Court File and Parties
Court File No.: 46300CP Date: 2016/08/31 Superior Court of Justice - Ontario Proceeding Under the Class Proceedings Act, 1992, S.O. 1992, c. 6
Re: James Jeffery and D’Alton S. Rudd, Plaintiffs And: Norman Catlos and Miriam Barkley, Defendants London Life Insurance Company and The Great-West Life Assurance Company, Defendants
Before: Justice J. N. Morissette
Counsel: Paul Bates, David B. Williams, Jonathan J. Foreman, Michela Gregory, for the plaintiffs Crawford Smith, John Laskin, Ezra Siller, for the Defendants Paul Tunley Philip Tunley and Justin Safayeni for The Law Foundation of Ontario (LFO)
And Between:
Court File No.: 47959CP Superior Court of Justice - Ontario
Re: John Douglas McKittrick, Plaintiff And: The Great-West Life Assurance Company and Great-West Life Co. Inc., Defendants
Before: Justice J. N. Morissette
Counsel: Paul Bates, David B. Williams, Jonathan J. Foreman, Michela Gregory, for the plaintiffs Crawford Smith, John Laskin, Ezra Siller, for the Defendants Paul Tunley Philip Tunley and Justin Safayeni for The Law Foundation of Ontario (LFO)
Amended Endorsement on Approval of Class Fees, Costs and Law Foundation Levy
1After a decade of hard fought litigation, which has been to the Court of Appeal more than once, the class representatives together with their class counsel are before this court for the following relief:
- Approval of the payment of class counsel fees and disbursements plus applicable taxes; and
- Payment of full indemnity costs plus applicable taxes and disbursements.
2The Law Foundation of Ontario seeks a determination of the entitlement of the Class Proceedings Fund, pursuant to ss. 10(2) and 10(3) of Ontario Regulation 771/92 (the “Regulation”) passed under the Law Society Act [1] (“LSA”) to receive a levy on the monetary award granted in favour of the members of the plaintiff class as a result of this Class action.
3Finally, the defendants seek costs on a partial indemnity scale. Both the class representatives and the Law Foundation of Ontario resist the defendant’s claim for costs.
The historical facts and proceedings
4These class proceedings were brought on behalf of 1.8 million participating policyholders against the defendant companies on the question of the legal compliance, or noncompliance of the Par account transactions (“PATs”) with the Insurance Companies’ Act [2] (“ICA”).
5The PATs arose in the course of the 1997 acquisition of London Insurance Group and its subsidiary London Life by Great-West Life and its parent company, Great-West Lifeco Inc. (“Lifeco”). At the time, it was anticipated that the merger of the companies’ operations would lead to benefits for the participating accounts.
6The plaintiffs’ class sought certification of these actions as class proceedings to create a statutory mandate for the representation of the policyholder’s interests as complainants under the Class Proceedings Act [3] (“CPA”) and the ICA to challenge the legality of the PATs and to seek remedies on behalf of the class. The defendants resisted the certification motion unsuccessfully and a certification order was granted. As a result, the plaintiffs were installed as court appointed representatives under the CPA on behalf of the defined class of all the participating policyholders of the defendant companies as at the date of the PATs until the date of judgment.
7Common issues were established and certified in order to furnish the representative plaintiffs with a clear directive to prosecute those issues on behalf of the class through a common issues trial. Those common issues were as follows:
a) Did the PATs constitute a breach of sections 331(4), 456, 458, 462, 492 or 521 of the ICA? b) Did the Directors and Officers of the defendants breach sections 166(1), 166(2), 211 or 212 of the ICA? c) Were the Great-West Life Assurance Company and Great-West Lifeco Inc. unjustly enriched by the PATs? d) If the answer to any of (a) to (c) is yes, what remedies, if any, are just and appropriate under sections 215 and 1031 of the ICA, or otherwise at law?
8The matter proceeded through documentary production and examinations for discovery. Expert reports were exchanged, the trial record was filed, and trial dates were set. The matter was tried over 45 days between September, 2009 and January, 2010. The Court found that there had been breaches of ss. 331(4), 462 and 458 of the ICA. The Court of Appeal upheld those findings but ordered a rehearing on the remedial issues.
9In doing so, the Court of Appeal recognized the sums to be returned to the participating accounts would need to be adjusted to account for the benefits received by the accounts since 1997. This was necessary to give effect to the “no contribution/no benefit” principle.
