COURT FILE NO.: CV-16-554457CP DATE: 20180809 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: FREDERICK CASS and EDWARD ALLAN McCAFFREY, Plaintiffs AND: WESTERNONE INC., PETER BLAKE, CARLOS K.H. YAM, ROBERT W. KING, GEOFFREY G. SHORTEN, DOUGLAS R. SCOTT, MICHAEL L. RIDLEY, CANACCORD GENUITY CORP., NATIONAL BANK FINANCIAL INC., and RAYMOND JAMES LTD., Defendants
BEFORE: Justice Glustein
COUNSEL: Jay Strosberg, for the Plaintiffs Mark A. Gelowitz and Teresa M. Tomchak, for the Defendants WesternOne Inc., Peter Blake, Carlos K.H. Yam, Robert W. King, Geoffrey G. Shorten, Douglas R. Scott and Michael L. Ridley H. Michael Rosenberg, for the Defendants National Bank Financial Inc., Canaccord Genuity Corp., and Raymond James Ltd.
HEARD: July 27, 2018
Reasons for Decision
Nature of Motion and Overview
[1] The plaintiffs Frederick Cass and Edward Allan McCaffrey (collectively, the “Plaintiffs”) bring this motion pursuant to the Class Proceedings Act, 1992, S.O. 1992, c. 6 (the “CPA”) for an order to (i) on consent, certify the action against the defendants, (ii) on consent, approve the settlement of this action in accordance with the terms of the settlement agreement signed in April and May 2018 (the “Settlement Agreement”), and (iii) approve the agreements as to fees, disbursements, and taxes between the Plaintiffs and Class Counsel [1] (the “Fee Agreements”) and fix those amounts.
[2] The Plaintiffs provided a draft approval order (the “Draft Approval Order”) for the court’s review which included the above relief, including setting out the fees, taxes, and disbursements sought at a total of $395,384.09, being $300,000 for fees, $39,000 for HST and $56,384.09 for disbursements including HST. [2]
[3] The Draft Approval Order also contained ancillary terms which included (a) repayment by the Plaintiffs of disbursements incurred by the Class Proceedings Fund (the “CPF”) and payment of the 10% levy to the CPF (both as required under s. 10(3) of O. Reg. 771/92) and (b) payment of legal fees of Gregory Wrigglesworth (“Wrigglesworth”), counsel responsible for collecting objections and opt-outs.
[4] The substance of the Draft Approval Order was consistent with the proposed draft approval order which was incorporated into the Settlement Agreement as Schedule “B”.
[5] At the hearing, I ordered that (i) the action be certified, (ii) the Settlement Agreement be approved, and (iii) the Fee Agreements be approved and fees, HST, and disbursements be fixed at the amounts sought. I approved the Draft Approval Order with minor modifications and later signed a revised approval order. I granted that relief by endorsement dated July 27, 2018 (the “Endorsement”) with reasons to follow. I now set out my reasons below.
Facts
The Parties
[6] The defendant WesternOne Inc. (“WesternOne”) is a publicly-traded company that focuses on acquiring and growing businesses in the construction and infrastructure services sector. WesternOne has two principal business platforms: (i) construction heat services and aerial equipment, and (ii) modular building construction and rentals through WesternOne’s subsidiary, Britco.
[7] The individual defendants Peter Blake, Carlos K.H. Yam, Robert W. King, Geoffrey G. Shorten (“Shorten”), Douglas R. Scott and Michael L. Ridley (“Ridley”) (collectively, the “Individual Defendants”) were officers and directors of WesternOne.
[8] The remaining defendants National Bank Financial Inc., Canaccord Genuity Corp., and Raymond James Ltd. (collectively, the “Underwriters”) were underwriters in the offering of the shares qualified by WesternOne’s Preliminary Short Form Prospectus dated September 12, 2014 (the “Preliminary Prospectus”) and WesternOne’s Short Form Prospectus dated September 18, 2014 (the “Short Form Prospectus”) (collectively, the “Prospectuses”).
The Allegations in the Amended Fresh Statement of Claim
[9] The Plaintiffs purchased shares of WesternOne pursuant to the Prospectuses and on the secondary market during the Class Period (as defined below) and held some or all of those shares at the close of trading on the Toronto Stock Exchange on November 12, 2014.
[10] The claim arises from alleged misrepresentations in WesternOne’s public documents, including management presentations, press releases, and in the Prospectuses. The alleged misrepresentations relate to Britco’s involvement in the “Keeyask Project” for the development of a proposed generating station in northern Manitoba.
[11] On December 10, 2014, this action was commenced by issuance of a statement of claim. After several amendments, the claim was issued in its current form on May 14, 2015 as the Amended Fresh Statement of Claim (the “Claim”).
