COURT FILE AND PARTIES

COURT FILE NO.: 12-CV-453236CP
DATE: November 18, 2013

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

THE TRUSTEES OF THE DRYWALL ACOUSTIC LATHING AND INSULATION LOCAL 675 PENSION FUND and 0793094 B.C. LTD.

Plaintiffs

– and –

SNC GROUP INC., IAN A. BOURNE, DAVID GOLDMAN, PATRICIA A. HAMMICK, PIERRE H. LESSARD, EDYTHE A. MARCOUX, LORNA R. MARSDEN, CLAUDE MONGEAU, GWYN MORGAN, MICHAEL D. PARKER, HUGH D. SEGAL, LAWRENCE N. STEVENSON, GILLES LARAMÉE, MICHAEL NOVAK, PIERRE DUHAIME, RIADH BEN AÏSSA and STÉPHANE ROY

Defendants

A. Dimitri Lascaris for the Plaintiffs

D. Michael Brown and James Hodgson for the Defendants, SNC Group Inc., Ian A. Bourne, David Goldman, Patricia A. Hammick, Pierre H. Lessard, Edythe A. Marcoux, Lorna R. Marsden, Claude Mongeau, Gwyn Morgan, Michael D. Parker, Hugh D. Segal and Lawrence N. Stevenson

Proceeding under the Class Proceedings Act, 1992

HEARD: In writing

PERELL, J.

REASONS FOR DECISION - COSTS

[1] This is a certified class action. In Reasons for Decision reported as The Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund v. SNC Group Inc., 2013 ONSC 6297, I dismissed the Representative Plaintiffs’ motion for the production of documents created in the course of a sanctions procedure initiated by the World Bank against the Defendant SNC Group Inc.

[2] SNC-Lavalin now seeks its costs for successfully resisting the Plaintiffs’ motion. It seeks $35,000 in fees on a partial indemnity scale, plus disbursements of $63,721.66, for a total of $98,721.66, inclusive of H.S.T.

[3] Thus, SNC-Lavalin claims approximately $100,000 for an interlocutory motion in an already certified class action.

[4] SNC-Lavalin submits that it was the successful party on the motion and that with its claim for fees reduced from $44,169.00, its claim for costs is reasonable and within the reasonable expectations of the unsuccessful party.

[5] The Plaintiffs submit, however, that the appropriate disposition is an order of costs to SNC-Lavalin in the cause. In the alternative, the Plaintiffs submit that costs should be $16,500, all inclusive, or, alternatively, $20,000, all inclusive.

[6] In support of an order for costs in the cause, the Plaintiffs rely on the fact that there was no final determination that all of the documents sought by the Plaintiffs on the motion would not be producible. The Plaintiffs point out that SNC-Lavalin is still required to make a determination as to whether the documents it sought are actually subject to settlement privilege. The Plaintiffs submit, therefore, that it is appropriate to wait at least until the completion of discovery to get a full picture of the Defendant’s success on the Plaintiffs’ production motion.

[7] The Plaintiffs concede that its lawyers devoted a similar number of hours to the motion as did SNC-Lavalin’s lawyers. However, the Plaintiffs submit that it does not follow that the time spent by the successful litigant is reasonable for the purposes of costs. Relying on Andersen v St Jude Medical, Inc., 2006 85158 (ON SCDC), [2006] O.J. No. 508 at para. 22 (Div. Ct.), the Plaintiffs submit that the quantum of costs should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant.

[8] The Plaintiffs urge that in the class action context, where excess is the rule rather than the exception, if the reasonable expectations of the unsuccessful party as to costs are tied too closely to the unsuccessful party’s own costs, then costs awards will be out of proportion to costs awards in the non-class action context and that will raise access to justice concerns for plaintiffs.

[9] The Plaintiffs note that SNC-Lavalin has provided no information to justify the reasonableness of its expert witness’s fees. There is no information about the number of hours spent by Mr. Moyer and his hourly rate, or whether he was assisted by other lawyers at his Washington law firm, and, if so, the seniority, hours spent, and hourly rates of those lawyers. And they note that SNC-Lavalin is asking to be indemnified for the cost of an expert whose opinion was found to be of no value in determining the motion. The Plaintiffs submit that SNC-Lavalin should not be entitled to recover any of the claimed expert fees.

[10] Thus, the Plaintiffs submit that if the Court is inclined to award costs, then the quantum should be $16,500, comprising $15,000 in fees and $1,500 in disbursements. Or, the Plaintiffs submit alternatively, there should be a substantial reduction to the claimed expert fees so that the costs award would be $20,000 all inclusive.

