Court File and Parties

CITATION: Keatley Surveying Ltd. v. Teranet Inc. (Costs), 2014 ONSC 3690 DIVISIONAL COURT FILE NO.: 19/3 COURT FILE NO.: CV-10-414169-00CP DATE: 20140626

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Himel, Sachs and Hennessy JJ.

BETWEEN:

Keatley Surveying Ltd. Appellant

– and –

Teranet Inc. Respondent

Counsel: Kirk M. Baert, Celeste Poltak and Jonathan Bida, for the Appellant Paul Morrison, Julie K. Parla and Jameel Madhany, for the Respondent

HEARD: In Writing

Sachs J.:

Introduction

[1] On March 26, 2014, this court allowed an appeal from a decision denying the Appellant’s motion to certify a class proceeding. In allowing the appeal, we agreed that, on the case as presented to her, the motion judge had correctly found that certification was not appropriate. On appeal, the Appellant re-cast its case by revising the class definition, providing a revised list of common issues and eliminating the request for relief that the motion judge found created a conflict between the Appellant and other potential members of the class.

[2] When we allowed the appeal, we requested that the parties provide us with written submissions as to costs. We have now received and reviewed those submissions.

[3] The Appellant seeks costs of the appeal fixed in the amount of $45,000.00 and costs of the motion below in the amount of $120,000.00. The latter amount is less than the $200,000.00 that was awarded to the Respondent by the motion judge when the certification was denied.

[4] The Respondent seeks its costs of the appeal fixed in the amount of $45,000.00 and argues that the motion judge’s order respecting costs should stand.

[5] For the reasons that follow, we find that the Appellant, as the successful party, is entitled to its costs of the appeal fixed in the amount of $45,000.00. We also find that, while the action was an action that was suitable for certification, the Appellant’s presentation of its case at the motion stage prejudiced the Respondent and caused the motion judge to make the decision she did. In view of this, we find that the motion judge’s decision awarding the Respondent costs fixed in the amount of $200,000.00 should be set aside and an order made that neither side is entitled to any costs of that motion.

Costs of the Appeal

[6] The Respondent submits that in spite of the fact that it lost the appeal, it should be awarded its costs of the appeal. It argues that such an order is necessary to compensate it for the prejudice it suffered as a result of the fact that the Appellant re-cast its case on appeal. It also submits that such an order is necessary in order to discourage class proceeding litigants from significantly re-formulating their cases on appeal.

[7] The Respondent acknowledges that it had full opportunity to respond to the Appellant’s case as re-formulated on appeal. Having done so, they were unsuccessful in resisting the Appellant’s request that the action be certified. Therefore, we reject the suggestion that the Respondent was prejudiced at the appellate stage by the fact that the Appellant re-formulated its case.

[8] The Appellant was the successful party on the appeal. As such, the normal rule that costs follow the event should apply (Pearson v. Inco Ltd. (2006), 2006 913 (ON CA), 78 O.R. (3d) 641 (C.A.)). In terms of quantum, both parties requested $45,000.00 and we find that this amount is a reasonable one, given the costs actually incurred by the Appellant and the significance and complexity of the issues raised on the appeal.

Costs of the Motion Below

[9] Generally, when an appeal is allowed, the order for costs at trial is set aside and the costs at trial and on appeal are awarded to the successful appellant. The court has discretion to depart from this approach in unusual circumstances: see Kopij v. Toronto (Metropolitan), [1999] O.J. No. 239 (Ont. C.A.); Tripkovic v. Glober (2003), 2003 43027 (ON CA), 64 O.R. (3d) 481, at para. 82 (Ont. C.A.).

[10] In Pearson, supra, the appellant sought certification before the motion judge (who denied certification) of a much broader claim than was ultimately certified by the Court of Appeal. As a result, the respondent argued that the costs order in its favour that had been made by the motion judge should stand.

[11] Rosenberg J.A. found that “[t]he appellant, having been successful on appeal, must for the purposes of costs be imputed success as well at the certification stage.” (para. 6). Thus, he refused to accede to the respondent’s request that the motion judge’s costs order should stand. However, he also acknowledged that “given the broad discretion under rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, the court can take into account the peculiar features” of the litigation before it (para. 6).

[12] In the present case, the Respondent argues that success on the appeal should not be imputed to the Appellant on the certification motion since, unlike in Pearson, this court made an explicit finding that the certification judge was correct not to certify the case before her. It argues that this is true even in light of the errors that this court did find in the motion judge’s approach. As a result, according to the Respondent, the outcome of the appeal did not affect the success of the Respondent on the motion below.

[13] In our view, the Respondent’s argument ignores two factors. While this court did find that there were serious flaws with the case as presented to the certification judge, in the end, we allowed the appeal, set aside the decision of the motion judge and certified certain common issues. As well, the appeal was successful on the central issue that was before the certification judge; namely, whether the action was suitable to be certified as a class action. As the Appellant put it in its submissions on costs: “the central question in the court below and on appeal was the same: is the action for copyright infringement procedurally appropriate for class proceedings?” These factors also flow from the fact that the s. 5(1) factors either exist on the record or they do not: see paras. 36-37 of the Appeal Decision.

[14] In effect, the Respondent’s submission that the costs of the motion below should stand involves accepting that even if the appeal determines that there was success in the result on the motion below, costs should be awarded against the successful party because of the lack of success on certain internal aspects of the motion judge’s decision.

