COURT FILE NO.: CV-10-414169-00CP

DATE: 20130311

ONTARIO SUPERIOR COURT OF JUSTICE

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

BETWEEN:

KEATLEY SURVEYING LTD.

Plaintiff

– and –

TERANET INC.

Defendant

Counsel: Ward K. Branch, William O’Hara, and Luciana Brasil, for the plaintiff F. Paul Morrison, Julie K. Parla and Jameel Madhany, for the defendant

HEARD: In Writing

C. HORKINS J.

[1] In reasons released December 14, 2012, I dismissed the plaintiff’s 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"). While the plaintiff satisfied the s. 5(1)(a) criterion, it failed to satisfy the remaining s. 5 criteria.

[2] The parties have not been able to agree on costs. Written submissions have been exchanged. The defendant asks the court to award it $496,617.67 for fees disbursements and applicable taxes. These costs represent about 40% of the actual costs that were incurred.

[3] It is the plaintiff’s position that there should be no costs order because the proceeding raised novel points of law and matters of significant public interest relating to the Canadian copyright regime. Alternatively if costs are awarded, a significant reduction is required and the award should not exceed $80,000.

Legal framework

[4] 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.

[5] 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.

[6] In Pearson v. Inco Ltd., 2006 7666 (ON CA), [2006] O.J. No. 991 at para. 13 (C.A.) (“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. [Citations omitted.]

(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.) [(“Boucher”)] ….

(3) The costs should, if possible, reflect costs awards made in closely comparable cases, recognizing that comparisons will rarely provide firm guidance. [Citations omitted.]

(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. [Citations omitted.]

(5) The costs expectations of the parties can be determined by the amount of costs that an unsuccessful party could reasonably expect to pay. [Citations omitted.]

(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. [Citations omitted.]

[7] 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 plaintiff argues that this case raised a novel point of law and involved matters of public interest and therefore no costs order should be made against it.

[8] In considering the appropriate award of costs in this case, I am guided by the above legal framework.

Does the Action Raise Novel Points of Law?

[9] This action does raise a novel point of law. During my consideration of s. 5(1)(a) I declined to rule that it was plain and obvious the cause of action would fail because a novel question of law was raised. This is clear in the following excerpt of my reasons:

[108] Since counsel could not locate any Canadian cases addressing the issue of copyright in land surveyors’ registered or deposited plans of survey, counsel searched other jurisdictions and located Copyright Agency Limited v. State of New South Wales, [2008] HCA 35 (“New South Wales”). This was the only relevant case found.

[109] In New South Wales, the Australian Court found that surveyors were entitled to compensation from the Crown for the use of their surveys in the New South Wales’ land registration system.

[110] Class counsel acknowledge that New South Wales was decided within the context of Australian copyright law. However, they say that the decision of the Federal Court of Appeal and the appellate decision issued by the High Court of Australia provide some guidance on this motion.

[111] Teranet states that this decision is entirely distinguishable. In summary, Teranet says that the Australian Copyright Act expressly permits the Crown to use any copyrighted work of a person belonging to a collective society, without infringement, if the use is for a public service. However, under the Australian Act, the Crown must pay the owner of the work equitable remuneration. Importantly, this feature of the Australian copyright regime does not have a counterpart in Canada.

[112] I do not propose to rule on the applicability of the New South Wales decision. I acknowledge the decision to show that there is a lack of Canadian jurisprudence in this area and observe that the usefulness of this case in the Canadian context is questionable.

[113] The applicable statutes and regulations show that a compelling case can be made that copyright belongs to the Crown, based on s. 12 of the Copyright Act and the statutory regime that governs plans of survey. However, I am very reluctant to draw this conclusion under s. 5(1)(a) and decline to do so.

[114] The meaning of s. 12 of the Copyright Act and its application to the surveyors and their plans of survey is a novel question that has not been determined by our courts. Novel questions of law should not be decided under s. 5(1)(a).

Is there a Public Interest Consideration?

[10] A case involves a matter of public interest only if the action has some significance or interest to the community beyond the proposed members of the class: see Williams v. Mutual Life Assurance Co. of Canada, 2001 62796 (ON SC), [2001] O.J. No. 445 at paras. 24-26 (S.C.J.); Gariepy v. Shell Oil Co., [2002] O.J. No. 3495 (S.C.J.); Caputo v. Imperial Tobacco Ltd. (2005), 2005 63806 (ON SC), 74 O.R. (3d) 728 at para. 36 (S.C.J.); Pearson v. Inco Ltd. (2006), 2006 7666 (ON CA), 79 O.R. (3d) 427 (C.A.); Smith v. Inco Ltd., 2012 ONSC 5094. As Perell J. observed in Fischer v. IG Investment Management Ltd., 2010 ONSC 296 at para. 14 there is a distinction between an action that is of interest to the public and true public interest litigation.

