ONTARIO SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 06-CV-314632CP
DATE: 20120814

PROCEEDING UNDER the Class Action Proceedings Act, 1992 , S.O. 1992, C. 6

BETWEEN:

Joanne Martin, Corrine Middleton, BERNARD VAN KERREBROECK , and Don Martin Plaintiffs – and – Astrazeneca Pharmaceuticals PLC, Astrazeneca pharmaceuticals, LP and astrazeneca Canada Inc. Defendants

James C. Orr , Megan B. McPhee and Norman Mizobuchi , for the plaintiffs
Frank J. McLaughlin, and Sarah Chesworth , for the defendants

HEARD: In Writing

c. hORKINS J.

[ 1 ] In reasons released May 7, 2012, I dismissed the plaintiffs’ motion to certify this action as a class proceeding pursuant to s. 5 of the Class Proceedings Act, 1992 , S.O. 1992, c. 6 (" Class Proceedings Act "). The parties have not been able to agree on costs. Written submissions have been exchanged.

[ 2 ] The defendants (“AstraZeneca”) were entirely successful on the certification motion. They ask the court to award them $1.2 million plus applicable HST for fees and disbursements. It is the plaintiffs’ position that each side should bear their own costs or if costs are to be awarded to AstraZeneca, then $75,000 is a reasonable amount.

Legal framework

[ 3 ] 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.

[ 4 ] 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 not made in this case.

[ 5 ] When exercising its discretion under s. 131(1) Courts of Justice Act , s. 31(1) of Class Proceedings Act, states that 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.” The plaintiffs argue that this case involved matters of public interest.

[ 6 ] In Pearson v. Inco Ltd. , 2006 7666 (ON CA) , [2006] O.J. No. 991 (C.A.) at para. 13 (“ Pearson ”) 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 14579 (ON CA) , [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 Class Proceedings Act is to provide enhanced access to justice.

[ 7 ] In considering the appropriate award of costs in this case, I am guided by the principles set out in Pearson and the factors in rule 57.01.

Summary of positions

AstraZeneca’s Position

[ 8 ] AstraZeneca’s Bill of Costs totals $1,406,953.50 in fees and HST. These fees are calculated on a partial indemnity basis. Disbursements and applicable HST total $209,284.22. Counsel state that these fees represent less than one third of the actual fees that AstraZeneca incurred in this proceeding.

[ 9 ] AstraZeneca seeks an award of costs for fees and disbursements totalling $1.2 million (plus taxes). They say that this amount is well within the expectations of the plaintiffs since class counsel claimed $1.255 in fees alone in Lambert v. Guidant Corp. , 2009 68460 (ON SCDC) , [2009] O.J. No. 5264 (“ Lambert ”). AstraZeneca recognizes that this award would be greater than the costs awards made in previous cases in Ontario. AstraZeneca submits that an award of $1.2 million is fair and reasonable for the following reasons:

• The duration of this proceeding: it was commenced in July 2006 and reached the certification hearing in November 2011, 5½ years later.

• Over this 5 ½ years, the plaintiffs repeatedly revised and expanded the case which necessitated multiple re-evaluations by AstraZeneca of the evidence necessary to respond.

• The proposed class proceeding was practically undefined in scope, and would have included every individual who ever consumed Seroquel in Canada over a 14 year period.

• After the delivery of their (fresh) Certification Record, the paintiffs vastly and unnecessarily expanded the case to include allegations of conspiracy to conceal safety data and to illegally promote Seroquel off-label and increased the quantum of damages sought to approximately $600 million.

• As would be expected, AstraZeneca took these allegations very seriously. It engaged in an extensive factual investigation in both Canada and the United States and made a full and detailed response.

• The breadth, scope and complexity (both scientific and legal) of the issues and allegations, which involved expert evidence of multiple disciplines and encompassed the development of scientific knowledge both within AstraZeneca and in the scientific community generally over a 14-year period.