10Following the rehearing on the remedial issues and another appeal to the Ontario Court of Appeal, the PATs were ordered unwound and the illegal accounting for the PATs was cancelled as of December 31, 2011. The Court of Appeal ordered that $56.43 million be returned to the participating accounts.
Issues
11The following are the issues to be determined by this Court with respect to the plaintiff’s claims for fees and costs:
FEES:
(a) Should the retainer agreement between the representative plaintiffs and class counsel be approved? (b) Should the request for payment of fees, disbursements and applicable taxes by class counsel be approved? (c) Is class counsel entitled to a payment of its fees, disbursements and applicable taxes from the amount ordered to be paid to the participating accounts as a result of the retainer agreements entered into between class counsel and the representative plaintiffs? (d) Is class counsel entitled to a charge or lien over the participating accounts by virtue of statute or at common law?
COSTS FOR PLAINTIFFS:
(a) Should the defendants be ordered to pay full indemnity costs, disbursements and applicable taxes to the plaintiffs? (b) Alternatively, should the defendants be directed to pay the highest level of indemnity costs to the plaintiffs?
COSTS FOR DEFENDANTS:
12The following are the issues with respect to the defendants’ motion for partial indemnity costs:
(a) Did the defendants achieve “substantial or complete success” in this class action, so as to entitle them to partial indemnity costs? (b) Regardless of how one characterizes the success achieved by each party in this class action, should the defendants be denied costs? (c) If the answer to issue (a) is yes, and the answer to issue (b) is no, then what is the appropriate quantum of costs to be awarded to the defendants?
LEVY:
13The following are the issues with respect to the Law Foundation of Ontario’s motion for an order entitling it to a levy:
(a) Does the final result in the class action include a “monetary award… in favour of” some or all of the plaintiffs’ class, within the meaning of s. 10(2) of the Regulation? (b) If so, what is the quantum of the levy payable to the Foundation under s. 10(3) of the Regulation?
ANALYSIS
FEES:
Approval of the Retainer Agreement:
14Typically, the defendant is not a respondent on a motion by class counsel to approve a retainer agreement. Here, the defendants, who were not named as respondents to the motion applied for standing. This was sought by the defendants because class counsel is seeking payment from the amount ordered to be paid to the participating accounts.
15Initially standing was opposed by the class representative, but at the hearing of these issues, standing was conceded.
16Class counsel claim fees in the amount of approximately $16.4 million, which represents 27.5 percent of the amount which was ordered to be paid back to the participating accounts by the defendants’ shareholder’s accounts, including taxes.
17The defendants submit that the class counsel’s claim is based on contract to which the defendants are strangers and therefore they have no liability under them. The defendants have no privity of contract.
18The defendants further submit that class counsel’s claim is against the class which has not received any monies. It argues that the funds allocated to the participating accounts as a result of this litigation have not been paid out as dividends and “may never be” [4].
19First, I wish to address whether the retainer agreement is compliant within the CPA.
20Section 32 and 33 of the CPA stipulates as follows:
Fees and disbursements
- (1) An agreement respecting fees and disbursements between a solicitor and a representative party shall be in writing and shall, (a) state the terms under which fees and disbursements shall be paid; (b) give an estimate of the expected fee, whether contingent on success in the class proceeding or not; and (c) state the method by which payment is to be made, whether by lump sum, salary or otherwise.
Court to approve agreements
(2) An agreement respecting fees and disbursements between a solicitor and a representative party is not enforceable unless approved by the court, on the motion of the solicitor.
Priority of amounts owed under approved agreement
(3) Amounts owing under an enforceable agreement are a first charge on any settlement funds or monetary award.
Agreements for payment only in the event of success
33.(1) Despite the Solicitors Act and An Act Respecting Champerty [5], a solicitor and a representative party may enter into a written agreement providing for payment of fees and disbursements only in the event of success in a class proceeding.
Interpretation: success in a proceeding
(2) For the purpose of subsection (1), success in a class proceeding includes, (a) a judgment on common issues in favour of some or all class members; and (b) a settlement that benefits one or more class members.
21The retainer agreements [6] state the terms under which fees and disbursements will be paid; they also provide an express example of the mechanics by which the contingent legal fee will be paid. The example provided was based on a hypothetical recovery valued at $50 million; and they further state that the method of payment of the contingency fee will be by lump sum out of the recoveries achieved including payments made to the participating accounts.
