Court File and Parties
Court File No. 97-CV-135179 CP
Date: 20130903
RE: Berry et al v. Pulley et al
BEFORE: Pepall J.
COUNSEL:
Peter Merchant, for the Plaintiffs, Berry et al
Steve Waller and Dougald Brown for the Defendants, Pulley et al Brian Shell for the Third Party Defendant, Kent Hardisty
COSTS ENDORSEMENT
Background
[1] This action was commenced in 1997, certified as a class proceeding in 2001, and tried in 2011. The Plaintiff class consisted of 171 Air Ontario pilots, five of whom were appointed as representative Plaintiffs. The Defendant class consisted of approximately 1,617 Air Canada pilots. The Plaintiffs alleged that members of the Defendant class and seven sub-classes committed the torts of conspiracy, intentional interference with economic interests, and negligent misrepresentation. They also alleged that the Defendant class owed a fiduciary duty to the members of the Plaintiff class and that that duty was breached.
[2] Judgement was rendered in 2012. The Defendants were successful in resisting the Plaintiffs’ action. The Defendants now claim costs of $1.5 million dollars. The Plaintiffs resist this claim. The Third Party Defendant takes no position.
Defendants’ Submissions
[3] The Defendants submit that their requested cost award of $1.5 million is reasonable. They advance numerous arguments in support of their position.
The Defendants were successful in the action and are therefore entitled to their costs on a partial indemnity scale.
Relying on the principle of indemnity, they submit that their actual costs were $2,026,880.46 and that the staffing, the hours spent, and the hourly rates were all reasonable.
Given that the Plaintiffs were unsuccessful, their reasonable expectation was that they would be responsible for a substantial costs award.
The Defendants made three offers to settle in writing:
(i) on June 26, 2007, they offered to have the action dismissed without costs;
(ii) on August 15, 2010, they offered to pay $300,000, such offer being open for acceptance until August 18, 2010; and
(iii) on August 23, 2010, they offered to pay $150,000, such offer being open for acceptance until after the commencement of the trial.
The amounts in issue were significant. The expert called by the Plaintiffs calculated loss of earnings damages of between $138 million and $172 million and negligent misrepresentation damages of $150,000. At trial, the Plaintiffs recovered nothing.
The proceeding was unique and complex with over 1600 Defendant subclass members; 12 representative Defendants; a factual matrix spanning many years; individual and related legal proceedings; in excess of 23 common issues; numerous documents including 12,000 documents in electronic format and 43 volumes of documents filed in evidence; about 42 days of examinations for discovery and extensive undertakings and answers to undertakings. The Defendants described the Plaintiffs’ claims as being “outside the mainstream in that they involve the application of economic torts in the context of labour relations, trade unions and collective bargaining. The economic torts relied on by the Plaintiffs, while not novel, have in recent years been subject to considerable doctrinal development in the courts in Canada and elsewhere.”
The case was a private dispute and important to the Defendant class members who faced potential financial ruin if the Plaintiffs were to succeed.
The Plaintiffs’ conduct served to lengthen the proceeding. With the exception of the claim for negligent misrepresentation, all causes of action were dependent on causation yet the plaintiffs knew years before the trial of Hollis Harris’ anticipated evidence addressing this issue. The Defendants submit that virtually all steps the Plaintiffs took since Mr. Harris’ examination in 2003-2004 were unnecessary. The negligent misrepresentation claim was also imprudent and proceeded in the face of known weaknesses at the heart of the Plaintiffs’ case.
Lastly, the Defendants submit that the proceeding was not a test case nor was it concerned with novel law; rather it involved the application of established economic torts, “albeit in an unusual context”. The proceeding also did not involve a matter of public interest, but was a private dispute between two groups of wage-earners reflecting no imbalance of power. The Defendants argue that the Plaintiff class was far from a vulnerable group. The Plaintiffs’ goal was not to redress any social injustice but rather to appropriate the financial benefits of the Defendants’ careers.
Plaintiffs’ Submissions
[4] The Plaintiffs respond with extensive and rather prolix submissions. Not surprisingly, they disagree with the Defendants’ cost request.
[5] They divide their submissions under three headings: alleged misstatements of facts and arguments by the Defendants; an analysis of the amounts claimed; and the suggested appropriate disposition. Given my conclusion, I only propose to encapsulate their submissions under this last heading.
[6] Firstly, the Plaintiffs submit that ACPA funded the defence, not the Defendants. As such, the Defendants should not be entitled to costs.
[7] Secondly, the Plaintiffs argue that the action raised matters of public interest and/or novel points of law. They claim that the issues at the heart of the litigation were whether officers of a union could breach their obligations as union officers at the direction of their members, and whether a right of dissent permitted those members to communicate with management and included a right to direct union officers to contravene a union constitution and policies. The case already had a profound impact on the law on the issue of the relationship between a union and its members.
[8] Furthermore, this was the first class action lawsuit that involved certification of a defendant class which raised both procedural and substantive implications and was also the first Canadian class action involving a defendant class that proceeded to trial.
