CITATION: 1146845 Ontario Inc. v. Pillar to Post Inc., 2015 ONSC 1115
COURT FILE NO.: CV-12-450503-00CP
DATE: 20150219
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1146845 ONTARIO INC., 1634481 ONTARIO INC. and J.P. CLEGHORN PROFESSIONAL PROPERTY INSPECTION SERVICES INC.
Plaintiffs
– and –
PILLAR TO POST INC., D.R. STEWARD, also known as DAN STEWARD and KIM CLARKE
Defendants
Jill M. Knudsen for the Plaintiffs
Gerald L.R. Ranking and Zohaib I. Maladwala for the Defendants Pillar to Post Inc. and Dan Steward
Paul Emerson for the Defendant Kim Clarke
Proceeding under the Class Proceedings Act, 1992
HEARD: In writing
PERELL, J.
REASONS FOR DECISION - COSTS
[1] The Plaintiffs 1146845 Ontario Inc. (“Radomski’s Franchise”), 1634481 Ontario Inc. (“Clermont’s Franchise”), and J.P. Cleghorn Professional Property Inspection Services Inc. (“Cleghorn’s Franchise”) are franchisees. They brought a proposed class action under the Class Proceedings Act, 1992, S.O. 1992, c. 6. Their claim was for $25 million in general damages and an additional $400,000 in damages for each franchisee in the proposed class of franchisees.
[2] Relying on an arbitration clause in the franchise agreement, the Defendant Pillar to Post Inc. brought a motion to stay the class action. The motion was successful; see 1146845 Ontario Inc. v. Pillar to Post Inc., 2014 ONSC 7400.
[3] Pillar to Post Inc. and D.R. Steward submit that as the successful party, they are entitled to recover the costs of the stayed action, but they are only seeking partial indemnity costs of $120,000, all inclusive for: (a) the motion to stay the class action; (b) the Plaintiffs’ cross-motion to partially certify this class action on the grounds of preferable procedure, which became moot because of the stay decision; and (c) the Defendants’ motion to strike the affidavits of David Kornhauser (a lawyer representing the plaintiffs), which also was moot, because on the eve of the motion, the Plaintiffs agreed to withdraw Mr. Kornhauser’s first affidavit and agreed not to rely on his second affidavit as evidence, and only to use it as potential examples of common issues.
[4] The Defendant Kim Clarke, who became separately represented after she left the employ of Pillar to Post, relies on her former employer’s costs submissions, but she claims her own partial indemnity costs of $8,000, all inclusive.
[5] The Plaintiffs submit that although costs would normally follow the event, in this case, there should either be no costs or the costs should be significantly reduced in recognition of the novel nature of the issues raised on the motion about the effect of the statutory right to associate under franchise legislation such as the Arthur Wishart Act (Franchise Disclosure), S.O. 2000, c. 3 on an arbitration provision in a franchise agreement.
[6] Further, the Plaintiffs submit that the Defendants cannot claim to be the victor because the merits of the Plaintiffs’ arbitral grievances remain to be determined. They submit that the amount sought by the Defendants is exorbitant and the Bill of Costs reveals “over-lawyering” of the issues.
[7] Further still, the Plaintiffs submit that if costs are awarded to the Defendants, then they should be reduced by a set-off for a never resolved costs award that the Plaintiffs were entitled to receive for their success in resisting the Defendants’ earlier motion to strike the Statement of Claim. The Plaintiffs submit that if some quantum of costs is awarded to the Defendants on the stay motion, then a net award of costs in the neighbourhood of $30,000.00 is appropriate, reasonable and within the expectations of the parties. In this regard, it may be noted that the Plaintiffs’ claim $36,741.95, all inclusive of fees for their success on the pleadings motion.
[8] In my opinion, Ms. Clarke’s claim for costs is fair and reasonable and it should be allowed. And, for the reasons set out below, in my opinion, the fair and reasonable awards for the pleadings motion and the stay motion are respectively $35,000, all inclusive, and $120,000, all inclusive, for a net award to the Defendants Pillar and Post and Mr. Steward of $85,000, all inclusive.
[9] The Plaintiffs were the successful party on the pleadings motion, and the reasonable and fair partial indemnity award for that motion is $35,000, all inclusive.
[10] I appreciate that the parties disagree about whether the Plaintiffs’ request for costs for the pleadings motion now comes too late, but the Defendants did not appear to press too hard on this point because they were the ones who originally suggested that settling those costs could be postponed, which suggestion, however, appears to have been spurned by the Plaintiffs. In any event, the fair and reasonable approach is not to let this set-off claim be lost on a technicality, and I, therefore, award the Plaintiffs $35,000 as a set-off.
[11] Turning to Defendants Pillar and Post and Mr. Stewards’ claim for costs of $120,000, I regard this claim as fair and reasonable in the circumstances where the stay motion was a very important and hard and well fought motion by the parties.
