Andersen et al. v. St. Jude Medical Inc. et al. [Indexed as: Andersen v. St. Jude Medical Inc.]
75 O.R. (3d) 398
[2005] O.J. No. 1459
Court File No. 367/04
Ontario Superior Court of Justice
Divisional Court
Molloy J.
April 18, 2005
Civil procedure -- Class proceedings -- Certification -- Costs -- Plaintiffs awarded costs of certification motion fixed at $600,000 -- Defendants' seeking leave to appeal quantum of costs -- Leave granted -- Amount of award considerably higher than any costs ever previously awarded for certification motion -- Motion judge not clearly justifying why such deviation was warranted -- Motion judge not considering amount of award from overall perspective of fairness and not considering [page399] whether that amount could have been within reasonable expectation of defendants -- Reason existing to doubt correctness of order -- Issues raised of sufficient public importance to warrant granting leave.
The motion judge granted the plaintiffs their costs of a motion to certify the action as a class proceeding, fixed at approximately $600,000. The defendants brought a motion for leave to appeal the quantum of costs.
Held, the motion should be granted.
The amount of the cost award was considerably higher than any costs ever previously awarded for a certification motion. Where the costs are this much outside the norm, it is important to justify why such a deviation is warranted in the particular circumstances of the case. It was not clear that the motion judge took that into account in fixing costs. Moreover, the motion judge did not take a step back to consider the amount awarded from an overall perspective of fairness and to consider whether that amount could have been within the reasonable expectation of the defendants. Accordingly, there was reason to doubt the correctness of the order. The issues raised transcended the interests of the immediate parties and could have an impact on the development of the law in this area. The issues were of sufficient public importance to warrant granting leave.
MOTION for a leave to appeal a costs order.
Cases referred to
Bank of Montreal v. Canada (Attorney General), [1999] O.J. No. 90, 117 O.A.C. 392 (Gen. Div.); 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.); Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, 2005 1042 (ON CA), [2005] O.J. No. 160, 5 C.P.C. (4th) 258 (C.A.); Gariepy v. Shell Oil Co., [2002] O.J. No. 3495, 23 C.P.C. (5th) 393, [2002] O.T.C. 656 (S.C.J.); Hodnett v. Taylor Manufacturing Industries Inc., 2002 49502 (ON SC), [2002] O.J. No. 2692, 18 C.C.E.L. (3d) 293 (S.C.J.); Hollick v. Toronto (Metropolitan), [1998] O.J. No. 2418 (Gen. Div.); Moon v. Sher, 2004 39005 (ON CA), [2004] O.J. No. 4651, 192 O.A.C. 222, 246 D.L.R. (4th) 440 (C.A.); Price v. Panasonic, [2002] O.J. No. 5437.
Gordon McKee and Jill Lawrie, for moving parties (defendants). Gavin MacKenzie, for responding parties (plaintiffs).
Endorsement by MOLLOY J.: --
Introduction
[ 1 ] This is a motion for leave to appeal from the costs order made by Cullity J. dated May 21, 2004. The issue before the motion judge giving rise to the costs award had been the plaintiffs' motion to certify this action as a class proceeding. The defendants in the action are the manufacturers of a mechanical heart valve alleged by the plaintiffs to be a dangerous product. The motion judge certified the action as a class proceeding and awarded costs of the motion to the plaintiffs on a partial indemnity basis. The [page400] certification decision itself was also the subject of a motion for leave to appeal, which proceeded separately, and I understand leave to appeal has been denied.
[ 2 ] With respect to the costs order, the motion judge found that the plaintiffs were entitled to costs on a partial indemnity basis. This is not challenged by the defendants. They seek leave to appeal only with respect to the quantum of costs awarded on the certification motion. Although there was a separate award of costs in respect of a pleadings issue within the certification process and a separate award of costs for the cost submissions themselves, neither of those awards is challenged. The costs fixed for the certification motion, which are the subject of this motion for leave to appeal, total approximately $600,000, and are broken down as follows:
Fees (other than counsel fees at the hearing) $381,659.80
Counsel fees $15,200.00
Disbursements $213,841.05
[ 3 ] The defendants assert that an appropriate cost award would have been $100,000 for fees and approximately $56,000 for disbursements, and have already paid that amount to the plaintiffs, along with the other aspects of the costs award that have not been challenged.
