ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 10-CV-411183-CP
DATE: July 16, 2013

BETWEEN:

Joseph (Jung Yub) Kang

Plaintiff

– and –

Sun Life Assurance Company of Canada

Defendant

W.J. Kim, for the Plaintiff
F.P. Morrison, G.P. Burt, and C. Daniel Wolski, for the Defendant

Proceeding under the Class Proceedings Act, 1992

HEARD: In writing

PERELL, J.

REASONS FOR DECISION - COSTS

[1] Pursuant to the direction of the Court of Appeal, the costs award for a pleadings motion was remitted to me for reconsideration in the light of the Court of Appeal’s reasons on a successful appeal from the Order I made on the pleadings motion.

[2] The Court of Appeal’s direction is reported as Kang v. Sun Life Assurance Company of Canada, 2013 ONCA 387. Its reasons on the appeal are reported as Kang v. Sun Life Assurance Company of Canada, 2013 ONCA 118.

[3] The background to this reconsideration is that in 2011, Joseph (Jung Yub) Kang commenced a proposed class action against Sun Life Assurance Company for $2 billion in damages and $500 million in punitive damages. The core of this action is his allegation that Sun Life’s sales agents falsely represented that life insurance policy premiums would vanish or would not increase and that the cost of insurance would not increase. The predominant cause of action is found in paragraphs 85 to 93 of the Revised Fresh as Amended Statement of Claim, which Mr. Kang described as a claim for negligent or reckless misrepresentation, the latter being more accurately described as a claim for fraudulent misrepresentation.

[4] In late 2011, Sun Life brought a motion to strike out numerous paragraphs in Mr. Kang’s Revised Fresh as Amended Statement of Claim. See Kang v. Sun Life Assurance Company of Canada, 2011 ONSC 6335. The motion was granted, but the parties could not agree about costs because there was a dispute about whether success on the pleadings motion was divided.

[5] Sun Life submitted that it was the successful party, and it sought costs of $76,654.02, all inclusive, on a partial indemnity basis payable in any event of the cause.

[6] Mr. Kang submitted that success was divided and given the divided success, he argued that there should be no order as to costs or that costs be in the cause. As a further alternative, he submitted that if Sun Life was to receive costs, the quantum should be $10,000.00, all inclusive.

[7] It is worth emphasizing that Mr. Kang’s original position was that there was divided success on the motion and that there should be no costs or costs in the cause if success was divided. My opinion, however, was that success was not divided and that Sun Life was the successful party.

[8] On the motion, Sun Life challenged 69 paragraphs of Mr. Kang’s 120-paragraph Revised Fresh as Amended Statement of Claim. I struck out 60 paragraphs. Of these 32 paragraphs were struck out without leave to amend because of egregious violations of the rules of pleading. The balance of the struck paragraphs: i.e., 28 paragraphs were struck out without leave to amend for failure to plead a reasonable cause of action.

[9] Before factoring in the adjustments made by the Court of Appeal, the result of the pleadings motion was that four supposed causes of action were struck out; namely; (1) breach of contract; (2) breach of fiduciary duty; (3) breach of duty of good faith and fair dealing; and (4) rescission of policy holder releases. I also struck out certain paragraphs pleading a claim of deceit and fraud because these paragraphs were a redundant argument and not a different claim for negligent or fraudulent misrepresentation.

[10] It is important to note that Sun Life had abandoned its attack on the pleading of negligent or fraudulent misrepresentation, save for an attack on the recoverability of the damages claimed by Mr. Kang. This particular attack was not successful, and I concluded that in accordance with s.5 (1)(a) of the Class Proceedings Act, 1992, S.O. 1992, c. 6, Mr. Kang had disclosed causes of action in negligent and fraudulent misrepresentation, including claims for waiver of tort, disgorgement, and punitive damages.

[11] I concluded that success was not divided and that Sun Life was overwhelmingly the successful party on an interlocutory matter that was of considerable importance to it, and that Sun Life should be entitled to costs in any event of the cause. It is worth noting that notwithstanding Sun Life’s overwhelming success, costs were not to be paid until the end of the litigation.

