Ontario Superior Court of Justice
COURT FILE NO.: CV- 10-396685CP
DATE: 20131108
ONTARIO
SUPERIOR COURT OF JUSTICE
Proceeding under the Class Proceedings Act, 1992
BETWEEN:
Yegal Rosen
Plaintiff
– and –
BMO Nesbitt Burns Inc.
Defendant
Jonathan Ptak, Jody Brown and Eli Karp for the Plaintiff
Peter Griffin, Monique Jilesen and Hugh Christie for the Defendant
HEARD: February 12 and 13; April 5, 2013
costs award
Justice Edward Belobaba
Introduction
[1] Over the past several months, I have released five decisions certifying proceedings as class actions that now require costs awards.[^1] Normally, costs awards are routine and can be easily adjudicated. Not so in the world of certification motions. Here, excess appears to be the norm in every aspect of the proceeding – in the amount of time spent by legal counsel, the volume of material filed with the court, the number of days scheduled for the oral hearing and the over-litigation of most issues. No wonder, then, that the costs that are typically sought by the successful party are in the hundreds of thousands of dollars. No wonder, also, that the number of class actions on an annual basis is declining. Access to justice, even in the very area that was specifically designed to achieve this goal, is becoming too expensive.
[2] Most members of the class action bar, whether acting for plaintiffs or defendants, agree that a “no costs” rule would be much more sensible. Like them, I also wish that the recommendations on costs as set out in the Ontario Law Reform Commission’s Report on Class Actions[^2] had been accepted. Instead, the provincial legislature decided to adopt the views of the Attorney-General’s Advisory Committee[^3] and continue the “costs follow the event” convention for the very different world of class actions as well. I was a member of that Advisory Committee. I now realize that I was wrong and that the OLRC was right. I understand that the provincial Law Commission is undertaking a review of the Class Proceedings Act,[^4] including the costs provisions. Hopefully, our mistake will be corrected.
[3] In the meantime, costs will continue to be awarded to the successful party on a certification motion and judges will continue to explain or try to explain their decision. Given the large costs claims and the subjectivity of the required analysis – recall the Rule 57.01(1) factors and the admonition of the Court of Appeal that costs awards should reflect what would be fair and reasonable to the losing party –many of the cost award decisions, although wordy, use unreliable metrics and are analytically unclear. In my view, more transparency is needed.
[4] For my part, I want to make clear how I will approach and determine costs awards in certification motions, now and in the future. I will, of course, continue to consider and apply the factors set out in Rule 57.01(1) and the various (and obviously binding) directions of the Court of Appeal. But the Rule 57.01(1) factors and the Court of Appeal directions can only take you so far. Consider, for example, the directions of the Court of Appeal that were provided in Pearson v Inco. [^5] I have taken the liberty of juxtaposing these directions with my commentary that is added in italics.
(i) 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.
I understand this direction. Class actions often involve claims in the many millions of dollars and will therefore be rigorously prosecuted and defended. It follows from this that the costs awards (even on a partial indemnity basis) will be substantial.
(ii) The costs must reflect what is fair and reasonable; and the costs expectations of the parties can be determined by the amount of costs that an unsuccessful party could reasonably expect to pay.
I understand this as well. My difficulty on certification motions, where the amounts being sought by the successful party are so large, is deciding what the unsuccessful party should reasonably expect to pay. It would be of some assistance to know what losing parties have been required to pay on average over the last five or ten years. It would also be of some assistance to know the average percentage that these awards reflect, expressed as the amount awarded divided by the amount sought. In this way, I would be better able to decide what the unsuccessful party could reasonably expect to pay.
(iii) The costs should, if possible, reflect costs awards made in closely comparable cases, recognizing that comparisons will rarely provide firm guidance.
Here again, a sensible direction, at least on its face. The difficulty stems from the fact that the metrics involved in assessing “closely comparable cases” are not always reliable. For example, in comparing costs awards, some judges assume that a certification motion that required three or four days of hearing must be more complicated and necessarily justifies a higher costs award than one that was completed in just one or two days. The reality, however, is that a growing number of judges (myself included) spend many hours in advance of the scheduled hearing date, carefully reviewing the material and the (lengthy) written submissions and therefore require only a day or two in court. Same complicated motion: very different use of court time. Thus, the “days in court” metric can be completely unreliable. Add to this, the Court of Appeal’s caution (above) that comparisons with closely comparable cases “will rarely provide firm guidance” and the third direction loses much of its value. For my part, I would find more value in knowing what costs were awarded in “roughly” comparable cases – in particular, the average costs awards and average percentages awarded. This kind of information, as I have already noted, would be of assistance in helping me decide what amount the losing party should reasonably be expected to pay.
(iv) A fundamental object of the Class Proceedings Act is to provide enhanced access to justice.[^6]
This direction contains a very important reminder. If class actions are to survive and provide enhanced access to justice, the costs awards on certification motions should not work to undermine this fundamental objective. They should not price the class proceeding out of existence. That is why it is important, in addition to the s. 57.01(1) factors, to consider the costs awards made to date and the proportionality between amounts sought and amounts awarded. This historical information would provide some measure of predictability and thus help ensure the continued viability of class proceedings.
