Court File and Parties
COURT FILE NO.: CV-09-378701CP DATE: 20160720 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
ST. CLAIR PENNYFEATHER Plaintiff – and – TIMMINCO LIMITED, PHOTON CONSULTING LLC, ROGOL ENERGY CONSULTING LLC, MICHAEL ROGOL, DR. HEINZ SCHIMMELBUSCH, ROBERT DIETRICH, RENÉ BOISVERT, ARTHUR R. SPECTOR, JACK L. MESSMAN, JOHN C. FOX, MICHAEL D. WINFIELD, MICKEY P. YAKISCH and JOHN P. WALSH Defendants
Counsel: Won J. Kim and Michael C. Spencer for the Plaintiff Alan D’Silva and Daniel S. Murdoch, for the Defendants, Timminco Limited, Dr. Heinz Schimmelbusch, René Boisvert, Robert Dietrich, Arthur R. Spector, Jack L. Messman, John C. Fox, Michael D. Winfield and Mickey P. Yakisch Paul Le Vay, and Carlo Di Carlo for Photon Consulting LLC, Rogol Energy Consulting LLC and Michael Rogol
Proceeding under the Class Proceedings Act, 1992
HEARD: In writing
PERELL, J.
REASONS FOR DECISION - COSTS
[1] In this proposed securities misrepresentation class action under the Class Proceedings Act, 1992, S.O. 1992, c. 6 and Part XXIII.1 of the Ontario Securities Act, R.S.O. 1990, c. S.5, the Timminco Defendants; namely: Timminco Limited, Dr. Heinz Schimmelbusch, René Boisvert, Robert Dietrich, Arthur R. Spector, Jack L. Messman, John C. Fox, Michael D. Winfield, and Mickey P. Yakisch, and the Photon Defendants; namely: Photon Consulting LLC, Rogol Energy Consulting LLC, and Michael Rogol brought motions for declarations that would terminate the Plaintiff St. Clair Pennyfeather’s - already terminated - secondary market misrepresentation claim.
[2] Mr. Pennyfeather resisted the Defendants’ motions, and he brought a cross-motion for a declaration that, if this Court grants leave to commence an action under Part XXIII.1 of the Ontario Securities Act, leave will be granted nunc pro tunc (“now for then”).
[3] I granted the Defendants’ motions, and I dismissed Mr. Pennyfeather’s cross-motion. See Pennyfeather v. Timminco Limited, 2016 ONSC 3124.
[4] In paragraphs 3-6 of my Reasons for Decision I summarized the background to the motions, the arguments of the parties, and the outcome as follows:
By way of a summary of the background facts, in May 2009, Ravinder Kumar Sharma commenced a proposed class action that included a statutory misrepresentation claim under Part XXIII.1 of the Ontario Securities Act. Mr. Sharma was subsequently replaced by Mr. Pennyfeather as the proposed representative plaintiff. The Defendants allegedly made the misrepresentations between March 17 and May 29, 2008, and Mr. Pennyfeather’s statutory claim is subject to an absolute three-year limitation period from the date of the misrepresentations. On March 31, 2011, i.e., after three-years had expired, Mr. Sharma obtained an order that s. 28 of the Class Proceedings Act, 1992 had suspended the running of the limitation period, and therefore, the Part XXIII.1 statutory misrepresentation claim was not statute-barred. On May 29, 2011, Mr. Pennyfeather served a motion for leave under Part XXIII.1; however, while his motion for leave was pending, appellate courts reversed, restored, and then reversed again the March 31, 2011 order; i.e., to be more precise, on February 16, 2012, the Court of Appeal reversed the March 31, 2011 order about s. 28 of the Class Proceedings Act, 1992, but on February 3, 2014, in three different proposed class actions that addressed statutory misrepresentation claims, a five-member panel of the Court of Appeal restored the October 31, 2011 order, only to be reversed by a divided Supreme Court in a decision released on December 7, 2015, known as CIBC v. Green, 2015 SCC 60. Thus, Mr. Pennyfeather’s Part XXIII.1 statutory misrepresentation claim was to be, then not to be, then to be, and then not to be because it was statute-barred. However, within days of the Supreme Court’s decision, Mr. Pennyfeather requested the scheduling of a hearing of his Part XXIII.1 claim on the theory that leave to assert his statutory misrepresentation claim might be granted nunc pro tunc and thus the Part XXIII.1 claim would not be statute-barred.