22Paragraph 9 of each retainer agreements states as follows:
I understand that “success” shall include:
a. A judgment or settlement which results in reimbursement of monies to the participating policy account of LLIC/GWLAC; b. A judgment or settlement which results in increased dividends or payments in favour of the class members; and c. A judgment or settlement that otherwise benefits some or all of the class members.
23It appears to this Court that the retainer agreements are clear and reasonably set out between the representative plaintiffs and class counsel the terms that a fee can be claimed as against the recoveries payable to the participating accounts.
24Clearly, these are sophisticated representative plaintiffs who had the goals of the CPA and the ICA in mind for the purpose of enforcing corporate compliance at the inception of this litigation.
25Accordingly, this Court declares that the retainer agreements are approved.
Entitlement to the Quantum of the requested class counsel fees?
26The objectives of the CPA, which are judicial economy, access to justice and behaviour modification are dependent in part upon counsel’s willingness to undertake class proceedings work. This in turn depends greatly on the incentives available to counsel to assume the risks and accept the financial burden of carrying class proceedings.
27It is in this context that I must determine the fairness and reasonableness of counsel fee when approving a fee arrangement.
28As indicated in Abdulrahim v. Air France, 2011 CarswellOnt 403 (SCJ) [7], the court held that class counsel’s fees should “not only reward counsel for meritorious efforts, but it should also encourage counsel to take on difficult and risky class action litigation.”
29This litigation concerned an extremely sophisticated and complicated series of events and transactions, which required an understanding of a range of disciplines, namely actuarial, accounting, regulatory and legal. The sections of the ICA in issue in this litigation were not subject to prior appellate consideration. The matter raised a series of novel questions and issues along the path to its ultimate determination.
30The nature of this compliance litigation was quite unique and necessitated a considerable degree of skill by class counsel to prosecute it satisfactorily.
31Class counsel took substantial risk of putting their time into this matter over a long duration on a contingent fee basis with highly uncertain results. These actions involved $220 million worth of participating accounts assets as at 1997. The final remedial award of $56.43 million was ordered to be returned to the participating accounts, in addition to accounting corrections and other relief.
32The nature of this compliance litigation is important because it assures participating policy holders that the company, to whom they pay their premiums and in whom they trust to declare dividends according to their dividend policies, will be held to account for any failure to comply with the ICA.
33For these reasons, I accept that class counsel took on considerable risk and responsibility in prosecuting this class action.
34It has also been recognized that a court when assessing the fees requested by class counsel, must “depart from its traditional neutrality and take on an active role to protect the interests of the class.” [8]
35The result achieved and the expectation of the class as to the amount of fees was subject to a specific notice ordered by this court for the benefit of class members in August, 2015. Class members were provided an opportunity to object to the fee requested. Not a single objection was received but rather class representatives supported and joined with class counsel to ask the Court to approve their requested fees to be paid from the monetary award granted.
36During the hearing of this matter, defence counsel conceded that their position was not to contest the amount of fees claimed but rather to object to having it paid from the participating accounts.
37Having reviewed the test for approving the quantum of the claim for fees, I approve the request of $16.4 million dollars of fees, which I understand includes taxes.
Are class counsel fees payable from the participating account and entitled to a charge or a lien over the PAR accounts by virtue of Statute or at Common law?
(i) “Success” for the purposes of the CPA and the retainer agreement?
38Class counsel submit that the award of money directed to be repaid to the participating accounts by court order in these cases represents the enforcement of the statutory rights and entitlements of the class members as complainants under the ICA.
39The defendants argue that class counsel’s only entitlement is from the class and only to the extent class members are entitled to demand the funds or have received those funds.
40The defendants further argue they are strangers to the class counsel’s retainer agreement. As a result the agreements are not binding on the defendants and cannot be enforced against them.
41Finally, the defendants argue that many members of the class are no longer policyholders and have no connection to the defendants. Those who remain policyholders have their contractual right to be paid dividends, if and to the extent declared by the companies.
42The Court of Appeal considered the appropriate remedy for the statutory breaches based on this Court’s finding of fact. The Court held that the best way to rectify the breaches was to unwind the PATs “as of now”, which this Court ultimately determined to be December 31, 2011.