[11] SNC-Lavalin submits that my ruling as to the utility of the reports of the expert witness for both sides should not preclude an award for this disbursement. It submits that the reasonableness of a disbursement is judged at the time it is incurred and not by hindsight: Fan (Guardian ad litem of) v. Chana, 2011 BCCA 516 at para. 56. It submits that expert fees reasonably incurred are still recoverable as costs even if the expert’s evidence is never filed or is ultimately ruled inadmissible: Narayah (Guardian ad litem of) v. Djurickovic, 2004 BCSC 341 at paras. 16-21; Nesbitt Aggregates Ltd. v. Smiths Construction Co (Arnprior), [2000] O.J. No. 3307 (S.C.J.) at para. 30; Campney v. Valiant Property, Management, 1997 CarswellOnt 3478 (Gen. Div.) at para. 7.

[12] As appears from the submissions of the parties, there is no dispute that SNC-Lavalin should recover costs on a partial indemnity basis and the matters in issue are whether those costs should be payable immediately or in the cause and whether the quantum of costs should be reduced from almost $100,000, all inclusive to $15,000, all inclusive.

[13] I do not agree with the Plaintiffs’ argument that costs should be in the cause. The Plaintiffs lost their production motion and that they may have some disclosure successes later is not a reason to postpone the licking of their tactical wounds now. That said, I do think that costs should be in the cause, but for different reasons, explained below.

[14] More precisely, I think the appropriate award in this case is to award SNC-Lavalin costs in any event of the cause in the amount of $98,721.66, inclusive of H.S.T. with $25,000 payable forthwith and the balance to be paid either: (a) as a setoff against any future costs awards made against SNC-Lavalin or (b) to SNC-Lavalin should it ultimately be successful in defending the action at trial.

[15] The rationale for this costs award to the defendant SNC-Lavalin in any event of the cause is that it aims at fulfilling more of the manifold purposes of a costs award while having regard to the exigencies of class action litigation, which is typically complex and expensive litigation with claims difficult to prove confronted by vigorous defences.

[16] While I would not express the point the same way as do the Plaintiffs, the Plaintiffs make a pertinent point in their observation that the costs in class proceedings raise access to justice concerns for plaintiffs. I agree, but I would add that access to justice is an entitlement of defendants just as much as it is for plaintiffs and the spiralling costs in class proceedings have become a threat to the viability of the class action regime.

[17] I also would add that some of what has been said in the past by judges about the risks of class actions now needs to be reconsidered on a case-by-case basis. For instance, the risk of a particular kind of class action being certified has changed and continues to change over the years, as the recent Supreme Court of Canada decisions about anti-competitive behaviour class actions demonstrates. And, for example, in the case at bar, in assessing risk, it may be noted that there was a consent certification to what will be a vigorously contested action on its merits. The risk of no certification was low but the risks of the litigation on the merits are high.

[18] The assessment of costs (and of lawyer’s fees) must adapt to a changing and evolving class action regime and every case requires individual treatment.

[19] Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnity successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage and sanction inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements. See: Hamilton-Wentworth (Regional Municipality) v. Hamilton-Wentworth Save the Valley Committee, Inc. (1985), 1985 1957 (ON SC), 51 O.R. (2d) 23 (H.C.J.); Skidmore v. Blackmore (1995), 1995 1537 (BC CA), 122 D.L.R. (4th) 330 (B.C.C.A.); Fellowes, McNeil v. Kansa General International Insurance Co. (1997), 1997 12208 (ON SC), 37 O.R. (3d) 464 (Gen. Div.); Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330 (C.A.); Somers v. Fournier (2002), 2002 45001 (ON CA), 60 O.R. (3d) 225 (C.A.); British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371 (S.C.C.); Benquesus v. Proskauer, Rose LLP, 2005 21097 (ON SC), [2005] O.J. No. 2418 (S.C.J.); 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 2006 35819 (ON CA), 82 O.R. (3d) 757 (C.A.); Reynolds v. Kingston (City) Police Services Board (2007), 2007 ONCA 375, 86 O.R. (3d) 43 (C.A.); Standard Life Assurance Co. v. Elliott (2007), 2007 18579 (ON SC), 86 O.R. (3d) 221 (S.C.J.).

[20] In the case at bar, the Plaintiffs were unsuccessful on their motion and put SNC-Lavalin to an expensive defence to protect a very important and socially useful privilege in the law of evidence, the privilege associated with communications to further settlement of litigation.