[9] Thirdly, the Plaintiffs challenge the Defendants’ cost request on the basis of my findings of wrongful conduct by the Defendants and their “resistive tactics” in the defence of the action which are described in detail at pp. 42-54 of their written cost submissions.
[10] The Plaintiffs state that their actual fees billed and paid by the Plaintiffs not including disbursements and taxes amount to $1,632,391.24 of which approximately 50% was the subject of prior cost awards.
[11] The Plaintiffs submit that if I determine that the Defendants should receive costs, an appropriate award is $446,177.60, plus allowable disbursements and applicable taxes. Production by the Defendants of supporting documents and detail is lacking according to the Plaintiffs. For example, the Defendants have not totalled the time attributable to matters covered by earlier cost dispositions.
[12] The Plaintiffs also take issue with many of the disbursements claimed and state that if awarded, a reasonable amount for disbursements is $31,609.97.
[13] Accordingly, if costs are awarded to the Defendants, the Plaintiffs submit that reasonable costs and disbursements amount to $477,787.57 inclusive of HST.
Applicable Principles
[14] Although well known, section 131 of the Courts of Justice Act bears repeating. It provides that:
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.
[15] When costs are awarded, they are to be fixed in accordance with Rule 57.01(1) and the Tariffs. Rule 57.01(1) provides that in exercising its discretion, in addition to the result in the proceeding and any offer to settle or to contribute made in writing, the court may consider an enumerated list of factors. These factors include: the principle of indemnity; the reasonable expectations of the unsuccessful party; the amount claimed and recovered; the complexity of the proceeding; the importance of the issues; the conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding; whether any step was improper, vexatious or unnecessary or taken through negligence, mistake or excessive caution; and a party’s denial of or refusal to admit anything that should have been admitted. Lastly, Rule 57.01 (1) provides that any other matter relevant to the question of costs may be considered by the court.
[16] Rule 57.01(4) states that nothing in the rule affects the authority of the court to award or refuse costs in respect of a particular issue or part of a proceeding. Rule 57.01(2) states that the fact that the party is successful in the proceeding or a step in a proceeding does not prevent the court from awarding costs against the party in a proper case.
[17] There are also specific rules that apply to class proceedings.
[18] Firstly, s. 31(2) of the Class Proceedings Act, 1992, S.O. 1992, c.6 (the “CPA”) provides that class members, other than the representative parties, are not liable for costs except with respect to the determination of their own individual claims.
[19] Secondly, s. 31(1) of that Act provides that:
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.
[20] Although not provided to me by either counsel, in Ruffolo v. Sun Life Assurance Company of Canada, 2009 ONCA 274, the Court of Appeal considered the principles governing an award of costs against an unsuccessful plaintiff in a class proceeding including the application of s. 31(1) of the CPA. At para. 29, Blair J.A. wrote:
In short, s. 131 of the Courts of Justice Act (and its companion, rule 57.01) continue to apply to the determination of costs in class proceedings. In such proceedings, however, the court will look to see whether any of the s. 31(1) factors apply – a test case, a novel point of law, a matter of public interest – and, if they do, will give them significance in the course of exercising its discretion in determining costs.
[21] Moreover, as noted in that decision, s. 31(1) should be considered in light of the trio of goals underpinning the CPA: access to justice; behavior modification; and judicial economy. There is no general rule that the presence of one or more of the s. 31(1) factors must result in an order of no costs; rather, they are factors to consider. For instance, in Kerr v. Danier Leather Inc., 2007 SCC 44, [2007] 3 S.C.R. 331 Binnie J. stated at para. 69, “it should not be assumed that class proceedings invariably engage access to justice concerns to an extent sufficient to justify withholding costs from the successful party.”
[22] In Drady v. Canada (Attorney General), [2008] O.J. No. 238, Cullity J. stated that “it is almost unheard of…for there to be no agreement, or understanding, between plaintiffs and class counsel in respect of the payment of costs if the action is unsuccessful.” In “Consumer (In)justice: Reflections on Canadian Consumer Class Actions”, 50 CBLJ (2010) 356 at 373, Jasminka Kalajdzic writes: “The extent to which representative plaintiffs personally pay adverse costs awards is not known with any precision. Anecdotally, it appears that class counsel often indemnify their clients against adverse costs.”[1]
[23] Ordinarily, costs follow the event. As stated by the Court of Appeal in Ontario Realty Corp. v. P. Gabriele & Sons Ltd., [2010] O.J. No. 4166 at para. 7:
Normally, there are costs consequences to a party where its action is dismissed. The purpose of the spectre of costs consequences is to focus litigants on the costs of the litigation to all parties, and to ensure that litigants act responsibly in bringing and pursuing actions, which are costly for any party involved. Similarly, the Rules regarding the cost consequences of offers to settle have the same purpose: to focus litigants on the need to settle as early as possible, if possible, with cost consequences for failure to accept a reasonable offer.
