ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 08-CV-347100CP
DATE: August 21, 2012

BETWEEN:

Lisa Cavanaugh, Andrew Hale-Byrne, Richard Van Dusen, Margaret Granger and Tim Blacklock

Plaintiffs

• and -

Grenville Christian College, The Incorporated Synod of the Diocese of Ontario, Charles Farnsworth, Betty Farnsworth, Judy Hay the Executrix for the Estate of J. Alastair Haig, and Mary Haig.

Defendants

Proceeding under the Class Proceedings Act, 1992

COUNSEL:

• Russell Raikes and Loretta Merritt for the Plaintiffs

• Scott C. Hutchinson, Aaron Dantowitz, and Justin Safayeni for the Law Foundation of Ontario

• Geoffrey D.E. Adair, John J. Adair, and Alexa Sulzenko for the Defendants, Grenville Christian College, Charles Farnsworth, and J. Alastair Haig

• Stephen Stieber and Linda C. Phillips-Smith for the Defendant the Incorporated Synod of the Diocese of Ontario

HEARING DATE: In writing

PERELL, J.

REASONS FOR DECISION - COSTS

[ 1 ] In the universe of class actions, there is a list of inevitable arguments. It is inevitable that in order to reduce his or her exposure to costs, the loser of a certification motion, be it the plaintiff or the defendant, will argue that the case was novel, a test case, or a matter of public interest. Inevitably, the successful party will counter-argue that there was nothing special about the case and that the normal rules about costs to the victor should apply. Inevitably, the loser of a certification motion, be it the plaintiff or the defendant, will argue that the winner’s claim for costs is excessive, unreasonable, and beyond the reasonable expectations of the losing party. The winner will inevitable argue that the expenditure of legal resources was commensurate with the high stakes reality of class actions. It is also inevitable that if the plaintiff loses a certification motion that he or she will argue that there should be an “access to justice discount” of the costs claimed by the defendant, else the purposes of the Class Proceedings Act, 1992 , will be frustrated. And it is just as inevitable that the successful defendant will then argue that the purposes of the Class Proceedings Act, 1992, are best served by awarding him or her, costs without any discount.

[ 2 ] That both parties may rue their respective arguments if the appellate court on the inevitable appeal reverses the certification decision does not seem to damper the inevitability of the arguments.

[ 3 ] Pursuant to the Class Proceedings Act, 1992, S.O. 1992, c. 6, the Plaintiffs, Lisa Cavanaugh, Andrew Hale-Byrne, Richard Van Dusen, Margaret Granger, and Tim Blacklock, commenced a proposed class action against the Incorporated Synod of the Diocese of Ontario and Grenville Christian College, including several personal defendants who had been in leadership roles at the school (collectively the Grenville Defendants).

[ 4 ] The Plaintiffs were former residential students at Grenville Christian College, which operated a junior school and a residential high school, and they alleged that the school was a place of fear, intimidation, and arbitrary punishment, and that they and the putative class members were physically and psychologically abused during their time at the school. Grenville identified itself as having an Anglican religious orientation and thus the school had some organizational kinship with the Diocese, which is part of the Anglican Church, but the Diocese did not own, manage, supervise, regulate, or finance the operations of the school.

[ 5 ] In my Reasons for Decision dated May 23, 2012, I dismissed the Plaintiffs’ action against the Diocese, and I dismissed their certification motion as against the Grenville Defendants. See Cavanaugh v. Grenville Christian College , 2011 ONSC 2995 .

[ 6 ] The Grenville Defendants seek their costs of the motion and their disbursements on a partial indemnity basis in the amount of $150,825.66, all inclusive. The Grenville Defendants were successful in resisting certification. They submit that doing so was of considerable importance to them since they were facing a potential class proceeding in which the Plaintiffs were making very serious allegations of impropriety, raising complex legal issues, and claiming $225 million in damages. Inevitably, the Grenville Defendants submit that the action was not a test case, did not raise a novel point of law, and did not involve a matter of public interest, which are factors the court may consider in awarding costs under s. 31(1) of the Class Proceedings Act , 1992.

[ 7 ] The Diocese, which was even more successful, because the action against it was dismissed for the failure of the statement of claim to disclose a reasonable cause of action, seeks its costs of the action on a partial indemnity basis in the amount of $214,689.45, all inclusive. Once again, inevitably, the Diocese argues that the normal rules about costs should apply and that it should be awarded costs without reduction for any supposed novelty of the claim against it or without reduction on the grounds that the Plaintiffs’ action was in the public interest. The Diocese denies that there should be any so-called access to justice discount.

