Fehr v. Sun Life Assurance Company of Canada, 2017 ONSC 2218
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ELDON FEHR, ANGELA WATTERS, GAETAN LAURIER, LESLIE MICHAEL LUCAS, JAMES PATRICK O’HARA, REBECCA JEAN CLARK, and LLOYD SHAUN CLARK
Plaintiffs
– and –
SUN LIFE ASSURANCE COMPANY OF CANADA
Defendant
Won J. Kim, Michael C. Spencer, and Megan B. McPhee for the Plaintiffs
F. Paul Morrison, Glynnis P. Burt, Hovsep Afarian, and Jacqueline Cole for the Defendant
Proceeding under the Class Proceedings Act, 1992
HEARD: In writing
PERELL, J.
REASONS FOR DECISION - COSTS
A. INTRODUCTION
1The Plaintiffs, Rebecca Jean Clark, Lloyd Shaun Clark, Eldon Fehr, Gaetan Laurier, Leslie Michael Lucas, James Patrick O’Hara, and Angela Watters brought a motion to have their action, which claimed $2.5 billion from Sun Life Assurance Company of Canada (“Sun Life”) certified as a class action under the Class Proceedings Act, 1992, S.O. 1992, c. 6.
2Sun Life resisted certification, and it brought a Rule 21 motion, which worked its way to the Court of Appeal. The outcome of the Rule 21 motion was a divided success. Next, the Plaintiffs moved forward with a certification motion and, in response, Sun Life brought a cross-motion to have each of the seven Plaintiffs’ individual actions, which asserted negligent misrepresentation and breach of contract claims, dismissed as statute-barred under provincial limitations statutes.
3The certification motion proceeded in two phases, and Sun Life was the successful party. However, technically speaking, Sun Life lost the summary judgment motion, but ironically for the Plaintiffs, their success on the summary judgment motion was a grand tactical and strategic victory for Sun Life. Sun Life’s unsuccessful summary judgment motion showed that there was no utility in certifying as a class action what was an overwhelming idiosyncratic assembly of claims and the unsuccessful summary judgment motion demonstrated that as a class action, the Plaintiffs’ action was woefully deficient and could not and should not be certified for all the reasons set out in my Reasons for Decision.
4Overall, based on the practical and juridical outcomes, Sun Life emerged as the successful party; the Plaintiffs’ campaign to mount a class action failed.
5As the overall victor, Sun Life requests that the Court award it costs of $3,661,815.52 on a substantial indemnity basis, comprised of $3,026,650.75 in fees, $100,539.01 in disbursements, $406,534.67 in HST, $93,000 in prior costs Orders, and $35,091.09 in non-taxable disbursements.
6In the alternative, Sun Life requests an award of $2,521,777.07 on a partial indemnity basis calculated at 60 percent of its actual costs. (Sun Life breaks this down as $1,245,066.37 for the certification motion and $1,276,710.70 for the summary judgment motion.)
7In the further alternative, Sun Life requests an award of $1,708,283.10 on a partial indemnity basis in accordance with the Costs Grid and pursuant to rule 57.01 of the Rules of Civil Procedure.
8The Plaintiffs submit that the appropriate award should be no more than $775,000, all inclusive.
9For the reasons that follow, I award Sun Life $1.0 million, all inclusive.
B. FACTUAL BACKGROUND
10For reasons the importance of which shall become apparent later, it is important to note that: (1) the alleged wrongdoing in this case was perpetrated in the 1980s and 1990s by Metropolitan Life Insurance Company’s ("MetLife") dedicated sales force; (2) MetLife’s agents sold approximately 230,000 life insurance policies; (3) in 1998, MetLife sold its Canadian business to Mutual Life, which was later renamed Clarica Life Insurance Company ("Clarica"); and (4) on December 31, 2002, Clarica and Sun Life were amalgamated and continued as one company under the name Sun Life.
11In 2010, the Plaintiffs, who were all purchasers of MetLife insurance policies, commenced a proposed class action. They claimed $2.5 billion in damages in an omnibus class action with respect to four universal life insurance policies that had been sold by MetLife between 1985 and 1998. In design, the Plaintiffs’ action was a gigantic container ship of what could have been eighteen or so large containers of litigation. The Plaintiffs action was against Sun Life but, to a very large extent, the alleged wrongdoing was a heritage liability of MetLife that Sun Life had inherited when it amalgamated with Clarica. Indeed, it was Sun Life’s litigation against MetLife to enforce an indemnity agreement that was the catalyst for the Plaintiffs’ action against Sun Life.
12In the sale of MetLife’s book of business, MetLife had agreed to indemnify the purchaser; i.e., ultimately Sun Life, for “market conduct” claims. Market conduct claims were defined to include allegations that MetLife engaged in a practice of misrepresenting the nature of its insurance policies, and, that among other things, MetLife violated applicable law relating to the sale, marketing or servicing of policies. Sun Life was experiencing claims from policyholders with MetLife policies and anticipated more claims including a possible class action and, therefore, Sun Life sought to trigger the indemnity provisions in the sale contract. Thus, the Plaintiffs’ proposed class action was inspired by Sun Life’s claim against MetLife.