[12] The factual allegations pleaded against the defendants are summarized below:
(i) On May 29, 2009, Manitoba Hydro and four First Nations signed a joint agreement for the Keeyask Project, a development of a proposed generating station in Northern Manitoba;
(ii) Preliminary work on access road construction and camp development began in early 2012;
(iii) On December 20, 2012, WesternOne announced that Britco had received the contract for Keeyask, to design, build and install a 2,000 room workforce accommodation complex for the construction of the generating station. The contract, worth $207 million, consisted of two phases. It was and continues to be Britco’s largest project to date. Britco is a large contributor to WesternOne’s earnings before interest, taxes, depreciation and amortization (“EBITDA”);
(iv) Phase one of the contract provided for the design, manufacture, supply, installation and commissioning of the accommodation facility, including site preparation, infrastructure, water distribution and collection systems for the dormitories, for the initial workforce of 500 people and the design only of additional dormitories for 1,500 people;
(v) The underground civil and related works required to ready the project site for installation were outside of Britco’s traditional core competencies;
(vi) The contract between Manitoba Hydro and Britco required phase one to be in working order and ready for occupancy by June 15, 2014;
(vii) Phase two of the contract provided for the manufacture, supply, installation and commissioning of an additional 1,500 dormitory rooms, with an occupancy date of April 2016;
(viii) In March 2013, Britco commenced the construction of the modular accommodation units for Keeyask;
(ix) In and around December 2013, the substantial completion date for phase one, as originally set out in the contract, was revised to July 15, 2014;
(x) On May 4, 2014, Manitoba Hydro advised Britco that it was necessary for Britco to develop and submit a recovery schedule for the construction in order to maintain the July 15, 2014 completion date;
(xi) On or about June 12, 2014, Britco notified Manitoba Hydro that it could not provide a fully operational camp by the amended contract date of July 15, 2014. WesternOne did not disclose this to investors;
(xii) As a result of Britco’s inability to comply with the completion date, Manitoba Hydro incurred costs associated with the rental of a temporary camp and charged these costs to Britco;
(xiii) In a presentation prepared by WesternOne’s management dated June 2014 and posted on WesternOne’s website, WesternOne stated that phase one was scheduled for completion by August 2014;
(xiv) In a presentation prepared by WesternOne’s management dated July 2014 and posted on WesternOne’s website, WesternOne stated that phase one was scheduled for completion by August 2014;
(xv) On August 19, 2014, WesternOne issued a press release (the “August Press Release”), which it filed with SEDAR, [3] stating that phase one of Keeyask had been designed, built and installed and phase two construction would commence immediately. The Plaintiffs allege that by issuing the August Press Release, WesternOne intended to, and did, convey to investors that phase one of Keeyask was complete;
(xvi) On September 9, 2014, WesternOne issued a news release and announced that it had entered into an agreement with a syndicate of underwriters co-led by the Underwriters under which the Underwriters agreed to purchase on a “bought-deal” basis, 4,375,000 common shares of WesternOne for sale to the public at a price of $8 per common share, representing an aggregate issue of $35 million. The aggregate issue on the offering would total $38,600,000 if the Underwriters exercised the over-allotment issue;
(xvii) On September 12, 2014, WesternOne filed the Preliminary Prospectus with the British Columbia Securities Commission (“BCSC”) and SEDAR. On that date, the BCSC and the Ontario Securities Commission (“OSC”) issued receipts to WesternOne for the Preliminary Prospectus;
(xviii) The Preliminary Prospectus contained the following description of Keeyask under the heading “Other Developments”:
On August 19, 2014, the Corporation announced that the Corporation’s Britco division had received approval to commence the second phase of a workforce accommodations contract for Keeyask Generating Station Project following regulatory approval. The second phase of the project is comprised of the design, manufacture, delivery and installation of an additional 1,500 dorm rooms for Manitoba Hydro, with an addition to the kitchen and recreation facility for a total of 387 modular units. The total value of the second phase of the project is $100 million. Plant production is expected to be completed in Britco’s Penticton facility by July 2015, and on-site construction and installation will be completed in March 2016;
(xix) On September 18, 2014, WesternOne filed the Short Form Prospectus with the BCSC and SEDAR which stated that it disclosed all material facts relating to the securities offered as required by the shares legislation of each province except Quebec;
(xx) On September 18, 2014, the BCSC and the OSC issued receipts to WesternOne for the Short Form Prospectus. A receipt for the Short Form Prospectus was deemed issued by the other reporting jurisdictions except Quebec;
(xxi) WesternOne, each of the Individual Defendants other than Shorten and Ridley, and the Underwriters, signed a certificate forming part of the Prospectuses certifying that the Prospectuses, together with the documents incorporated by reference, constituted full, true and plain disclosure of all material facts relating to the shares offered by the Prospectuses;
(xxii) On September 25, 2014, the offering closed;
(xxiii) The Underwriters exercised the over-allotment issue, and therefore the aggregate amount raised on the offering was $38,600,000. WesternOne’s net proceeds from the offering were $33,512,500;
(xxiv) On November 13, 2014, before the opening of trading on the Toronto Stock Exchange, WesternOne issued a press release (the “November Press Release”), its Management’s Discussion and Analysis (“MD&A”), and its Interim Condensed Consolidated Financial Statements for the period ending September 30, 2014. Each of the documents was filed with SEDAR. In the November Press Release and the MD&A, WesternOne disclosed, for the first time, that:
(a) phase one was not complete and was not scheduled to be completed until early 2015;
(b) the company had incurred increased labour and sub-contractor costs arising from delays in completing on-site civil and pre-engineered structure works for phase one of Keeyask; and
(c) Britco’s adjusted EBITDA declined by 39.8 percent;
(xxv) On November 13, 2014, the price of WesternOne’s common shares closed at $4.17, a decline of more than 18 percent from the closing price on November 12, 2014; and
(xxvi) On March 5, 2015, WesternOne issued a press release stating that:
(a) during the fourth quarter of 2014 it made a $7.1 million adjustment to reduce project gross profit related to the on-site construction portion of phase one of Keeyask;
(b) phase one was substantially complete as of March 5, 2015; and
(c) management’s intention was to not pursue on-site general construction and infrastructure work in the future.
The Class Period, Class Definition, and Causes of Action
[13] For the purpose of settlement, the “Class Period” is defined as the period from June 12, 2014 (when Britco notified Manitoba Hydro that it could not provide a fully operational camp by July 15, 2014) up to and including November 12, 2014 (the day prior to the November Press Release and the sharp decline in WesternOne’s share price).
[14] The Plaintiffs allege that during the Class Period, the following misrepresentations were made with respect to the status of phase one of Britco’s involvement in the Keeyask project:
(i) by failing to disclose that phase one could not be completed on schedule,
(ii) by stating on August 19, 2014 that phase one was installed, and
(iii) thereafter failing to disclose until November 12, 2014 that phase one was not complete.
[15] The Plaintiffs represent two subclasses of investors who allegedly suffered damages as a result of the alleged misrepresentations in the Prospectuses and in other public documents. For the purposes of settlement, the Class is defined as:
The Prospectus Class means all persons, other than Excluded Persons, [4] who acquired Shares of WesternOne pursuant to the Prospectuses and held some or all of those Shares at the close of trading on the Toronto Stock Exchange on November 12, 2014.
The Secondary Market Class means all persons, other than Excluded Persons, who acquired Shares of WesternOne during the Class Period on secondary markets, or pursuant to WesternOne’s Premium Dividend and Dividend Reinvestment Plan, and held some or all of those Shares at the close of trading on the Toronto Stock Exchange on November 12, 2014.