43The Court of Appeal expressly stated: “No monies are to be paid out to individual class members as a result of our disposition.” [9]
44Thus, the Court’s remedy was to put the participating accounts in the position they would have been had the PATs never occurred. On March 31, 2014, the defendants paid from the respective shareholders’ account the following amounts to GWL’s and LL’s respective participating accounts:
- GWL, $26,864 million; and
- LL, $29,570 million.
45The evidence filed by the defendants, in support of their position show that none of the funds allocated to the participating accounts have been paid out as dividends, and the allocation of the amount ordered returned to the participating accounts has been allocated to the surplus. Therefore, they say that there was no impact on dividends for either 2014 or 2015.
46The Court of Appeal expressly provided that the PAR payments be dealt with in the ordinary course in accordance with the defendants’ dividend policies. The evidence demonstrates that the PAR accounts have been in a significant surplus position for decades – with the accumulated surplus totalling $1.7 billion (for London Life) and $579 million (for Great-West Life) as of December 31, 2014. Both insurers have made payment of dividends out of this surplus every year for more than a century. Great West Life has announced that its dividend scale will increase for 2015 by an average of 4.6 percent, while London Life has confirmed that its dividend scale will be unchanged.
47The evidence at trial demonstrated that assets backing surplus strengthen the surplus position of the participating accounts, which is a favourable factor in all respects for participating policyholders including dividend setting. Therefore, the allocation of new assets to surplus allows existing assets that might otherwise have been allocated to surplus to be allocated to liabilities, all of which is beneficial to the participating business.
48How then to deal with whether the plaintiffs were successful or not for the purpose of the CPA and the retainer agreement?
49The representative plaintiffs state that when these actions were certified under the CPA, the representative plaintiffs and class counsel were invested with a statutory mandate under that Act to represent the defined class of participating policyholders, to specifically prosecute the common issues ordered by the Court for resolution and to seek the relief that may flow from success on those common issues.
50Without the machinery of the CPA, there would have been no access to justice to prosecute and obtain resolution of the compliance complaints that arose in this action. In other words, the CPA has facilitated access to the Courts to achieve compliance and its remedies for policyholders in this litigation.
51The compliance issues included among others:
(a) Whether s. 458 of the ICA was identified and relied upon by the defendants, Mercer and by extension OSFI, as the legal justification for the PATs in 1997; (b) Whether an independent legal opinion had been provided in 1997 respecting the legality of the PATs; (c) How Mercer came to characterize s. 458 of the ICA as the legal justification for the PATs in its Independent Actuarial Report; (d) Whether the independence of Mercer had become compromised in the course of developing its report; (e) How the accounting for the PATs was specifically conceived by the Defendants in 1997, including the nature of the review undertaken by the external auditors Deloitte and Ernst and Young, whether those external auditors had conducted a specific analysis of the GAAP compliance of the accounting for the PATs and whether specific documentary proof of their analysis could be provided; (f) The precise nature and role of OSFI’s review of the PATs including the existence of any specific approvals and the connection of those approvals to the work undertaken by Mercer; and (g) Whether any approval granted by OSFI should be determinative of the legality of the PATs and more particularly whether the Courts were required to defer to OSFI’s decision making on the topic.
52This court, and the Court of Appeal affirmed that the defendants had failed to comply with the ICA and ordered the remedy designed to achieve compliance as follows:
(a) The PATs were ordered to be unwound as of December 31, 2011. The court cancelled the illegal accounting for the participating account transactions as of December 31, 2011; and (b) LLIC and GWL were ordered to pay a total of $56.43 million on an after-tax basis plus an applicable rate of interest from the shareholder accounts to the participating account of LLIC and GWL.
53The amounts ordered paid to the participating accounts were to be dealt with by the defendants in accordance with their participating account dividend policies in the ordinary course of business.
(ii) Post judgment decisions:
54After disclosure by the defendants to the plaintiffs of the handling of the historical amortization charges made against the participating accounts between 1997 and the effective date, the defendants disclosed that they did indeed cancel $139,437,000 worth of unlawful amortization charges made against the participating account between 1997 and 2011.
55The defendants have further disclosed in their responding materials that following the first appeal decision, they changed their expense allocation method, which was permitted by the Court of Appeal’s decision. Under the new allocation methods, the GWL and LL participating accounts were allocated a level of expense incurred by the companies that reflects the fact that the accounts have not contributed to the acquisition of London Life.
56Finally, the defendants disclosed that they have charged some of their legal defence costs to the participating accounts up to the effective date.
