ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JOSEPH FANTL
Plaintiff
– and –
TRANSAMERICA LIFE CANADA
Defendant
David F. O’Connor and J. Adam Dewar, for the Plaintiff
Mary Jane Stitt, for the Defendant
HEARD: In writing
Perell J.
REASONS FOR DECISION - COSTS
A. INTRODUCTION
Introduction
1By reasons for decision reported as Fantl v. Transamerica Life Canada, 2013 ONSC 2298, I certified this action as a class proceeding under the Class Proceedings Act, 1992, S.O. 1992, c. 6. In my Reasons for Decision, I tentatively indicated that costs should be in the cause.
2The Plaintiff, Joseph Fantl opposes costs in the cause, and he submits that there is no principled reason to depart from the normal rule that a successful plaintiff on a certification motion should receive his or her costs forthwith and not in the cause.
3Thus, Mr. Fantl seeks costs on a partial indemnity scale of $165,000.00 in legal fees (reduced from $193,000.00), plus disbursements of $16,800.00 and $23,000.00 for taxes, for a rounded total of $200,000.00, all inclusive, payable forthwith.
4The Defendant Transamerica Life Canada also opposes costs in the cause. Given that Mr. Fantl’s success was limited to claims for certification that were unopposed, Transamerica asserts that it was the overwhelmingly successful party on the certification motion, and it seeks a tripartite order of: (1) its costs thrown away on a partial indemnity basis in respect of an abortive certification motion in 2007, in the amount of $127,669.10, inclusive of HST payable forthwith; (2) its costs on a partial indemnity basis of $137,617.61, inclusive of disbursements and HST, for the recent certification motion payable forthwith or, at least to it, in the cause; and (3) the balance of its partial indemnity costs, in the amount of $117,518.50, to be deferred until the conclusion of the litigation.
5Thus, with some costs reserved, Transamerica seeks a costs award of $265,287.22 for the certification motion, all inclusive, payable forthwith.
6Because Mr. Fantl’s action has the support of the Class Proceedings Fund, which is administered by the Law Foundation of Ontario, and because of Transamerica’s claim for costs or the prospect of a costs award in the cause exposing Mr. Fantl to an adverse costs award, the Law Foundation was entitled, pursuant to Rule 12 of the Rules of Civil Procedure, to make submissions about how the court should exercise its discretion about the costs of the certification motion.
7The Law Foundation’s position is to align itself with Mr. Fantl’s position that he and not Transamerica should receive costs payable forthwith. The Law Foundation submits that based on the normal rule and the policies of the Class Proceedings Act, 1992, the rule that a successful plaintiff on a certification motion should receive costs should apply notwithstanding the concessions or the alleged successes of Transamerica on the certification motion.
8Having considered the submissions of the parties and for the reasons that follow, it is my opinion that the costs of the certification motion and the quantum of them should be in the cause.
9In my opinion, the normal costs rule does not apply because success on the certification motion was divided. Mr. Fantl was not the only successful party. In the case at bar, an order for costs in the cause is the appropriate award and consistent with the purposes of the class proceedings legislation.
B. FACTUAL AND PROCEDURAL BACKGROUND
Factual and Procedural Background
10I shall set out the factual and procedural background from what I know from case managing this action for the last five years and based on the submissions of the parties.
11This class action began on December 29, 2003, when Michael A. Millman had a statement of claim issued in Ontario against Transamerica. The claim was framed in breach of contract.
12The action did not progress, and the matter was referred to REKO, a law firm comprised of Peter Roy, R. Douglas Elliott, Won J. Kim, and David F. O’Connor. Mr. Fantl was asked to replace the original plaintiff, Mr. Millman, as the representative plaintiff in the action against Transamerica. Thus, Mr. Fantl became the plaintiff and REKO became Mr. Fantl’s solicitor of record in the action against Transamerica. At REKO, Mr. Kim became the supervising partner with the most involvement in and responsibility for the file.
13Between the autumn of 2005 and the end of March 2006, Mr. Kim decided to amend the statement of claim in the action against Transamerica to add negligent misrepresentation claims to the claims sounding in contract. A Fresh as Amended Statement of Claim, which also introduced Mr. Fantl as the proposed representative plaintiff, was issued on April 5, 2006.