[24] In that case, the trial judge had declined to award costs to a successful defendant against whom numerous claims for fraud and other malfeasance had been withdrawn at various times during the course of the trial. He had found the defendant’s involvement in some of the transactions to be “troubling” and negligent and the defendant had also agreed to two “unjustified price reductions”. In addressing the trial judge’s cost disposition, the Court of Appeal stated, at para. 10 of its reasons, that the trial judge was entitled to include as a factor the conduct of the defendant on the impugned transactions. However, the Court set aside the cost award as the trial judge had failed to view the defendant as prima facie entitled to costs and also had failed to advert to the offers to settle made by the defendant.
[25] The principle of costs following the event also applies to class proceedings: Pearson v. Inco Ltd. (2006), 2006 7666 (ON CA), 79 O.R. (3d) 427 (C.A.) at para. 13 and Ruffolo at para. 34. In a similar vein, the principles relating to offers to settle should also apply to class proceedings.
Analysis
[26] Dealing firstly with the factors identified in s. 31(1) of the CPA, this was not a test case nor in my view, did it involve a matter of public interest. As Perell J. stated in Sorbara v. Canada (AG), (2009), 2009 6629 at para 14, virtually every class action has some aspects or attributes upon which it becomes arguable that the class proceeding is in the public interest. In substance, however, this action engaged the private commercial interests of two competing groups of pilots.
[27] The next issue to consider is whether the action raised a novel point of law.
[28] According to the Plaintiffs, this was the first class action in Ontario that involved the certification of a defendant class and the first class proceeding involving a defendant class to proceed to trial. I accept that this factual context resulted in ancillary novelties. Indeed, in their costs submissions, the Defendants themselves described the action as being “unique”. Perell J. in his reasons on a motion in the action stated:
This is a rare class action where there is a plaintiff class, seven defendant subclasses, and a representative-nominal Third Party, which is defending the main action. As representative actions go, this is the very rare complete package. All the active litigants act on behalf of or represent others. The individual litigants represent collectives.
[29] The unique procedural nature of the action was sometimes reflected in the cost awards in the various procedural motions which cost awards were not apparently claimed in the defendants’ costs request. I say apparently because it is very difficult if not impossible to ascertain the appropriate allocation of costs for those various motions based on the approximately 400 pages of dockets produced by Defendants’ counsel, which were not organized in any meaningful fashion. To quote from the affidavit attaching their dockets filed by the Defendants in support of their costs request: “…the marks on these dockets indicate time incorporated, or not, into the Bill of Costs.”
[30] The action certainly engaged some novel points of law. As the Plaintiffs submit, as originally cast, this action has already had a profound impact on the law in Canada. This resulted from the Supreme Court of Canada’s decision in this case on the summary judgement motion dealing with the relationships amongst the union, the union constitution, its members and officers. That said, the costs associated with that determination have already been addressed by the courts.
[31] At trial, the parties did not differ on the constituent elements of each of the four causes of action advanced by the Plaintiffs but differed on the application of the law to the facts. In this sense, it cannot be said that the action raised a novel point of law. While the procedural novelties may have a bearing on a costs award, I am not persuaded that the action can be said to have raised a novel point of law for the purposes of invoking the application of s. 31(1) of the CPA.
[32] Turning then to my disposition on costs, in spite of my conclusion relating to s. 31(1) of the CPA, in my view, an award that the Defendants bear their own cost is fair and reasonable in the circumstances of this case. In making such a determination, I recognize that the Defendants were successful and therefore costs would ordinarily follow that event. I am also mindful of the offers to settle made by the Defendants and the other submissions advanced by the Defendants which favour their position on costs.
[33] Nonetheless, while I ultimately found in favour of the Defendants, I consider the Defendants’ conduct in their dealings with the Plaintiffs to have been shabby and high-handed. I do not propose to repeat all of the findings that I made in my lengthy decision. That said, I do observe that having committed to a merger of pilot seniority lists and binding arbitration, the Defendants nonetheless worked to prevent the implementation of the arbitral award and the attendant list. I also note my finding of unlawful conduct by Defendant subclasses 1, 3 and 5 at paras. 409 to 431 of my reasons for decision. I do not view this cost disposition as a distributive cost order. Rather, in my view, the Defendants are not deserving of a cost award in their favour.
[34] I did consider whether different cost treatments should be accorded to the various Defendant sub-classes but decline to do so. No submissions were made in this regard nor was there any breakdown provided in this respect. Moreover, I believe that the Defendant class should be treated as a whole for the purposes of this cost disposition. I am satisfied that the Defendants should bear their own costs. In my view, this is a very fair and a reasonable disposition.
[35] Given this decision, it is unnecessary to address the Plaintiffs’ arguments relating to ACPA, the Defendants’ alleged “resistive tactics” in the litigation, and quantum.
[36] I attach a form of judgment consented to by the parties but amended by me and which now incorporates a provision that the Plaintiffs and the Defendants are to bear their own costs. The draft order has been initialled by me and may be signed, issued and entered.
Pepall J.
Released: September 3, 2013
[^1]: Information on this issue was not provided to me by counsel in their cost submissions in this case.