By way of summary of the positions of the parties, the Timminco Defendants, the Photon Defendants, and Mr. Walsh, who adopted each other’s arguments, submitted that Mr. Pennyfeather’s request for an order nunc pro tunc was barred by the doctrines of res judicata, issue estoppel, or abuse of process and, in the alternative, based on the Supreme Court’s so-called red-line rule in CIBC v. Green, supra about the operation of the court’s nunc pro tunc jurisdiction, the Defendants submitted that the court’s jurisdiction to make a nunc pro tunc order does not apply to save Mr. Pennyfeather’s statutory cause of action. The red-line rule is that the motion for leave must be brought before the expiry of the limitation period. To which, Mr. Pennyfeather’s responding submission is that his nunc pro tunc argument is not barred by any estoppel and it is a meritorious plea.
Such being the factual background and such being the position of the parties, my own view is that res judicata, which concerns the re-litigation of causes of action and defences is not applicable. As for issue estoppel, which has strict elements, and abuse of process, which is a more flexible doctrine, their elements could have been applicable to preclude Mr. Pennyfeather’s request for a nunc pro tunc order; however, in any event, it is not in the interests of justice either as a matter of res judicata, issue estoppel, or abuse of process to bar Mr. Pennyfeather’s request as being re-litigation, and, rather, his request for a nunc pro tunc order should be considered on its merits. However, considering Mr. Pennyfeather’s argument on its merits, his request for a nunc pro tunc order fails because of the red-line rule, and it fails on its merits after considering the factors relevant to whether the court should exercise its discretion to make an order nunc pro tunc. In short, the court’s nunc pro tunc jurisdiction is available for Part XXIII.1 statutory claims, but the jurisdiction should not be exercised in the circumstances of this case.
Accordingly, Mr. Pennyfeather’s motion should be dismissed and the Defendants’ motion should be granted with an order declaring that Mr. Pennyfeather’s statutory misrepresentation claim is statute-barred. Mr. Pennyfeather is barred from asserting a claim under Part XXIII.1 of the Ontario Securities Act.
[5] The Timminco Defendants now seek costs of $124,028.81 inclusive of taxes and disbursements on a partial indemnity basis. The Photon Defendants seek costs of $25,330.07 inclusive of taxes and disbursements on a partial indemnity basis. For the reasons that follow, I grant the Defendants’ claims for costs as requested.
[6] Mr. Pennyfeather submits that each should party bear their own costs with respect to the motions and cross-motion because I did not agree with the Defendants’ argument that his nunc pro tunc argument was res judicata and, thus, success was divided on the motions.
[7] In my opinion, however, there was no divided success. From the parties’ and the court’s perspective, the Defendants’ motions and the Plaintiff’s cross-motion were of the same coin and the Defendants won the toss of that coin. I dismissed the technical res judicata argument so that Mr. Pennyfeather could win or lose on the merits. The effect of the ultimate order is that Mr. Pennyfeather’s already dead action will not rise like a legal phoenix.
[8] Mr. Pennyfeather submits that there should be no costs because he was a public interest litigant. In my opinion, however, he does not qualify as a public interest litigant. His litigation was normative high stakes class action securities litigation where the proposed representative plaintiff and class counsel understand the risks of the exposure to an adverse costs award.