[12] Although Mr. Kang salvaged something valuable from the motion - because I insisted that the pleadings motion also determine the cause of action criterion of the test for certification under s. 5 (1)(a) of the Class Proceedings Act, 1992, S.O. 1992, c. 6 - I decided that he was not the successful party on this particular motion. In this regard, it is also worth noting that the costs for the certification motion will be determined after the completion of the certification motion.

[13] I concluded that Mr. Kang should reasonably have anticipated that Sun Life would challenge the pleading, especially one that included allegations that unnecessarily and unjustifiably complicated the action and that included causes of action that were not reasonable or viable. I concluded that the motion was not an ordinary run-of-the-mill pleadings motion and that in the context of a billion-dollar action with serious allegations of misconduct, the amount of work performed for the pleadings motion was reasonable and proportionate to the seriousness of the matter. I concluded that in the circumstances, a costs award of $73,654.02 payable to Sun Life, in any event of the cause, was fair and reasonable, and I so ordered.

[14] My Reasons for the costs award are reported as Kang v. Sun Life Assurance Company of Canada, 2011 ONSC 7436.

[15] With an exception for the plea of breach of fiduciary duty, Mr. Kang appealed the decision to strike any paragraphs based on a failure to show a cause of action. Thus, he appealed to restore three causes of action and to restore 21 paragraphs of the 64 paragraphs that had been struck out.

[16] The Court of Appeal allowed the appeal and restored 18 paragraphs and the claims for (1) breach of contract, and (2) breach of duty of good faith and fair dealing. The Court also restored the pleadings of deceit and fraud, which I had struck out as redundant argument of the claim of fraudulent misrepresentation.

[17] The Court of Appeal held that the law with respect to good faith had not been fully settled, and it was premature to strike out the claim.

[18] It held that the contract terms in issue were not as clear as I thought, and that the contract terms were at least ambiguous, and, therefore, the breach of contract claim should not have been struck out.

[19] The Court of Appeal held that there was an aspect of the plea of deceit and fraud that was different from the already pleaded claim for fraudulent misrepresentation. The non-redundant aspect was Sun Life’s alleged fraud in denying that it had been fraudulent. The Court concluded that it was not plain and obvious that this meta-fraud claim, which was based on a different set of allegations from the fraudulent misrepresentation, was doomed to failure, and, therefore, I had erred in striking out the fraud-about-a-fraud claim.

[20] The Court of Appeal awarded Mr. Kang the costs of the appeal in the amount of $20,000.00. It did not set aside my original award of costs and said nothing about the costs that I had awarded save to direct that I should reconsider the costs in light of the decision of the Court of Appeal.

[21] Mr. Kang now submits that I should set aside the original costs award and make a new award awarding him $75,000.00 payable forthwith.

[22] Mr. Kang says that Sun Life’s motion must now be viewed as unsuccessful. He argues that in light of the Court of Appeal’s “emphatic” decision, he should receive costs forthwith because he was the overwhelmingly successful party. He submits that Sun Life’s achieved only a paltry success on some technical pleadings grounds that only delayed the certification motion and his access to justice. He submits that the Court of Appeal overturned the decision at first instance and made strong findings of liability against Sun Life and that he succeeded in saving his class action, which would have been wholly gutted had Sun Life’s motion succeeded, which it did not. He submits that he substantially advanced his class action by satisfying the cause of action criterion for the future certification motion. He says that the fees requested are reasonable having regard to what Sun Life expended and what it might reasonably have expected to pay as the unsuccessful party. He says that the $75,000.00 in fees is reasonable in light of the quality of his counsel, Mr. Kim and Ms. Paris, whom he lauds as experienced, leading class action litigators.

