SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-08-362807-00 CP
DATE: 20120525

RE: Michael Cannon, Plaintiff

Funds for Canada Foundation et al., Defendant

BEFORE: G.R. Strathy J.

COUNSEL:
Samuel S. Marr, Margaret Waddell & Susan Brown , for the plaintiff

John F. Rook, Q.C. , Eric R. Hoaken and Mark W. Smyth for the defendants Patterson Palmer (aka Patterson Palmer Law), Patterson Kitz (Halifax), Patterson Kitz (Truro), McInnes Cooper, Edwin C. Harris, Q.C.

John P. Brown and Meighan Leon , for the defendants ParkLane Financial Group, Trafalgar Associates Limited and Trafalgar Trading Limited

Deborah Berlach and Emma Holland , for the defendants Funds for Canada Foundation, Sam Albanese, Ken Ford, David Raby, Greg Wade, Riyad Mohammed and Mary-Lou Gleeson

Gary H. Luftspring and Andrea Sanche, for the defendants Matt Gleeson and Gleeson Management Associates Inc.

Bradley E. Berg and Charles Dobson , for the defendant Appleby Services (Bermuda) Ltd. as trustee of The Bermuda Longtail Trust

DATE HEARD: By written submissions

C O S T S E N D O R S E M E N T

[1] I have now received and reviewed the extensive written submissions of the parties with respect to the costs consequent to my decision certifying this action as a class proceeding and dismissing motions for summary judgment brought by the defendants ParkLane Financial Group Limited (ParkLane) and by the defendant Edwin Harris and the law firms with which he was associated: Cannon v. Funds for Canada Foundation , 2012 ONSC 399 .

[2] The plaintiff has resolved the costs of the FFC Foundation Defendants and has excluded the costs in relation to those defendants from the costs claimed against the other defendants.

[3] In considering the costs of these motions, I have regard to the principles applicable to costs, set out in Rule 57 of the Rules of Civil Procedure, R.R.O. 1990, reg. 194, particularly the principle that costs must be fair and reasonable, having regard to the reasonable expectations of the parties. I also consider the principles underlying the Class Proceedings Act, 1992, S.O. 1992, c. 6 ( C.P.A. ), in particular the goal of providing access to justice.

[4] In Pearson v. Inco Ltd. , 2006 7666 (ON CA) , [2006] O.J. NO. 991, 79 O.R. (3d) 427 (C.A.), Rosenberg J.A. identified the following factors and principles as those which he considered in fixing the award of costs of the certification motion, at para. 13:

(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), 23 C.P.C. (5th) 393 (Ont. Sup. Ct. J.) at para. 9 ; Smith v. The Canadian Tire Acceptance Ltd. (1995), 1995 7163 (ON SC) , 22 O.R. (3d) 433 (Gen. Div.) at 449, aff'd (1995), 26 O.R. (3d) 94 (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 (C.A.) at para. 24 and Cloud v. Canada (Attorney General), (2005) 7 C.P.C. (6th) 137 (C.A.) at para. 3(e) .

(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 (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 (Sup. Ct. 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), 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 . …

(6) The views of the motion judge concerning the complexity of the issues and what is fair and reasonable. …

(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 (Gen. Div.) at 391. …

[5] In considering the appropriate award of costs in this case, I will have regard to the principles set out by Rosenberg J.A., the factors in rule 57 and the submissions of the parties. These are discussed below.

The Importance of the Proceeding – A Vital Step

[6] This is a very important piece of class action litigation. The class consists of almost 10,000 people scattered across the entire country. Their collective loss is said to be almost $150 million. It is a real loss, in the sense that the class members have lost real dollars out of their own pockets. The certification motion was not a finding on the merits, but it was a finding that the C.P.A. is an appropriate vehicle for the advancement of the claims of the class and it was a necessary first step in providing the class members with access to justice. Had the motion not been successful, it would likely have been the end of the road for class members.

[7] Similarly, and for obvious reasons, the summary judgment motions brought by the two groups of defendants were extremely important. Had they succeeded, the action would have suffered a serious, and perhaps fatal, setback.

[8] As Rosenberg J.A. observed in Pearson v. Inco , the parties treated these motions as being a vital step in this proceeding, as of course they were. This is illustrated by the presence at the counsel tables of some 13 lawyers – 11 of whom represented the defendants. The stakes were high for both parties. The defence of the certification motion and the prosecution of the summary judgment motions left very few stones unturned.