[16] The Plaintiffs plead the following causes of action:
(i) Negligence: The Plaintiffs plead that all of the defendants breached their duties to the Prospectus Class members by failing to ensure that WesternOne provided full, true and plain disclosure of all material facts relating to the WesternOne shares that would be distributed pursuant to the Prospectuses. The Plaintiffs plead that (a) WesternOne and the Individual Defendants were negligent since they (1) knew that the documents did not disclose a material fact or (2) “signed the certificate of the Prospectuses certifying that the Prospectuses constituted full, true and plain disclosure of all material facts relating to the WesternOne shares offered by the Prospectuses” [5] and (b) the Underwriters were negligent since “they failed to do the required due diligence which would have disclosed the matters complained of herein”;
(ii) Breach of s. 130 of the OSA: [6] The Plaintiffs plead that WesternOne, the Individual Defendants other than Shorten and Ridley, [7] and the Underwriters breached their duties to the Prospectus Class members since “[t]he Prospectuses did not disclose that phase one was not complete” and, as such, “[t]he Prospectuses did not provide full, true and plain disclosure of all material facts relating to the WesternOne shares that were qualified and distributed pursuant to the Prospectuses”;
(iii) Negligent misrepresentation: The Plaintiffs plead that WesternOne and the Individual Defendants made negligent misrepresentations relating to the status of phase one of the Keeyask project, in the August Press Release, management presentations, and the Prospectuses, [8] and, as such, breached a duty of care owed to the Secondary Market Class members; and
(iv) Subsections 138.3(1) and (4) of the OSA: The Plaintiffs plead that they intend to bring a motion to seek leave under s. 138.8 of the OSA to amend the Claim to plead the rights of action in ss. 138.3(1) and (4) of the OSA, i.e. to seek damages for the Secondary Market Class members for misrepresentations in WesternOne’s documents and for failure to make timely disclosure.
Steps in the Litigation After the Issuance of the Claim
[17] None of the defendants served a statement of defence.
[18] On April 9, 2015, the Plaintiffs received funding from the CPF.
[19] On June 11, 2015, the Plaintiffs served their motion record for certification and for leave under s. 138.8 of the OSA to plead the rights of action under ss. 138.3(1) and (4) of the OSA in relation to the alleged (i) misrepresentations in the Prospectuses and other public documents and (ii) failure to make timely disclosure.
[20] On November 13, 2015, the defendants filed responding motion material to both the certification and leave motions, which set out the following uncontested evidence:
(i) The scope of the project changed over time, was more profitable than projected and took less time than anticipated because of a very significant expansion in revenue offsetting additional costs;
(ii) There were essentially no material facts relating to the status of the project that were not disclosed;
(iii) The status of phase one of the project was not anticipated to have a significant effect on the share price so there was no obligation to disclose it; and
(iv) The decline in the share price following the alleged corrective disclosure was mainly due to non-company specific factors rather than company-specific news.
[21] The Plaintiffs considered the evidence of due diligence raised by the defendants in their responding materials. Class Counsel and the Plaintiffs then were able to evaluate the risks and had an appropriate evidentiary basis to negotiate with the defendants, to agree to the settlement and to recommend its approval to the court.
[22] In April and May, 2018, the parties signed the Settlement Agreement.
The Settlement Agreement
[23] Pursuant to the Settlement Agreement, the defendants will pay $1 million, all inclusive.
[24] The Settlement Agreement provides that the approval of Class Counsel’s fees, disbursements, and taxes is not required as a term of the settlement:
[T]he procedure for, and the allowance or disallowance by the Court of any requests for class counsel’s fees to be paid out of the $1 million settlement amount provided for in the Approval Order are not part of the settlement provided for herein and any order or proceeding relating to class counsel’s fees, or any appeal from any order relating thereto or reversal or modification thereof, shall not operate to terminate or cancel this Settlement Agreement or affect or delay the finality of the Approval Order and the settlement of this action provided for herein.
[25] The Settlement Agreement incorporates the Draft Approval Order, which sets out that there is to be a “net settlement fund” to be determined by deducting, from the $1 million paid by the Plaintiffs, (i) Class Counsel’s approved fees, disbursements and taxes, (ii) repayment by the Plaintiffs of disbursements incurred by the CPF, (iii) payment of the 10% levy to the CPF and (iv) payment of legal fees of Wrigglesworth for collecting objections and opt-outs.
[26] Consequently, the “net settlement fund” is $385,499.25, since the $1 million payment by the defendants is subject to the proposed payments:
(i) Class counsel fees and taxes $339,000 (ii) Disbursements to be reimbursed to the CPF $172,893.41 (iii) Additional disbursements incurred by Class Counsel $56,384.09 (iv) Legal fees paid to Wrigglesworth $3,390 (v) 10% levy paid to CPF $42,833.25 [9]
[27] Consequently, approximately $385,000 would remain for distribution to all Class members. The estimated cost of distribution of those funds to those shareholders would be $200,000, based on other recent class action settlements. As a result, if the balance were distributed to the Class members, the approximate balance left for distribution would be $185,000.
[28] Given the minimal projected balance left for distribution after anticipated distribution costs, the Draft Approval Order provides that the net settlement fund (approximately $385,000) will be paid to the Access to Justice Fund administered by the Law Foundation of Ontario (the “ATJF”), targeted for the study of investor rights.
[29] In its proposal for a cy-près payment, the Law Foundation of Ontario set out numerous cases in which cy-près awards were made to the ATJF, as well as numerous examples of grants made to advance investor protection and strengthen investor rights and remedies.
[30] Notice of the proposed settlement was provided to the Class in accordance with my order dated May 30, 2018.
[31] In the notice, Class members were advised that (i) the settlement would be for $1 million “less the lawyers’ fees, $300,000.00, plus disbursements and taxes” and (ii) the “net settlement fund” “will not be distributed to the Class because of the substantial costs of distribution” but instead “will be paid for the benefit of the class to the Law Foundation of Ontario’s Access to Justice Fund for the study of investor rights”. [10]
[32] As of the hearing, no Class Members objected to the settlement.
[33] Notice of the settlement will be given under the terms of the order I signed after the hearing, which is consistent with my May 30, 2018 order. [11]
[34] The Settlement Agreement provides for a 45 day opt-out period after the Notice of Certification and Settlement approving the settlement is last posted.
Class Counsel’s Fees, Disbursements, and Taxes
[35] The retainer and fee agreements between the Plaintiffs and Class Counsel are dated January 5, 2015 and May 1, 2015 (previously defined as the “Fee Agreements”), and provide for a contingency fee of 30% of the total recovery, plus taxes and disbursements.
[36] Class Counsel requests approval of the Fee Agreements and an order that its fees be fixed at $300,000 (30% of the $1 million recovery), plus HST of $39,000, and additional disbursements of $56,384.09 (including taxes) which have been paid by Class Counsel, for a total of $395,384.09.
[37] The request for fees of $300,000 plus disbursements and taxes was contained in the notice of the proposed settlement. As of the hearing, there were no objections to this request.
[38] The Plaintiffs understand and support Class Counsel’s fee request.