14With an amended pleading and a new plaintiff, the action began to make some progress. Cross-examinations on the certification materials were conducted, and the certification motion was scheduled for June 2007.
15During this period, Mr. Kim decided that the claim against Transamerica should be expanded from the one policy type owned by Mr. Fantl to numerous Transamerica insurance policies. There would be an omnibus claim, and Justice Hoy, who was case managing the action, was so advised at a case conference on June 20, 2007. The class action expanded from a claim based on Mr. Fantl’s one insurance policy to a claim based on 53 insurance policies.
16The 2007 certification motion, however, did not proceed. Transamerica protested that on the eve of the certification motion, Mr. Fantl had materially changed the basis of his negligent misrepresentation claim, serving a factum that bore little resemblance to his pleading or the supporting affidavit in his certification motion record. Justice Hoy aborted the certification hearing.
17Around this time, Transamerica advised Mr. Fantl that it was prepared to settle part of his claim dealing with a management fee overcharge and that it was prepared to reimburse all similarly situated policyholders. The misrepresentation claim, which concerned whether Transamerica had promised that its funds would replicate the stock market performance of the S&P 500, was left to be litigated later.
18The parties agreed to a consent certification of just the overcharge claim, and Mr. Fantl and REKO turned their attention to settlement negotiations leading to a consent certification and settlement approval and to the details of implementing what would be a gargantuan settlement administration.
19While all this was going on, in early November 2007, the REKO partnership began to come apart, and the partners decided to end the firm after December 31, 2007. What followed was a dispute that made its way from me, to the Divisional Court, and finally to the Court of Appeal. The dispute was about whether Mr. Kim’s new firm or Mr. O’Connor’s new firm would have carriage of the settlement and the outstanding uncertified contested claims between Mr. Fantl and Transamerica. (See: Fantl v. Transamerica Life Canada, 2008 17304 (ON SC), [2008] O.J. No. 1536, leave to appeal granted, [2008] O.J. No. 2593 (Div. Ct.), affd 2008 63563 (ON SCDC), [2008] O.J. No. 4928, (Div. Ct.), affd 2009 ONCA 377 and Fantl v. Transamerica Life Canada, 2010 ONSC 3113.)
20Mr. O’Connor’s firm won the right to have carriage of Mr. Fantl’s class action, and the parties became preoccupied with implementing the partial settlement. There was a consent certification, a settlement approval motion, and a contested motion to determine the counsel fee for the settled portion of the class action. (See: Fantl v. Transamerica Life Canada, [2009] O.J. No. 3366 (S.C.J.); Fantl v. Transamerica Life Canada, [2009] O.J. No. 4323 (S.C.J.); and Fantl v. Transamerica Life Canada, [2009] O.J. No. 5003 (S.C.J).)
21Although neither party nor the Law Foundation mentioned it for the purposes of the matter now before the court, it may be worth noting that Mr. Fantl’s lawyers received a counsel fee of $7 million, all inclusive, for the settled part of the class action.
22Meanwhile, the contested misrepresentation claims were held in abeyance until around August 2011, when the parties ramped up the litigation about whether the balance of the action would be certified as a class proceeding. The parties exchanged new factums and argued the certification motion, and I released my decision in April 2013.
23In the reactivated class action, Mr. Fantl was successful in having his action certified for five insurance policies. However, these claims were unopposed, and Transamerica was successful in eliminating all the other policies, 48 insurance policies that Mr. Fantl had proposed to include in the class proceeding.
24Moreover, Mr. Fantl’s tort claim and his aggregate damages claims were not certified as common issues. Mr. Fantl’s claims for breach of implied terms, collateral contract and collateral warranty were struck out. Thus, Transamerica achieved a substantial substantive success in resisting Mr. Fantl’s certification motion.
25Some measure of Transamerica’s victories and Mr. Fantl’s defeats may be gauged by the fact that Mr. Fantl has appealed the certification decision to the Divisional Court and the striking of his various claims to the Court of Appeal. There are no cross-appeals.
C. DISCUSSION AND ANALYSIS
Discussion and Analysis
26The Ontario Legislature rejected the recommendation of the Ontario Law Reform Commission that Ontario adopt a no-costs rule for class actions. The Class Proceedings Act, 1992 imposes a “loser pays” rule. The Legislature intended that costs play their normal role in class action litigation.