The Complexity of the Proceedings

[9] The motions were factually complex and legally complex, as illustrated by the myriad of issues that were addressed in my judgment, which ran to some 557 paragraphs. The motion itself occupied four full days of hearing. It was preceded by several pre-hearing motions, the costs of which were reserved to the certification motion.

[10] The materials put before the court were extensive. They included:

• 38 volumes of evidence;
• affidavits of 18 affiants;
• 16 days of cross-examination;
• 13 factums with almost 800 pages in total; and
• 12 volumes of authorities.

[11] There were five sets of defendants, each raising their own unique and challenging issues. Steering this case successfully through certification and the summary judgment motions required every bit of skill, diligence and perseverance that the plaintiff’s counsel could muster.

The Result of the Proceeding

[12] The plaintiffs were successful in all respects. Not only was the action certified, but the defendants’ summary judgment motions were defeated.

The Principle of Indemnity

[13] The principle of indemnity is important, but it is not over-riding. It must be balanced with the other factors and regard must be had to whether the time spent, rates claimed and disbursements incurred were reasonable in the circumstances.

[14] In broad terms, on the certification motion the plaintiffs are claiming about 400 hours for each of 2 senior counsel, Mr. Marr and Ms. Waddell, at a partial indemnity rate of $350 per hour. They also claim for the work of about five associates, two of whom did most of the work, totaling about 600 hours, at rates of $190 per hour. In addition, there were about 150 hours of law clerk time and 350 hours of student time. The resulting total for the certification motion, on a partial indemnity basis, is about $420,000 before disbursements and taxes.

[15] On the ParkLane summary judgment motion, there is a claim for the same two senior lawyers with about 240 hours of time in total, associates (170 hours), clerks (40 hours) and students (60 hours) for a total of $215,000, including taxes.

[16] On the Lawyers’ summary judgment motion, there is a claim for the senior lawyers (285 hours), associates (270 hours), clerks (43 hours) and students (120 hours) for a total claim of about $185,000 including taxes.

[17] There is a claim of $17,500 for the production motion brought by ParkLane and the Lawyers, involving about 30 hours of the senior lawyers and 20 hours of associate time.

[18] On the motion to exclude the affidavit of Mr. Krishna, the claim is for about $28,000, with 55 hours of the senior lawyers’ time and 24 hours of associate time.

[19] There is also a claim of $27,000 for the costs submissions.

[20] The total amount claimed for costs of all motions, on a partial indemnity basis, is $1,124,199.10, which includes disbursements of $252,619.49. The approximate breakdown, before taxes, is:

• Certification: $420,000 (partial indemnity)
• ParkLane summary judgment: $185,000 (substantial indemnity) and $125,000 (partial indemnity);
• Lawyers’ summary judgment: $240,000 (substantial indemnity) and $161,000 (partial indemnity);
• Production motion: $15,000 (partial indemnity);
• Lawyers’ motion to strike Krishna affidavit: $27,000 (partial indemnity);
• Disbursements: $224,000;
• Costs submissions ($24,000).

[21] Standing back and looking at the matter as a whole, I find that the time spent was reasonable in all the circumstances, particularly having regard to the importance of the motions and their complexity. While there were two relatively senior lawyers on the file (1988 and 1989 years of call), there appears to have been appropriate delegation of routine tasks to two junior lawyers (2010 calls). I have no perception at all that this is a case in which multiple lawyers were thrown at the file with resulting inefficiency and duplication. The rates claimed are reasonable, considering the seniority and experience of counsel. I will discount the time spent by the two senior lawyers somewhat to reflect the fact that they are at two different firms, with perhaps some measure of overlap and inefficiency involved, but I would not consider this a major issue. From my own observations, the plaintiff’s case was prosecuted and presented efficiently. I have seen much more serious examples of inefficiency and over-lawyering in costs submitted by much larger law firms, with multiple lawyers, at all levels, working on the file.