[23] Sun Life disputes that Mr. Kang had overwhelming success on the original motion as it now emerges after the appeal to the Court of Appeal. Two causes of action remain removed and 42 paragraphs remain struck out without leave to amend, and this remains a substantial defeat for Mr. Kang. It says that the restoration of causes of action was a relatively minor success given the central issues in the law suit. It disputes that the Court of Appeal made determinations of liability. Sun Life asserts that the Court of Appeal decided only that certain causes of action could be pleaded because they were not doomed to failure, and the merits of all the causes of action remain to be proven. It submits that Mr. Kang’s limited success on appeal does not alter Sun Life’s status as the successful party and that the appropriate order in all the circumstances would be to reduce the original $76,654.02 costs award to Sun Life by $20,000.00.

[24] I disagree with the submissions of both parties. As I now reconsider the matter, the outcome of the motion was one of divided success. Sun Life’s success is no longer overwhelming, but it secured a substantial victory, and in defending 18 more paragraphs and the various causes of action, Mr. Kang also secured a substantial victory. Success was divided.

[25] Sun Life had very good reason to attack the Revised Fresh as Amended Statement of Claim, which egregiously did not comply with the rules of pleading, and Sun Life was successful in that attack. Mr. Kang dismisses Sun Life’s success in striking out 42 paragraphs and two causes of action as unworthy of an award of costs. However, to the contrary, it was a substantial success against Mr. Kang’s obstinate defence of a non-compliant pleading. If the advancement of his proposed class action has been retarded, then Mr. Kang is to blame and Sun Life cannot be faulted for challenging what was a fundamentally non-compliant and procedurally unfair pleading.

[26] But Sun Life’s motion was not a complete success, and Mr. Kang achieved the satisfaction of the first criterion for certification, and he preserved three causes of action that he wishes to advance against Sun Life. His success, however, is not as great as he would have it. No findings of liability were made, and the merits of all the causes of action remain to be determined. It would not have been proper for the Court of Appeal to make findings of liability, and all it (or a motions court on a pleadings motion) could decide was that Mr. Kang had stepped over the very low hurdle of showing that his causes of action were not doomed to failure.

[27] There is no emphatic endorsement of the causes of action by the Court of Appeal and with respect, in my opinion, the differentiated allegation of fraud and deceit still adds little, because if Mr. Kang proves the underlying negligent or fraudulent misrepresentation claim, then the meta-fraud claim is superfluous, and if he fails to prove the underlying negligent or fraudulent misrepresentation claim, then there is no meta-fraud claim to prove. The fundamental core of the action remains whether Sun Life lied, not about whether it lied about its lie.

[28] As I now reconsider the matter, Sun Life reasonably brought the motion and achieved a substantial victory, but it overreached and did not achieve a complete success. Mr. Kang unreasonably defended a large part of his egregiously non-compliant pleading, but he successfully defended three causes of action, and he denied Sun Life a complete success on its motion that would otherwise have been an overwhelming success.

[29] The delay in the proceeding cannot be attributed to Sun Life, which was justified in bringing its motion, and Mr. Kang’s success in achieving the first criterion for certification will be dealt with as an aspect of the certification motion.

[30] Success on this interlocutory motion was divided, and it remains to be seen whether Mr. Kang will achieve certification, and if he achieves certification, it remains to be seen whether he will succeed on the three causes of action that he preserved. In these circumstances, an order of costs in the cause seems fair and reasonable.

[31] It may be noted that rule 57.03(1)(a) does not make mandatory the fixing of costs and the direction that they be payable within 30 days; the rule admits of the exception of where the court is satisfied that a different order would be more just. The court's residual discretion about costs remains: Intercontinental Forest Products SA v. Rugo, 2004 33353 (ON SCDC), [2004] O.J. No. 4190 (Div. Ct.).

[32] In my opinion, in the circumstances of this case, the fairest award is to fix costs at $75,000.00, which both sides now regard as reasonable, and make those costs in the cause.

[33] Order accordingly.

Perell, J.

Released: July 16, 2013

COURT FILE NO.: 10-CV-411183-CP
DATE: July 16, 2013

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Joseph (Jung Yub) Kang

Plaintiff

‑ and ‑

Sun Life Assurance Company of Canada

Defendant

REASONS FOR DECISION - COSTS

Perell, J.

Released: July 16, 2013