Court File and Parties

COURT FILE NO.: CV-12-452867-CP
DATE: 20131113
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Celia Sankar / Moving Party / Plaintiff

AND:

Bell Mobility Inc. and Bell Canada Enterprises Inc., Responding Parties / Defendants

Proceeding under the Class Proceedings Act, 1992

BEFORE: Justice Edward Belobaba

COUNSEL:
Louis Sokolov, Jean-Marc Leclerc and Nadine Blum for the Moving Party
Steve Tenai, Jeremy Devereux and Jennifer Teskey for the Responding Parties

HEARD: May 21, 22 and 23, 2013

costs award

Introduction

[1] Over the past several months, I have released five certification decisions 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 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, 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 have been more complicated and necessarily justified 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. In my view, there would be more value in knowing 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 constraint) 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 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 or 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] I heard this certification motion in May, 2013. The plaintiff, Celia Sankar, asked that a class action be certified on behalf of more than one million Ontarians who had purchased Bell Mobility pre-paid phone cards and then lost their unused credit balances when the defendant “prematurely” seized these funds allegedly in breach of the terms of service and provincial consumer protection regulations. In reasons released on October 4, 2013, I certified this proceeding as a class action. I added a sub-class of “consumers” and certified five of the seven proposed common issues, albeit with some qualifications.[10]

[9] This was not a document-heavy certification motion. The plaintiff filed only one affidavit, there were no expert reports and cross-examinations were completed in less than one day. Nonetheless, it was a relatively complex motion. There were many possible permutations in the “forfeiture” analysis and the size and number of written submissions was substantial. Overall, I would have described this particular certification motion as one of above-average difficulty. I was therefore pleasantly surprised when I received the plaintiff’s costs outline.

[10] The plaintiff asked for $204,304 on a partial indemnity basis, $195,718 for fees and $8586 for disbursements (taxes included.) The only troublesome aspect in this costs request was the novel assertion that partial indemnity costs are now being routinely calculated as 60% of actual costs. In other words, if a lawyer is actually billing $1000 an hour (and some in Toronto have already reached this plateau), he or she could legitimately ask for $600 per hour on a partial indemnity basis. In my view, this would be absurd. Like most Ontario judges, I have long based my partial indemnity calculations on the Rules Committee’s Notice to the Profession. The suggested hourly rates contained therein are well-known to lawyers: up to $225 for under-ten year calls; up to $300 for ten to twenty-year calls; and a maximum of $350 for over-twenty year calls – with appropriate subdivisions reflecting the actual year of call. Until such time as this directive is modified or withdrawn, or declared out-of-date by the Court of Appeal, I will continue to follow and apply the Rules Committee’s hourly rate guidelines.

[11] The defendant does not challenge the hourly rates per se, but argues for a costs award of $75,000 because success was divided. The defendant did prevail on the unfair sales practice and aggregate damages issues – neither was certified. However, the unfair sales practice issue did not consume much time or energy. Indeed, it was raised for the first time during the second day of the certification hearing and consisted of three sentences in a written submission that was filed with the court. The argument on the aggregate damages issue was also of moderate scope and content. I cannot in good faith conclude in the overall that success was divided. I agree with the plaintiff that the certified case against Bell Mobility is every bit as large as the one pleaded in the statement of claim. The plaintiff is entitled to her costs on partial indemnity basis.

[12] 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 will try to do so by following the template set out above.

[13] Hourly-rate compliance. 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. For example, and using the lawyer’s initials from the plaintiff’s costs outline, JL should be charging $350 not $450; JML $250 not $360; NB $200 not $270; CD $170 not $240; BP and RN $60 not $120; and TB and TA $80 not $120. The overall “overcharge” is $43,879. The requested $195,718 in fees is therefore reduced to $151,839. (I will ignore the taxes.)

[14] Obvious excesses. The only obvious excess is the $382 charge for “legal research.” The disbursements request is therefore reduced to $8204. The total fees and disbursements claim (as adjusted) is now $160,043.

[15] Closely comparable costs awards. The plaintiff pointed to the costs awarded in what she describes as four comparable cases. However, the defendant distinguished each of these awards and did so in a convincing fashion. In short, the “closely comparable costs awards” comparison was not very helpful.

[16] Historical averages. Over the last six years, in cases where the plaintiff claimed less than $500,000 (here the amount is $160,043 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 about $110,430. The overall average award (for claims under $500,000) has been $163,000 or about 59% of the amount sought. Applying the latter percentage herein, the award here would be $94,425. The historical data therefore suggests that the appropriate range may be somewhere between a low of $94,425 and a high (the amount requested, as adjusted) of $160,043. I hasten to add that this “range” is not determinative – it is just another piece of information to add to the mix.

[17] Final review. Standing back and considering the factors under Rule 57.01(1), the admonitions of the Court of Appeal about making sure that the costs award is fair and reasonable to the losing party, the current and historical comparisons as set out above and the reduction needed to reflect some measure of divided success, I find it fair and reasonable to fix the costs at $150,000 all-inclusive.

[18] Order to go fixing costs at $150,000 payable forthwith by the defendant Bell Mobility to the plaintiff. 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 13, 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 forthwith and $150,000 payable to him in the cause.

[10] Sankar v Bell Mobility, supra, note 1.