Ontario Superior Court of Justice
Court File No.: 06-CV-316213 CP
Date: 20120501
PROCEEDING UNDER the Class Action Proceedings Act, 1992 , S.O. 1992, C. 6
BETWEEN:
JAMES RICHARD MACDONALD, JOHN A. ZOPPAS, LYNN D. ZOPPAS and TAMAS VARGA Plaintiffs â and â BMO TRUST COMPANY, BMO NESBITT BURNS INC., BMO INVESTORLINE INC. and BMO BANK OF MONTREAL Defendants
Ken Rosenberg and Jeffrey Larry , for the plaintiffs
Joel Wiesenfeld and Andrew Gray , for the defendants
HEARD: In Writing
c. hORKINS J.
[ 1 ] In reasons released January 31, 2012, I certified this action as a class proceeding. The parties have not been able to agree on costs. Written submissions have been exchanged.
[ 2 ] The plaintiffs seek their costs and disbursements fixed and payable in the amount of $261,662.55. This represents partial indemnity fees of $134,143.84 (inclusive of taxes) up until November 15, 2011 and thereafter substantial indemnity fees of $110,560.61 (inclusive of taxes). Disbursements total $16,958.10 inclusive of taxes.
[ 3 ] The plaintiffs made an offer to settle the certification motion on November 15, 2011, on the basis set out in the notice of motion, without payment of any costs. The defendants did not respond to this offer.
[ 4 ] The defendants dispute the plaintiffs' request for substantial indemnity costs. They say that $170,000, inclusive of disbursements and taxes is a fair and reasonable amount for costs.
Legal framework
[ 5 ] The source of judicial discretion to award costs is set out in s. 131 of the Courts of Justice Act , R.S.O. 1990, c. C.43 that states:
131.(1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
[ 6 ] In addition to this general discretion, an award of costs is governed by rules 49 (in the event of an offer to settle) and 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. An offer was made in this case.
[ 7 ] When exercising its discretion under s. 131(1) Courts of Justice Act , s. 31(1) of Class Proceedings Act, 1992, S.O. 1992, c. 6 states that the court âmay consider whether the class proceeding was a test case, raised a novel point of law or involved a matter of public interest.â None of these considerations are engaged in this case.
[ 8 ] In Pearson v. Inco Ltd. , 2006 ONCA 211 , [2006] O.J. No. 991 (C.A.) at para. 13 the court identified the following principles for fixing costs on a certification motion:
(1) Ontario, unlike other class proceedings jurisdictions such as British Columbia, has not sought to interfere with the normal rule that costs will ordinarily follow the event.
(2) The costs must reflect what is fair and reasonable: Boucher v. Public Accountants Council for the Province of Ontario , 2004 ONCA 588 , [2004] O.J. No. 2634 (C.A.).
(3) The costs should, if possible, reflect costs awards made in closely comparable cases, recognizing that comparisons will rarely provide firm guidance.
(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.
(5) The costs expectations of the parties can be determined by the amount of costs that an unsuccessful party could reasonably expect to pay.
(6) The views of the motion judge concerning the complexity of the issues and what is fair and reasonable.
(7) Whether the case raises an issue of public importance.
(8) A fundamental object of the CPA is to provide enhanced access to justice.
The defendantsâ Position
[ 9 ] The defendantsâ position can be summarized as follows:
⢠The plaintiffs are claiming ineligible fees and unexplained disbursements.
⢠The result of the certification motion was less favourable to the plaintiffs and so entitlement to substantial indemnity is not triggered.
⢠The fees requested are excessive.
Analysis
Ineligible/ Excessive Fees and Unexplained Disbursements
[ 10 ] Upon receipt of the defendantsâ submission concerning ineligible fees, the plaintiffs agreed that fees for an earlier stay motion should not be included in the fees for the certification motion. Therefore the fees are reduced by $37,042. The parties did not agree on the remaining fees in issue.
[ 11 ] The plaintiffs seek fees of $5,892 for reviewing the certification decision, communicating with class members and taking the necessary steps to prepare the certification order. The defendants say there is no basis for claiming this amount. No authority was provided. In my view, this is necessary work that flows from the courtâs decision to certify the action. It is fair and reasonable and I allow it.