Analysis
[39] The issues on this motion are (i) whether the Plaintiffs have met the test under the CPA to have this action certified as a class proceeding, (ii) whether the court should approve the Settlement Agreement, and (iii) whether the court should approve the Fee Agreement and fix Class Counsel’s fees, disbursements, and taxes at the amounts sought. I address each of these issues below.
Issue 1: Certification as a Class Proceeding
[40] I first consider the general principles of certification and then consider the individual requirements under s. 5 of the CPA.
General Principles on Certification
[41] The CPA is remedial legislation. It is to be given a generous, broad, liberal and purposive interpretation to promote the goals of class proceedings, i.e. judicial economy, access to justice and behaviour modification (Hollick v. Toronto (City), 2001 SCC 68 (“Hollick”), at para. 15; Cloud v. Canada (Attorney General) (2004), 73 O.R. (3d) 401 (C.A.) (“Cloud”), at para. 37).
[42] An order certifying a class proceeding is not a determination of the merits of the proceeding (s. 5(5) of the CPA).
[43] The court is required to certify the action as a class proceeding where the following five-part test in s. 5(1) of the CPA is met:
(a) the pleadings disclose a cause of action;
(b) there is an identifiable class of two or more persons that would be represented by the representative plaintiff;
(c) the claims of the class members raise common issues;
(d) a class proceeding would be the preferable procedure for resolution of the common issues; and,
(e) there is a representative plaintiff who,
(i) would fairly and adequately represent the interest of the class;
(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and
(iii) does not have, on the common issues for the class, an interest in conflict with the interest of other class members.
[44] Under s. 5(1)(a), the court applies the same standard of proof as on a motion to strike a cause of action. The facts as pleaded are assumed to be true and the requirement is satisfied unless it is plain and obvious that the plaintiff’s claim cannot succeed (Hollick, at paras. 16, 25).
[45] For the remaining certification requirements, the plaintiff must establish "a minimum evidential basis for a certification order" by "show[ing] some basis in fact for each of the certification requirements" (Hollick, at paras. 24-25).
[46] The court must be satisfied that all of the requirements for certification are met, even when certification is sought for the purposes of settlement. However, the requirements “need not be as rigorously applied in a settlement context” (Osmun v. Cadbury Adams Canada Inc., [2009] O.J. No. 5566 (S.C.J.) (“Osmun”), at para. 21) given the different circumstances associated with actions which have reached settlement (Corless v. KPMG LLP, [2008] O.J. No. 3092 (S.C.J.), at para. 30), and because the manageability of the proceeding is not at issue (Speevak v. Canadian Imperial Bank of Commerce, 2010 ONSC 1128, at para. 14).
The Pleadings Disclose a Cause of Action (s. 5(1)(a))
[47] In determining whether a pleading discloses a cause of action: (i) no evidence is admissible to assess the cause of action; (ii) all pleaded allegations of fact are accepted as proven, unless they are patently ridiculous or incapable of proof; (iii) the novelty of the cause of action will not militate against sustaining the plaintiff’s claim; (iv) matters of law which are not fully settled by the jurisprudence must be permitted to proceed; and (v) the court’s power to refuse to certify on this ground is exercised “only in the clearest of cases” (Perrenoud v. eHealth Ontario, 2012 ONSC 6704, at paras. 54-59).
[48] A court may consider documents referred to in the pleading, such as a contract, to determine if the pleading discloses a cause of action (Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 68 O.R. (3d) 457 (C.A.), at para. 58).
[49] For the purposes of this certification motion, the Plaintiffs rely on their allegations of:
(i) negligent misrepresentation against WesternOne and the Individual Defendants (for liability to the Secondary Market Class), and
(ii) breach of s. 130 of the OSA by all defendants except Shorten and Ridley (for liability to the Prospectus Class), which similarly provides for liability for misrepresentation by an issuer, underwriter, director or person who signs the certificate, in a prospectus released by an issuer. [12]
[50] The negligent misrepresentation claim is set out at paragraphs 82 to 94 of the Claim, while the s. 130 claim is set out at paragraphs 60 to 64 of the Claim. The essence of the misrepresentation is that the defendants (i) failed to disclose that phase one of the Keeyask project was not complete and (ii) misled investors as to its status.
[51] The required elements to plead a negligent misrepresentation claim are set out in Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at para. 33:
The required elements for a successful Hedley Byrne claim have been stated in many authorities, sometimes in varying forms. The decisions of this Court cited above suggest five general requirements: (1) there must be a duty of care based on a "special relationship" between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) the representor must have acted negligently in making said misrepresentation; (4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted. In the case at bar, the trial judge found that all elements were present and allowed the appellant's claim.
[52] In the Claim, the Plaintiffs plead the following with respect to the negligent misrepresentation claim:
(i) WesternOne and the Individual Defendants owed a duty of care to the Secondary Market Class members because “it was reasonably foreseeable that the Secondary Market Class members would rely upon the misrepresentation and would suffer damages as a result”;
(ii) WesternOne and the Individual Defendants made or authorized the dissemination of the alleged misrepresentations to the Secondary Market Class members through the management presentations, the August Press Release, and the Prospectuses. [13] The representations did not constitute full, true, and plain disclosure about phase one of the project, and were untrue, inaccurate, or misleading, since they did not disclose that phase one was not complete;
(iii) “WesternOne and the Individual Defendants made the misrepresentations negligently”, i.e. those defendants knew or ought to have known that the alleged representations were misleading;
(iv) The Secondary Market Class members reasonably relied on the misrepresentations; and
(v) The Secondary Market Class members suffered damages and loss as a result of relying on the misrepresentations.
[53] Consequently, I find that the Plaintiffs have pleaded the required elements of a common law negligent misrepresentation claim.
[54] The s. 130 claim is based on the same alleged misrepresentation in the Prospectuses. The Plaintiffs plead that WesternOne, the Individual Defendants other than Shorten and Ridley, and the Underwriters breached their duties to the Prospectus Class Members since “[t]he Prospectuses did not disclose that phase one was not complete” and, as such, “[t]he Prospectuses did not provide full, true and plain disclosure of all material facts relating to the WesternOne shares that were qualified and distributed pursuant to the Prospectuses”.
[55] Consequently, I find that the Plaintiffs have pleaded the required elements of a s. 130 claim.
[56] I also note that other courts have certified similar claims of breach of s. 130 of the OSA for the primary market class and common law negligent misrepresentation for the secondary market class (Simmonds v. Armtec Infrastructure Inc., 2014 ONSC 3587, at para. 16; Poole v. PetroMagdalena Energy Corp., 2013 ONSC 4171, at para. 19).
