Court File and Parties

COURT FILE NO.: CV-15-11067-00CL COURT FILE NO.: CV-16-548624 DATE: 20160926

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: WOLFGANG VAETH, ANIKA VAETH, ROWITHA VAETH, SASKIA VAETH, THORSTEN FUERHOLZER, ROSWITHA FUERHOLZER, SABINE FUERHOLZER, and BURKHARD SCHNEIDER Plaintiffs – and – NORTH AMERICAN PALLADIUM LTD., PHIL DU TOIT, DAVID LANGILLE, and KPMG LLP Defendants

Counsel: Eli Karp for the Plaintiffs Wolfgang Vaeth, Anika Vaeth, Rowitha Vaeth, Saskia Vaeth, Thorsten Fuerholzer, Roswitha Fuerholzer, Sabine Fuerholzer, Burkhard Schneider, and Craig Johnson Alan W. D’Silva and Alexandra Urbanski for the Defendants North American Palladium Ltd., Phil Du Toit, and David Langille Michael J.P. O’Brien for the Defendant KPMG LLP

AND BETWEEN: CRAIG JOHNSON Plaintiff – and – NORTH AMERICAN PALLADIUM LTD., PHIL DU TOIT, DAVID LANGILLE, and KPMG LLP Defendants

Proceeding under the Class Proceedings Act, 1992

HEARD: In writing

PERELL, J.

REASONS FOR DECISION - COSTS

[1] As explained in Vaeth v. North American Palladium Ltd., 2016 ONSC 5015, pursuant to the Class Proceedings Act, 1992, S.O. 1992, c. 6, Morganti Legal acts for Craig Johnson in a securities misrepresentation class action (the “Johnson Class Action”), against North American Palladium Ltd. (“Palladium”), Phil Du Toit, David Langille (collectively, the “Palladium Defendants”), and KPMG LLP, which was Palladium’s auditor. The class action is about alleged misrepresentations made in Palladium’s corporate public disclosure documents between July 30, 2014 and April 14, 2015 inclusive. Morganti Legal also acts for Wolfgang Vaeth, Anika Vaeth, Rowitha Vaeth, Saskia Vaeth, Thorsten Fuerholzer, Roswitha Fuerholzer, Sabine Fuerholzer and Burkhard Schneider (the “Vaeth Plaintiffs”), in a securities misrepresentation action (the “Vaeth Action”) against the Palladium Defendants and KPMG LLP about the same alleged misrepresentations. The plaintiffs in both actions advance common law negligence claims and statutory misrepresentation claims under Ontario’s Securities Act, R.S.O. 1990, c. S.5.

[2] The Defendants in both actions brought a motion to stay both actions temporarily. I made a complicated order that temporarily stayed both actions for the purpose of effecting a change of lawyer in one or the other of the actions.

[3] The Palladium Defendants seek costs a partial indemnity scale in the amount of $34,393.69, all inclusive. KPMG LLP seeks costs on a partial indemnity scale in the amount of $29,478.37, all inclusive.

[4] The Plaintiffs object to KPMG LLP claiming costs because it was not the moving party. There is no merit to this objection. The stay motion arose from a direction I made during a case management conference, and KPMG LLP was a party affected by the motion and entitled to participate. Had the Plaintiffs been successful, they no doubt would have claimed costs from KPMG LLP.

[5] As for objections that have some traction, the Plaintiffs submit that the costs claimed are excessive. They submit that success on the motion was divided and, therefore, the Defendants’ claims should be halved. The Plaintiffs submit that the Defendants should not be permitted to depart from the Costs Grid established by the Costs Subcommittee of the Civil Rules Committee, and there should be no award for a junior counsel fee. The Plaintiffs submit that there should no recovery of lawyer rates for ministerial work that should have been performed by a law clerk.

[6] The Plaintiffs submit that while the Palladium Defendants were partially successful and entitled to reasonable costs, the appropriate award would be in the range of $7,500-$10,000, all inclusive.

[7] The Plaintiffs submitted a Costs Outline of their own claim for costs. On a partial indemnity scale the Plaintiffs’ claim was $15,848.25, all inclusive, or $10,805.63, all inclusive, under the Costs Grid.

[8] For the reasons that follow, in my opinion, the appropriate award in the circumstances of these cases is to award the Palladium Defendants $25,000, all inclusive, and KPMG LLP, $20,000, all inclusive.

[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) of the Rules of Civil Procedure, 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] I do not intend to weigh in on the debate about whether the Costs Grid is a dead letter in the exercise of the court’s discretion as to costs. See: Inter-Leasing Inc. v. Ontario (Revenue), 2014 ONCA 683; Fairfield Sentry Limited v. Pricewaterhouse Cooper LLP, 2015 ONSC 4961, Mask v. Silvercorp Inc., 2015 ONSC 7780; Pennyfeather v. Timminco Ltd., 2016 ONSC 4706. I shall not ignore the Costs Grid; rather, I shall factor its guidance into what shall be a conventional assessment of costs in accordance with the criteria set out in rule 57.01.

[13] The Defendants were the successful parties on the motion. Success or failure is measured by the order not by how many discrete arguments or points were won or lost by the parties during the argument. In the case at bar, the Plaintiffs struck out, and costs are not assessed by whether or not they had a prolonged at bat fouling off the Defendants’ strike pitches. The Defendants won the motion. As noted above, the normative rule is that the successful party is entitled to costs on a partial indemnity basis.

[14] Although the reasons differed for why the Defendants’ motion to stay was important to the parties, it was a very important motion for the parties respectively.

[15] The Defendants were confronted with a class action and an individual action, which is a multiplicity of proceedings. There was the unusual twist that the plaintiffs in the individual action and the plaintiff in the class action were represented by the same law firm. Thus, there was the foreseeable oddity that a putative class member would opt out of being represented by Class Counsel just in order to be represented by the same counsel in an individual action.

[16] It was complicated, and the Order which the Plaintiffs are appealing was complicated.

[17] The complexity of the motion and the importance of the motion to the parties justifies the time spent by the Defendants, and as the successful parties, they should be indemnified for this expenditure.

[18] This all said, the critical controlling principle is that the sum awarded reflects the fair and reasonable expectations of the unsuccessful litigant and, in my opinion a combined costs claim of approximately $70,000 is beyond those expectations. The Plaintiffs, who were the responding party, expended approximately $16,000, and so I do not think that awards of $25,000, all inclusive, and $20,000, all inclusive, is beyond their expectations.

[19] Order accordingly.

Perell, J.

Released: September 26, 2016