• On the eve of the hearing, the plaintiffs admitted that their case was unnecessarily broad, thus confirming that AstraZeneca was put to unnecessary cost in response.

• The Plaintiffs were wholly unsuccessful on this motion – their pleading was found to be fatally deficient and their claims lacked a proper evidentiary foundation.

• There are no mitigating circumstances that would reduce the Plaintiffs’ liability for costs.

The Plaintiffs’ Position

[ 10 ] The plaintiffs say that each side should bear their own costs but if costs are to be awarded to AstraZeneca, $75,000 would be fair and reasonable. They offer the following reasons to support this position:

• The class that was proposed is a historically disadvantaged group. A historically disadvantaged group falls within the public interest consideration in s. 31(1) of the Class Proceedings Act . Costs have never been awarded in this province to defendants in relation to any unsuccessful certification motion against plaintiffs who have been historically disadvantaged in society.

• There is insufficient information to support the time spent by defence counsel.

• AstraZeneca is claiming improper fees and disbursements

• The fees requested are excessive and well above the high water mark for costs awarded to a successful defendant on a certification motion in Fresco v. Canadian Imperial Bank of Commerce, 2010 ONSC 1036 (“ Fresco ”) ($525,000).

Analysis

Is there a Public Interest Consideration?

[ 11 ] Section 31(1) of the Class Proceedings Act states that “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.”

[ 12 ] The plaintiffs argue that s. 31(1) is engaged and therefore no costs order should be made against them. This is because the action was brought on behalf of a class that is a historically disadvantaged group. The proposed class was “all persons in Canada who were prescribed and who consumed Seroquel.” Seroquel is an antipsychotic medication and is prescribed for use in Canada for a range of psychiatric illnesses.

[ 13 ] Health Canada approved Seroquel for use in the treatment of schizophrenia, the acute management of manic episodes associated with bipolar disorder, and the acute management of depressive episodes associated with bipolar I and bipolar II disorder. Seroquel is also used to treat anxiety, sleep disorders, depression and dementia-related psychosis.

[ 14 ] There is no dispute that Seroquel is used to treat mental illnesses that can involve serious and devastating symptoms and consequences in a person’s life. Courts have recognized that individuals with mental illnesses and disorders are a historically disadvantaged group that been negatively stereotyped and are generally subject to social prejudice. (see Granovsky v. Canada (Minister of Employment and Immigration) , 2000 SCC 28 () , [2000] 1 S.C.R. 703 (S.C.C.) at para. 68 ; Winko v. British Columbia (Forensic Psychiatric Institute), 1999 694 (SCC) , [1999] 2 S.C.R. 625 (S.C.C.) at para. 35 ; Battlefords and District Co-operative Ltd. v. Gibbs, 1996 187 (SCC) , [1996] 3 S.C.R. 566 (S.C.C.) at para. 31 ; R. v. Swain, 1991 104 (SCC) , [1991] 1 S.C.R. 933 (S.C.C.) at para. 85 )

[ 15 ] AstraZeneca agrees that individuals with mental illness may be a historically disadvantaged group, but says there is no real connection between the disadvantages and this proceeding.

[ 16 ] I accept that individuals with mental illness may be a historically disadvantaged group but conclude that s. 31 is not engaged. If I am wrong, then the role that this should play in considering costs is very minimal. My reasons follow.

[ 17 ] There was no evidence on the certification motion to establish the existence of an interested class of persons. Furthermore, the notional class was so wide that it captured those who would not fall within a group of persons who have been historically disadvantaged.

[ 18 ] Seroquel has been prescribed by doctors in Canada for a wide variety of off-label uses. Many of the off-label uses for which Seroquel is prescribed are for relatively mild conditions, such as difficulty with sleep and anxiety. This means that not all of the notional class who ever took Seroquel in Canada would have the type of severe mental illness that would place them within a group of persons who might be considered to have been historically disadvantaged in society.