[ 4 ] In addition to hearing the certification motion itself, the motion judge had case managed the action prior to the certification motion. He was in a unique position to understand the degree of complexity involved, the extent to which expert evidence and other material was or was not required and the amount of preparation time that was reasonable for the motion. The motion judge provided a written endorsement with considerable detail as to his reasoning in making the award he did. Leave to appeal a costs award should never be given lightly and the circumstances of this case warrant particular deference to the motion judge. However, I am persuaded this is an appropriate case in which to grant leave.
Consistency
[ 5 ] My main reason for granting leave is the amount of the cost award and the fact that it is so much higher than any costs ever previously awarded for a motion of this type. The motion judge noted (at para. 5) the general principle that "courts should seek to avoid clear inconsistency with awards in other [page401] cases". He stated (at para. 7)"I have no difficulty in accepting that the amounts claimed in this case are sufficiently greater than those awarded in earlier decisions to give rise to at least an appearance of inconsistency." However, having recognized this general principle, it is not clear that the motion judge took this into account in arriving at the figure he ultimately fixed, particularly given the degree to which his award deviated from the level of costs usually awarded in comparable motions.
[ 6 ] The motion judge referred to the difficulty in drawing direct comparisons between the case at hand and decisions made in other reported cases. Each case obviously has its own unique features influencing the appropriate cost award and it is never possible to find another case precisely "on all fours" with the one at hand. However, that does not mean it is not helpful to consider the range of costs in similar cases in order to ensure there is some level of predictability and consistency in cost awards. I therefore take issue with the motion judge's observation (at para. 7) that it is not "useful to attempt to extrapolate from these decisions even a range within which an award of costs in this case should appropriately be made". I agree it is not easy to extrapolate from numerous other cases, none of which is the same as the one before you. However, I believe it is a useful, and indeed necessary, part of the process.
[ 7 ] The motion judge relied on the decision of Nordheimer J. in Gariepy v. Shell Oil Co., [2002] O.J. No. 3495, 23 C.P.C. (5th) 393 (S.C.J.) (at para. 17) as support for the proposition that "without an intimate understanding of the course of the proceedings in other cases it is difficult -- and I think -- dangerous to attempt to make comparisons that will provide firm guidance in determining an appropriate level of costs in respect of a particular motion". At para. 17 in Gariepy, Nordheimer J. stated, referring to a number of earlier cases"Direct comparisons are therefore neither possible nor particularly useful." However, he was referring in that context to the difficulty in making comparisons to cases decided before the current cost grid came into effect. He did not endorse the general proposition that it was "dangerous" to make comparisons to other similar cases. On the contrary, he noted at para. 14 of his decision that the figure fixed for costs should be "within a range of costs awards for like matters so that there is some measure of consistency (albeit a very rough measure) and thereby some level of predictability". A similar point was made by Nordheimer J. in Hodnett v. Taylor Manufacturing Industries Inc., 2002 49502 (ON SC), [2002] O.J. No. 2692 (S.C.J.) (at para. 9) and by Shaughnessy J. in Price v. Panasonic, [2002] O.J. No. 5437 (S.C.J.) (at paras. 26-27). In my view, the Gariepy [page402] decision does not support the proposition for which it was cited. The importance of consistency in costs awards is well-recognized in the case law.
[ 8 ] The costs awarded in this case are not merely somewhat above the range awarded in similar cases. There is no other certification motion costs award that even approaches the amount ordered in this case. That is not to say that the amount awarded here might not be appropriate in the particular circumstances of this case, as there were certainly factors that could be said to have driven up the costs. However, where the costs are this much outside the norm, it is important to justify why such a deviation is warranted in the particular circumstances of the case. It is not clear that the motion judge took that into account in fixing costs at this level, and I find there is therefore reason to doubt the correctness of his decision in this regard.
Overall Reasonableness and Expectation of the Paying Party
[ 9 ] The costs endorsement in this case was released on May 21, 2004. Since that time, there have been three decisions of the Court of Appeal which have emphasized the importance of an additional step in the process of fixing costs, which requires the judge to step back and examine the overall award with a view to determining whether it is "fair and reasonable" for the kind of matter involved. Further, in determining what is fair and reasonable, the judge fixing costs is required to take into account the reasonable expectation of the parties concerning the quantum of costs. See: 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.) (released June 22, 2004); Moon v. Sher, 2004 39005 (ON CA), [2002] O.J. No. 4651, 246 D.L.R. (4th) 440 (C.A.) (released November 16, 2004); and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, 2005 1042 (ON CA), [2005] O.J. No. 160 (C.A.) (released January 24, 2005).