[12] I need not decide whether there was any over-lawyering because the Defendants are not asking to be paid for the totality of their legal work and if over-lawyering occurred, it has been accounted for. The Defendants are not claiming costs apart from those associated with the stay motion. The Plaintiffs’ Bill of Costs on a partial indemnity scale is for $185,170.10 and an award of $120,000 trims the fat, if any.
[13] I disagree with the Plaintiffs’ submissions that the Defendants were not totally successful because the merits of the franchisees’ grievances has yet to be determined. The Defendants are the successful party in a motion that brought this proposed class action to a conclusion, and the normal factors with respect to costs apply. The Plaintiffs’ class action has been stayed, and it will now be for the Arbitrator to determine the costs for adjudicating the merits of the Plaintiffs’ claims.
[14] I disagree with the Plaintiffs’ submissions that this is an appropriate case to invoke the discretionary factors described by s. 31 of the Class Proceedings Act, 1992, S.O. 1992, c. 6. Under s. 31(1) of the Class Proceedings Act, 1992, the court should give special weight to whether the class proceeding was a test case, raised a novel point of law, or involved a matter of public interest: Caputo v. Imperial Tobacco Ltd. (2005), 2005 63806 (ON SC), 74 O.R. (3d) 728 (S.C.J.) at para. 32; Joanisse v. Barker, [2003] O.J. No. 4081 (S.C.J.); Garland v. Consumers' Gas Co. (1995), 1995 7179 (ON SC), 22 O.R. (3d) 767 (Gen. Div.), aff’d (1996), 1996 1022 (ON CA), 30 O.R. (3d) 414 (C.A.); Fehringer v. Sun Media Corp., [2002] O.J. No. 5514 (S.C.J.); Sutherland v. Hudson's Bay Co., [2008] O.J. No. 602 (Sup. Ct.) at para. 11; McCracken v. Canadian National Railway Co., 2012 ONSC 6838.
[15] The effect of s. 31(1) of the Act is to encourage the court to recognize that class actions tend toward being test cases, the determination of a novel point of law, or the adjudication of matters of public interest and courts, therefore, should be alert to and respond to these tendencies when making decisions about costs: Ruffolo v. Sun Life Assurance Co. of Canada, 2008 5962 (ON SC), [2008] O.J. No. 599 (S.C.J.) at para. 51, aff’d 2009 ONCA 274, [2009] O.J. No. 1322 (C.A.), leave to appeal to the SCC ref’d [2009] SCCA No. 226; McCracken v. Canadian National Railway Co., supra.
[16] In normal litigation, it is relatively rare that the court will invoke its discretion to eliminate or reduce an unsuccessful litigant’s exposure to costs because the party was litigating a novel point or was litigating in the public interest. This follows because in the overwhelming majority of cases, the prime motivation of the parties will not be altruistic. In most cases, even if there is some public benefit that may be achieved by the litigation or some advancement achieved in the development of the law, a party will have the expectation that if he or she is successful a partial indemnity for legal costs will follow and if the party fails, he or she will have to indemnify the successful party.
[17] Class actions are no different. Although class actions are by design intended to be in the public interest and although they often raise novel issues, it remains the case that it will be relatively rare that the court’s discretion to negate or diminish a costs award will be exercised.
[18] In the case at bar, as in many class actions, an unsuccessful party will submit after-the-fact of the outcome that he or she should be relieved of costs because of the novelty or public interest value of the case. However, this submission was not the party’s expectation before-the-fact. The party’s genuine expectation was they would be successful and that they would recover costs. While not disingenuous, the after-the-fact submission that the case was novel or in the public interest has to be taken with more than a grain of salt.
[19] There is an “I know it when I see it” quality to recognizing novel legal points or public interest litigation, and I regard the case at bar as hard fought commercially or financially motivated litigation, and I would not exercise my discretion to treat the case as novel or public interest litigation.
[20] I also do not regard the case as manifesting a novel point of law of the type that would justify relieving the unsuccessful party from its exposure to costs. In this case, if there was a novel point it had to do with the right to associate under franchise legislation as an exception to the agreement to arbitrate disputes. There is some irony in the Plaintiffs’ relying on the novelty point because they were the ones that introduced it, and I rather doubt that had they been successful, they would have agreed to forgo costs.
[21] In future cases, I commend the practice of parties agreeing before the fact of the outcome whether or not the case classifies as novel or as public interest litigation.
[22] For the above reasons, after the set-off, I respectively award Ms. Clarke $8,000, all inclusive, and the Defendants Pillar and Post and Mr. Steward $85,000, all inclusive.
Perell, J.
Released: February 19, 2015
CITATION: 1146845 Ontario Inc. v. Pillar to Post Inc., 2015 ONSC 1115
COURT FILE NO.: CV-12-450503-00CP
DATE: 20150219
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1146845 ONTARIO INC., 1634481 ONTARIO INC. and J.P. CLEGHORN PROFESSIONAL PROPERTY INSPECTION SERVICES INC.
Plaintiffs
– and –
PILLAR TO POST INC., D.R. STEWARD, also known as DAN STEWARD and KIM CLARKE
Defendants
REASONS FOR DECISION – COSTS
PERELL J.
Released: February 19, 2015