SUPERIOR COURT OF JUSTICE - ONTARIO

Court File No.: 07-CV-335257CP
Date: 20120323

RE: JAMES WILLIAMS, KATHLEEN SCHATZ and RAFAEL LIPNER , Plaintiffs/Moving Parties

and

CANON CANADA INC. and CANON INC. , Defendants/Respondents

BEFORE: G.R. Strathy J.

COUNSEL:
Henry Juroviesky and Kevin Caspersz , for the Plaintiffs /Moving Parties
Joseph D’Angelo and Paul Martin , for the Defendants/Respondents

DATE HEARD: By written submissions

E N D O R S E M E N T

(Costs of Certification Motion)

[ 1 ] This endorsement deals with the costs of the plaintiffs’ unsuccessful motion to certify this action as a class proceeding pursuant to s. 5(1) of the Class Proceedings Act, 1992 , S.O. 1992, c. 6 (“ C.P.A. ”). My reasons are reported as: Williams v. Canon Canada Inc. , 2011 ONSC 6571 , [2011] O.J. No. 5049.

[ 2 ] The plaintiffs claimed that 20 models of the defendants’ “Powershot” line of cameras had a common defect that unexpectedly caused them to shut down and remain inoperable. I found that the plaintiffs had failed to establish that there was such a common defect. There was no factual basis to conclude that the alleged defect in the plaintiffs’ cameras was common to all cameras owned by the proposed class.

[ 3 ] The action was originally based on a theory that there was a defect in the cameras’ internal computer, which caused them to shut down. This theory was abandoned for a theory based on defective design, which was not supported by any qualified expert evidence. No “defect” was identified that was common to the class.

[ 4 ] The defendants now ask for their costs on a partial indemnity basis in the amount of $764,944.37, inclusive of disbursements and taxes. The costs will not be borne by the representative plaintiffs or by the Class Proceedings Fund – they will be paid by class counsel. It is typical in class proceedings that class counsel agrees to indemnify the representative plaintiff against an adverse costs award – Perell J. noted this recently in McCracken v. Canadian National Railway , 2010 ONSC 6066 , 100 C.P.C. (6 th ) 334 (S.C.J.).

Submissions of the Parties

[ 5 ] I will begin by briefly summarizing the positions of the parties.

[ 6 ] In support of their claim for costs, the defendants make the following submissions:

(a) the plaintiffs were wholly unsuccessful;

(b) the claim was substantial – it was for milllions of dollars, with a class of over a million people, spanning a lengthy time period;

(c) the issues were important to the defendants and went to the reputation of their well-known cameras;

(d) the proceeding was unnecessarily complicated, over-broad, and lacked a proper evidentiary foundation;

(e) the defendants were obliged to incur substantial costs in order to respond to the claim; and

(f) there are no circumstances that would mitigate the usual award of costs – this was not a test case, did not involve novel points of law or matters of public interest.

[ 7 ] The defendants also say that in light of large costs awards over the past three years, the plaintiffs could reasonably have expected to pay substantial costs in the event they were unsuccessful. These include the following awards:

Decision

Amount Requested

Amount Awarded

Lavier v. MyTravel Canada Holidays Inc., 2008 44697 (ON SC) , [2008] O.J. No. 3377 (S.C.J.)

$170,174.44

$125,000 to defendants

Ruffolo v. Sun Life Assurance Co. of Canada , 2009 ONCA 274

$538,334.83

$215,000 to defendants

Singer v. Schering-Plough Canada Inc. , 2010 ONSC 1737

$323,851.18 and $304,706.40

$400,000 in total - $200,000 to each defendant

Fresco v. CIBC , 2010 ONSC 1036

$750,000

$525,000 to defendant

Lambert v. Guidant Corp., 2009 68460 (ON SCDC) , [2009] O.J. No. 5264

$1,255,345.75 plus disbursements and G.S.T.

$650,000 plus disbursements and G.S.T. to plaintiffs

McCracken v. Canadian National Railway , 2010 ONSC 6026

$740,650.55

$740,650.55 to plaintiffs

[ 8 ] The plaintiffs’ submissions are, in summary, as follows:

(a) in the exercise of its jurisdiction with respect to costs, and as permitted by s. 31(1) of the C.P.A. , the court should consider the fact that this case raised a novel point of law and one involving the public interest;

(b) the award sought by the defendants is not in line with the amounts awarded to defendants on certification motions;

(c) there is significant overlap between the costs incurred by the defendants on certification and those associated with the merits of the case; and

(d) in any event, the costs claimed are grossly excessive.

Discussion

(a) Novel Point of Law

[ 9 ] In its Report on Class Actions (1982), the Ontario Law Reform Commission recommended that the costs rules in civil actions ought not to apply to class actions. This recommendation was not accepted, but the rigours of the usual cost regime were mitigated somewhat by section 31(1) of the C.P.A. That section confirms the jurisdiction of the court to award costs in class proceedings, but sets out special considerations that may be considered in the exercise of the court’s discretion:

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.

[ 10 ] It is apparent that the legislature wished to relax the usual costs regime in cases involving novel legal points or engaging the public interest.

[ 11 ] In my view, there was nothing particularly novel about the claim in this case. The plaintiffs’ claim did not founder because they were asserting a novel point of law or pushing the envelope in a case involving the public interest – it foundered because there was no evidence to support the commonality of their claim.

(b) Other Awards

[ 12 ] The plaintiffs say that in Ruffolo v. Sun Life Assurance Co. of Canada and Fresco v. CIBC, the plaintiffs had the full protection of the Class Proceedings Fund of the Law Foundation and the awards made were undoubtedly influenced by that consideration. As well, they say, both actions were considerably more complicated and protracted than this proceeding. They note that the record on the motion in McCracken v. C.N.R. was enormous.

