Pearson v. Inco Limited et al. [Indexed as: Pearson v. Inco Ltd.]
79 O.R. (3d) 427
[2006] O.J. No. 991
Docket: C42414
Court of Appeal for Ontario,
McMurtry C.J.O., Rosenberg and Gillese JJ.A.
March 15, 2006
Civil procedure -- Costs -- Class proceedings -- Plaintiff succeeding on appeal in having environmental claim certified as class proceeding although plaintiff substantially narrowed scope of claim and somewhat reduced size of proposed class on appeal -- Original costs award made in favour of defendant by motion judge should not stand -- Plaintiff entitled to his costs of certification motion and appeals -- Quantum of costs reflecting plaintiff's limited success and fact that case involved matter of public interest within meaning of s. 31(1) of Class Proceedings Act -- Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 31(1).
On a motion for certification of an environmental claim as a class proceeding, the defendant was entirely successful before the motion judge and was awarded its costs of the motion. The plaintiff was successful on appeal, but the scope of the claim was substantially narrowed and the size of the proposed class was somewhat reduced.
Held, the plaintiff should have his costs of the certification motion and the appeals.
The plaintiff, having been successful on appeal, had to be imputed success at the certification motion stage for the purposes of costs. The original costs award made by the motion judge in the defendant's favour could not stand. However, in fixing costs, the court could take into account the fact that the plaintiff achieved success against the defendant in respect of a relatively minor aspect of the original claim. On the other hand, a factor favouring a more significant costs order in the plaintiff's favour was the fact that the case involved a matter of public interest and therefore engaged s. 31(1) of the Class Proceedings Act, 1992. A fair and reasonable award in favour of the plaintiff was $90,000 for the costs of the motion. The plaintiff was awarded costs of $65,000 for the appeal to the Divisional Court and $50,000 for the appeal to the Court of Appeal.
APPEAL from the order of the Divisional Court (O'Driscoll, Then and MacKenzie JJ.), 2004 34446 (ON SCDC), [2004] O.J. No. 317, 6 C.E.L.R. (3d) 117 (S.C.J.) and a costs order reported at, [2004] O.J. No. 3074, 10 C.E.L.R. (3d) 307 (S.C.J.), dismissing an appeal from the orders of Nordheimer J., [2002] O.J. No. 3532, 50 C.E.L.R.(N.S.) 88 (S.C.J.) and [2002] O.J. No. 2764, 33 C.P.C.(5th) 564 (S.C.J.) dismissing a motion to certify an action as a class proceeding.
Cases referred to Andersen v. St. Jude Medical, Inc., 2006 85158 (ON SCDC), [2006] O.J. No. 508, 145 A.C.W.S. (3d) 786 (Div. Ct.); Armak Chemicals Ltd. v. Canadian National Railway Co. (1991), 1991 7060 (ON CA), 5 O.R. (3d) 1, [1991] O.J. No. 1535, 84 D.L.R. (4th) 326, 4 C.P.C. (3d) 280 (C.A.) [Leave to appeal to S.C.C. refused [1992] 1 S.C.R. vi] (sub nom. Oakville Storage & Forwarders v. C.N.R., Oakville Storage v. C.N.R.); Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634, 188 O.A.C. 201, 48 C.P.C. (5th) 56 (C.A.); Chadha v. Bayer Inc., 2003 35843 (ON CA), [2003] O.J. No. 1162, 168 O.A.C. 143, 170 O.A.C. 127, 31 B.L.R. (3d) 214 (C.A.); Ciano v. York University, [2000] O.J. No. 3482, 99 A.C.W.S. (3d) 606 (C.A.); Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4924, 