[ 8 ] The Defendants’ claims for costs are resisted by the Plaintiffs and by the Class Proceedings Fund of the Ontario Law Foundation , which is supporting the Plaintiffs’ action.

[ 9 ] The Foundation will ultimately be responsible for paying the costs awarded, and it has standing to resist the claim for costs. In other respects, the involvement of the Foundation is not to be taken into account when determining the entitlement, scale, or quantum of costs. See: McNaughton v. Co-operators General Insurance Co. , 2007 12709 (ON SCDC) , [2007] O.J. No. 1453 (Div. Ct.); Ruffolo v. Sun Life Assurance Co. of Canada (2008), 2008 5962 (ON SC) , 90 O.R. (3d) 59 (S.C.J.); Arabi v. Toronto-Dominion Bank , 2006 42059 (Ont. S.C.J.)

[ 10 ] The Plaintiffs and the Foundation make the usual counter-arguments against the claims for costs, and they make one special argument. They submit that the Defendants’ costs claims should be reduced for four reasons: (1) the case involved a matter of public interest; namely, the regulation of education and historical abuse at a teaching institution; (2) there should be an access to justice discount to support the purposes of the class proceedings legislation; (3) the amounts claimed by the Grenville Defendants and the Diocese respectively are not fair and reasonable; and (4) the Diocese incurred costs unnecessarily, most particularly because the Diocese could and should have participated in an earlier pleadings motion. The fourth argument is the special one.

[ 11 ] For the reasons that follow, I disagree with the first, second, and fourth arguments. I agree with the third argument against the Diocese’s claim but not with respect to the Grenville Defendants’ claim for costs.

[ 12 ] Dealing with the Grenville Defendants’ claim for costs, although a claim of $150,000 for the costs of an interlocutory motion seems extraordinarily high, in the universe of class action litigation, the Grenville Defendants’ claim is fair and reasonable, and I grant it without reduction.

[ 13 ] My opinion, however, is different for the Diocese’s claim for costs, which is not fair and reasonable and should be reduced to a fairer award and one that would have been in reasonable contemplation of the unsuccessful Plaintiffs. Since, the Grenville Defendants’ claim is a measure of what is fair and reasonable and since the Diocese’s defence involved less forensic resources and demands than those engaged by the Grenville Defendants, I will reduce the Diocese’s award to $150,000, all inclusive. I reduce the Diocese’s award on the basis that it is excessive in the circumstances, and it should be more consistent with the award made to the Grenville Defendants. I make no further reduction on account of the fourth argument, described above.

[ 14 ] In reaching my decisions, I have applied the following principles that have been developed in the case law about costs claims after certification motions.

[ 15 ] In Ontario, for certification motions, the ordinary rule is that costs will follow the event: Pearson v. Inco Ltd . (2006), 2006 7666 (ON CA) , 79 O.R. (3d) 427 (C.A.) at para. 13 ; Attis v. Canada (Minister of Health) , [2007] O.J. No. 2990 (S.C.J.) , aff’d 2008 ONCA 660 () , [2008] O.J. No. 3766 (C.A.), leave to appeal ref’d, [2008] S.C.C.A. No. 491; 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.) , leave to appeal to S.C.C. ref’d [1996] S.C.C.A. No. 12; Kerr v. Danier Leather Inc. , 2007 SCC 44 at paras. 60-71 .

[ 16 ] The Class Proceedings Act, 1992 , was never intended to insulate representative plaintiffs, or class members, from the possible costs consequences of unsuccessful litigation, and its goal is not to encourage the promotion of litigation; rather, it is designed to provide a procedure whereby courts will be more readily accessible to groups of plaintiffs: Smith v. Canadian Tire Acceptance Ltd. supra at p. 449; David Polowin Real Estate Ltd. v. Dominion of Canada General Insurance Co. , 2008 ONCA 703 () , [2008] O.J. No. 3997 (C.A) at paras. 28-31 .