[ 13 ] The plaintiffs say that the costs claimed by the defendants are excessive and out of line with their reasonable expectations.

[ 14 ] Most of the cases referred to by the plaintiffs in support of this submission are more than ten years old: Hollick v. Toronto (City), (1998), 18 C.P.C. (4 th ) 394 , revd 1998 18868 (ON SC) , 168 D.L.R. (4 th ) 760; Rudder v. Microsoft Corp ., [1999] O.J. No. 4275 (S.C.) ; Elliott v. Canadian Broadcasting Corp. , 1995 244 (ON CA) , [1995] O.J. No. 1710 (C.A.); Controltech Engineering v. Ontario Hydro (2000), CarswellOnt 340 (Div. Ct.) . In my view, these earlier cases are not representative of the appropriate award in a case such as this. However one might wish for a simple and focused certification motion, the fact is that the trend has been towards substantial records, extensive cross-examinations and lengthy hearings. Costs awards have reflected this expansion of the certification motion well beyond what was initially contemplated in 1992. Costs awards have increased to reflect these changes.

[ 15 ] That said, this case was definitely at the low to middle end of the scale in terms of volume of material, duration and complexity.

(c) Work Unrelated to Certification

[ 16 ] The plaintiffs say that a considerable amount of the time and disbursements spent by the defendants and their lawyers related to the search and harvesting of “e-documents” by an out-sourced technical firm, resulting in charges of more than $110,000. There is merit to this submission and to the related submission that some of the time spent by the defendants’ lawyers appears to have been on matters having to do with discovery and other issues going to the merits of the claims.

(d) Other Factors

[ 17 ] I agree with the plaintiffs that the costs claimed by the defendants are greater than could be considered reasonable on a partial indemnity basis due to the use of two full-service law firms and the predominance of time spent by two or three senior lawyers with billing rates at the top of the scale. However reasonable this may have been from the defendants’ perspective, it is not an expense that should be visited on the plaintiffs.

Other Applicable Considerations

[ 18 ] The applicable principles derive from section 131 of the Courts of Justice Act , R.S.O. 1990, c. C.43, rule 57.01 of the Rules of Civil Procedure , R.R.O. 1990, reg. 194 and s. 31(1) of the C.P.A. set out earlier. In Singer v. Schering Plough Canada Inc., 2010 ONSC 1737 , I noted these principles and also noted the purposes of costs rules as outlined by Perell J. in Lavier v. MyTravel Canada Holidays Inc. , above, at para. 31 , namely: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to encourage settlements; (3) to discourage frivolous claims and defences; (4) to discourage and sanction inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to facilitate access to justice.

[ 19 ] Perell J. continued, at para. 32:

Applying these principles in the context of class proceedings and subject to the court's historic discretionary jurisdiction with respect to costs, where a plaintiff brings a reasonable but ultimately unsuccessful motion for certification but one that does not qualify as a test case, novel issue of law, or matter in the public interest, then the defendant should anticipate a less than complete indemnity but an indemnity designed: to discourage frivolous claims; to discourage and sanction inappropriate behaviour by litigants in the conduct of the proceedings; and to facilitate access to justice. In anticipating costs, a defendant should rein in any tendency to commit more resources than are necessary to fairly test and challenge the propriety of certifying the class proceedings.

[ 20 ] I respectfully adopt this as an appropriate approach. The degree to which any one of these factors is or is not present will affect the amount of the costs award.

[ 21 ] I have considered the various factors set out in rule 57.01. I do not regard any factor as being predominant in this case. The factors must be balanced and the award must be proportional, fair, and reasonable to both sides. The right to indemnity – compensation for time spent and fees and disbursements charged – must be weighed against the importance and complexity of the issues and the reasonable expectations of the unsuccessful party, having regard to the conduct of the parties and any other relevant considerations.

[ 22 ] As I have said, this case was not a test case, or one involving a novel issue or the public interest. Although proof was wanting, I cannot say it was unreasonable to bring the action or that the action was frivolous. There was at least some evidence that the “E-18 error” was a confusing message that confounded some users of Canon’s cameras. The plaintiffs’ evidence concerning the cause of this problem was weak and they were unable to establish that the problem was due to a common defect. I do not, however, regard this as a case in which it is necessary to make an award with deterrence in mind. Nor do I consider that there was conduct of the plaintiffs in the course of the proceeding that would call for an award of costs as a sanction.

[ 23 ] For the reasons already given, it is my view that this was a case in which the very substantial costs incurred due to the resources committed by the defendants, while perhaps reasonable from the corporate perspective, should not be visited on the plaintiffs.

[ 24 ] In this regard, it is appropriate to consider the effects of the award sought on access to justice. As Perell J. has recently noted in his costs decision in McCracken v. C.N.R. , the reality of class action litigation in Ontario is that Class counsel bears the costs award. Plaintiffs are typically represented by smaller, entrepreneurial firms, such as plaintiffs’ counsel in this case. Without such firms, willing to take on the risks of class actions, access to justice would be impaired. This may not have been “bet the firm” litigation, but the costs demanded by the defendants are close to being “bet the house”.

[ 25 ] To recognize this consideration is not to overlook the requirement that the award of costs must be fair to both parties.

[ 26 ] In all the circumstances, it is my view that an award of costs to the defendants in the amount of $200,000, all inclusive, payable within 60 days, would be fair and reasonable and within the reasonable expectations of the plaintiffs and it is so ordered.

G.R. Strathy J.

DATE: March 23, 2012