[22] Recent costs awards in similar class proceedings informs the reasonable expectations of the parties and promotes the objective of consistency in outcomes. I have noted above that in Pearson v. Inco, Rosenberg J. observed that “costs should, if possible, reflect costs awards made in closely comparable cases, recognizing that comparisons will rarely provide firm guidance.” To that I would add that comparisons can also be difficult to make, since class proceedings involve such a variety of claims and circumstances. Cullity J. made the point in Andersen v. St. Jude Medical Inc. [2004] O.J. No. 3102 at para. 7 as follows:

[W]ithout 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.

[23] I respectfully agree with that observation. That said, having had the benefit of several years of exposure to class proceedings, and having made a number of costs awards and considered the awards of my colleagues over the years and up to the present, it is my view that the costs claimed in this case are not at all out of line with what has been claimed, and awarded, in cases such as this, which are at the high end of the scale in terms of importance and complexity.

[24] That said, this case was definitely at the higher end of the scale in terms of complexity, issues and importance.

[25] In a recent decision in McCracken v. Canadian National Railway Company , 2010 ONSC 6026 , Perell J. awarded costs to the plaintiffs of $740,000, which included fees of $550,000, for a five day certification and rule 21 motion, which involved only one defendant. Perell J. had the following to say about the costs of certification motions, at paras. 11 and 12:

The jurisprudence about awarding costs should be applied to the reality, not to the pretend of class proceedings. Provided that the plaintiff is a genuine plaintiff with a genuine claim on behalf of the class and that the plaintiff has the duties and responsibilities of a genuine plaintiff, including giving instructions, participating in the litigation, and representing the class members, and provided that it is recognized that the Legislature has purposely designed a system for class actions that anticipates that entrepreneurial lawyers will be the vehicle for access to justice, there is no reason to pretend and make costs awards as if class counsel was actually billing the plaintiff, when manifestly they are not, or to make costs awards as if plaintiffs will pay the costs when manifestly they will not. Ending the fictions will just reduce opaque arguments and opaque reasons for judgment and allow courts transparently to use costs: to pay for the expense of litigation; to facilitate access to justice; to discourage frivolous claims and defences; to discourage and to sanction inappropriate behaviour in the conduct of the lawyer-driven proceedings; and to encourage settlements.

Ending the fictions associated with the awarding of costs in class proceedings will facilitate the court's ability to do justice when awarding costs in the context of class proceedings where: (a) the certification motion is mandatory; (b) the test for certification is complex; (c) the evidentiary burden is asymmetrical; (d) the stakes are high for the parties; (e) the stakes and risk are high for the entrepreneurial class counsel; (f) the ruling on the merits is usually way off in the future; (g) the parties cannot resist providing evidence about the merits, notwithstanding the case law that holds that certification is not intended to be a ruling on the merits; and (h) the strategy of the parties is often of the take-no-prisoners variety.

[26] I respectfully agree with and adopt these observations.

[27] In Toronto Community Housing Corp. v. Thyseenkrupp Elevator (Canada) Ltd. , 2011 ONSC 7588 , [2011] O.J. No. 5866, Horkins J. awarded costs to the plaintiff of $400,000 plus disbursements and taxes.

[28] In Lambert v. Guidant Corp ., 2009 68460 (ON SCDC) , [2009] O.J. No. 5264, Cullity J. awarded the plaintiff $650,000 plus G.S.T. and disbursements.

[29] It is not only plaintiffs who have received large costs awards. Defendants who have successfully resisted certification have received, and can reasonably expect to receive, substantial costs awards. For example, in Fresco v. CIBC, 2010 ONSC 1036 , [2010] O.J. No. 746, in dismissing the certification motion, Lax J. awarded costs of $525,000 to the defendant. In Singer v. Schering-Plough Canada Inc. , 2010 ONSC 1737 , [2010] O.J. No. 1243, I awarded costs against the plaintiff in the total amount of $400,000, divided equally in favour of the two defendants.

Access to Justice

[30] As Rosenberg J.A. noted in Pearson v. Inco , above, in considering the appropriate costs award, the court should have regard to the important object of providing access to justice to class members. Access to justice will be compromised if plaintiffs are not fairly compensated for their costs in prosecuting a certification motion and in successfully resisting attempts by defendants to strike a knock-out blow on summary judgment.

Defendants’ Submissions

[31] The defendants have made a number of submissions in response to the plaintiff’s claim. I will summarize them, and my conclusions, below.

A Formal Assessment Should be Ordered

[32] The defendants argue that a formal assessment should be awarded in view of the complexity of the costs issues.