[ 17 ] The Ontario Legislature did not adopt the recommendation of the Ontario Law Reform Commission that the class actions’ legislation should have special costs rules and not be governed by the costs rules that govern individual actions. Rather, in class proceedings, the approach to fixing costs is the same as in ordinary actions, but the court should give special weight to whether the class proceeding was a test case, raised a novel point of law, or involved a matter of public interest: Caputo v. Imperial Tobacco Ltd. (2005), 2005 63806 (ON SC) , 74 O.R. (3d) 728 (S.C.J.) at para. 32 ; Joanisse v. Barker , [2003] O.J. No. 4081 (S.C.J.) ; Garland v. Consumers' Gas Co . (1995), 1995 7179 (ON SC) , 22 O.R. (3d) 767 (Gen. Div.), aff’d (1996), 1996 1022 (ON CA) , 30 O.R. (3d) 414 (C.A.).

[ 18 ] Under the Ontario class action legislation, the effect of s. 31(1) is to encourage the court to recognize that class actions tend toward being test cases, the determination of a novel point of law, or the adjudication of matters of public interest and courts, therefore, should be alert to and respond to these tendencies when making decisions about costs: Ruffolo v. Sun Life Assurance Co. of Canada , 2008 5962 (ON SC) , [2008] O.J. No. 599 (S.C.J.) at para. 51 , aff’d 2009 ONCA 274 () , [2009] O.J. No. 1322 (C.A.), leave to appeal to the S.C.C. ref’d [2009] S.C.C.A. No. 226.

[ 19 ] In exercising its discretion with respect to costs in the context of a class proceeding, the court should have regard to the underlying goals of the Act: McNaughton Automotive Ltd. v. Co-operators General Insurance Co. , 2007 12709 (ON SCDC) , [2007] O.J. No. 1453 (Div. Ct.); KRP Enterprises Inc. v. Haldimand (County) , [2008] O.J. No. 3021 (S.C.J.) .

[ 20 ] Costs awarded against unsuccessful plaintiffs in certification motions have typically been modest, relative to the actual costs incurred by the successful defendants, reflecting the concern that cost awards not be inconsistent with the objective of access to justice: DeFazio v. Ontario (Ministry of Labour) , [2007] O.J. No. 1975 (S.C.J.) at para. 49 ; 2038724 Ontario Ltd. v. Quizno's Canada Restaurant Corp. , [2007] O.J. No. 1136 (S.C.J.) at para. 49 , leave to appeal ref’d [2007] O.J. No. 2404 (S.C.J.) .

[ 21 ] In exercising the court's discretion to award costs, there needs to be a balance between encouraging class actions that have potential merit and discouraging those that may be frivolous or vexatious; the reality is that large cost awards against unsuccessful plaintiffs will have a chilling effect and likely discourage meritorious class actions: Pauli v. ACE INA Insurance Co. , 2004 ABCA 253 () , [2004] A.J. No. 883 (C.A.) at para. 31 , leave to appeal to S.C.C. ref’d, [2004] S.C.C.A. No. 169.

[ 22 ] Although sometimes modest in relative terms, in absolute terms, the costs awards against unsuccessful plaintiffs have sometimes been very substantial. Substantial costs awards have been made in favour of successful defendants in class proceedings.See: Ruffolo v. Sun Life Assurance Co. of Canada , 2008 5962 (ON SC) , [2008] O.J. No. 599 (S.C.J.) at para. 51 , aff’d 2009 ONCA 274 () , [2009] O.J. No. 1322 (C.A.), leave to appeal to the S.C.C. ref’d [2009] S.C.C.A. No. 226 ($215,000.00); Singer v. Schering-Plough Canada Inc ., 2010 ONSC 1737 () , [2010] O.J. No. 1243 (S.C.J.) ($200,000.00)

[ 23 ] Defendants, just as much as plaintiffs, are entitled to access to justice, and the court in exercising its discretion must be aware of the access to justice implications of its award to both plaintiffs and defendants: 2038724 Ontario Ltd. v. Quizno's Canada Restaurant Corp ., 2010 ONSC 5390 at para. 17 .

[ 24 ] A critical controlling principle for the awarding of costs is that the sum awarded reflect the fair and reasonable expectations of the unsuccessful litigant: 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 ; Caputo v. Imperial Tobacco Ltd . supra, at paras. 23-25 .

