Court File and Parties

COURT FILE NO.: CV- 22-00675855-00CP DATE: 20230331 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BURFORD LAW PROFESSIONAL CORPORATION and TAIS DAVIS, Plaintiffs – and – DYE & DURHAM LIMITED and DORPROCESS LP, Defendants

BEFORE: E.M. Morgan J.

COUNSEL: Theodore Charney, Caleb Edwards, and Sumaiya Akhter, for the Plaintiffs Joseph Groia and David Sischy, for the Defendants

HEARD: March 30-31, 2023

Mid-Certification Motion Adjournment

[1] This proposed class action has been brought in respect of the cost of software produced and sold by the Defendants and designed primarily for use by real estate lawyers and others working in the conveyancing process.

[2] The proposed class is:

“[L]aw firms in the province of Ontario who received the Promise or Representation and paid a fee for the use of the Unity software between January 18, 2021 and January 18, 2024.

[3] The Defendants’ product is used and the fee is paid on a transaction-by-transaction basis. The evidence is that in 2021 the Defendants raised the fee from $25 to $129 per transaction, and in 2022 raised it again to $249 per transaction. The 2022 increase came in the face of what Plaintiffs’ counsel describe as a contractual promise, and what Defendants’ counsel describe as a marketing approach, that stated that the price of the Defendants’ product would be frozen at the 2021 level of $129 for the next 3 years. The claim alleges breach of contract, breach of the Competition Act, and negligent misrepresentation.

[4] Plaintiffs’ counsel have now requested a mid-certification motion adjournment. They have completed their submissions and Defendants’ counsel are part way through their own responding submissions. Plaintiff’s counsel state that during the course of making their submissions and listening to my questions, they have identified a gap in the evidence that they would like the opportunity to fill in.

[5] Plaintiffs’ counsel submit that section 5(4) of the Class Proceedings Act, 1992 (“CPA”) gives me the discretion to grant an adjournment for this purpose. Defendants’ counsel agree that I have leeway under the CPA to grant a mid-motion adjournment, but submit that the circumstances here are not right for the adjournment that the Plaintiff seeks.

[6] The questions that I had been asking that prompted the Plaintiffs’ request were with respect to the real stake that class members have in this action. It seemed from the record and from Plaintiffs’ counsels’ presentation of the case that the focus was on how to absorb the increased cost per transaction to the clients, and from there to a discussion of whether the expense in question – the transaction fee for using the Defendants’ software – was disbursed directly to the clients or absorbed by the lawyer/class members.

[7] I expressed the concern that those who really suffered the loss seemed to be the class members’ clients rather than the class members themselves; in fact, a featured piece of evidence contained in the Plaintiffs’ record is the Globe and Mail’s coverage of the higher transactional costs faced by home buyers. This focus suggested that there may be a question of whether the actual class members have a sufficient stake in the litigation at all.

[8] Plaintiffs’ counsel propose an adjournment in order to bring new expert evidence on the real estate conveyancing market at large. This evidence will be introduced in an effort to show that the real estate law market is highly commoditized and intensely competitive in a way that makes it very price sensitive. Plaintiffs’ counsel expects the experts to opine that clients choose real estate lawyers on the basis of price alone, and not on quality of service or comparative legal skill.

[9] Plaintiffs’ counsel go on to say that this will be accompanied by evidence of business loss by real estate lawyers as a result of the Defendants’ price increase. Counsel predict that the new evidence will address the particularly steep losses and reduction of business suffered by smaller real estate firms as against large firms who can absorb the Defendants’ increases.

[10] Defendants’ counsel submit that what Plaintiffs’ counsel has described is not a filling-in of gaps in the record, or the addition of some technical evidence about the real estate market. It is rather a wholesale re-conceptualization of the claim.

[11] Up until now, the Plaintiffs’ focus had been on the cost per transaction and the impact on clients and on the law firms’ pricing of each transaction. The Statement of Claim, and the Plaintiffs’ proposed Amended Statement of Claim, emphasize the cost per transaction as their basis for relief.

[12] Both Ms. Burford-Grinell and Ms. Davis claim reimbursement of expenses incurred on a per-transaction basis, based on what they say has been the Defendants’ unfair 2022 increase, plus the out-of-pocket cost of transitioning to a competitor’s software. While they say almost as an aside that they have lost business, there is no real evidence of this anywhere in the record. Had there been, I would imagine it would have been the subject of some probing cross-examination, with the accompanying production of law firm financial records, etc. Nothing of that sort is in the record.

[13] Similarly, there is nothing – or precious little – in either the new or the old version of the Plaintiffs’ pleading, and likewise nothing in the proposed common issues, that speaks to law firm profitability at large. The general question in the proposed common issues as to whether the Defendants owe the class damages for breach of contract and other causes of action does not really cover what Plaintiff’s counsel proposes.

[14] Furthermore, although the two Plaintiff affiants describe their firms as small and speak about the difficulties caused by the Defendants’ price increases, there is nothing in the record or in the pleading or in the common issues that in any real way addresses the large firm vs small firm distinction that Plaintiffs’ counsel describes. Supporting that distinction will doubtless entail a significant effort of evidence gathering. There will also have to be some re-drafting to form a basis for any new evidence about the various sized firms and how their respective economies of scale absorb the impact of the Defendants’ increased price.

[15] In my view, Defendants’ counsel is correct that this is a fundamental reconceptualization of the claim. Contrary to Plaintiffs’ counsel’s assessment (which, admittedly, was given in an impromptu answer to my own question), some further amendment to the pleading and to the common issues will be necessitated.

[16] Moreover, a redefinition of the class, or possibly a division into subclasses, will have to be considered. The focus of the argument will change from a transaction-by-transaction claim for damages to a law firm profitability claim for damages. In all, the gap-filling exercise looks to me like a re-do of nearly the entire case.

[17] If Plaintiffs’ counsel wants to re-vamp the case in this way, there certainly must be an adjournment. The new focus of the damages claim and the nature of the class members’ interest in the action cannot be accomplished on the basis of the current record.

[18] An adjournment at this stage raises the issue of prejudice to the Defendants. They have gone to all of the trouble of defending a case that is no longer the real case they will have to meet.

[19] That prejudice is in essence one of cost, but the cost is substantial. It is almost as if the Defendants have been successful in the motion overall, and what they will confront down the road is a different motion. While some of the record will still be relevant in the next round, the focus will have shifted and of necessity the argument and accompanying legal research, not to mention the responding evidence, will also have substantially changed.

[20] I am therefore prepared to grant the adjournment requested by Plaintiffs’ counsel, but at the same time I will invite submissions on the quantum of costs thrown away to be paid by the Plaintiffs to the Defendants. Both sets of counsel have already provided me with sealed copies of their respective bills of costs in anticipation of the certification motion. I have not looked at them as they are sealed, but will use those bills as a basis for fixing the costs thrown away to date.

[21] I would ask Defendants’ counsel, within one week of today, to send brief submissions by email to Plaintiffs’ counsel and to my assistant, setting out what percentage of their bill should be ordered now, and why that percentage makes sense. I would ask Plaintiffs’ counsel, within one week thereafter, to send equally brief responding submissions to Defendants’ counsel and to my assistant, addressing the quantum of costs to be paid.

[22] The certification motion is adjourned to October 11-12, 2023.

Date: March 31, 2023 Morgan J.