[57] For the above reasons, I find that the Plaintiffs have pleaded the requisite elements of the causes of action of negligent misrepresentation and breach of s. 130 of the OSA.
There is an Identifiable Class (s. 5(1)(b))
[58] The class definition must identify all those who may have a claim, who will be bound by the result of the litigation, and who are entitled to notice. The class must be defined by objective criteria without reference to the merits of the action. It cannot be unlimited (Hollick, at para. 17; Bywater v. Toronto Transit Commission, [1998] O.J. No. 4913 (Gen. Div.), at para. 10).
[59] For the purposes of certification, the Plaintiffs seek to act on behalf of the following class:
The Prospectus Class means all persons, other than Excluded Persons, who acquired Shares of WesternOne pursuant to the Prospectuses and held some or all of those Shares at the close of trading on the Toronto Stock Exchange on November 12, 2014.
The Secondary Market Class means all persons, other than Excluded Persons, who acquired Shares of WesternOne during the Class Period on secondary markets, or pursuant to WesternOne’s Premium Dividend and Dividend Reinvestment Plan, and held some or all of those Shares at the close of trading on the Toronto Stock Exchange on November 12, 2014.
[60] Both groups exclude persons related in any manner to WesternOne, the Underwriters, the Individual Defendants, or any person or entity related to them.
[61] The above definition is objective and does not depend on the merits of the claim or the outcome of the litigation.
[62] There is a rational connection between the Plaintiffs’ proposed class definition and the proposed common issues (Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, at para. 38). The proposed class is not overly broad or overly narrow (Hollick, at para. 21) since it is confined to those shareholders during the applicable Class Period.
[63] Accordingly, the class definition satisfies s. 5(1)(b) of the CPA.
The Claims Raise Common Issues (s. 5(1)(c))
[64] The common issue proposed to be certified on consent is:
Did WesternOne make a misrepresentation in the Prospectuses or at common law about the status of the Keeyask Infrastructure Project?
[65] The proposed common issue is “necessary to the resolution of each class member’s claim” and a “substantial ingredient” of those claims (Hollick, at para. 18). Allowing the suit to proceed as a representative one will avoid duplication of fact-finding and legal analysis, meeting the “low bar” required for this aspect of s. 5 (Cloud, at paras. 51-52).
[66] I adopt the following submission of the Plaintiffs: [14]
The proposed common issue is rationally connected to the claims in this action. Here, the focus is entirely on the conduct of the defendants. The determination of the common issue will establish liability for all Class members and as such, is necessary to the resolution of each claim.
A Class Proceeding is the Preferable Procedure (s. 5(1)(d))
[67] A class proceeding is the preferable procedure for the resolution of the common issues in an action when it is a fair, efficient and manageable method for advancing the class members’ claims, and is preferable to other means of resolving the class members’ claims (Hollick, at paras. 27-31).
[68] In considering preferability, a court “is to adopt a practical cost-benefit approach … to consider the impact of a class proceeding on class members, the defendants, and the court” (AIC Limited v. Fischer, 2013 SCC 69, at para. 21).
[69] Further, “where there is a cause of action, an identifiable class, common issues, and a settlement, there is a strong basis for concluding that a class proceeding is the preferable procedure because certification would serve the primary purposes of the Class Proceedings Act, 1992; namely, access to justice, behavioural modification, and judicial economy” (Krajewski v. TNOW Entertainment Group, Inc., 2012 ONSC 3908, at para. 32).
[70] The Plaintiffs submit that a class proceeding is the preferable procedure because: [15]
(i) The parties have a common interest in the determination of whether the defendants, or any of them, made the misrepresentation;
(ii) There is no other viable means of redress;
(iii) The certification of this action achieves the objectives of the CPA because: (a) it avoids a multiplicity of proceedings that would place a significant burden on scarce judicial resources thereby facilitating judicial economy; and (b) the majority of the individual damages claims are likely to be relatively small making the costs of pursuing individual actions prohibitive and uneconomical so it provides access to justice; and
(iv) A class proceeding for statutory and common law misrepresentation is a method of redress that would fairly, efficiently, and manageably advanced [sic] the Class Members’ claims and is preferable to any other reasonably available means to resolve their claims.
[71] At the hearing, defendants’ counsel noted that in Musicians’ Pension Fund of Canada (Trustees of) v. Kinross Gold Corp., 2014 ONCA 901 (“Kinross”), the Court of Appeal upheld the motions judge and (i) denied leave to bring an action under s. 138.8 of the OSA and (ii) did not certify a negligent misrepresentation claim for failing to report a write-down of goodwill.
[72] The court in Kinross held that certification of the negligent misrepresentation claim would not be the preferable procedure since “numerous individual trials will be required to establish reliance, causation and damages” and that “[i]f such a class action were to be certified, those trials would proceed against the backdrop of an existing judicial determination that the appellants’ core claims of misrepresentation […] hold no reasonable prospect for success at trial”. Consequently, the court held that “[t]o permit a class action to proceed in the circumstances of this case, in my view, would render access to justice more illusory than real and would significantly undercut the goal of judicial economy” (Kinross, at paras. 136-39).
[73] It would not be appropriate to undertake a “rigorous” analysis of preferability. Such an approach would require an analysis of factors which could include (i) concerns raised in Kinross with respect to negligent misrepresentation claims generally, or for negligent misrepresentation claims sought when leave under s. 138.8 of the OSA is (or could be) denied, and, on the other hand, (ii) any different factors which arise in the present case, such as the s. 130 claim which was not raised in Kinross and does not require reliance.
[74] Neither party asked the court to embark on such a “rigorous” analysis and it would be inconsistent with settled law to do so. Consequently, I do not, by these reasons, undertake the extensive review of the preferability issue that would be required on an opposed certification motion. Both parties consented to certification for the purpose of approving the Settlement Agreement.
[75] For the above reasons, I find that there is a basis to conclude that a class action is the preferable procedure. Consequently, I find that this requirement under s. 5(1)(d) of the CPA has been met.
There is an Adequate Representative Plaintiff and a Workable Plan (s. 5(1)(e))
[76] In determining whether a representative plaintiff is appropriate, the court considers “whether there was a common interest with other class members and whether the representatives would ‘vigorously prosecute’ the claim” (Campbell v. Flexwatt Corp, at paras. 75-76).
[77] The proposed representative plaintiffs will fairly and adequately represent the class. Cass purchased shares pursuant to the Prospectuses. McCaffrey purchased shares pursuant to the Prospectuses and on the secondary market.