[33] I do not agree. Rule 57.03 provides that on the hearing of a contested motion, unless the court is satisfied that a different order would be more just, the court shall fix the costs of the motion and order that they be paid within 30 days, or “in an exceptional case” refer the costs for assessment under rule 58. The rule reflects several important considerations in the award of costs.

[34] First, the judge or master who heard the motion is generally in the best position to determine a fair award of costs having regard to the factors set out in rule 57. Having “been there”, having heard and seen the evidence and argument and considered the evidence, the presiding judicial officer is best equipped to undertake the analysis and apply the requisite principles and discretion that go into the award of costs. It seems to me that this promotes the litigants’ confidence, and the public’s confidence, in the fairness of the award, because the award of costs is regarded as an integral part of the award, not an administrative adjunct to the award made by someone who is removed from the context.

[35] The second consideration is that this procedure promotes efficiency by having one judicial officer deal with all aspects of the matter, including costs. It does not require a second judicial officer to become informed of all the nuances of the dispute.

[36] The third consideration is that this promotes timeliness in the awarding of costs. Time is money and delaying the award of costs to an assessment deprives a litigant of funds to which he or she is entitled.

[37] The fourth, related consideration is that the timely award of costs keeps the parties aware of the ongoing costs of the litigation and to some extent helps to control those costs.

[38] Rule 57.03 states that an assessment should only be ordered in an exceptional case. I am not satisfied that there is anything particularly exceptional about this case, or that it would be more just to refer the issue to an assessment.

Substantial Indemnity Costs not Warranted

[39] The plaintiff asks for costs of the summary judgment motions against the Lawyers and the ParkLane defendants on a substantial indemnity basis. The plaintiff says that the summary judgment motions were doomed to fail. He also relies on offers to settle that were served on the defendants and were not accepted. The offers by the plaintiff were to consent to the dismissal of the summary judgment motion without costs.

[40] I accept the defendants’ submission that substantial indemnity costs should not be awarded. The offer to settle did not represent a serious offer of compromise. It offered capitulation. The defendants’ motions for summary judgment raised serious issues and they were justified in proceeding with them.

Duplication of Time

[41] I have discussed this issue above. The defendants say that the costs are excessive because there has been duplication of time, particularly between the two senior counsel on the file. On a substantial motion of this kind, particularly where it included two separate and very important summary judgment motions, there is bound to be some degree of overlap in the work performed by the various lawyers involved in the preparation of the case. I am not satisfied, however, that there has been much unnecessary duplication of time. There was appropriate delegation to quite junior lawyers. I have no sense that there was inefficiency or unnecessary duplication in the work done by the senior counsel. The time is not so excessive as to lead to an inference of duplication or inefficiency.

Release of FFC

[42] The defendants say that there should be a reduction in the fees claimed because the plaintiff has settled the costs claim with FFC for an undisclosed amount without giving an appropriate reduction to the defendants. I am not satisfied that this is the case. The plaintiff has extracted from the costs claimed the amounts specifically relating to FFC and it has not been established that any costs properly payable by FFC have been claimed from the other defendants.

The Plaintiffs’ Pleadings

[43] The defendants are critical of the deficiencies of the plaintiff’s pleadings, which were the subject of comment in my reasons for judgment. They say that the costs should be reduced for that reason.

[44] I am not prepared to engage in a process of deciding the costs of certification on an issue-by-issue basis. It is not unusual for the plaintiff to succeed on some issues and to fail on others.

No Costs should be awarded for the Production Motion

[45] The plaintiff made a request for production in connection with the summary judgment motions. The defendants ultimately produced some documents and the request for the remaining documents was withdrawn. ParkLane and the Lawyers object to the costs claimed by the plaintiff for a motion for production of documents that was settled by a consent order. The defendants say that the motion was broad and over-reaching and included a request for affidavits of documents.

[46] The plaintiff was facing important summary judgment motions by two defendants. The production motion was reasonably brought. The fact that it was ultimately resolved should not absolve the defendants from paying reasonable costs, which I would fix in total at $12,500 all inclusive.

Excessive Disbursements

[47] The defendants challenge the disbursements claimed by the plaintiff which are $252,619.49, after taxes.