[ 25 ] A class proceeding should not become a means for either defendants or plaintiffs to overspend on legal expenses simply because the economies of scale of a class proceeding makes it worthwhile to enlarge the investment in the defence or prosecution of the case: 2038724 Ontario Ltd. v. Quizno's Canada Restaurant Corp. , 2010 ONSC 5390 at para. 19 .

[ 26 ] 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: Lavier v. MyTravel Canada Holidays Inc. , 2008 44697 (ON SC) , [2008] O.J. No. 3377 at paras. 31 and 32 ; Singer v. Schering-Plough Canada Inc ., 2010 ONSC 1737 () , [2010] O.J. No. 1243 (S.C.J.).

[ 27 ] A matter of public interest is something more than a matter that might interest the public, and it may not be possible for a court to provide a precise and comprehensive definition of the concept: Vennell v. Barnado's (2004), 2004 33357 (ON SC) , 73 O.R. (3d) 13 (S.C.J.) at paras. 28-29 ; Ruffolo v. Sun Life Assurance Co. of Canada , supra at paras. 71-77; McLaine v. London Life Insurance Co. , [2008] O.J. No. 2360 (Div. Ct.) at paras. 14-17 .

[ 28 ] To be a "matter of public interest" the class action must have some specific, special significance for, or interest to, the community at large beyond the members of the proposed class: Williams v. Mutual Life Assurance Co. of Canada , 2001 62796 (ON SC) , [2001] O.J. No. 445 (S.C.J.) at paras. 24-26 ; Gariepy v. Shell Oil Co ., [2002] O.J. No. 3495 (S.C.J.) ; Caputo v. Imperial Tobacco Ltd ., supra, at para. 36 .

[ 29 ] A case involves a matter of public interest if the class proceeding has some specific, special significance for, or interest to, the community at large beyond the members of the proposed class: Pearson v. Inco Ltd ., supra ; Williams v. Mutual Life Insurance Co. of Canada , supra, at para. 24; Moyes v. Fortune Financial Corp. , [2002] O.J. No. 4298 (S.C.J.) at para. 6 ; Sutherland v. Hudson's Bay Co . [2008] O.J. No. 602 (S.C.J.) at paras. 42-46 .

[ 30 ] A case concerning a regulated industry tends to raise matters that have a strong public interest component: Caputo v. Imperial Tobacco Ltd ., supra at para. 36 ; Cassano v. The Toronto Dominion Bank , [2005] O.J. No. 6332 (S.C.J.) at para. 10 .

[ 31 ] In determining the reasonableness of the claims for costs in the immediate case, a few points about the procedural leading up to the certification motion should be noted:

• The Plaintiffs commenced their action on January 15, 2008.

• The Grenville Defendants retained Adair Morse and the Diocese retained Stieber Berlach.

• The Plaintiffs brought a motion for a Mareva injunction against the Grenville Defendants, in which the Diocese had only a watching brief.

• In 2009, the Grenville Defendants, but not the Diocese, brought a pleadings motion to challenge the Plaintiffs’ statement of claim. In a judgment that was varied on appeal, portions of the statement of claim were struck out and portions of the statement of claim were struck out with leave to amend.

• The Plaintiffs served an amended statement of claim and filed their material for a certification motion.

• The Grenville Defendants defended the certification motion and filed responding material.

• The Diocese defended the certification motion, but it did not file any additional material.

• The many affiants for the certification motion were cross-examined, and it took several years before the certification motion was ready to be argued.

• The certification motion was argued on April 30, 2012 and May 1, 2012.

• I released my decision on May 23, 2012. I concluded that the Grenville Defendants had satisfied all of the criteria for certification except for the preferable procedure criterion. I concluded that the Amended Amended Statement of Claim did not disclose a reasonable cause of action against the Diocese.

[ 32 ] With the above factual and procedural background and applying the legal principles noted above, in my opinion, the Grenville Defendants are entitled to their costs on a partial indemnity basis for successfully resisting the certification motion.

[ 33 ] Although a certification motion is a procedural motion and not a decision on the merits, it is understandable and to be expected that a defendant will vigorously resist having a $225 million claim certified as a class action. Although the Plaintiffs did not disclose what their claim for costs would have been had the action been certified, they would and should have reasonably expected a claim of $150,825.66 from the Grenville Defendants. Having regard to the usual factors that guide a court’s discretion in awarding costs, the Grenville Defendants claim for costs is fair and reasonable.

