ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 12-CV-452614CP
DATE: December 18, 2012
BETWEEN:
CASSIE HODGE Applicant – and – GARY NEINSTEIN AND NEINSTEIN & ASSOCIATES LLP Respondents
Peter I. Waldman for the Applicant
Chris G. Paliare and Odette Soriano for the Respondents
HEARD: In writing
REASONS FOR DECISION – COSTS
PERELL, J.
[ 1 ] Cassie Hodge is an applicant in a proposed class action under the Class Proceedings Act, 1992 . Ms. Hodge alleges that the Respondents, Gary Neinstein, a lawyer, and Neinstein & Associates LLP, his law firm, entered into unlawful contingency fee agreements with clients.
[ 2 ] Ms. Hodge brought and then abandoned a motion to obtain the court’s approval of a third party funding agreement to finance her proposed class proceeding. The Respondents now seek costs on a partial indemnity basis of $15,909.90, all inclusive. The breakdown is: $12,689.00 for fees; $1,649.57 for HST on fees; and $1,571.33 for disbursements.
[ 3 ] Ms. Hodge alternatively submits that: (1) the costs decision be deferred to the certification motion; (2) no costs be awarded because of the novelty of the issues; or, (3) if costs are awarded, the award should be $2,500, all inclusive.
[ 4 ] For the reasons that follow, I award the Respondents $7,000, all inclusive, payable to the Respondents in any event of the cause.
[ 5 ] Rule 37.09 (3) addresses the costs of an abandoned motion. It states:
37.09 (3) Where a motion is abandoned … a responding party on whom the motion was served is entitled to the costs of the motion forthwith, unless the court orders otherwise.
[ 6 ] Ms. Hodge’s motion was abandoned, and, in my opinion, the Respondents should recover costs.
[ 7 ] In the case at bar, the abandonment of the motion came about in the following circumstances.
[ 8 ] On July 6, 2012, at a case conference, I was advised that Ms. Hodge wished to obtain court approval to enter into a third party funding agreement to finance her proposed class proceeding. I scheduled the motion for October 1, 2012.
[ 9 ] Ms. Hodge delivered her motion material on September 19, 2012, and I adjourned the pending motion to permit the Respondents to obtain disclosure of financial information about the third party funder. The information was referred to in the supporting affidavit of Alex Lindsay, who is one of Ms. Hodge’s lawyers. I also permitted a cross-examination of Mr. Lindsay.
[ 10 ] The financial information was produced, and Mr. Lindsay was cross-examined.
[ 11 ] The parties disagree about what was achieved by the disclosure of the financial information and by the cross-examination of Mr. Lindsay.
[ 12 ] As I understand the Respondents’ submission, they would have it that the disclosure and cross-examination of Mr. Lindsay revealed that the financial circumstances of JLHD Developments Inc., the proposed third party, made it unworthy of being approved as a third-party funder and the cross-examination revealed that Ms. Hodge’s lawyers had not performed sufficient due diligence before seeking to have the court approve the funding arrangement and that the material that was brought before the court was misleading or inaccurate.
[ 13 ] Ms. Hodge disagrees with the Respondents’ submissions and rather submits that she sought out a third party funder because without this funding to protect her from an adverse costs award, she would have been unable to pursue access to justice for herself and the putative class members. She submits that the cross-examination of Mr. Lindsay did not reveal that JLHD Developments would not have been a suitable third-party funder but the Respondents improperly sought privileged information that caused JLHD Developments to withdraw its funding.
[ 14 ] I do not think that for the purposes of this motion, I need to decide whose submission is correct, because, in any event, the outcome of the cross-examinations was that the third-party funder withdrew its commitment to provide third-party funding and Ms. Hodge abandoned her motion.
[ 15 ] I do not see in the above circumstances any reason to depart from the normal rule that the respondent to an abandoned motion is entitled to costs. Ms. Hodge brought a motion for approval of third party funding, and she put the Respondents to the expense of defending it, and then she abandoned her motion without securing the respondents consent to do so. In my opinion, the defendant or respondent has a right to resist third party funding of a class action. It is helpful to the court that the defendant scrutinizes the appropriateness of an arrangement that might be champertous. See Fehr v. Sun Life Assurance Company of Canada , 2012 ONSC 2715 . In the case at bar, Ms. Hodge brought her motion, caused the Respondents to exercise their rights to scrutinize the appropriateness and adequacy of the third party funding, and she abandoned her motion. In these circumstances, I see no reason for ordering otherwise than as provided by rule 37.09 (3).
[ 16 ] Ms. Hodge submits, however, that there were elements of her motion that made it novel and this circumstance would justify making no order as to costs. This argument might have some traction, if her motion had been argued, but her motion was not argued. Had it been argued, however, I rather think that Ms. Hodge would have asked for costs if she was successful and only suggested that the case was novel had her motion failed.
[ 17 ] I think that exposure to costs for a contested third-party funding motion should be symmetrical and the normal rules about costs should apply, unless the defendant consents to the motion, in which case there should be no order as to costs. I think exposure to costs in a funding motion will encourage parties to perform the necessary due diligence to satisfy the court that the third party funding agreement should be approved or disapproved.
[ 18 ] This all said, in my opinion, the amount claimed for costs in the case at bar is excessive on a partial indemnity basis and the award should be reduced.
[ 19 ] I think the appropriate award is $7,000, all inclusive payable to the Respondents in any event of the cause.
[ 20 ] Order accordingly.
Perell, J.
Released: December 18, 2012
COURT FILE NO.: 12-CV-452614CP
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CASSIE HODGE
Plaintiff
‑ and ‑
GARY NEINSTEIN and NEINSTEIN & ASSOCIATES LLP
Defendants
REASONS FOR DECISION - COSTS
Perell, J.
Released: December 18, 2012.