[78] Further, the affidavit evidence of the proposed representative plaintiffs demonstrates that they can and did instruct counsel, are familiar with the substance of the issues in the action, understand that they are to consider and act in the best interests of the class, and have reviewed and approved of the proposed settlement.
[79] Finally, the proposed representative plaintiffs do not have a conflict of interest with other class members on the common issues, as the settlement of the action would resolve their claims as much as it would the other class members’ claims.
[80] Consequently, I find that this requirement under s. 5(1)(e) of the CPA has been met.
Conclusion on Certification Issues
[81] For the above reasons, I certify the action as a class proceeding as per the Endorsement.
Issue 2: Approval of the Settlement Agreement
[82] The Settlement Agreement provides that it is binding (subject to court approval) regardless of whether the court allows Class Counsel’s fees, disbursements, and taxes, such that any costs issue “shall not operate to terminate or cancel this Settlement Agreement or affect or delay the finality of the Approval Order and the settlement of this action”. The Draft Approval Order provides for the court to determine whether to approve the Fee Agreements and set Class Counsel’s fees, disbursements, and taxes.
[83] The approval of Class Counsel’s fees, disbursements, and taxes is to be determined as a separate matter from approval of the Settlement Agreement. In other words, the Settlement Agreement can be approved without approving the fees, disbursements, and taxes sought by Class Counsel or approval of the Fee Agreements.
[84] Consequently, I separately consider the reasonableness of the Settlement Agreement, including the terms in the Draft Approval Order.
The Applicable Legal Principles on Approving a Settlement Agreement
[85] In Parsons v. Canadian Red Cross Society, [1999] O.J. No. 3572 (S.C.J.) (“Parsons 1”), Winkler J. (as he then was) set out the applicable legal principles relevant to the court’s assessment of the reasonableness of a settlement agreement (at paras. 69-80):
(i) The test for approving a settlement is whether, in all of the circumstances, the settlement is fair, reasonable and in the best interests of the class as a whole, not whether the settlement meets the demands of a particular class member;
(ii) The court should not engage in a “dissection of the settlement with an eye to perfection in every aspect”. The settlement need only fall “within a zone or range of reasonableness”, which is an “objective standard which allows for variation depending on the subject matter of the litigation and the nature of the damages for which the settlement is to provide compensation”;
(iii) In determining whether to approve a settlement, the court may take into account the following factors: [16]
(a) the likelihood of recovery or success,
(b) the proposed settlement terms and conditions,
(c) the amount and nature of discovery, evidence or investigation,
(d) the future expense and likely duration of litigation,
(e) the recommendation of neutral parties, if any,
(f) the number of objectors and nature of objections,
(g) the presence of good faith, arm’s-length bargaining and the absence of collusion,
(h) the degree and nature of communications by counsel and the representative plaintiff with class members during the litigation and information conveying to the court the dynamics of, and the position taken by the parties during, their negotiation, and
(i) the recommendation and experience of counsel;
(iv) These factors “are, and should be, a guide in the process and no more. Indeed, in a particular case, it is likely that one or more of the factors will have greater significance than others and should accordingly be attributed greater weight in the overall approval process”; and
(v) Class action settlements must be “seriously scrutinized by judges”.
[86] The function of the court in reviewing a settlement is not to reopen and enter into negotiations with litigants in the hope of improving the terms of the settlement. It is within the power of the court to indicate areas of concern and afford the parties an opportunity to answer those concerns with changes to the settlement. However, the court’s power to approve or reject settlements does not permit it to modify the terms of a negotiated settlement (Dabbs v. Sun Life Assurance Co. of Canada, [1998] O.J. No. 1598 (S.C.J.) (“Dabbs”), at para. 10).
[87] “Evidence sufficient to decide the merits of the issue is not required because compromise is necessary to achieve any settlement. However, the court must possess adequate information to elevate its decision above mere conjecture” (Ontario New Home Warranty Program v. Chevron Chemical Co., [1999] O.J. No. 2245 (S.C.J.), at para. 92). The parties proposing the settlement have an obligation to provide sufficient information to permit the court to exercise an objective, impartial and independent assessment of the fairness of the settlement in all the circumstances (Dabbs, at para. 15).
[88] It is not necessary that examination for discovery have occurred at the time of settlement. Settlements reached at an early stage of proceedings are appropriate (Dabbs, at para. 24).
[89] There is a “strong initial presumption of fairness” when the settlement is negotiated at arm’s length and recommended by class counsel (Serhan (Trustee of) v. Johnson & Johnson, 2011 ONSC 128 (“Serhan”), at paras. 55-56).
[90] Similarly, Sharpe J. (as he then was) held in Dabbs v. Sun Life Assurance Co. of Canada, [1998] O.J. No. 2811 (S.C.J.), at para. 32:
The fact that this settlement is strongly recommended by experienced class counsel is certainly a factor in its favour. The recommendation of class counsel is clearly not dispositive as it is obvious that class counsel have a significant financial interest in having the settlement approved. Still, the recommendation of counsel of high repute is significant. While class counsel have a financial interest at stake, their reputation for integrity and diligent effort on behalf of their clients is also on the line. […]
[91] Cy-près settlements have been ordered by the court where (Serhan, at paras. 58-59):
(i) “it is not practical to distribute the benefits in any other manner”;
(ii) “A direct distribution to the Settlement Class would be uneconomic considering the modest damages and the fact that there is no cost effective way of locating the Settlement Class Members, determining if they suffered damage and, if so, establishing their loss”; and
(iii) “[T]he cy près distribution is directly related to the issues in the lawsuit” and will “directly benefit” people in similar circumstances to the class members.
Application of the Law to the Facts
[92] I find that the Settlement Agreement is reasonable, including the proposed cy-près payment.
[93] The primary factor in the present case is the risks relating to continued litigation and the likelihood of recovery or success.
[94] The uncontested evidence is that when this action was commenced, based on the information that was in the public domain, including information pursuant to several freedom of information requests to the province of Manitoba, the Plaintiffs, Class Counsel and the CPF believed that the action had significant merit.
[95] On that review of the publicly-available evidence, there was a reasonable argument that (i) the status of phase one had not properly been disclosed in the public documents; (ii) as such, liability could be imposed under s. 130 of the OSA, negligent misrepresentation, and negligence; and (iii) leave under s. 138.8 of the OSA could be granted to pursue a misrepresentation claim for the secondary market based on the WesternOne documents.
