SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-13-474486-CP

DATE: 20150721

RE: Joanna Goldsmith, Plaintiff / Moving Party

AND:

National Bank of Canada, Defendant / Responding Party

BEFORE: Justice Edward P. Belobaba

COUNSEL: Dimitri Lascaris and Sajjad Nematollahi for the Plaintiff

Paul Steep, Eric Block and Byron Shaw for the Defendant

HEARD: April 15, 2015

Proceedings under the Class Proceedings Act, 1992

cost award on leave motion

[1] This is a proposed securities class action. In a decision[^1] released on May 20, 2015 I dismissed the plaintiff’s motion for leave under s. 138.8 of the Securities Act.[^2] I was not persuaded that there was a reasonable possibility that the plaintiff could show at trial that either the defendant Bank or its capital markets subsidiary, National Financial, were “promoters” as defined in the Act and thus liable for the secondary market misrepresentations allegedly made by the issuer, Poseidon Concepts Inc. [^3]

[2] I have now reviewed the parties’ cost submissions.

[3] The defendant Bank asks for $230,919 all-inclusive on a partial indemnity basis. The defendant argues that the hourly rates set out in the Civil Rules Committee’s Information to the Profession (“the Grid”) are out of date and submits that 60 per cent of a lawyer’s actual rate should be the new partial indemnity measure.

[4] The plaintiff submits that the “promoter” argument involved a novel point of law and asks under s. 31(1) of the Class Proceedings Act[^4] that no costs be awarded or at most $47,000.

[5] I will deal first with the plaintiff’s submission. In my view, this is not a case that falls within s. 31(1) of the CPA. This was not a test case. It did not raise any novel point of law. Nor did it involve a matter of public interest. This was a relatively conventional secondary market misrepresentation claim. The plaintiff sued the defendant Bank because the primary target, Poseidon Concepts, was insolvent. As I noted in my decision:

In most securities class actions, the primary defendant is the publicly-traded corporation. Here, the primary defendant has filed for insolvency protection. Aggrieved shareholders must therefore identify other plausible targets (read “deep pockets”) that were involved in the Poseidon debacle - for example, banks, financial advisors, lawyers and accountants.[^5]

[6] Given the statutory definition and the applicable case law, the argument that the Bank or its capital markets subsidiary were “promoters” on the facts herein had no merit. In making this argument, the plaintiff was trying to force a square peg into a round hole –hardly a novel activity. The defendant is clearly entitled to its costs.

[7] But the defendant’s costs request, based on a “60 per cent of actual” measure, is not tenable. I know that some judges have suggested that the $350 maximum set out in the Grid, indeed the entire Grid, is out of date.[^6] For my part, I do not agree. But even if this were so, this should be a matter for the careful review of the Civil Rules Committee rather than ad hoc judicial comment.

[8] Recall that the objective of the costs award is to fix an amount that is “fair and reasonable” to the unsuccessful party “rather than an amount fixed by the actual costs incurred by the successful litigant.”[^7] Actual legal costs incurred are irrelevant and all the more so in an era where the legal profession continues to enjoy protection from market forces and where access to justice for most litigants remains illusory mainly because of the high hourly rates charged by lawyers. The Grid coupled with the judicial admonition in Boucher^8 may be the only way to signal to the legal profession and its self-regulator what “reasonable” legal fees should look like.

[9] In the cost endorsement in Inter-Leasing Inc. v. Ontario,[^9] a panel of the Court of Appeal agreed with the appellant that the Grid rates were out of date and suggested that 55 to 60 per cent of “a reasonable actual rate”[^10] might more appropriately reflect partial indemnity. This was a more sensible suggestion: 60 per cent of a “reasonable actual rate.” But what is a reasonable actual hourly rate for a senior Toronto litigator. It is certainly not $900 or $1000 per hour. This is obviously not market-pricing. What about $500 to $600? Is this more reasonable? No doubt - but if so, the Grid rates are actually up to date (i.e. the $350 maximum is pretty much in line with the Court of Appeal’s suggested 60 per cent measure.)

[10] The real question is this: how does one go about deciding what constitutes a “reasonable actual rate” in the context of a self-regulated profession that continues to enjoy the benefits of a monopoly, including monopoly-pricing? That is why the Rules Committee (or someone even more objective) should continue to set the Grid rates and should do so with one eye always on the public interest.

[11] In any event, I will continue to apply the current Grid until it is changed (by the Rules Committee.) And I will apply the revised rates thereafter but only if they are “fair and reasonable” not just for lawyers but for the public they serve.

[12] Returning then to the defendant’s costs request. Corrected to comply with the hourly rates set out in the Grid, the request is revised from $230,919 to $177,779. I also conclude that two reductions should be made in the disbursements listing: (i) lawyers should not charge for “periodicals” or “on-line search” expenses – time spent reading the case law, yes, but not the additional electronic or publisher fees;[^11] and (ii) the photocopying charge is excessive and should be cut in half.[^12] I would therefore reduce the disbursements total by about $5500 and the overall total to about $171,500 all-inclusive.

[13] None of the other criticisms levelled by the plaintiff succeed. The best way for an unsuccessful party to convince a court that the successful party’s costs request is unreasonable is for the former to present a certified copy of her own cost outline. This would provide much-needed credibility to complaints about excessive fees or, for example, the high cost of the defendant’s expert report.

[14] A final comment. This was not a certification motion where the statutory hurdles are low and reduced litigation costs are judicially encouraged.[^13] This was a leave motion with a preliminary merits test that was fought hard by the defendant as it had every right to do. The point is this: the costs on a leave motion can be substantial.

[15] Standing back and considering all of the relevant factors set out in Rule 57.01(1), I find it fair and reasonable to fix costs at $170,000 all-inclusive, payable forthwith by the plaintiff to the defendant.

Belobaba J.

Date: July 21, 2015

[^1]: Goldsmith v. National Bank of Canada, 2015 ONSC 2746 (S.C.J.)

[^2]: Securities Act, R.S.O. 1990, c. S.5 (“the Act”).

[^3]: The plaintiff claims that the defendant Bank is liable for the issuer’s misrepresentations because the Bank was a “promoter” (and thus an “influential person”) and as such knowingly influenced the release of the impugned disclosure documents: see s. 138.3 of the Act.

[^4]: Class Proceedings Act 1992, S.O. 1992, c. 6 (“CPA”).

[^5]: Supra, note 1, at para. 2.

[^6]: For example, in Stetson Oil & Gas Ltd., v. Stifel Nicolaus Canada Inc., 2013 ONSC 5213 at paras. 22 and 25, Newbould J. commented that the Grid rates were “completely outdated” and found it appropriate to award 60 per cent of time charged on a partial indemnity scale and 90 per cent of time charged on a substantial indemnity scale.

[^7]: Boucher v. Public Accountants Council of Ontario, (2004) 2004 14579 (ON CA), 71 O.R. (3d) 291 at para. 26.

[^9]: Inter-Leasing Inc. v. Ontario (Revenue), 2014 ONCA 683.

[^10]: Ibid., at para. 5.

[^11]: One assumes that a lawyer’s operating costs, including legal subscription services, are already included in his or her hourly rate calculation. Double-counting should not be permitted.

[^12]: Photocopying is a “profit centre” in many law firms, but fair and reasonable page-copy rates should not include such arbitrarily inflated pricing. “At cost” photocopying charges would be more reasonable for the purposes of a cost outline.

[^13]: Recall the “cost protocol on certification motions” described in my 2013 costs awards. See for example, Dugal v. Manulife Financial, 2013 ONSC 6354.