13In their proposed class action, the Plaintiffs advanced claims of: (a) negligent misrepresentation; (b) fraudulent misrepresentation; (c) breach of contract; (d) breach of a duty of good faith and fair dealing; and (e) deceit and fraud. The Plaintiffs alleged that Sun Life (i.e., the MetLife sales agents, then the Clarica personnel and then Sun Life personnel) kept information from the Plaintiffs.
14In their Statement of Defence, Sun Life, among other things, pleaded a limitation period defence. The Plaintiffs replied to Sun Life’s limitations defence with allegations of fraudulent concealment.
15In October 2011, the original plaintiff, Joseph Kang, filed a Revised Fresh as Amended Statement of Claim that added Mr. Fehr, Ms. Watters, Mr. Laurier, and Mr. Lucas as Plaintiffs. Sun Life responded with a motion to strike out paragraphs from the pleading. The motion relied on rules 21.01(1)(b), 25.06 and 25.11 of the Rules of Civil Procedure and s. 5(1)(a) of the Class Proceedings Act, 1992. In other words, the motion would consider the first criterion for certification, which is whether the plaintiff has shown a cause of action for the proposed class.
16The result of the pleadings motion was that four causes of action were struck out; namely; (1) breach of contract; (2) breach of fiduciary duty; (3) breach of duty of good faith and fair dealing; and (4) rescission of policyholder releases. I also struck out certain paragraphs pleading a claim of deceit and fraud because these paragraphs were a redundant argument and not a different claim from negligent or fraudulent misrepresentation, which claims were not being challenged by Sun Life. I concluded that in accordance with s. 5(1)(a) of the Class Proceedings Act, 1992, Mr. Kang had disclosed causes of action in negligent and fraudulent misrepresentation, including claims for waiver of tort, disgorgement, and punitive damages. See Kang v. Sun Life Assurance Company of Canada, 2011 ONSC 6335 and my costs award Kang v. Sun Life Assurance Company of Canada, 2011 ONSC 7436.
17With an exception for the plea of breach of fiduciary duty, Mr. Kang appealed to restore three causes of action and to restore 21 paragraphs of the 64 paragraphs that had been struck out.
18In 2013, the Court of Appeal allowed the appeal and restored 18 paragraphs and the claims for breach of contract and breach of duty of good faith and fair dealing. The Court also restored the pleadings of deceit and fraud, which I had struck out as redundant, of the claim of fraudulent misrepresentation. The Court of Appeal awarded Mr. Kang the costs of the appeal in the amount of $20,000. The Court of Appeal directed that I should reconsider the costs of the pleading motion in light of its decision. See Kang v. Sun Life Assurance Company of Canada, 2013 ONCA 118 and 2013 ONCA 387.
19I duly reconsidered the costs of the pleadings motion and ordered costs of $75,000 in the cause. See Kang v. Sun Life Assurance Company of Canada, 2013 ONSC 4800 and 2013 ONSC 5193.
20On July 10, 2013, Sun Life delivered a Fresh as Amended Statement of Defence.
21On October 31, 2013, the Plaintiffs delivered a Reply to Fresh as Amended Statement of Defence.
22In the fall of 2013, Sun Life decided to bring a summary judgment motion.
23On March 28, 2014, at a case conference, I cancelled the scheduled hearing of the certification motion and Sun Life’s cross-motion for a summary judgment, and I directed that a new timetable be established. I reserved judgment on several procedural and production issues that were on the agenda of the case conference, including whether Sun Life, which had voluntarily delivered an affidavit of documents, should deliver a further and better affidavit of documents.
24On April 8, 2014, I released Reasons for Decision from the case conference providing directions for the certification motion and for the summary judgment motion, which was subsequently scheduled for September 2015. See Fehr v. Sun Life Assurance Company of Canada, 2014 ONSC 2183.
25On the run-up to the certification motion and the summary judgment motion, the Plaintiffs brought an unsuccessful refusals motion. See Fehr v. Sun Life Assurance Company of Canada, 2015 ONSC 2908. I awarded Sun Life costs of $18,000, all inclusive, payable in any event of the certification motion: Fehr v. Sun Life Assurance Company of Canada, 2015 ONSC 3918.
26The summary judgment motion and the certification motion were heard on September 28, 29 and 30, and October 1, 2, 5, 6 and 7, 2015.
27I released my Reasons for both motions which is reported as Fehr v. Sun Life Assurance Company of Canada, 2015 ONSC 6931. I released a supplementary decision, on a motion to correct the Reasons: see Fehr v. Sun Life Assurance Company of Canada, 2016 ONSC 455. I awarded the Plaintiffs $7,500, all inclusive, payable in any event of the cause for the motion to correct the Reasons; see Fehr v. Sun Life Assurance Company of Canada, 2016 ONSC 1463.