[ 19 ] This leaves the named plaintiffs to consider and neither suffered from schizophrenia. Ms. Martin was prescribed Seroquel to treat bi-polar disorder and Ms. Middleton was prescribed Seroquel for an off-label use to treat stress and an obsessive compulsive behaviour.

[ 20 ] Plaintiffs’ counsel says that a costs order against the plaintiffs will have a chilling effect that does not respect the goal of providing access to justice for the disadvantaged members of society. They rely on Joanisse v. Barker, [2003] O.J. No. 4081 . The plaintiffs and proposed class in Joanisse were patients at a maximum security facility for the criminally insane and alleged damages as a result of receiving experimental treatments. Justice Cullity dismissed the certification motion. He declined to award costs against the plaintiffs because the class of persons included those who suffered from serious mental illnesses and constituted some of the most disadvantaged members of society. At para. 14 Cullity J. stated:

… All the members of the putative class suffer - or, at the relevant times, suffered - from some form of serious mental illness and although, as I indicated in my reasons for the decision, the degree of vulnerability may vary from one to another, they constitute some of the most disadvantaged members of society. There is I believe a strong public interest in ensuring that they have access to justice. Realistically, a class proceeding may well be the only avenue that is available to them. By itself, this is not sufficient to justify certification if the requirements in section 5 (1) are not satisfied. However, I believe that, in the circumstances and in the light of the goals or objectives of the Act and the provisions of section 31 (1), it is a proper and appropriate exercise of my discretion to depart from the normal rule that costs follow the event and make no order for costs, other than an order excluding the application of rule 39.02(4)(b) in respect of the cross-examinations that were conducted.

[Emphasis added.]

[ 21 ] Unlike this case, Cullity J. found that “[a]ll member of the putative class suffer - or, at the relevant times, suffered - from some form of serious mental illness”. As a result, there was a convincing evidentiary foundation that engaged s. 31 of the Class Proceedings Act .

[ 22 ] Even if a factor in s.31 is engaged, it does not automatically follow that there should be no costs awarded. This was confirmed in Ruffolo v. Sun Life Assurance Co. of Canada, 2009 ONCA 274 , 68 C.P.C. (6th) 322 at para. 35 where the court stated:

Even if the presence of one or more of the s. 31(1) criteria is found to exist, a court need not refrain from awarding costs to a successful defendant in a class action. Otherwise, the continuing application of the "costs follow the event" regime to class proceedings would be rendered meaningless. Whether a "no costs" order, or some adjustment to the costs as claimed, is appropriate to reflect the s. 31(1) factors will depend on the circumstances of each case.

[ 23 ] Like many class actions, the plaintiffs in this proceeding are not exposed to costs orders because class counsel have agreed to indemnify them for any costs orders that are made against them. Indemnity agreements are common in class action proceedings. This point has been expressed by other class action judges. For example, Perell J. made this point in McCracken v. Canadian National Railway Co., 2010 ONSC 6026 , 100 C.P.C. (6th) 334 at para. 7 :

[I]t is well known that if the plaintiff is unsuccessful in obtaining certification or if the class is ultimately unsuccessful, the plaintiff will be insulated from costs liability by having obtained funding from the Class Proceedings Fund of the Law Foundation of Ontario or by having obtained an indemnity agreement from class counsel. (The existence of these indemnity agreements is also well known, but their disclosure is often resisted).

[ 24 ] The fact of the indemnity agreement in this action is an important factor to consider (see Singer v. Schering-Plough Canada Inc., 2010 ONSC 1737 , 87 C.P.C. (6th) 345 at para. 20 (“ Singer ”)). In my view, the indemnity agreement eliminates the argument that a costs award against the plaintiffs will have a chilling effect that does not respect the goal of providing access to justice for the disadvantaged members of society. Class counsel routinely assume the risk of costs whether the plaintiffs are disadvantaged members of society or not.

... (decision continues exactly as in source) ...