192 O.A.C. 239, 247 D.L.R. (4th) 667, [2005] 1 C.N.L.R. 8, 27 C.C.L.T. (3d) 50, 2 C.P.C. (6th) 199 (C.A.), supp. reasons [2005] O.J. No. 733, 7 C.P.C. (6th) 137, 137 A.C.W.S. (3d) 703 (C.A.); Gariepy v. Shell Oil Co., [2002] O.J. No. 3495, [2002] O.T.C. 656, 23 C.P.C. (5th) 393, 116 A.C.W.S. (3d) 495 (S.C.J.); Hague v. Liberty Mutual Insurance Co., 2005 13782 (ON SC), [2005] O.J. No. 1660, [2005] O.T.C. 290, 21 C.C.L.I. (4th) 300, 13 C.P.C. (6th) 37, 138 A.C.W.S. (3d) 804 (S.C.J.); Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, [2001] S.C.J. No. 67, 56 O.R. (3d) 214n, 205 D.L.R. (4th) 19, 277 N.R. 51, 24 M.P.L.R. (3d) 9, 2001 SCC 68, 13 C.P.C. (5th) 1; [page428] Joanisse v. Barker, [2003] O.J. No. 4081, [2003] O.T.C. 733, 46 C.P.C. (5th) 348, 126 A.C.W.S. (3d) 201 (S.C.J.); Lau v. Bayview Landmark Inc., [1999] O.J. No. 4385, 92 A.C.W.S. (3d) 752 (S.C.J.); Moyes v. Fortune Financial Corp., [2002] O.J. No. 4298, [2002] O.T.C. 883, 117 A.C.W.S. (3d) 881 (S.C.J.); Murphy v. Alexander, 2004 15493 (ON CA), [2004] O.J. No. 720, 236 D.L.R. (4th) 302, 21 C.C.L.T. (3d) 226 (C.A.); Robertson v. Thomson Corp. (1999), 1999 14780 (ON SC), 43 O.R. (3d) 389, [1999] O.J. No. 908, 43 C.P.C. (4th) 166 (Gen. Div.); Smith v. Canadian Tire Acceptance Ltd. (1995), 26 O.R. (3d) 94, [1995] O.J. No. 3380, 40 C.P.C. (3d) 129 (C.A.), affg (1995), 1995 7163 (ON SC), 2 O.R. (3d) 433, [1995] O.J. No. 327 (Gen. Div.); Williams v. Mutual Life Assurance Co. of Canada, 2001 62796 (ON SC), [2001] O.J. No. 445, 6 C.P.C. (5th) 194 (S.C.J.) Statutes referred to Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 31(1) Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 57.01 [as am.]
Kirk M. Baert, Eric Gillespie and Celeste B. Poltak, for appellant. Alan Lenczner, Larry P. Lowenstein and Mahmud Jamal, for respondent, Inco Limited. David Estrin, David McRobert and Laura Young, for intervener, The Environmental Commissioner of Ontario. Paul Muldoon, for intervenor, Canadian Environmental Law Association. Robert V. Wright, for intervenor, Friends of the Earth.
The judgment of the court was delivered by
[1] ROSENBERG J.A.:-- Following the release of our reasons for judgment in this matter [reported at (2005), 2006 913 (ON CA), 78 O.R.(3d) 641, [2005] O.J. No. 4918 (C.A.)], the parties were invited to provide written submissions with respect to costs of the appeal, the motion for leave to appeal, the appeal before the Divisional Court and the certification motion. I would dispose of the costs as follows: for the appeal to this court, $50,000 inclusive of GST and disbursements; for the appeal to the Divisional Court, $65,000 inclusive of GST and disbursements; and for the certification motion before the motion judge, $90,000 inclusive of GST and disbursements. [page429]
Costs of the Certification Motion
[2] Inco was entirely successful before the motion judge and sought costs in the amount of approximately $260,000 on account of fees and disbursements. The motion judge awarded Inco $85,000 in costs ($45,000 for fees and $40,000 for disbursements). The appellant, having been successful in having the claim certified as a class proceeding, now seeks costs of approximately $366,000. Inco submits that the costs order made by the motion judge in its favour should stand, or alternatively, that there be no costs or an award of between $20,000 and $45,000.