[5] In an effort to further the ‘access to justice’ objective and make my own decision-making process more transparent and predictable, I will adopt the following procedure in deciding costs awards in conventional certification motions – that is, in certification motions that do not fall within s. 31 of the CPA (i.e. test cases, novel points of law or matters of public interest):
➢ I will generally be content with costs outlines certified by counsel. I will not require either side to submit actual dockets. If they wish to do so, that is up to them.
➢ I will (briefly) review the certified costs outlines to ensure that the hourly rates being charged by counsel fall within the range set out by the Rules Committee in its Information to the Profession.
➢ I will also review the costs outline for any obvious excesses in fees or disbursements.[^7] Apart from any obvious excesses, I will accept the costs outline as is. I will not drill down into any of the detail.
➢ If the unsuccessful party wants to argue unreasonableness (beyond hourly-rate compliance or obvious excesses) it should submit its own certified costs outline showing what it actually spent (on a partial indemnity scale) on the certification motion. If a parallel costs outline is not submitted by the unsuccessful party (and none is required) I will probably conclude that the amount being requested by the successful party is not unreasonable.
➢ I will consider seriously historical costs awards in similar cases. Such comparisons can never be determinative but, as I have already noted, they provide useful guideline as to what amounts or percentages have been awarded in the past. As it happens, I have reviewed the costs awards in certification motions over the last six years[^8] and I will make use of the following information:
Costs Awards Over the Last Six Years
I. Where the costs sought were under $500,000
Average Award
(including fees and disbursements)
Percentage
amount awarded / amount sought
For Plaintiff
$169,250
63%
For Defendant
$148,870
50%
Overall
$163,000
59%
II. Where the costs sought were over $500,000
Average Award
(including fees and disbursements)
Percentage
amount awarded / amount sought
For Plaintiff
$496,118
62%
For Defendant
$341,000
39%
Overall
$388,728
46%
➢ For example, where the costs sought were less than $500,000, the average all-inclusive award for the successful defendant was $148,870; and where the costs sought were more than $500,000, it was $341,000. Would this information be of some assistance to the court in deciding what the losing defendant should reasonably be expected to pay? I think it would be.
➢ As I conclude my costs review, I will stand back and reassess the amount that is before me (after the reductions and removals of any excesses). I will again review the factors set out in Rule 57.01(1), the admonitions of the Court of Appeal, and the historical costs awards data as set out above, and come to a final amount that, in my view, is fair and reasonable to both sides, always remembering that the fundamental objective of the Class Proceedings Act is access to justice.
➢ In cases where the final fees or disbursement amount is dramatically above the norm, I will consider making a costs award in two parts: a portion that is payable immediately and a further portion that is payable in the cause.[^9]
[6] I don’t know how this approach will play out. It will likely result in lower than expected costs awards. But if it also results in leaner and more focused certification motions, a greater measure of predictability for the participants, and in the overall, the continuing viability of the class action vehicle, that is all to the good.
[7] I now turn to the costs award herein.
Analysis
[8] In a decision released on August 20, 2013, I certified this “unpaid overtime” case as a class action. The plaintiff says this is the first misclassification action involving investment advisors that has been certified as a class proceeding.
[9] The certification motion was relatively complex requiring a fairly nuanced factual and legal analysis. The amount of material filed by the parties was voluminous – lengthy factums, a total of 34 affidavits, seven expert reports and many pages of cross-examination. I was therefore not surprised when the plaintiff submitted a costs outline seeking $575,000 in costs on a partial indemnity basis.
[10] The plaintiff points out that the legal fees that were actually incurred (on a partial indemnity basis) were $609,951 and the disbursements $74,878 for a total of $684,829. However, as already noted, the plaintiff would be content with $575,000. The defendant submits that the costs award should not exceed $315,000.
[11] As I explained in the introductory portion of these reasons, it is important to restore some measure of transparency and predictability to certification-motion costs awards, at least to the costs awards that I must decide. I propose to do so by following the template set out above.
[12] Hourly-rate compliance. I note that the hourly-rates being charged by the plaintiff’s legal team do not accord with the rates set out in the Rules Committee’s Information to the Profession. The defendant correctly documents this excess and suggests that a reduction of some $88,000 is needed to bring the hourly-rate charges in line with the well-known “grid.”[^10] I agree with the defendant. However, this reduction is already absorbed in the plaintiff’s decision to decrease its “actual” all-inclusive amount of $684,829 to $575,000.
[13] Obvious excesses. Given that the aggregated damages issue was not certified, I agree with the defendant that the fees and charges relating to the Drogin, Becker, Corgin and Lowe reports should be excluded - in all about $58,572. I also agree that some of the fees charged by Messrs. Baert, Karp and Juroviesky should also be excluded for the reasons advanced by the defendant. The defendant suggests a reduction of $112,532; I would reduce the quantum by half that – about $56,266. This means that the original $575,000 has now been reduced by $114,838 to $460,162. The only other obvious excess is the claim for “online searches” (legal research) in the amount of $3397. This would reduce the original $575,000 to $456,765. The other criticisms levelled by the defendant about the “unreasonableness” of the plaintiff’s costs outline would have been more persuasive if the defendant had filed its own costs outline documenting the costs that it had incurred.