57I pause here to note that Mr. Bates moved orally at the hearing to have me clarify paragraph 33 of my judgment which was upheld by the Court of Appeal, which states:
“This Court orders and declares that the defendants shall be enjoined from debiting, expensing or otherwise deducting from the participating accounts any costs or expenses incurred by the defendants in defence of these actions or any other amounts except those arising in the ordinary course of business, except by leave of the court on notice to the class representative.”
58The defendants urge me not to engage in interpreting my judgment, because they say that special evidentiary rules apply to contempt proceedings. The defendants submit they must be afforded an opportunity to respond to any allegation that they are in contempt through a proper written record.
59I agree that it would be inappropriate for me to find the defendants in contempt of this Court’s judgment without a full record and argument. I decline to make such a finding on this record.
60Having said that, it appears to me that when assessing whether class counsel’s fees ought to be paid from the “monetary award” ordered and whether the plaintiffs were “successful”, this court can and ought to be allowed to assess what the defendants did both before and after judgment, without making a finding of contempt per se.
61In my view, the fact that the defendants have subsequently acted to change the allocation method, which supports their position that the class may never receive dividends as a result, cannot buttress their position that the class may never receive any monetary relief which should defeat the class counsel’s fee as a charge on the award.
62In my view, this litigation represents a “success story” because the plaintiffs successfully proved that the defendants were non-compliant with the ICA. Of course, like any other litigation, not every remedy sought was granted. This is hardly unusual.
63Accordingly, the plaintiffs have achieved “a judgment on common issues in favour of some or all class members” as provided at s. 33(2)(a) of the CPA.
64The plaintiffs have also achieved success as they had defined it in the retainer agreements executed prior to the commencement of this litigation.
65Pursuant to s. 32(3) of the CPA, “amounts owing under an enforceable agreement are a first charge on any settlement funds or monetary award.”
66Section 24 of the CPA enables the court to make an “aggregate assessment of monetary relief”, by “determining the aggregate or a part of the defendant’s liability to class members and give judgment accordingly…”
67In Hislop v. Canada (Attorney General), 2009 ONCA 354 [10], the Court of Appeal held that the phrase “monetary award” means “a payment of money imposed by judicial authority.”
68In the report which gave rise to the CPA, the Law Reform Commission (“LRC”) recognized that there were various forms of relief that could be monetary in nature and beneficial to class members in a class proceeding. It was also recognized that certain of the forms of relief that could be achieved in class proceedings might be aggregate in nature. As a result, the LRC recommended terminology and phrasing within the Act using terms such as “monetary award”, “monetary relief”, or “aggregate relief” in express contrast to “damages” or other references to narrower forms of relief that might be available at law. [11]
69The LRC specified that a categorical approach is not to be taken toward aggregate assessment. Different forms of monetary relief can facilitate aggregate assessment. The report stated:
The Commission’s recommendation speaks in terms of “monetary relief”, rather than “damages”, in order to make it clear that aggregate assessment is also possible with respect to restitutionary and other monetary causes of actions. The present “categorical” approach to the availability of monetary relief in Ontario ought not to be replaced by a categorical approach to aggregate assessment. The standard proposed by the Commission would permit the propriety of an aggregate assessment to be determined on a functional, case-by-case basis, irrespective of the kind of monetary relief that is being sought. [12]
70The Court of Appeal’s decision stipulated that the remedy it awarded as prescribed by the remedial formula it ordered is an “amount paid to” or “returned to” the participating account from the shareholders’ account. The award made is “monetary relief” in every sense.
71The monetary relief achieved on behalf of the class in this case is a “monetary award” for the purposes of s. 32(3) of the CPA and it is also an “aggregate assessment of monetary relief” for the purposes of the CPA. It is also a “payment of money imposed by judicial authority” as contemplated by the Hislop case.
72Accordingly, this court finds that although the payment of $56.43 million was not ordered to be paid directly to the class members, it was ordered to be paid to the benefit of the class members through its payment to the respective participating accounts of the class members.
73Even if the participating accounts are not accessible by the class members, they are, by statute, a fund available for the benefit of class members, when and if the directors of the defendants declare dividends.
74I harken back to the trial evidence of Mr. McFeators McFeetors, the CEO of the defendant corporations, who said that London Life pays out more than 85 to 90 percent of earnings in the participating account as dividends to par policyholders.