[9] The most general rule about costs, not to be departed from without good reason, is that costs at a partial indemnity scale follow the event, which is to say that normally costs are ordered to be paid by the unsuccessful party to the successful party on a partial indemnity scale: Bell Canada v. Olympia & York Developments Ltd. (1994), 17 O.R. (3d) 135 (C.A.); Pike's Tent and Awning Ltd. v. Cormdale Genetics Inc. (1998), 27 C.P.C. (4th) 352 (Ont. Gen. Div.).
[10] A critical controlling principle for the awarding of costs is that the sum awarded reflect the fair and reasonable expectations of the unsuccessful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.) at para. 24; Caputo v. Imperial Tobacco Ltd. (2005), 74 O.R. (3d) 728 (S.C.J.) at paras. 23-25; Lee v. General Motors Co. of Canada, [2004] O.J. No. 2245 (S.C.J.); McGee v. London Life Insurance Co., [2008] O.J. No. 5312 (S.C.J.) at paras. 5-8.
[11] The traditional discretionary principles developed for costs awards are codified in rule 57.01 (1), which states:
Factors in Discretion
57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party’s denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and
(i) any other matter relevant to the question of costs.
[12] On the motions, the Defendants succeeded and Mr. Pennyfeather failed. Costs follow the event.
[13] Mr. Pennyfeather was advancing a claim for approximately a half billion dollars under the Class Proceedings Act, 1992 and the Ontario Securities Act. The motions and the underlying litigation are off the measuring scale for legal, factual, and procedural complexity and in importance to the parties.
[14] Mr. Pennyfeather did not disclose the details or the amount of his own costs but expressed incredulity that a total of 402.32 hours of time could have been spent by the Timminco Defendants’ lawyers on the motions and cross-motion. I acknowledge that the hours seem very high, but Mr. Pennyfeather could or should reasonably have expected that the Defendants would incur a substantial legal expense for prosecuting the Defendants’ motions and in responding to his cross-motion, which it may be noted included a voluminous motion record.
[15] In the absence of any disclosure of the time engaged and rates charged by Mr. Pennyfeather’s lawyers and in all the peculiar circumstances of this action, which included: (a) difficult and obscure law about the nature of nunc pro tunc orders; (b) the relationship between Mr. Pennyfeather’s case and three other enormously complicated securities class actions; and (c) deciphering and applying a decision of a splintered Supreme Court of Canada that analyzed flip-flopped decisions of the courts in Ontario about the operation of s. 28 of the Class Proceedings Act, 1992, I find the hours expended by Timminco’s lawyers and how the work was allocated between senior and junior lawyers reasonable and appropriate.
[16] In this last regard, while the hours were numerous, the hourly rates of the Timminco Defendants’ costs claim were taken from the out-of-date “Costs Grid” and courts have recently departed from using the Costs Grid to determine costs. In Inter-Leasing, Inc. v. Ontario (Minister of Revenue), 2014 ONCA 683 at para. 5, the Court of Appeal has stated that the Grid is out of date and the more reasonable measure of a party's partial indemnity costs is 60 percent of actual costs.
[17] No challenge was made to the hours and hourly rates of the Photon Defendants’ lawyers.
[18] For the above reasons, I award the Timminco Defendants and the Photon Defendants their costs as requested.
[19] Orders accordingly.
Perell, J. Released: July 20, 2016
COURT FILE NO.: CV-09-378701CP DATE: 20160720 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
ST. CLAIR PENNYFEATHER Plaintiff – and – TIMMINCO LIMITED, PHOTON CONSULTING LLC, ROGOL ENERGY CONSULTING LLC, MICHAEL ROGOL, DR. HEINZ SCHIMMELBUSCH, ROBERT DIETRICH, RENÉ BOISVERT, ARTHUR R. SPECTOR, JACK L. MESSMAN, JOHN C. FOX, MICHAEL D. WINFIELD, MICKEY P. YAKISCH and JOHN P. WALSH Defendants
REASONS FOR DECISION – COSTS PERELL J. Released: July 20, 2016