27The Legislature, however, sent a signal that the courts should be cautious in awarding adverse costs awards against plaintiffs and rather should be alert to circumstances when it would be appropriate to make no costs award. The Legislature was aware that adverse costs awards could chill access to justice and since the major policy goal of the Act is facilitating access to justice, the Legislature wished the courts to be hyper-sensitive to whether there might be a justification for making a no-costs order. This policy is reflected in s. 31(1) of the Act, which states:
31.(1) 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.
28The case at bar does not qualify as a test case, does not raise a novel point of law, and does not involve a matter of public interest, and I shall employ the normal principles that guide the court’s discretion with respect to costs.
29In Pearson v. Inco Ltd., 2006 7666 (ON CA), [2006] O.J. No. 991 (C.A.) at para. 13, the Ontario Court of Appeal identified the following principles for fixing costs on a certification motion: (1) the normal rule is that costs will ordinarily follow the event; (2) the costs must reflect what is fair and reasonable; (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 complexity of the issues is a factor in what is fair and reasonable for costs; (7) whether the case raises an issue of public importance is a factor in fixing costs; and (8) a fundamental object of the Class Proceedings Act, 1992 is to provide enhanced access to justice.
30The jurisprudence reveals that when a plaintiff is successful in obtaining certification, typically, he or she is awarded costs payable forthwith and the action moves on to a common issues trial or a negotiated settlement. Typically, when a defendant is successful in resisting certification, he or she is awarded costs payable forthwith and more often than not the plaintiff’s action comes to an end.
31In the case at bar, Mr. Fantl submits that he is entitled to costs payable forthwith because he achieved certification. He submits that the fact that his class action has been reduced from misrepresentation claims for 53 insurance policies to a claim for five insurance policies matters for naught because he submits that this is a common phenomenon that does not disqualify a successful plaintiff from a costs awards, and he points to the fact that the appellate courts have frowned on distributive costs awards: see Pearson v. Inco Ltd., 2006 7666 (ON CA), [2006] O.J. No. 991 (C.A.) at para. 5.
32In the case at bar, Transamerica counters that it is entitled to costs payable forthwith because it was overwhelmingly successful in resisting certification. It submits that Mr. Fantl cannot ride the coattails of the certification of his action for five insurance policies and he cannot justify receiving costs when Transamerica consented to the certification of those five claims and when Transamerica stopped in their tracks the claims on 48 insurance policies. Transamerica also claims costs for the abortive 2007 certification motion, which it submits were wasted because Mr. Fantl recast his claim at the eleventh hour.
33By and large, I agree with the tenor of Transamerica’s submissions that it is a candidate for costs notwithstanding that Mr. Fantl was successful in certifying a class action. I also agree with the tenor of Mr. Fantl’s submissions that he is a candidate for costs because he was successful in certifying a class action. When I indicated in my certification Reasons for Decision that the case at bar might be an appropriate case for costs in the cause, it was precisely because I anticipated that both parties would be claiming success, and since situations of divided success have traditionally been occasions for courts to order costs in the cause, I gave the parties the heads-up that this might be the appropriate award in the circumstances of this case. I was asking them for reasons not to apply this traditional approach to costs.
34Having considered the written submissions of the parties, which respectively pooh-pooh their opponent’s success, I conclude that my sentiment was correct, and I shall, therefore, order all the costs to be in the cause. I see no advantage in fixing the amount of those costs in the cause now.
35I believe this costs award to be fair and just in the circumstances of this case. If it turns out that Mr. Fantl is eventually successful in his truncated class action, then it would be fair for him to recover his costs for his failed attempt to advance a larger class action. In the case at bar, the claims on the 48 insurance policies were not frivolous and vexatious, and it was reasonable and socially useful for Mr. Fantl to present all of the possibly related claims before the court. The putative class members of these claims have learned that it is plain and obvious that there is no legal basis to prosecute these claims as a class action. While that does not create a res judicata binding on the class members, it is useful precedent that provides access to justice. If Mr. Fantl ultimately succeeds on the 5 remaining policies for which there are legally viable claims, then in my opinion, subject to the discretion of the trial judge, he should have his costs for the claims that were struck out at certification. However, if he fails totally, then subject to the discretion of the trial judge, Transamerica should have its costs for successfully litigating the certified and the non-certified claims.