[3] Before the motion judge, the appellant sought certification of a much broader claim than the claim that was certified by this court. A short description of the original claim is provided in paras. 11 and 12 of our reasons for judgment in this matter. As demonstrated at para. 4 of the reasons of the motion judge reported at [2002] O.J. No. 2764, 33 C.P.C. (5th) 264 (S.C.J.), the proposed class was also very broad. The appellant sought damages from Inco and the other then defendants in the amount of $600 million, together with punitive damages of $150 million and certain injunctive relief. On appeal to the Divisional Court, and subsequently to this court, the appellant substantially narrowed the scope of the claim and somewhat reduced the size of the proposed class.
[4] Later in these reasons I set out a number of factors and principles that I have considered in fixing the costs awards. In respect of the costs order for the certification motion, however, two factors predominate. First, the award should reflect the limited success achieved. Second, the award should take into account that this case involved a matter of public interest within the meaning of s. 31(1) of the Class Proceedings Act, 1992, S.O. 1992, c. 6 ("CPA").
[5] With respect to the limited success achieved by the plaintiff, this court has made it clear that distributive costs awards are to be avoided. See Murphy v. Alexander, 2004 15493 (ON CA), [2004] O.J. No. 720, 236 D.L.R. (4th) 302 (C.A.), at para. 72 and Armak Chemicals Ltd. v. Canadian National Railway Co. (1991), 1991 7060 (ON CA), 5 O.R. (3d) 1, [1991] O.J. No. 1535 (C.A.), leave to appeal to S.C.C. refused [1992] 1 S.C.R. vi. I also generally agree with the comments of Winkler J. in Lau v. Bayview Landmark Inc., [1999] O.J. No. 4385, 92 A.C.W.S. (3d) 752 (S.C.J.), at para. 3:
Simply put, the [CPA] 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. [page430]
[6] The appellant, having been successful on appeal, must for the purposes of costs be imputed success as well at the certification motion stage. Accordingly, I cannot accede to Inco's submission that the original costs award made by the motion judge in its favour should stand. That being said, 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 this litigation. In particular, this court can consider the fact that the appellant achieved success against Inco in respect of a relatively minor aspect of the original claim and that in view of the decision of the Supreme Court of Canada in Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, [2001] S.C.J. No. 67, 205 D.L.R. (4th) 19, it was unlikely a court would certify the sweeping claim originally made.
[7] As Carthy J.A. said in Armak Chemicals Ltd., supra, at p. 9 O.R., "Individual issues can be dealt with ... appropriately under the general discretion and explicit guidance set forth in rule 57.01(1)." In my view, the award in favour of the appellant should reflect the fact that a substantial portion of the fees for the motion would have been directed to the very broad health-related claims, including the serious allegations of increased risk of death due to cancer. Since the health and related claims occupied such a significant part of the action before the motion judge, I think it appropriate to give that feature of the case special weight.
[8] On the other hand, a factor favouring a more significant costs order in the appellant's favour is that, in my view, this case involved a matter of public interest and therefore engaged s. 31(1) of the CPA:
31(1) In exercising its discretion with respect to costs under subsection 131(1) of the Courts of Justice Act, the court may consider whether the class proceeding was a test case, raised a novel point of law or involved a matter of public interest.
[9] I agree with Cullity J. in Williams v. Mutual Life Assurance Co. of Canada, 2001 62796 (ON SC), [2001] O.J. No. 445, 6 C.P.C. (5th) 194 (S.C.J.), at para. 24 that a case involves a matter of public interest within the meaning of s. 31(1) if the class proceeding has "some specific, special significance for, or interest to, the community at large beyond the members of the proposed class". Also see Moyes v. Fortune Financial Corp., [2002] O.J. No. 4298, [2002] O.T.C. 883 (S.C.J.), at para. 6.