[21] Awarding $25,000 in costs payable forthwith with the balance payable later addresses the indemnity purpose of costs, discourages meritless interlocutory motions, and is sensitive to the chill of costs awards on access to justice for the losing party. It also recognizes that this particular class action will be expensive and that all parties will anticipate that their opponents will expend considerable legal resources at every stage of the litigation.

[22] By limiting the amount payable forthwith to about 25% of the costs award, I mean to send the signal that for a post-certification interlocutory motion in a class action, the parties should not expect to immediately recover an indemnity for costs that would be more fairly paid, if at all, once the outcome of the litigation is determined.

[23] In the case at bar, I have made the costs payable to the Defendant SNC-Lavalin in any event of the cause to recognize that the Plaintiffs’ motion was both an unsuccessful motion and, in my opinion, an unreasonable motion to challenge SNC-Lavalin’s right to claim settlement privilege.

[24] I appreciate that under rule 57.03(1), on the hearing of a contested motion, unless the court is satisfied that a different order would be more just, the court shall fix the costs of the motion and order them to be paid within 30 days. This rule by its own terms does not preclude a court from ordering costs in the cause or a hybrid order where a portion of the costs are paid forthwith and the balance in the cause.

[25] Rule 37.03 (1) was introduced to discourage motion activity by making costs immediately payable. However, unfortunately, the rule sometimes has the opposite effect by encouraging motions of a type that would likely not have been brought before rule 37.03 (1) was introduced.

[26] For example, before rule 37.03 (1), a party might forgo challenging a pleading or a procedural step that was irregular, because while its motion might be successful, costs would likely only be ordered in the cause. With the introduction of rule 37.03 (1), it becomes worthwhile to bring the motion in order to impose a costs burden on the opponent. Similarly, with the advent of rule 37.03 (1) sometimes a party will resist a motion when they actually are indifferent to the outcome, because they may be successful in obtaining costs by resisting the motion. I am not suggesting that any of this occurred in the case at bar. I simply make these observations to point out that rule 37.03 (1) should not be slavishly followed and a court should exercise its discretion to make a costs award that is fair and that serves the various purposes of a costs award.

[27] Although, I sigh for the administration of justice in awarding almost $100,000 in costs for what at the end of the day was just an interlocutory motion at the discovery stage of an action, I have not reduced the award because in the current environment of class action litigation, $100,000 is the amount that the Plaintiffs’ likely anticipated would be the costs recovery or costs exposure on what the Plaintiffs regarded as a very important motion, as evidenced by their own substantial marshalling of resources for the motion, which included lengthy factums and a record of about 400 pages.

[28] Although the Plaintiffs challenged the cost of SNC-Lavalin’s expert witness, the stimulus for any expert evidence testimony was the Plaintiffs, and they have not disclosed what they paid to their own expert, probably because it was greater than what SNC-Lavalin paid.

[29] In all the circumstances, I think that it is fair that both parties will have to pay their expert’s fees now, with SNC-Lavalin’s indemnification for this disbursement coming later in the cause and with no indemnity to the Plaintiffs for this cost of the litigation.

[30] Thus, I award SNC-Lavalin $98,721.66, inclusive of H.S.T. with $25,000 payable forthwith and the balance to be paid either: (a) as a setoff against any future costs awards made against SNC-Lavalin or (b) to SNC-Lavalin should it ultimately be successful in defending the action at trial.

[31] Order accordingly.

Perell, J.

Released: November 18, 2013

COURT FILE NO.: 12-CV-453236CP

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

THE TRUSTEES OF THE DRYWALL ACOUSTIC LATHING AND INSULATION LOCAL 675 PENSION FUND and 0793094 B.C. LTD.

Plaintiffs

‑ and ‑

SNC GROUP INC., IAN A. BOURNE, DAVID GOLDMAN, PATRICIA A. HAMMICK, PIERRE H. LESSARD, EDYTHE A. MARCOUX, LORNA R. MARSDEN, CLAUDE MONGEAU, GWYN MORGAN, MICHAEL D. PARKER, HUGH D. SEGAL, LAWRENCE N. STEVENSON, GILLES LARAMÉE, MICHAEL NOVAK, PIERRE DUHAIME, RIADH BEN AÏSSA and STÉPHANE ROY.

Defendants

REASONS FOR DECISION - COSTS

Perell, J.

Released: November 18, 2013.