75The fact that no dividend has been paid since the remedy was ordered is of no import to the determination that a monetary award has indeed been provided to the participating accounts for the ultimate benefit into the future for the class members.
76The ICA is a federal statute, which is subject to the Interpretation Act. In my view, the representative plaintiffs are statutory complainants who, as persons and policyholders, are empowered to have undertaken this compliance litigation against the defendant companies.
77Here the plaintiffs have successfully achieved a compliance order under s. 1031 of the ICA. An individual plaintiff in a case of this nature could not conduct more than a decade of expensive and vigorously defended compliance litigation without legal counsel who have all of the supporting services, resources and capabilities necessary. The plaintiffs took advantage of the contingent fee construct facilitated under the CPA as the only viable mechanism to achieve realistic compliance.
78This class action is the first in Canadian corporate compliance litigation to consider and apply the ICA and its compliance remedy following a trial. Similarly, it is the first to consider GAAP compliance by a major Canadian financial institution and the impact of a regulatory approval on the legality of the corporate transaction under challenge.
79For these reasons, the fee request of class counsel is approved under s. 32(2) of the CPA. As a result, an imposition of a first charge for class counsel fees over the monetary award of $56.43 million in the sum of $16.4 million is granted.
80Class counsel has made an alternative claim for fees by virtue of section 1031 of the ICA. Given that I have found a charge under section 32(3) of the CPA, I need not deal with that submission. Nevertheless I note that the Court of Appeal explained that the purpose of s. 1031 is “remedial rather than compensatory or punitive”. As indicated in the first Court of Appeal decision, section 1031 “is not a stand-alone power but rather complementary to the power to order compliance or restrain further non-compliance.” [13]
81Given this finding, there is no point in reviewing charging orders under the Solicitors Act or at common law.
COSTS:
82Section 31(1) of the CPA states: “In exercising its discretion with respect to costs under subsection 131(1) of the Courts of Justice Act, the court may consider whether the class proceeding was a test case, raised a novel point of law or involved a matter of public interest.”
83This case involved the accountability of the defendants and their corporate actors’ at the most senior levels in a highly regulated financial industry.
84As indicated in McCracken v. Canadian National Railway, 2012 ONCA 797 [14], the existence of governmental regulation in an industry, is a factor that supports a finding in favour of a public interest component. That is because the class action was intended to afford an efficient means to obtain collective redress for a group of individuals complaining about the legality of a particular transaction in a federally regulated company.
85The defendants argue that they are entitled to costs because “they achieved substantial success in the actions”.
86As the Court of Appeal emphasized in their reasons on the liability appeal [15], the purpose of the ICA provisions breached by the defendants is to ensure GAAP compliance and “to protect the interests of participating policyholders from unfair or inequitable treatment.” In my view, it would be entirely inappropriate to award the defendants any costs given their breach of the regulatory provisions of the ICA.
87The plaintiffs were successful in challenging the PAT’s which were a novel legal and accounting arrangement. In essence, the class action enabled individual participating policy holders to exercise a regulatory function under the ICA as against defendants that failed to comply with that Act and federal regulator that failed in the exercise of its oversight.
88In further assessing whether the defendants are entitled to costs, I must review their conduct throughout the litigation process.
89The defendants maintained the position up to trial but then abandoned that s. 458 of the ICA provided the legal justification for the PATs. Further, the Mercer report’s independence was compromised by the defendant’s CEO and as a result, OSFI reliance was also undermined.
90In my view, the defendants have been unsuccessful on the majority of the core factual battles. The plaintiffs were successful in proving that the PATs were non-compliant. The Court of Appeal ordered the defendants to transfer $56.43 million to the participating accounts, in addition to cancelling the unlawful amortization charges of $139,437,000.
91The defendants were only successful in areas that became subsumed in the overarching analysis of legal compliance of the PATs. No discernable increase in trial time resulted.
92Moreover a “distributive costs” approach advocated by the defendants is misguided in principle. Justice Winkler (as he then was) observed in Lau v. Bayview Landmark Inc., [1999] O.J. No. 4385 [16]:
Simply put, the CPA aims to provide access to the justice system to litigants to whom procedural barriers and economics would otherwise present insurmountable hurdles. It is not in keeping with the spirit of that aim to penalize successful plaintiffs by attempting to break the certification motion down with a play by play analysis and apportioning costs accordingly.
93I agree with him.