[10] So far as I am aware, this is the first environmental claim to be certified as a class proceeding in Ontario since the decision of the Supreme Court of Canada in Hollick, supra, upholding this court's decision refusing certification of the environmental claim in that case. The case is of significance to the community at large [page431] beyond the members of the proposed class since it concerns the important issue of whether claims alleging widespread pollution can be suitable for certification. I repeat what we said at para. 88 of our reasons for judgment in this matter dealing with the behaviour modification rationale for a class proceeding:
Thus, modification of behaviour does not only look at the particular defendant but looks more broadly at similar defendants, such as the other operators of refineries who are able to avoid the full costs and consequences of their polluting activities because the impact is diverse and often has minimal impact on any one individual.
[11] I agree with Cullity J. in Joanisse v. Barker, [2003] O.J. No. 4081, 46 C.P.C. (5th) 348 (S.C.J.), at para. 11, that although s. 31(1) of the CPA does not replace the broad discretion under s. 131 of the Courts of Justice Act, since the legislature mentioned certain factors, where they apply, those factors should be given significance [See Note 1 at the end of the document].
[12] In addition, I take into account the factors set out in rule 57.01. Of particular relevance to this case are the amounts claimed, the complexity of the proceedings and the importance of the issues. However, as to complexity, I recognize that it could be fairly argued that much of the complexity lay in the claims that have not been certified.
[13] In summary, in fixing costs of the certification motion I would apply the following principles and factors:
(1) Ontario, unlike other class proceedings jurisdictions such as British Columbia, has not sought to interfere with the normal rule that costs will ordinary follow the event. See Gariepy v. Shell Oil Co., [2002] O.J. No. 3495, 23 C.P.C. (5th) 393 (S.C.J.), at para. 9; Smith v. Canadian Tire Acceptance Ltd. (1995), 1995 7163 (ON SC), 22 O.R. (3d) 433, [1995] O.J. No. 327 (Gen. Div.), at p. 449 O.R., affd (1995), 1995 3152 (ON CA), 26 O.R. (3d) 94, [1995] O.J. No. 3380 (C.A.) and Williams v. Mutual Life Assurance Co. of Canada, supra, at paras. 13-15.
(2) The costs must reflect what is fair and reasonable: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634 (C.A.), at para. 24 and Cloud v. Canada (Attorney General), [2005] O.J. No. 733, 7 C.P.C. (6th) 137 (C.A.), at para. 3(e). [page432]
(3) The costs should, if possible, reflect costs awards made in closely comparable cases, recognizing that comparisons will rarely provide firm guidance: Andersen v. St. Jude Medical, Inc., 2006 85158 (ON SCDC), [2006] O.J. No. 508, 145 A.C.W.S. (3d) 786 (Div. Ct.), at paras. 22 and 40 to 42 and Hague v. Liberty Mutual Insurance Co., 2005 13782 (ON SC), [2005] O.J. No. 1660, [2005] O.T.C. 290 (S.C.J.), at para. 9.
(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. Hague v. Liberty Mutual Insurance Co. at para. 9 and Chadha v. Bayer Inc., [2003] O.J. No. 1162, 170 O.A.C. 127 (C.A.).
(5) The costs expectations of the parties can be determined by the amount of costs that an unsuccessful party could reasonably expect to pay. See Andersen v. St. Jude Medical, Inc. at paras. 24 to 27 and Hague v. Liberty Mutual Insurance Co. at para. 15. A measure of Inco's reasonable expectations of costs is the amount it sought before the motion judge ($260,000).
(6) The views of the motion judge concerning the complexity of the issues and what is fair and reasonable. See in particular the costs reasons of [the] motion judge at paras. 12, 18 and 23.
(7) The case raised an issue of public importance.