[48] Their submissions are, in summary:

(a) the claims for disbursements for the expert reports of Mr. Krishna ($105,193.15) and Mr. Soriano ($39,617.50) should not be allowed at this stage;

(b) certain non-tariff disbursements, totaling $4,875.27, should not be allowed – these include binding, courier and meals, to mention the more substantial items;

(c) allegedly excessive amounts including photocopies ($41,909.32), research ($9,763.38), process servers ($706.3) and travel ($604.97).

[49] Basically, the defendants say that the amounts claimed under the last heading are excessive and not supported by appropriate evidence. They say that the amounts claimed should be reduced by about half.

[50] I will allow recovery of the expert reports of Mr. Krishna and Mr. Soriano. They were reasonably incurred for the purpose of the certification motion and they were relevant to the preferability analysis on the certification motion.

[51] I would be prepared to recognize some minor reductions for non-tariff items and for amounts that might be considered excess. Having done so, it is my view that a global allowance for disbursements (including the experts’ reports) of $200,000, inclusive of taxes, would be fair and reasonable.

Submissions of Appleby

[52] Appleby submits that it played a very limited role on the motion. Its involvement did not really commence until May 2011 when it filed a notice of intent to defend. It did not file evidence on the certification motion, it did not move for summary judgment, and its factum and oral submissions were quite brief. I accept this submission and the award of costs against Appleby will reflect this.

Submissions of the Gleeson Defendants

[53] In the same vein, the Gleeson defendants submit that they were a bit player and that their submissions were focused and brief. I agree and the costs will reflect this.

Costs of the Costs Submissions

[54] The plaintiff was required to spend substantial time to prepare costs submissions and to reply to the defendants’ extensive submissions. The defendants say that the claim for costs is excessive.

[55] The costs submissions are important. They were treated as important by all parties, particularly by ParkLane and the Lawyers who filed substantial briefs. The plaintiffs filed two large briefs as well as responding submissions. The amount at issue is very significant and justified a commensurate expenditure of time.

[56] I would fix the costs of the costs submissions at $17,000, to be allocated as set out below.

Failure of Defendants to Disclose their Fees and Disbursements

[57] There is sometimes a certain measure of hypocrisy in the costs submissions of the unsuccessful party on a certification motion. Like Lax J., who suggested that if the plaintiffs had won in Fresco , their costs claim would probably have been “breathtaking”, I cannot help but imagine that if the shoe were on the other foot in this case, the defendants’ costs claims would be well into the stratosphere and that, collectively, they would be asking the plaintiff to pay an amount at least as high as the plaintiff claims, and probably more. None of the defendants, in particular neither ParkLane nor the Lawyers, have submitted evidence of their fees or disbursements to support their arguments about over-lawyering or excessive disbursements: see the observations of Winkler J. in Risorto v. State Farm Mutual Automobile Insurance Company (2003), 2003 43566 (ON SC) , 64 O.R. (3d) 135 at para. 10 .

[58] This is not so say that the defendants should be required to pay anything more than what is “fair and reasonable”. It is to say, however, that it is highly likely that the Lawyers and ParkLane, both of which are represented by senior counsel at national law firms, likely incurred fees and disbursements of at least the same magnitude as the plaintiff, could reasonably have expected to seek or pay costs of at least the same magnitude, and would undoubtedly have claimed costs of at least that magnitude if they had been the successful parties on the motion.

Conclusions

[59] I would therefore fix the costs as follows, inclusive of taxes but before disbursements, as follows:

(a) Certification : Costs fixed at $325,000, payable $175,000 by ParkLane, $100,000 by the Lawyers, $30,000 by Appleby and $20,000 by Gleeson;

(b) ParkLane Summary Judgment Motion : Costs payable by ParkLane fixed at $110,000;

(c) Lawyers’ Summary Judgment Motion : Costs payable by Lawyers fixed at $135,000;

(d) Production Motion : Costs thrown away fixed at $12,500;

(e) Motion to Strike the Krishna Affidavit : Costs fixed at $17,500, payable by the Lawyers;

(f) Disbursements : Fixed at $200,000, inclusive of taxes, payable in the same proportion as the costs of the certification motion;

(g) Costs Submissions : Fixed at $17,000, payable $7,500 by ParkLane, $7,500 by the Lawyers and $1,000 by each of Appleby and Gleeson.

G.R. Strathy J.

DATE: May 25, 2012