[ 12 ] The plaintiffs seek $6,202.50 in fees to prepare the costs submissions. This reflects almost 40 hours of work. The defendants say that $3,000 is a fair and reasonable amount. In my view, 40 hours for this task is high and I reduce it to $4,000.
[ 13 ] The defendants questioned disbursements of $7,067. The plaintiffs agree that a $701.25 disbursement for air travel to Windsor should be removed. A satisfactory explanation has been provided to show that the remaining contested disbursements were incurred as a result of the certification motion. The amount of $6,262.50 relates to fees paid to valuation experts and $103.25 was paid for outside legal services. One of the representative plaintiffs had to attend at a law firm in British Columbia to swear his affidavit.
Should Substantial Indemnity Costs be Awarded?
[ 14 ] Rule 49.10(1) states that when the plaintiff obtains a judgment âas favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs from that date, unless the court orders otherwiseâ.
[ 15 ] Rule 49.10 (3) states that the âburden of proving that the judgment is as favourable as the terms of the offer to settle, or more or less favourable , as the case may be, is on the party who claims the benefit of subrule (1) or (2). [Emphasis added.]
[ 16 ] The defendant argues that the result of the certification motion was less favourable to the plaintiffs than the offer for three reasons:
(1) The plaintiffs agreed after the conclusion of the motion to drop the negligence claim included in their pleading.
(2) The plaintiffs did not have the claim certified as against the Bank of Montreal and, in fact, the claim against that defendant was withdrawn.
(3) The plaintiffs were required to amend their common issues from those proposed in the offer to settle. In particular, the plaintiffs were required to include as a common issue the very significant threshold issue asking for a determination of the nature of the duties owed by the defendants. The common issues originally proposed presumed the nature of that duty.
[ 17 ] In my view, the defendantsâ position is overly technical and does not justify refusing the substantial indemnity costs that are requested.
[ 18 ] The plaintiffsâ certification notice of motion is dated April 15, 2011. A list of common issues was attached to the notice of motion. While the statement of claim included a negligence cause of action, there never was a common issue dealing with negligence. Neither party mentioned the negligence cause of action in their factum. It is fair to say that neither side was paying any attention to this cause of action until after the certification hearing.
[ 19 ] On December 22, 2011, I wrote to counsel and asked if the plaintiffs were pursuing the negligence claim. Counsel confirmed that they were not. Defence counsel cannot rely on my inquiry to argue that the plaintiffs did not do as well on the motion as they would have if the offer had been accepted. If the defendants had accepted the offer, there would not have been a common issue that addressed negligence because it was not part of the common issue list attached to the notice of motion.
[ 20 ] The parties agreed to dismiss the action against the BMO Bank of Montreal during the certification motion. The notice of motion did seek certification against this defendant. The defendants are correct that if they had accepted the offer then the case would have been certified against this defendant. The common issues focused on the defendants as a group. Technically the plaintiffs have one less defendant that they are suing. However, the case as plead remains the same. The dismissal on consent without costs against this one defendant has no practical effect on the future prosecution of this class action.
[ 21 ] The defendants last point deals with a change to the language in the common issues that I dealt with in paragraph 183 of the judgment as follows:
[183] The common issues describe the registered accounts as âTrust Accountsâ. Since the first common issue asks whether the defendants were acting as trustees, it is presumptuous for this common issue to assume that the accounts are âTrust Accountsâ. One might say that this is an obvious characterization of the registered accounts, since the Nesbitt Burns agreement with the account holder is called a trust agreement, the InvestorLine agreement is called a Declaration of Trust and BMO Trust is described as the trustee and can delegate the trust duties to Nesbitt Burns. However, the accounts are not called âtrust accountsâ in the various documents. For example, the Nesbitt Burns RSP Trust Agreement refers to the RRSP Plan. In other documents reference is simply made to the âaccountâ. None of the account statements use the phrase âtrust accountâ.