94The defendants have also disclosed that their half of their legal costs have been charged and paid from the participating accounts throughout the litigation up until the effective date. In other words, the shareholder’s accounts have had to pay no only half of their legal fees in the defence of this litigation, yet the PAR accounts have been expensed with the defendants’ legal costs.
95For all of these reasons, and given the important public interest component, I find that the plaintiffs are entitled to costs and the defendants are not.
96In terms of quantum, I fix them on a partial indemnity scale at $4 million, to be paid from the shareholders’ accounts as transaction costs associated with the London Insurance Group acquisition. The partial indemnity scale is appropriate largely given that the fee request by plaintiffs’ counsel has been approved by this Court to be paid from the monetary award paid in the PAR accounts.
LEVY:
97Shortly before the common issues trial, the plaintiffs applied for financial support from the Fund under s. 59.3 of the LSA. In total, the Fund provided the plaintiffs with a total of $1,520,346.50 in funding support to cover disbursements in this matter.
98The Law Foundation of Ontario (“Foundation”) claims the repayment to the Fund of all disbursements for which financial support has been paid by the Fund, as provided under s. 10(3)(a) of the Regulation.
99In addition the Foundation seeks a determination of its entitlement to receive a levy on the monetary award in this case to be paid to the Class Proceedings Fund (“Fund”). They rely on ss. 10(2) and 10(3) of Ontario Regulation 771/92 (“Regulation”) passed under the Law Society Act [17] (LSA).
100The Foundation submits that the remedy provided by the Ontario Court of Appeal is “a monetary award… in favour of” the plaintiff class within the meaning of s. 10(2)(a) of the Regulation and is therefore subject to the 10 percent levy, payable under s. 10(3)(b) of the Regulation.
101The Foundation is a corporation without share capital established and continued pursuant to s. 53 of the LSA. The Fund is established pursuant to s. 59.1 of the LSA and is administered by the Foundation pursuant to s. 59.1 and related provisions thereof.
102At issue is whether the result in this class action includes a “monetary award… in favour of” some or all of the plaintiff class, within the meaning of s. 10(2) of the Regulation?
103If so, what is the quantum of the levy payable to the Foundation under s. 10(3) of the Regulation?
104The Foundation submits that given the close relationship between the Regulation and the CPA, the same definition adopted by the Court of Appeal in Hislop v. Canada (Attorney General) ought to be applied in interpreting s. 10(2)(a) of the Regulation. That is the phrase “monetary award” means “a payment of money imposed by judicial authority.”
105The Foundation submits that the Regulation contemplates payment of the levy from either the plaintiffs or defendants, depending on what is necessary and appropriate in the circumstances. Therefore, the payment of a levy is conditional on the outcome of the class proceeding.
106The defendants submit that the levy is only payable when a “monetary award” has been “made in favour of one or more person in a class” and only payable by the plaintiff and only in circumstances where the plaintiff is entitled to money. The defendants do concede however, that their interpretation finds no support in the text of the Regulation.
107The Foundation argues that the ordinary meaning of the phrase “in favour of” the plaintiff class must mean “to the advantage of” the plaintiff class and does not require that a specific amount be paid out directly to class members.
108The defendants further argue that there is no “regulatory privity” between them and the Fund and therefore they should not be required to pay the levy. Section 59.5(5) of the LSA expressly provides that the levy applies “against a settlement fund or monetary award” and “is a charge on the fund or award”, for which a defendant is typically responsible.
109In Smith v. Money Mart, 2010 ONSC 1334 [18], Perell J. approved a settlement that provided for the defendant Money Mart to pay the Fund’s levy directly.
110It seems that it may not be necessary for an award to be actually in the hands of class members before the levy can be determined and made payable. This case is similar to where a monetary award might be ordered to be paid into a trust - a pension plan or another similar entity – that would benefit members of the class but would not put funds in their direct control.
111The Foundation submits that its entitlement to a levy and a charge under the LSA attached as soon as the Court of Appeal awarded $56.43 million to be paid to the participating account. The net effect of the disposition made by this Court and the Court of Appeal describes the remedy as a “monetary relief” which means that the PAR payments are to be made to the PAR accounts from the shareholders’ account.
112I find that it would be unreasonable and inappropriate to interpret the language “a monetary award…in favour of” as requiring a payment of compensation or damages directly to some or all of the plaintiff class.