[ 34 ] I do not regard the case at bar as being of the sort of case that there should be no award of costs because the case is a matter of public interest. The claim against the Grenville Defendants was a claim against a singular independent private educational institution that allegedly had adopted a perverse and reprehensible approach to education and to the treatment of students. The Plaintiffs were not litigating because they wished to advance the cause of students at residential schools; they were litigating because they wished to receive compensation for the harm they and their fellow students suffered at a particular private school operated by the Grenville Defendants. There was no viable claim against the Diocese. The public would be interested in these circumstances, and the public should always be interested in seeing that justice is done, but the case at bar was not in the public interest in the same way that the cases involving claims against the Government of Canada and the religious organizations that operated schools where our native peoples were systematically abused were in the public interest.

[ 35 ] I do not see how the fact that schools are in a regulated sector is of any importance because nothing turns on the regulation of education and the claims being advanced are not against the regulator.

[ 36 ] Provided that the amounts claimed for costs are reasonable, I see no basis for a so-called access to justice discount in the circumstances of the case at bar. Under the Ontario regime for class actions, the Plaintiffs – and more importantly Class Counsel - would know from the outset that they were exposed to a costs award but they went ahead with their litigation nonetheless. Class counsel should be commended for taking on the Plaintiffs’ case and assuming the associated risks in pursuit of access to justice for their clients, but that risk is not to be avoided by the inevitable arguments that the case was in the public interest and in pursuit of access to justice.

[ 37 ] For good or for evil, any litigation chill is already built into the system selected by the Legislature. The Legislature advertently imposed the normal rules about costs notwithstanding the view of the Ontario Law Reform Commission that the question of costs was "the single most important issue" that the Commission considered in designing a class action procedure. In the Commission's view, the matter of costs affected not simply the efficacy of class actions, but the more fundamental question of whether class actions should be utilized at all. See Ontario Law Reform Commission Report on Class Actions (Toronto: Ministry of Attorney General, 1982) at p. 647. In rejecting the recommendation of the Commission, the Legislature decided that there is to be some restraints on the access to justice available through a class action procedure. The Legislature did not recommend any so-called access to justice discount.

[ 38 ] I suspect that neither the Law Reform Commission nor the Legislature foresaw the sometimes breath-taking claims for costs in class actions for what is supposed to be just an interlocutory procedural motion. This lack of foresight may explain why courts have infused the jurisprudence about costs in class proceedings with the idea that in the exercise of the court’s discretion, a judge should have regard to the purposes of the class actions legislation. This discretion is helpful, but is it must be exercised within the directive of the Legislature that the normal rules and policies about costs are to apply to class proceedings. I have considered this discretion in arriving at my costs awards, but repeat that in the case at bar, it is my opinion that provided that the amounts claimed for costs are fair and reasonable in the circumstances, I would not reduce either Defendants’ claims for costs by an access to justice discount.

[ 39 ] Finally, to address the special argument that the Diocese’s claim for costs should be reduced because it could have participated in the pleadings motion that was brought by the Grenville Defendants. I do not fault the Diocese for this decision. The Grenville Defendants’ motion was not comprehensive, and its realistic goal was that of trimming the causes of actions or reducing the allegations against the Grenville Defendants. It is understandable that the Diocese might make the tactical decision that the best time to make its discrete attack against the Plaintiffs’ pleading was at the certification proceeding and that it should not embroil itself in the Grenville Defendants’ pleading motion. The Plaintiffs made the decision to sue the Diocese and they cannot complain that the Diocese decided to defend itself by waiting for the certification motion to challenge the legal viability of the claim against the Diocese.

[ 40 ] For the above Reasons, I award the Grenville Defendants $150,825.66, all inclusive, and the Diocese $150,000.00, all inclusive.

Perell, J.

Released: August 21, 2012

COURT FILE NO.: 08-CV-347100CP
DATE: August 21, 2012

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

Lisa Cavanaugh, Andrew Hale-Byrne, Richard Van Dusen, Margaret Granger and Tim Blacklock

Plaintiffs

‑ and ‑

Grenville Christian College, The Incorporated Synod of the Diocese of Ontario, Charles Farnsworth, Betty Farnsworth, Judy Hay the Executrix for the Estate of J. Alastair Haig, and Mary Haig.

Defendants

REASONS FOR DECISION - COSTS

Perell, J.

Released: August 21, 2012