[11] In my view, this action does not raise a matter of public interest. The plaintiff commenced this action against a private sector for profit company, seeking to recover its alleged financial losses. The plaintiff is a professional corporation owned and operated by a qualified land surveyor. Since there was no evidence of an interested class of persons, it cannot be said that there is any evidence of a broader public concern raised by the actions of the defendant.

Are the Defendant’s Costs Fair and Reasonable?

Discount for Summary Judgment Costs and Fees Relating to Merits of the Action

[12] The plaintiff says that costs must be reduced to eliminate work done for a summary judgment motion that did not go ahead and to eliminate work done by the defence team that was related to the merits of the action.

[13] Initially, it was agreed that the plaintiff’s certification motion and the defendant’s summary judgment motion would be heard at the same time. However, since there was insufficient time to hear both motions, I directed that only the certification motion would go ahead. This was done after the parties had prepared the material for the summary judgment motion.

[14] The defendant reduced its costs to reflect that its summary judgment motion did not go ahead. The defendant applied a 50% reduction to the fees of the research lawyer and all costs incurred to draft and compile the summary judgment factum and briefs of authority. They say that this reduction reflects the fact that much of the evidence tendered on the summary judgment motion was relevant to the certification motion as well.

[15] The plaintiff argues that a further reduction is required. Since the same affidavit evidence was used for both motions, the plaintiff says that the 50% reduction should be applied to the defendant’s total fees.

[16] Evidence directed at the merits of the action is admissible on a certification motion if it is relevant to the requirement of certification set in s. 5 of the Class Proceedings Act. It is obvious from my reasons denying certification that such evidence was integral to the defendants’ position that certification should be denied.

[17] The losing plaintiff made the same argument in Singer v. Schering-Plough Canada Inc., 2010 ONSC 1737. This was rejected by Strathy J. at para 23. As he stated “[t]he real battle in these cases, and the time and effort spent by the defendants, was over whether the claim was appropriate for certification. The merits were not at issue.” I reach the same conclusion in this case.

[18] While I accept that a reduction in fees is required to reflect that the summary judgment motion did not go ahead, it is difficult to apply a strict mathematical approach given the overlap between the two motions. Obviously a reduction is required. In my view, the degree of reduction is best considered when examining the overall costs award and what is fair and reasonable.

[19] The plaintiff also argues that the fees of the research lawyer are excessive. The lawyer in question is a 2002 call with a partial indemnity rate of $225. The plaintiff says that this work should have been done by an articling student with a partial indemnity rate of $60. If this lower rate is applied the fees of the research lawyer should be reduced to $8,748. I will take this factor into consideration when I step back and look at what is fair and reasonable. That said, it must be recognized that a research lawyer is likely to be more efficient in conducting the research than an articling student. Therefore, in my view, it would not be fair to simply apply a $60 an hour rate.

Costs for cross-examination

[20] The plaintiff argues that no costs should be allowed for cross-examinations. The defence spent 221.63 hours ($52,447.50) preparing and attending at cross-examinations. Costs associated with cross-examinations on interlocutory motions are governed by rule 39.02(4)(b), which provides that "[o]n a motion other than a motion for summary judgment or a contempt order, a party who cross-examines on an affidavit … is liable for the partial indemnity costs of every adverse part on the motion in respect of the cross-examination, regardless of the outcome of the proceeding, unless the court orders otherwise."

[21] Under rule 39.02(4)(b), the defendant is liable for the plaintiff's partial indemnity costs in respect of the cross-examinations of Mr. Keatley and Mr. Bunker, and the plaintiff is similarly liable for the defendant's partial indemnity costs in respect of the cross-examinations of the defendant's fact witnesses. The plaintiff states that where both parties have cross-examined the opposing affiants and their costs are not significantly different, the fairest approach is to order that each party should bear the costs of its own cross-examinations. Further, the plaintiff says that this is not a case where it is appropriate to "order otherwise".

[22] In two previous decisions, I did “order otherwise” and both decisions were upheld on appeal. I adopt the following passage from Martin v. AstraZeneca Pharmaceuticals 2012 ONSC 4666 (“AstraZeneca”):

38 In my view, this is a case where it is appropriate to "order otherwise". This approach is consistent with my costs decision in Toronto Community Housing Corporation v. Thyssenkrupp Elevator (Canada) Ltd., 2011 ONSC 7588 at para. 23, 2012 ONSC 225 (Div. Ct.) ("Toronto Community Housing"). As in that case, I adopt the following passage in Hague v. Liberty Mutual Insurance Co., 2005 13782 (ON SC), [2005] O.J. No. 1660 at para. 18:

I do consider that this a case where it is appropriate to "order otherwise" regarding the presumptive responsibility for costs of cross-examinations under rule 39.02(4). I do so, in part, because, as I earlier alluded to, I consider a certification motion to be much like a motion for summary judgment in certain respects and, I note, summary judgment motions are expressly exempt from the provisions of rule 39.02(4). I do so also because, given what is at stake in a certification motion, I consider it unwise for the court to be too ready to second guess counsel's decision to cross-examine on any of the affidavits filed.