[15] On this point, it is important to consider the class action costs jurisprudence concerning the fact that distributive costs awards are to be avoided. In a distributive costs award, the major issues at trial are identified and the party who was successful on each issue is awarded costs for the time and expense attributable to that issue: Armak Chemicals Ltd. v. Canadian National Railway Co. (1991), 1991 7060 (ON CA), 5 O.R. (3d) 1 (C.A.).

[16] In Armak, Carthy J.A. noted that distributive costs awards impose a burden on an appellate court to decide every issue decided by a motion judge as opposed to only deciding those issue that are necessary to dispose of the appeal. However, of more significance is the reasoning applied by Winkler J. [as he then was] in Lau v. Bayview Landmark Inc., [1999] O.J. No. 4385 (S.C.J.), at paras. 2-4:

The plaintiffs seek their costs on the motion on the simple basis that they were successful in obtaining certification. Hence, they submit that costs ought to follow the result. The defendants, on the other hand, contend that they ought to be awarded their costs in respect of all causes of action for which certification was not granted.

I cannot accede to the defendants’ submission. In my view, it would run contrary to the goals of the Act to give effect to this argument. Simply put, the Act aims to provide access to the justice system to litigants to whom procedural barriers and economics would otherwise present insurmountable hurdles. It is not in keeping with the spirit of that aim to penalize successful plaintiffs by attempting to break the certification motion down with a play by play analysis and apportioning costs accordingly.

However, as always, costs remain in the discretion of the court pursuant to s. 131 of the Courts of Justice Act…

[17] This reasoning was applied by Rosenberg J.A in Pearson.

[18] In Pearson, at para. 13, the Court of Appeal provided a list of principles and factors that should guide courts when they are fixing the costs of a certification motion:

(1) Ontario, unlike other class proceedings jurisdictions such as British Columbia, has not sought to interfere with the normal rule that costs will ordinarily follow the event.

(2) The costs must reflect what is fair and reasonable.

(3) The costs should, if possible, reflect costs awards made in closely comparable cases, recognizing that comparisons will rarely provide firm guidance.

(4) A motion for certification is a vital step in the proceeding and the parties expect to devote substantial resources to prosecuting and defending the motion.

(5) The costs expectations of the parties can be determined by the amount of costs that an unsuccessful party could reasonably be expected to pay.

(6) The views of the motion judge concerning the complexity of the issues and what is fair and reasonable.

(7) The case raised an issue of public importance.

(8) A fundamental objective of the CPA is to provide enhanced access to justice.

(9) The Appellant’s claim substantially evolved from the claim brought before the motion judge. [Cites omitted]

[19] In Pearson, where, as indicated above, the case certified on appeal was substantially narrower than the one put before the motion judge, Rosenberg J.A. awarded the plaintiff (who was successful on the appeal) slightly more than the defendants had received on the certification motion. He also awarded the plaintiff its costs of the Divisional Court and appeal court proceedings. The Respondent in the case at bar argues that Pearson should be followed and it should receive its costs of the motion below.

[20] In our view, there are two important distinctions between this case and Pearson. First, in this case, we found that the motion judge was correct when she did not certify the case as presented to her. No such finding was made by the Court of Appeal in Pearson. Second, and perhaps more important, Pearson was a novel environmental class action. As such, it was a case that involved a matter of public interest and engaged s. 31(1) of Class Proceedings Act, 1992, S.O. 1992, c. 6. The same cannot be said of the case at bar.

[21] We accept that it is not unusual for cases to evolve as they proceed through the courts on a certification motion. However, this was not a case that just “evolved” from the case that was presented to the certification judge. It was almost completely re-formulated. As we noted in our appeal decision at para. 39, class action litigants should be deterred from completely re-casting their cases on appeal. Costs are an important tool for shaping the way parties conduct themselves: 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 2006 35819 (ON CA), 82 O.R. (3d) 757 (C.A.), at para. 26.

[22] In our view, the Respondent should be compensated for the prejudice it suffered in wasting time responding to a case that was improperly formulated at the certification motion. As we noted at paras. 6 and 34, one way to compensate the Respondent for this prejudice is through a costs award.

[23] On the other hand, to award the Respondent its costs of the motion below would be to violate the rule that costs normally follow the event, something that the courts should only do in exceptional cases, cases that usually include misconduct on the part of the successful party or significant public interest cases (McNaughton Automotive Ltd. v. Co-operators General Insurance Co., 2008 ONCA 703, 93 O.R. (3d) 257, at para. 32.)

[24] Balancing all of these factors, it is our view that the appropriate award of costs for the motion below is an award of no costs to either party.

Conclusion

[25] For these reasons, the Appellant is entitled to its costs of the appeal fixed in the amount of $45,000.0, all inclusive. The motion judge’s award of costs in relation to the motion below is set aside and an order will go that there shall be no costs awarded to either side for that motion.

SACHS J.

HIMEL J.

HENNESSY J.

Released: 20140626

CITATION: Keatley Surveying Ltd. v. Teranet Inc. (Costs), 2014 ONSC 3690 DIVISIONAL COURT FILE NO.: 19/3 COURT FILE NO.: CV-10-414169-00CP DATE: 201406

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Himel, Sachs and Hennessy JJ.

BETWEEN:

Keatley Surveying Ltd. Appellant

– and –

Teranet Inc. Respondent

COSTS ENDORSEMENT

SACHS J.

Released: 201406