36It seems unfair to award either party costs forthwith for their divided success at the certification motion.
37So far, Mr. Fantl’s success has been procedural in achieving certification, but the substantive merits of his claims on the five insurance policies remains to be seen. His defeats have been both procedural and substantive, and the normal rule does not apply in these circumstances. He has not earned an award of costs payable forthwith.
38Mr. Fantl’s submission that the access to justice mission of the Class Proceedings Act, 1992 entails that he should obtain costs for his truncated class action certification success is false. The normal rules for costs apply to class proceedings. Costs awards are designed to indemnify successful litigants for the costs of litigation, but Mr. Fantl has only achieved a procedural success and much less of one than his aspirations. His genuine success remains to be seen. It is premature to decide that he is entitled to an indemnity for the costs of his litigation.
39So far, Transamerica’s success has been both procedural and substantive, but it has not achieved a comprehensive victory, and it may ultimately be shown to be a wrongdoer. It is too early to determine whether Transamerica should recover costs for the certification motions. Subject to what the appellate courts may say, it remains to be seen whether it is a truly successful litigant entitled to an indemnification for the costs of being put to a defence. It is premature to decide that it is entitled to an indemnity for the costs of its defence.
40I wish to make it clear that I am not making a distributive costs award based on Transamerica succeeding on some issues. Its success went far beyond downsizing the class definition or pruning the common issues as wanting for commonality or for not satisfying the preferable procedure test. Transamerica’s success had a substantive weight comparable to success on a motion under Rule 21, hence Mr. Fantl’s appeal to the Court of Appeal. Mr. Fantl cannot merrily say that he was the winner because he achieved certification and, therefore, the normal rule for class actions applies.
41It is worth noting that in Pearson v. Inco Ltd., 2006 7666 (ON CA), [2006] O.J. No. 991 (C.A.), where the court frowned on distributive costs awards, it found another way to take into account the plaintiff’s limited success on the certification motion, which success only came after the appellate courts reversed the motion judge’s decision in favour of the defendant. Justice Rosenberg, using the benchmark of what the defendant had originally received on the certification motion, reduced the quantum of the award from the $260,000.00 to $90,000.00, which he was only prepared to award because the plaintiff’s claim had a public interest component.
42Costs in the cause is another way of taking into account a parties’ limited success on a motion, and it leaves it open for the party to be indemnified if he or she ultimately succeeds on the merits. See: 2038724 Ontario Ltd. v. Quizno's Canada Restaurant Corp. 2010 ONSC 5390, at para. 31, leave to appeal to Div. Ct. denied 2011 ONSC 859 (Div. Ct.); Kang v. Sun Life Assurance Company of Canada, 2013 ONSC 4800. In some cases, it may be appropriate to make a hybrid award with some costs payable forthwith and the balance payable in the cause. See 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2011 ONSC 3475
43I also wish to make it clear that I am not making any new law about the exercise of the court’s discretion about costs in the context of a class proceeding. I am attempting to do what the Legislature intended in directing that the normal rules about costs apply. Apart from saying that awarding costs is an activity of exercising discretion in a principled way and that an award of costs should be fair and reasonable in the circumstances, the extent to which the court employs the tools available to it will depend upon the exigencies of each case: Parker v. Pfizer Canada Inc., 2012 ONSC 4643 at para. 14. In my opinion, the appropriate award for this particular class action is costs in the cause.
D. CONCLUSION
Conclusion
44For the above reasons, I order the costs of the certification motion to be in the cause. Neither party should receive costs for their written costs submissions and for the preparation of bills of costs.
Perell, J.
Released: August 9, 2013
CITATION: Fantl v. Transamerica Life Canada, 2013 ONSC 5198
COURT FILE NO.: 06-CV-306061CP
DATE: August 9, 2013
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JOSEPH FANTL
Plaintiff
‑ and ‑
TRANSAMERICA LIFE CANADA
Defendant
REASONS FOR DECISION - COSTS
Perell, J.
Released: August 9, 2013.