[96] However, as I set out at paragraph 20 above, the defendants delivered responding material on the certification and OSA leave motion. I repeat here the uncontested facts established by that evidence:
(i) The scope of the project changed over time, was more profitable than projected and took less time than anticipated because of a very significant expansion in revenue offsetting additional costs;
(ii) There were essentially no material facts relating to the status of the project that were not disclosed;
(iii) The status of phase one of the project was not anticipated to have a significant effect on the share price so there was no obligation to disclose it; and
(iv) The decline in the share price following the alleged corrective disclosure was mainly due to non-company specific factors rather than company-specific news.
[97] As a result of the defendants’ evidence, Class Counsel and the Plaintiffs recognized that there were significant, and likely insurmountable, risks that the action could not succeed.
[98] In particular, Class Counsel and the Plaintiffs reasonably concluded that the defendants would be able to establish both due diligence and minimal, or no damages. Causation would also have been a significant hurdle, as the defendants’ uncontested evidence was that the decrease in share price on November 13, 2014 was not due to company-specific factors.
[99] The defendants’ evidence raised significant, and likely insurmountable, risks that (i) the Plaintiffs would not obtain leave to amend the claim under s. 138.8 of the OSA to plead a claim for misrepresentation and lack of timely disclosure under ss. 138.3(1) and (4) of the OSA; (ii) the Plaintiffs would be unable to prove liability and/or obtain a meaningful assessment of damages at the trial of the common issues; and (iii) the delay and costs associated with continuing the litigation, including appeals would harm the interests of the Class members, if a settlement was not sought. I address these risks below.
[100] For a statutory claim for secondary market misrepresentation the plaintiff must first meet the threshold requirement for leave, namely, that there is a reasonable or realistic chance that the claims will succeed at the trial of the common issues.
[101] In Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18, at paras. 38-39, the court (i) held that the threshold for leave “should be more than a ‘speed bump’” and (ii) applied a higher threshold of requiring a plaintiff who seeks leave to lead “sufficient evidence to persuade the court that there is a reasonable possibility that the action will be resolved in the claimant’s favour”.
[102] Based on the defendants’ evidence, it was highly unlikely, and likely insurmountable, that leave would be granted on the basis of “a reasonable possibility that the action will be resolved in the claimant’s favour”, given the due diligence, lack of damages, and causation defences raised.
[103] With respect to the remaining claims, the defendants’ evidence made it highly unlikely, and likely insurmountable, that the Plaintiffs could succeed on a misrepresentation claim or establish damages or causation at a trial of the common issues. The evidence established that (i) no material facts relating to the status of the project had not been disclosed (and the status of phase one was not material in any event); (ii) the project was more profitable than anticipated; and (iii) the decline in share price after the alleged corrective disclosure was mainly due to non-company specific factors.
[104] Consequently, Class Counsel reasonably concluded (as stated by Plaintiffs’ counsel in her affidavit sworn in support of the present motion):
It was a sobering experience to discover that the alleged facts were not supported by the evidence. We did not believe that we would be successful in obtaining leave, certification or at the trial of the common issues.
[105] Class Counsel and the Plaintiffs then had an appropriate evidentiary basis to negotiate with the defendants, to agree to the settlement, and to recommend its approval to the court. I agree that the risks of leave not being granted or lack of success at a common issues trial were overwhelming and justified Class Counsel in trying to reach a settlement.
[106] Given the risks of the litigation arising from the uncontested due diligence evidence, a $1 million proposed settlement is well within the range of reasonableness. The settlement was reached by arm’s length negotiations which proceeded over several months, with the Plaintiffs being able to obtain a $1 million settlement “which was considerably higher than the defendants’ first offer”. [17]
[107] The proceeds of settlement are sufficient to (i) permit Class Counsel to pay the CPF for its disbursements, (ii) permit Class Counsel to make a disbursement for the 10% levy of the CPF based on the net settlement fund and (iii) after paying legal fees and additional disbursements of Class Counsel, as well as Wrigglesworth’s legal fees, still leaving over $385,000 to be distributed on a cy-près basis to educate future investors in order to attempt to avoid potential losses in other securities matters. Given that leave would likely not have been granted and the plaintiffs would not likely have succeeded on a common issues trial, the settlement terms are reasonable.
[108] Those terms are supported by Class Counsel who are very experienced in securities cases and in class actions generally. They have put their reputation “on the line” in supporting such a settlement as being fair, reasonable and in the best interests of the Class members. In these circumstances, the “strong initial presumption of fairness” in Serhan, which arises when the settlement is negotiated at arm’s length and recommended by class counsel, is justified.
[109] I also find that it is appropriate to order the cy-près payment to the ATJF, for the purpose of the study of investor rights, as sought in the Draft Approval Order and set out in the notice to the Class members in advance of this hearing.
[110] The uncontested evidence is that of the remaining funds of approximately $385,000, an estimated $200,000 would be required to distribute the funds to all Class members, which is more than half of the remaining funds.
[111] As in Serhan, it is not practical to distribute the funds to every shareholder since “it would be uneconomic considering the modest damages” (which are even less than in Serhan), and there is “no cost effective way of locating the Settlement Class members, determining if they suffered damage and, if so, establishing their loss” (Serhan, at para. 58).
[112] Further, allocating the net settlement funds of over $385,000 to the ATJF for the study of investor rights is “directly related to the issues in this litigation” (Serhan, at para. 59), since future investors will benefit from education and potential legislative reform based on the work of the ATJF.
[113] Consequently, I find that the cy-près payment is appropriate.
[114] For the above reasons, I approve the Settlement Agreement as per the Endorsement.
Issue 3: Approval of the Fee Agreements and Class Counsel’s Fees, Disbursements, and Taxes
[115] I consider the reasonableness of the proposed fees, disbursements, and taxes separately under s. 32(2) of the CPA.
[116] I first consider the relevant principles on approving class counsel fees and disbursements and then apply those principles to the facts of this case.
The Applicable Legal Principles on Approving Class Counsel Fees and Disbursements
[117] Class counsel fees are to be approved on the basis of whether they are “fair and reasonable” in all of the circumstances (Parsons v. Canadian Red Cross Society (2000), 49 O.R. (3d) 281 (S.C.J.) (“Parsons 2”), at para. 13-14 and 56; Lefrancois v. Guidant, 2014 ONSC 1956 (“Lefrancois”), at para. 52).