(8) A fundamental object of the CPA is to provide enhanced access to justice. See Robertson v. Thomson Corp. (1999), 1999 14780 (ON SC), 43 O.R. (3d) 389, [1999] O.J. No. 908 (Gen. Div.), at p. 391 O.R.
(9) The appellant's claim substantially evolved from the claim brought before the motion judge.
[14] I have also taken into account the submissions by Inco's counsel that the dockets provided by the appellant's counsel contain errors [See Note 2 at the end of the document] and are vague and do not, for example, show what work related to the property value issue. However, I also accept the submission made by the appellant's counsel that the appellant's [page433] lawyers have made only a token claim for disbursements and have not claimed for all of the work done by all the other lawyers who worked on the file.
[15] Bearing these principles in mind, in my view a fair and reasonable award in favour of the appellant is $90,000 for fees as the costs of the motion.
Costs in the Divisional Court
[16] The Divisional Court awarded Inco approximately $61,000 for costs and disbursements that it sought in its reasons now reported at 2004 34446 (ON SCDC), [2004] O.J. No. 317, 49 C.P.C. (5th) 267 (Gen. Div.). The appellant seeks costs in the amount of $146,902.50. Inco submits that there should be no costs of the appeal before the Divisional Court, especially because the decision of the Divisional Court was rendered before this court's decision in Cloud v. Canada (Attorney General), supra.
[17] By the time the case was before the Divisional Court, the appellant had narrowed the claim and it appeared in much the same way as it was presented in this court.
[18] At para. 8 of its reasons, the Divisional Court observed as follows:
In this case, if the action had been certified, the amount claimed was $600 million damages and $150 million punitive damages. The amount of the claim was reduced when 8,000 potential class members ceased to be claimants and the claim was narrowed to real property damage. However, the remaining claim was still potentially large, one which would cause Inco to spend substantial time preparing for the appeal.
[19] Those factors now apply in favour of the appellant. The appeal was a vital step in the proceedings and would have required considerable time to prepare and properly present. I have not been persuaded that costs should not follow the event, especially bearing in mind that the case involves a matter of public interest. While the subsequent release of this court's reasons in Cloud was important, a factor of equal if not greater significance is the appellant's decision to narrow the claim to make it more amenable to certification. I would give the appellant its costs in the amount of $65,000 inclusive of disbursements and GST.
Costs in the Court of Appeal
[20] The appellant seeks a total of $162,240 for the leave motion and the appeal. The respondent submits that costs should be set somewhere between $23,000 and $50,000 (the costs award in Chadha v. Bayer, supra). [page434]
[21] This appeal was initially argued over two days and then required further attendance. On appeal, Inco argued that certification failed in respect of almost all of the criteria set out in the CPA, notwithstanding that the appellant had significantly narrowed his claim. As the Divisional Court observed, the claim is still potentially large. On the other hand, except for the impact of this court's decision in Cloud, the issues were not significantly different than they were before the Divisional Court.
[22] Bearing in mind the principles and factors set out above, in my view the appellant is entitled to an award of costs on a scale similar to that ordered by this court in Chadha ($50,000) and in Cloud ($42,500). I would therefore fix the appellant's costs in this court for the leave motion and the appeal in the amount of $50,000 inclusive of disbursements and GST.
Order accordingly.
Notes
Note 1: Also see the brief endorsements of this court in Cloud v. Canada (Attorney General), [2005] O.J. No. 733, 7 C.P.C. (6th) 137 (C.A.) and Ciano v. York University, [2000] O.J. No. 3482, 99 A.C.W.S. (3d) 606 (C.A.) and the other Superior Court decisions referred to by Cullity J. at para. 11 of Joanisse. To the extent that the reasons of Nordheimer J. in Gariepy at para. 4 hold to the contrary, I must disagree.
Note 2: For example, the appellant refers to a six-day hearing before the motion judge when the motion was only four days, the dockets include work related to the other defendants, and apparently, they include work on interlocutory proceedings where costs were already dealt with.