[14] Closely comparable costs awards. The plaintiff points to the costs awarded in three other “overtime” cases,[^11] ranging from a low of $475,000 to a high of $620,000. There is some value in these “comparable” costs awards, to be sure, but the sample size is extremely small – only two of the awards were adjudicated; the third (Fulawka) was on consent. In my view, it makes more sense to include in the comparison base not only the “overtime” cases but all relatively complex certification motions. If we do the latter, then one finds costs awards in the $325,000 to $400,000 range.[^12]
[15] Historical averages. Over the last six years, in cases where the plaintiff claimed less than $500,000 (as here, namely $456,765 as adjusted) the plaintiff was awarded on average $169,250 or about 69 percent of the amount requested. If this percentage was applied here, the plaintiff would recover $315,167 – pretty much what the defendant has suggested. I note from the “historical averages” chart that the overall average award (for claims under $500,000) has been $163,000 or about 59% of the amount sought. Applying this percentage herein, the award here would be $269,491. The historical data suggests that the correct costs award may be somewhere between $269,491 and $315,167.
[16] Final review. Standing back and considering again the factors under Rule 57.01(1) (especially the complexity of the proceeding), the various admonitions of the Court of Appeal about making sure that the costs award is fair and reasonable to the losing party, and the current and historical comparisons as set out above, I find it fair and reasonable to fix the costs at $290,000 all-inclusive.
[17] Order to go fixing costs at $290,000 payable forthwith by the defendant BMO Nesbitt Burns to the plaintiff Yegal Rosen. Class counsel will understand that all costs awards paid to counsel must be taken into account in the final calculation and approval of any legal fees.
Belobaba J.
Date: November 8, 2013
[^1]: Dugal v Manulife Financial, 2013 ONSC 4083; Rosen v BMO Nesbitt Burns, 2013 ONSC 2144; Crisante v DePuy Orthopaedics, 2013 ONSC 5186; Brown v. Canada (Attorney General) 2013 ONSC 5637; and Sankar v Bell Mobility, 2013 ONSC 5916.
[^2]: Ontario Law Reform Commission, Report on Class Actions, (Toronto: Ministry of the Attorney General, 1982).
[^3]: Report of the Attorney General’s Advisory Committee on Class Action Reform, (Toronto: Ministry of the Attorney General, 1990).
[^4]: S.O. 1992, c. 6.
[^5]: Pearson v Inco Ltd., 2006 7666 (ON CA), [2006] O.J. No. 991 (C.A.)
[^6]: Ibid., at para. 13.
[^7]: An obvious fees-related excess: too many counsel at the cross-examinations or at the hearing. An obvious disbursement excess: charging for “legal research.” In my view, lawyers (who are already billing very high, monopoly-based, hourly rates for their legal knowledge) should not be charging for “legal research.” Customers should not have to pay anyone who charges by the hour, whether lawyers or plumbers, to learn on the job. Legal research is obviously essential, but it should not be a chargeable disbursement.
[^8]: I acknowledge the work of counsel for DePuy in Crisante v DePuy, supra, note 1, who provided me with a a very useful costs chart showing amounts sought and amounts awarded in certification motions since May, 2007. I edited this down to 36 contested costs awards - 20 awarding costs to the plaintiffs and 16 awarding costs to the defendants. I divided the awards into two categories based on the amounts sought (fees plus disbursements): Category One – amounts sought under $500,000 (23 awards, 16 for the plaintiffs and 7 for the defendants) and Category Two – amounts sought over $500,000 (13 awards, 4 for the plaintiff and 9 for the defendant.) I then calculated the average award and average percentage (amount awarded divided by amount sought) in the two categories, for plaintiffs, defendants and overall. The results are set out above. (I remind the reader that the amounts include fees and disbursements.) I acknowledge the statistical deficiencies, but I nonetheless find the information to be of some assistance.
[^9]: See, for example, Lipson v Cassels, Brock & Blackwell, 2013 ONSC 6450 at para. 29. Justice Perell awarded the plaintiff $298,582 in costs - $148,582 payable to him forthwith and $150,000 payable to him in the cause.
[^10]: Under the Rules Committee’s costs-grid, senior counsel Baert should be assigned, a most, a $350 hourly rate (not $554); intermediate counsel Ptak about $225 (not $313 to $363) and junior counsel Rosenfeld about $200 (not $264).
[^11]: McCracken v. Canadian National Railway Co, 2012 ONSC 6838; Fresco v. CIBC, 2012 ONSC 1036; and Fulawka v. Bank of Nova Scotia, 2012 ONCA 443.
[^12]: Cannon v. Funds for Canada Foundation, 2012 ONSC 3009; Singer v. Schering-Plough Canada Inc., 2010 ONSC 1737; and Toronto Community Housing Corporation v. Thyssenkrupp Elevator (Canada) Limited, 2011 ONSC 7588.