[118] The courts in Lefrancois (at para. 52) and in Silver v. Imax Corp., 2016 ONSC 403 (at para. 41) set out the following factors which may be considered by the court when determining whether class counsel’s fees are fair and reasonable:
(i) the factual and legal complexities of the matters,
(ii) the risks assumed in pursuing the litigation, including the risk that the matter might not be certified, and the risk of loss at trial,
(iii) the opportunity cost to class counsel in the expenditure of time in pursuit of the litigation and settlement,
(iv) the amount in issue,
(v) the result achieved,
(vi) the importance of the matter to the class members and to the public,
(vii) the degree of responsibility assumed and the skill and competence demonstrated by class counsel,
(viii) the ability of the class to pay, and
(ix) the expectations of the representative plaintiffs, the class and class counsel as to the basis for calculating fees and the amount of fees.
[119] An agreement to make a contingent payment, on the basis of a percentage of a settlement or recovery, is contemplated by the word “otherwise” in s. 32(1)(c) of the CPA, and has often been awarded (Nantais v. Telectronics Proprietary (Canada) Ltd. (1996), 28 O.R. (3d) 523 (Gen. Div.) at pp. 528-29; Crown Bay Hotel Ltd. Partnership v. Zurich Indemnity Co. of Canada (1998), 40 O.R. (3d) 83 (Gen. Div.) (“Crown Bay”), at 86).
[120] Contingency fee arrangements are an “important means” to provide “enhanced access to justice to those with claims that would not otherwise be brought because to do so as individual proceedings would be prohibitively uneconomic or inefficient”. Similar to a multiplier, a contingency fee retainer “gives the lawyer the necessary economic incentive to take the case in the first place and to do it well” and, as such, “that opportunity must not be a false hope” (Gagne v. Silcorp Limited (1998), 41 O.R. (3rd) 417 (C.A.), at 422-23).
[121] The policy of the CPA is to provide an incentive to class counsel to pursue class actions in order to increase access to justice. Class counsel fees have been awarded and are intended to compensate law firms for the risk that they may never be paid for their time or reimbursed for their disbursements. In Parsons 2, Justice Winkler (as he was then) stated (at para. 56; see also para. 14):
[…] The legislature has not seen fit to limit the amount of fees awarded in a class proceeding by incorporating a restrictive provision in the CPA. On the contrary, the policy of the CPA, as stated in Gagne, is to provide an incentive to counsel to pursue class proceedings where absent such incentive the rights of victims would not be pursued. It has long been recognized that substantial counsel fees may accompany a class proceeding. […]
[122] In Crown Bay, Winkler J. commented on the benefits of a contingency fee in class actions to encourage settlement (at 88):
[…] On the other hand, where a percentage fee, or some other arrangement such as that in Nantais, is in place, such a fee arrangement encourages rather than discourages settlement […] Fee arrangements which reward efficiency and results should not be discouraged.
[123] Similarly, in Osmun v. Cadbury Adams Canada Inc., 2010 ONSC 2752, Strathy J. (as he then was) endorsed contingency fee arrangements in class actions. He held (at paras. 21 and 22):
There is much to be said in favour of contingent fee arrangements. Litigants like them. They provide access to justice by permitting the lawyer, not the client, to finance the litigation. They encourage efficiency. They reward success. They fairly reflect the considerable risks and costs undertaken by class counsel, including the risk that they will never be paid for their work, the risk that their compensation may come only after years of unpaid work and expense, and the risk that they will be exposed to substantial cost awards if the action fails. Effective class actions simply would not be possible without contingent fees. Contingent fee awards serve as an incentive to counsel to take on difficult but important class action litigation.
[…] in my respectful view, courts should not be too quick to disallow a fee based on a percentage simply because it is a multiple – sometimes even a large multiple - of the mathematical calculation of hours docketed times the hourly rate.
[124] In Abdulrahim v. Air France, 2011 ONSC 512, Strathy J. (as he then was) approved a “one-third” contingency fee, referring to it as “standard in class action litigation”. He held (at para. 13):
A contingency fee of one-third is standard in class action litigation and has been common place in personal injury litigation in this province for many years. It has come to be regarded by lawyers, clients and the courts as a fair arrangement between lawyers and their clients, taking into account the risks and rewards of such litigation. Fees have been awarded based on such a percentage in a number of class action cases.
[125] In Cannon v. Funds for Canada Foundation, 2013 ONSC 7686 (“Cannon”), Justice Belobaba also approved a one-third contingency fee and held that there was a presumption that such arrangements are valid and enforceable provided that they are “fully understood and accepted by the representative plaintiffs”. He held (Cannon, at para. 8):
What I suggest is this: contingency fee arrangements that are fully understood and accepted by the representative plaintiffs should be presumptively valid and enforceable, whatever the amounts involved. Judicial approval will, of course, be required but the presumption of validity should only be rebutted in clear cases based on principled reasons.
[126] In Cannon, Justice Belobaba provided “examples of clear cases where the presumption of validity could be rebutted” which included (Cannon, at para. 9):
(i) “Where there is a lack of full understanding or true acceptance on the part of the representative”,
(ii) “Where the agreed-to contingency amount is excessive”, and
(iii) “Where the application of the presumptively valid one-third contingency fee results in a legal fees award that is so large as to be unseemly or otherwise unreasonable”.
Application of the Law to the Facts
[127] I find that there is no basis to rebut the “strong presumption of validity” of the contingency fee arrangement (Cannon, at para. 9).
[128] I rely on the following factors:
(i) The matter was factually and legally complex. A proper understanding of the facts concerning the status of phase one required lengthy and detailed analysis. The law relating to the various causes of action is complex, requiring counsel to consider numerous authorities, distinguish facts, and consider the applicable principles;
(ii) Consequently, Class Counsel undertook significant risk in advancing the claim;
(iii) Class Counsel demonstrated great skill and competence in the prosecution and resolution of the action under the circumstances. Class Counsel recognized that the risks of proceeding were too high and negotiated a settlement;
(iv) The agreed-to contingency amount is not excessive;
(v) The application of the contingency fee does not results in a legal fees award that is so large as to be unseemly or otherwise unreasonable;
(vi) The Plaintiffs understood and accepted the Fee Agreements. Consequently, there was an expectation of the Class as to the amount of fees that would be sought by Class Counsel;
(vii) The Plaintiffs supported approval of the Fee Agreements at this hearing; and
(viii) No Class member objected to the proposed fees of $300,000 and disbursements being deducted from the net amount of $1 million paid by the defendants, which was set out in the notice of settlement.
[129] For the above reasons, I approve the Fee Agreements and the fees, disbursements, and taxes sought by Class Counsel as per the Endorsement. I fix those amounts at a total of $395,384.09, being $300,000 for fees, $39,000 for HST and $56,384.09 for disbursements including HST.
Order and Costs
[130] For the above reasons, I grant the order as per the Endorsement.
GLUSTEIN J. Date: 20180809