[ 10 ] The motion judge in this case carefully reviewed the reasonableness of the time spent and the appropriate rate for the various lawyers involved. He drastically reduced the amounts claimed by the plaintiffs on various grounds including: time really directed towards preparing the case itself rather than the certification motion; duplication caused by "over- lawyering"; and work that went beyond what was warranted for the limited factual basis required for certification. He did not simply conduct a mechanical exercise based on the application of the hourly rates to the time spent. However, it does not appear that he took that final step advocated by the Court of Appeal. After making deductions for unnecessary work and duplicative time, he did not consider the [page403] amount awarded from an overall perspective of fairness and consider whether that amount could have been within the reasonable expectation of the defendants. This is related to the previous issue I mentioned above with respect to consistenc y with previous awards, as parties can be presumed to expect costs within a range of what has been awarded in other cases. However, the two may not entirely overlap. It may, for example, be reasonable to conclude that the losing parties were aware that costs for this particular motion would be far higher than norm and would have expected to recover costs in a similar range if they had been successful. Although there had been some references in earlier cases to this overriding principle of reasonableness and predictability, the concept was not as clearly defined as is now the case since the costs trilogy from the Court of Appeal in 2004/2005. Needless to say, the motion judge could not have taken these three cases into account as his decision predates them. It is possible the motion judge in effect applied this principle in reaching the decision he did, but his reasons do not expressly indicate he did so. It does not appear he applied this final step of considering reasonableness in the context of expectations and predictability.
[ 11 ] It is not necessary that I disagree with the result reached by the motion judge in order to grant leave. The moving party is not required at this stage to convince me that the motion judge was wrong, or even probably wrong. Leave to appeal should be granted "if the correctness of the order is open to serious debate": Hollick v. Toronto (Metropolitan), [1998] O.J. No. 2418 (Gen. Div.) at para. 1; Bank of Montreal v. Canada (Attorney General), [1999] O.J. No. 90, 117 O.A.C. 392 (Gen. Div.), at paras. 4-5. In this case, given the size of the costs award and the extent to which the award exceeds any other costs award for a motion of this nature, I believe there is room for serious debate as to whether the award can be said to be fair and reasonable for a motion of this kind, regardless of how much time and money was spent by the plaintiffs in preparing for and conducting the motion. Likewise, it is open to debate whether a losing party on a motion for certification could have reasonably expected the possibility of being ordered to pay $600,000 in costs if unsuccessful on the motion.
Importance
[ 12 ] Having concluded there is reason to doubt the correctness of the motion judge, the next step is to consider whether the issues raised are of sufficient public importance to warrant granting leave. Importance to the parties themselves is not sufficient. I am satisfied that the issues raised transcend the [page404] interests of the immediate parties and could have an impact on the development of the law in this area. Class proceeding certification motions are often lengthy and complex. The parties frequently, and often correctly, perceive the outcome of such motions to be critical to success or failure in the action itself. For this reason, certification motions can become a costly battlefield with a "no-holds barred" approach. The recoverability of costs at an exceptionally high scale has considerable policy implications. As I have already discussed, the process of considering consistency and predictability in fixing costs will typically involve the consideration of costs awarded in other similar pr oceedings. Previously, an award of $100,000 in costs for a certification motion would be at the upper end of the range. A costs award of $600,000 (or even $400,000 exclusive of disbursements) will be taken into account in other cases and could have the effect of raising the bar, such that awards in the future can be expected to creep up. Whether one sees this as a good or bad development in the law, it is nevertheless a development, and one which merits examination at an appellate level. Exposure to costs awards at this level could be prohibitive for plaintiffs and might raise access to justice issues. On the other hand, the costs to defendants in resisting a certification motion could be crippling if not recoverable at a level approaching what the motion actually cost to defend. I am advised that this issue has not yet been addressed at an appellate level in the context of a class proceeding certification motion. Given recent developments in class proceedings generally and in the fixing of costs for other ty pes of proceedings, it would be useful for the public and the practising bar to have the benefit of appellate guidance on the application of these general principles for fixing costs in the context of certification motions.
Conclusion
[ 13 ] I am therefore of the view that this is an appropriate case for further consideration by the Divisional Court. Leave to appeal is granted, with costs reserved to the court hearing the appeal.
Motion granted.