39 The plaintiffs have not provided examples of any cases under the Class Proceedings Act where rule 39.02(4)(b) has been used to deny the successful party its costs for cross-examinations. The cross-examinations that AstraZeneca conducted were necessary to elicit evidence that was within the exclusive possession of the plaintiffs (and their experts) and was referenced throughout my reasons (see, for example, paras. 50, 66, 235, 245, 264, 286-287, 297, 305-307, 311, 313-315, and 363-365).

[23] I acknowledge that 2038724 Ontario Ltd. v. Quizno’s Canada Restaurant Corp., 2008 27822 (ON SC), [2008] O.J. No. 2276 at paras. 27-28 is an example of the court denying the successful party its costs of cross-examination. The court concluded in that case that it was the fairest approach in the circumstances. However, the above passage from Hague v. Liberty Mutual Insurance Co, was not considered by the court in Quizno’s.

[24] I see no reason to depart from my approach in Toronto Community Housing and AstraZeneca. The plaintiff does not argue that any of the cross-examinations were unnecessary. Further, it is apparent from my decision on the certification motion that cross-examinations were necessary to elicit evidence that was in the exclusive possession of the plaintiff (see for example paras. 57, 132, 136, 141-145, 233-235).

Disbursements

[25] The defendant claims $28,453.38 for photocopying fees. It is the plaintiff’s position that this is too high for the following reason. Assuming a per page cost of 25 cents, the proposed disbursement amounts to 113,814 pages of paper. If this volume of paper was placed in 3 inch binders, at 500 pages per binder, the plaintiff says that the defendant's photocopies would require 228 binders that would occupy 57 feet of shelf space. While certification motions can often be document intensive, the plaintiff says that the volume of materials filed on the certification motion did not come close to this figure. The plaintiff requests that this disbursement be reduced by 75%, to $7,113.35.

[26] This analysis is not correct because it does not recognize that the disbursement costs include photocopying, scanning and the cost of binding the documents for court. All briefs of authority were double sided. Further, the defendant assumed the responsibility of preparing a joint brief of authorities, a joint brief of statutory excerpts and a joint brief of cross-examination transcripts. The defence team prepared two sets of documents for plaintiff’s counsel and the court copies. The defendant should not be penalized for having agreed to assume all of this work.

Fair and Reasonable Costs

[27] 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 the Court of Appeal directed in Boucher.

[28] I distinguish the factors in this case from the factors that justified the high costs that I allowed in AstraZeneca ($475,000). In that case, at paras. 62-67, I reviewed various cases where cost awards have been made against an unsuccessful plaintiff. I have considered those cases for the purpose of arriving at a decision in this case

[29] AstraZeneca is an example of the high water mark for a cost award against a plaintiff who is unsuccessful on a certification motion. AstraZeneca was a more complicated case with numerous flawed causes of action and extensive expert testimony. The plaintiff failed to satisfy all of the s. 5 criteria and s. 31 (1) of the Class Proceedings Act was not engaged. In contrast, this action advances one cause of action that raises a novel question of law and the plaintiff did satisfy the s. 5(1)(a) criterion.

[30] The fees incurred by the unsuccessful party may be used to ascertain the reasonable expectations of that party. In AstraZeneca at para. 57, I stated as follows:

Costs incurred by the opposing party can provide the court with a measure of what is reasonable. It is always open to the losing party to provide this information, but they did not do so in this case. (See Hague v. Liberty Mutual Insurance Co., (2005), 2005 13782 (ON SC), 13 C.P.C. (6th) 37 (Ont. S.C.J.) at para. 15.) 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 v. Royal & Sun Alliance Insurance Co. of Canada (2005), 2005 33041 (ON SC), 77 O.R. (3d) 612 (Ont. 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.

[31] The plaintiff submitted its Bill of Costs in this proceeding. Their partial indemnity fees for the certification hearing were $173,899.50. I accept that this is a measure of what is reasonable.

[32] 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.

[33] The fact that this action raises a novel point of law does not lead me to order no costs. First, the plaintiff failed to satisfy all of the remaining s. 5 criteria. In particular, there was no evidence of an identifiable class of two or more persons. To the extent that I found the pleading to raise a novel point of law raised by the pleading, there is no evidence that anyone other than the plaintiff has an interest in this point. To be clear, the existence of the novel point of law is simply one of many factors that I have considered.

[34] The defendant is entitled to fair and reasonable costs. Based on all of the above, I allow the defendant the amount of $200,000 for all fees, disbursements and applicable taxes.

___________________________ C. Horkins J.

Released: March 11, 2013

COURT FILE NO.: CV-10-414169-00CP

DATE: 20130311

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

KEATLEY SURVEYING LTD.

Plaintiff

– and –

TERANET INC.

Defendant

COSTS DECISION

C. Horkins J.

Released: March 11, 2013