates”. He considered the submissions made by the parties, but was not “persuaded to change [his] mind” (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 42).

• In view of the fact that success was divided, Mr. Justice Perell determined that no costs should be ordered with respect to motions concerning undertakings and refusals arising from the cross-examinations ($28,910 asked for) (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 43).

• Similarly, because success was divided, the judge ordered no costs for the preparation of the Bill of Costs ($4,360 asked for) or for the costs submissions ($10,625 asked for) made in respect of the certification motion (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 45)

• The plaintiff had been unsuccessful on a motion to strike the affidavit of their expert. Mr. Justice Perell observed that, when he assessed costs following his decision not to certify the proceeding, he had awarded costs, in respect of that motion, to the defendants. In the decision being considered here, he found that there was no reason to change and, accordingly, concluded that these amounts should be offset against the amounts he was awarding to the plaintiffs ($9,680 being asked for) (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 40).

[31] Again, Mr. Justice Perell has considered the circumstances and applied the discretion of the court. There is no wrong, new or novel principle that has been relied on.

(d) Costs that were “in the cause”

[32] The disbursements awarded, in the cause, reflect the cost of an expert report relied on by the plaintiffs as demonstrating that the damages, in this case, could be assessed on a class-wide basis ($81,348.88). This is a necessary part of any motion for certification. As counsel for the plaintiffs sees it, if plaintiffs cannot be certain that payment of this cost will be forthcoming, the access to justice of the plaintiffs is impaired. It was his submission that if “costs in the cause” is to be a regular part of the cost regime in class proceedings, this should considered by the Divisional Court so that guidance is provided to counsel as to circumstances in which this may occur.

[33] The award of costs in the cause is not new. Mr. Justice Perell did note that its use “has become somewhat unconventional”. He observed that it was a discretionary tool that was available in making cost awards for proceedings governed by the CPA. He noted that, for a judge engaged in that endeavour, it could be “particularly helpful” (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 14 (21)).

[34] He proposed that this could be the case in considering costs following motions to certify the proceeding. The judge referred to the fact that such motions are mandatory. He considered that, even when it was clear that the motion to certify would succeed, the resistance of the defendant may be productive because it could serve to "prune aspects of the class proceeding". He concluded: “An order that a portion of the plaintiff’s costs should be in the cause allows the court to do justice in accordance with the exigencies of the particular certification motion and recognizes that it was reasonable for the defendant to oppose the certification motion, which it [sic] entitled to do, and which resistance may be productive and even in the interests of class members, who will have a proceeding that is manageable and the preferable procedure to achieve access to justice” (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at paras. 22 and 23). All of this is a general consideration of why this established and available tool may be useful in circumstances such as that confronted by Mr. Justice Perell in dealing with costs of a motion to certify a class proceeding. It is an appropriate part of applying the broad discretion of the court in respect of costs.

[35] The judge went on to apply this tool to the particular case. The question of whether the opinion offered to the effect that the damages arising from this action were assessable on a class-wide basis remained "a very live issue in this class action" (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 49). It was, therefore, appropriate to assess these costs, at the end of the day, when the true value of the opinion could be judged. Mr. Justice Perell observed that this was the same approach he had taken in the cost award made after the motion for certification had been dismissed.

[36] The decisions made in this award of costs relied on known and established principles that were utilized in a reasonable and proper use of the discretion of the court.

[37] It follows that I find that there is no reason to doubt the correctness of the decision of Mr. Justice Perell.

Is there a conflicting decision?

[38] Counsel for the plaintiffs submitted that there is a case that conflicts with the decision of Mr. Justice Perell. He referred the court to the case of Robertson v. Thomson Corporation (1999), 1999 14780 (ON SC), 43 O.R. (3d) 389 (Gen. Div.). In that case, following a successful motion certifying a class proceeding, the plaintiff submitted that he should have his costs paid forthwith while the defendants said that the costs should be to the plaintiff in the cause. The defendants argued for reliance on the principle applied in interlocutory injunction cases where a successful plaintiff will ordinarily not be awarded costs forthwith on the theory that, until the action has been tried, there has been no determination of the merits sufficient to warrant an immediate award. Mr. Justice Sharpe (as he then was) expressed the view that there were significant differences between a motion for an interlocutory injunction and a motion for certification in a class action. In the former, a plaintiff comes before the court to request an exceptional order to protect his or her position up to trial. In a class proceeding, the plaintiff is required to present a certification motion as a condition of proceeding further. The certification motion is intended to screen claims that are not appropriate for treatment as class actions. In part, this is to protect the defendant from being unjustifiably embroiled in complex and costly litigation. Mr. Justice Sharpe concluded that, while the certification motion is like an interlocutory injunction in that no rights are determined, these differences are sufficient to justify a different regime for cost orders. The judge decided that the appropriate order was for payment of costs to the plaintiff for the certification motion, on a party and party basis, paid forthwith. Counsel for the defendants sees this as the establishment of a principle that, when costs of a certification motion are assessed, they should be made payable, not in the cause, but forthwith. It could be argued that this is demonstrated by the reliance by Mr. Justice Sharpe on the injunction found in Gagne v. Silcorp Ltd. (1995), 1998 1584 (ON CA), 41 O.R. (3d) 417 at 422 that a fundamental objective of the CPA is “to provide enhanced access to justice to those with claims that would not otherwise be brought because to do so an individual proceedings would be prohibitively uneconomic or inefficient”. To my mind, this is taking the case too far. The decision it represents was made: "In the circumstances of the present case". Mr. Justice Sharpe reviewed the particular circumstances of the individual plaintiff in that case. The case is an example of the exercise of the court's discretion in a particular circumstance, rather than the definition of a determined or fixed principle.

[39] It is not as if Mr. Justice Perell was not aware of or did not consider the implications of Robertson v. Thomson Corp., supra. In his decision, he found that “an order that a portion of the plaintiff’s costs be in the cause and that another portion be payable forthwith is not inconsistent with Justice Sharpe’s ruling in Robertson…”. He noted that “…an absolute rule that the representative plaintiff is always entitled to its costs of a successful certification motion payable forthwith would sterilize the court’s discretion”. He concluded that “…there is no suggestion in Robertson v. Thomson Corp., supra, that the court does not have the jurisdiction to order costs in the cause where appropriate to do so” (see: 2038724 Ontario Limited v. Quizno’s Canada Restaurant Corporation, supra, at para. 31).

[40] I find that the decision in Robertson v. Thomson Corp., supra, does not conflict with the cost order made by Mr. Justice Perell.

Conclusion

[41] There being no reason to doubt the correctness of the decision and no decision conflicting with it, the motion for leave to appeal is dismissed (see: Rule 62.02(4) of the Rules of Civil Procedure).

Costs

[42] Counsel agreed that the costs of the motion for leave to appeal, for each of them, should be fixed at $5,000 and that the award of costs of the motion should follow the event. It follows that costs of this motion are to be paid by the plaintiffs to the two sets of defendants, in the amount of $5,000 each, for a total of $10,000.

LEDERER J.

Released: 2011-02-08