[ 22 ] The defendants assert that the nature of their duty was previously âpresumedâ by the proposed common issues. I disagree. The first common issue asks if the defendants were acting as trustees. The language in the common issues that followed was changed to reflect that this key determination would have to be made at the common issues trial. It is not uncommon for a certification judge to require revisions to common issues so that they will be consistent. That is what occurred in this case.
[ 23 ] In summary, I see no reason to conclude that the plaintiffs should be denied substantial indemnity costs from the date of the offer forward. Any difference between what would have resulted if the offer had been accepted and the outcome of the motion, it is technical in nature. The plaintiffs have satisfied the burden of proving that âthe judgment is as favourable as the terms of the offer to settle, or more or less favourable , as the case may beâ. They are entitled to substantial indemnity costs from the date of their offer forward.
Is the Amount Fair and Reasonable?
[ 24 ] Fixing an amount for costs is not driven solely by a mathematical calculation. The court must be guided by the overriding principle of reasonableness as stated in Boucher v. Public Accountants Council for the Province of Ontario , 2004 ONCA 588 , [2004] O.J. No. 2634 (C.A.). The defendants argue that the amount requested is not fair and reasonable.
[ 25 ] The defendants point out that this motion was the latest certification motion in a series of numerous related foreign exchange class actions. Courts in British Columbia had previously certified similar actions on a contested basis and courts in Ontario have also certified similar actions in connection with approving settlements of those actions. The defendants seem to suggest that because this motion followed others that were similar, it should not have cost as much to argue certification. However, it also follows that if this was just another foreign currency exchange class action, then the defendants ought to have consented to what they suggest was an obvious outcome.
[ 26 ] The defendants do not question the hourly rates of the class counsel team, the number of lawyers, students and clerks who work on this file and how the work was shared amongst the team. I have reviewed these details and find that the rates, hours and allocation of work were fair and reasonable.
[ 27 ] Costs incurred by the defence can provide the court with a measure of what is reasonable. It is always open to the defence to provide this information, but they did not do so in this case. (See Hague v. Liberty Mutual Insurance Co. (2005), 2005 ONSC 13782 , 13 C.P.C. (6th) 37 at para. 15 (Ont. S.C.J.).) A comparison of fees is especially persuasive in determining the reasonable expectation of the unsuccessful party when the disparity between the costs claimed is significant. In Canadian National Railway Corp. v. Royal and SunAlliance Insurance Co. of Canada (2005), 2005 ONSC 33041 , 77 O.R. (3d) 612 (S.C.J.), the bill of costs was reduced by 25% after it was argued that the plaintiffs spent four times more than the unsuccessful defendants.
[ 28 ] The certification motion was heard over two and one half days. The defendants say that it was based on a modest evidentiary record and was not a complex certification motion. In my view, this motion was of moderate complexity and the motion record was typical in size. No doubt there are certification motions that last longer, are more complex and/or have more extensive records. Costs in these cases can exceed $600,000 (see Lambert v. Guidant Corp, 2009 ONSC 68460 , [2009] O.J. No. 5264; McCracken v. Canadian National Railway Co., 2010 ONSC 6026 (S.C.J.)).
[ 29 ] The costs requested, subject to the few changes noted above, are exceedingly fair and reasonable. Allowing for the changes, the partial indemnity fees are reduced by $37,042 and the substantial indemnity fees are reduced by $2,202.50. The disbursements of $14,940.95 are reduced by $701.25. I allow applicable taxes on the adjusted fees and disbursements. These fees and disbursements together with applicable GST and HST are fixed and payable by the defendants forthwith.
___________________________ C. Horkins J.
Released: May 1, 2012
COURT FILE NO.: 06-CV-316213 CP
DATE: 20120501
ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN:
JAMES RICHARD MACDONALD, JOHN A. ZOPPAS, LYNN D. ZOPPAS and TAMAS VARGA Plaintiffs â and â BMO TRUST COMPANY, BMO NESBITT BURNS INC., BMO INVESTORLINE INC. and BMO BANK OF MONTREAL Defendants
REASONS FOR DECISION
C. Horkins J.
Released: May 1, 2012