113Instead of using “compensation” or “damages” to describe the type of judgment that would give rise to the levy, s. 10(2)(a) uses the more expansive phrase “monetary award”. It does not refer to “payable to” but instead stipulates “in favour of” that class.
114In my view the use of these different terms is deliberate, meaningful and should be given a consistent interpretation. Had the legislature intended for a levy to be payable only in the event that compensation or damages were payable directly to some or all of a class, s. 10(2)(a) of the Regulation would have been drafted using clear language to that effect.
115Finally, the Fund’s purpose is to “improve access to justice in the Province of Ontario”. [19] The levy can be viewed as the “quid pro quo” for this financial assistance and assumption of risk. Given that the Fund is self-funding, the levy is the means by which the Fund can continue to provide assistance to other plaintiffs with meritorious requests for financial support in order to facilitate access to justice in Ontario.
116Accordingly, to allow for a levy only in cases where a class member personally receives compensation, an artificial incentive to provide funding to only those class actions that fall within the narrower range of cases would be created. This would be contrary to the purpose of the Fund and would have a chilling effect that courts have consistently cautioned against in the class proceedings context.
117In the case at bar, judicial economy was achieved; behaviour modification was promoted; and access to justice enhanced all goals of the CPA. Without the Fund, the plaintiffs would not have had the resources to mount this case, and important questions about the legality of the defendants’ transactions would likely have never been adjudicated and rectified.
118This is a case where a levy is appropriate.
Quantum of the levy:
119Pursuant to s. 10(3), that figure is the sum of:
(a) The amount of any financial support paid by the Fund, excluding any amount repaid by a plaintiff; and (b) 10 percent of the amount of the award… to which one or more persons in a class that includes a plaintiff who received financial support from the Fund is entitled.
120The sum of $1,520,346.50 is that amount owing under subsection (a).
121With respect to subsection (b), are the plaintiff class members “entitled” to the amount of the award? The PAR policyholders participate in the profits of the insurers, pursuant to s. 2(1) of the ICA. Given the financial position of the PAR accounts, the enhanced surplus created by the PAR payments can reasonably be expected to result in increased dividend payment to the members of the plaintiff class, even though the defendants have decided not to declare any dividends at present.
122To deny a levy to the Fund would undermine its objectives.
123Accordingly, the Foundation is entitled to an order:
(a) For payment from the PAR accounts to the Class Proceedings Fund a levy pursuant to ss. 10(1) of the Reg. 771/92, in the amount of: (i) $1,520,346.50; and (ii) 10 percent * ($56.43 million less $16.4 million) = $4,030,000
Disbursements:
124Given this Court’s decision to have the Foundation reimbursed for $1.520 million of disbursements paid by them, I grant no further disbursements. The unpaid disbursements of $118,000 were largely for appeal matters that have already been the subject matter of costs awards.
Devrett Deverett Law Offices (DLO):
125The parties agreed that should the plaintiffs’ class be successful in obtaining their fees paid from the monetary relief awarded to the PAR accounts, this firm would seek the same by way of written submissions.
126Accordingly, written submissions may be filed for my review by all parties according to a schedule agreed upon. Should this decision be appealed, then the written submission will await the outcome of the appeal.
Justice J. N. Morissette Date of Original Release: August 31, 2016 Date of Amended Endorsement Release: October 14, 2016
[1] R.S.O. 1990, c. L.8. [2] S.C. 1991, c. 47. [3] 1992, S.O. 1992, c.6. [4] Page 13 of defendant’s factum para. 54. [5] Chapter 327 of the RSP, 1897. [6] Pages 313, 320 and 327 of the Motion Record. [7] 2011, CarswellOnt 403 (SCJ) at para. 9. [8] Smith Estate v. National Money Mart Company, 2011 ONCA 233, para. 100. [9] Pp. 237-38. [10] 2009 ONCA 354, para 44. [11] Report on Class Actions (1982), Vol. 2 at p 520-531. [12] Ibid. [13] Jeffery, ONCA 683, at para. 142. [14] 2012 ONCA 797 at para. 9. [15] Jeffery, 2011 ONCA 683 at paras. 110, 120 and 125. [16] [1999] OJ No 4385 at para. 3. [17] R.S.O. 1990, c. L.8. [18] 2010 ONSC 1334 and approved at 2011 ONCA 233. [19] Garland v. Consumers’ Gas Co (1995), 22 O.R.(3d) 767.