28In my Reasons for Decision for the certification and summary judgment motions, I held that the Plaintiffs’ breach of contract claims regarding the cost of insurance (“COI”) and Administrative Fee increases for its Flexiplus and Optimet insurance policies were statute-barred from 2001 to 2008 and from 2007 to 2008 respectively, but not for subsequent years. I held that the claims for misrepresentation were statute-barred. I held that the Universal Plus breach of contract claim was premature and should be dismissed. I found that the claims for deceit (fraudulent misrepresentation), breach of the duty of good faith and fair dealing, and rescission were not statute-barred. I concluded that the COI and Administrative Fee breach of contract claims for the years after 2008 might be certifiable as a class action, and I adjourned the certification motion for more evidence about these causes of action. I dismissed the balance of the Plaintiffs’ motion for certification.
29In my Reasons for Decision, I concluded that the allegations of misrepresentation and deceit and fraud did not satisfy the common issues criterion of the Class Proceedings Act, 1992. At paragraphs 293 to 295 of my decision, I stated:
Further, the proposed Representative Plaintiffs' subsequent dealings with Sun Life, from which dealings the deceit (fraudulent misrepresentation), breach of duty of good faith, and rescission claims are derived, are idiosyncratic, and these causes of action do not show commonality. Further still, the circumstances of Sun Life's limitation period defences are not common but emerge from the personal histories of each Plaintiff and each putative Class Member.
In the case at bar, commonality has not been established for the questions based on the misrepresentation claims, which in and of themselves are multifarious. I am also not satisfied that commonality has been established for the questions with respect to the causes of action based on deceit and fraud, breach of the duty of good faith, and rescission.
To borrow from Justice Rosenberg in Williams v. Mutual Life Assurance Co. of Canada, any com-mon issue, however phrased, cannot meet the requirements that the issue be necessary to the resolution of each class members' claim and a substantial ingredient of each of the class members' claims. In the case at bar, establishing that MetLife or Sun Life misconducted itself in a particular case would not represent a substantial ingredient in each of the Class Members' claims. Inevitably, the misrepresentation, deceit, breach of duty of good faith and rescission claims would break down into individual proceedings.
30I found that there was no merit to the allegations of fraudulent concealment, and I held that Sun Life did not conceal information or mislead the Plaintiffs. I concluded that the Plaintiffs had failed to establish that there was some basis in fact for the allegations of fraudulent concealment.
31The adjourned certification motion with respect to the COI and the Administrative Fee issues was heard in December 2016. In the result, I dismissed the certification motion. See Fehr v. Sun Life Assurance Company of Canada, 2016 ONSC 7659.
32In defending this action, Sun Life incurred actual costs of $4,041,828.34, comprised of taxable fees in the amount of $3,362,945.28, taxable disbursements in the amount of $100,539.01, HST in the amount of $450,252.96, non-taxable costs Orders in the amount of $93,000, and nontaxable disbursements in the amount of $35,091.09.
33For comparative purposes, the Plaintiffs advised that Class Counsel had expended approximately $1.7 million in fees for the certification motion and for the summary judgment motion.
C. DISCUSSION AND ANALYSIS
1. General Principles – Costs and Class Proceedings
34Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage and sanction inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements. See: Hamilton-Wentworth (Regional Municipality) v. Hamilton-Wentworth Save the Valley Committee, Inc. (1985), 1985 CanLII 1957 (ON SC), 51 O.R. (2d) 23 (H.C.J.); Fellowes, McNeil v. Kansa General International Insurance Co. (1997), 1997 CanLII 12208 (ON SC), 37 O.R. (3d) 464 (Gen. Div.); Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), 46 O.R. (3d) 330 (C.A.); Somers v. Fournier (2002), 2002 CanLII 45001 (ON CA), 60 O.R. (3d) 225 (C.A.); British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371 (S.C.C.); 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 2006 CanLII 35819 (ON CA), 82 O.R. (3d) 757 (C.A.); Reynolds v. Kingston (City) Police Services Board (2007), 2007 ONCA 375, 86 O.R. (3d) 43 (C.A.).
35The court's discretion in awarding costs arises under the authority of s. 31(1) of the Courts of Justice Act, R.S.O. 1990, c. C-43 and is to be exercised by a consideration of the factors in rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. These factors include the principle of indemnification, the reasonable expectations of the parties, the complexity of the proceeding, the importance of the proceeding and the conduct of the parties in litigation. Under the scheme developed in Ontario for class proceedings, subject to the court’s discretion and the directive of s. 31 of the Class Proceedings Act, 1992, discussed below, the plaintiff remains liable for costs.
36A 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), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) at para. 24; Caputo v. Imperial Tobacco Ltd. (2005), 2005 CanLII 63806 (ON SC), 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.
37In Boucher v. Public Accountants Council for the Province of Ontario, supra, after a two-day hearing of a judicial review application, the motions judge fixed costs on a partial indemnity scale at $187,682.51, all inclusive. On appeal, the Court of Appeal reduced the aggregated award to $63,000, all inclusive. At para. 24 of his judgment, Justice Armstrong stated:
- The appellants submit that the motions judge accepted the bills of costs that were presented to her without any deductions. The bills were prepared in accordance with the calculation of hours times dollar rates provided by the costs grid. While it is appropriate to do the costs grid calculation, it is also necessary to step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable. This approach was sanctioned by this court in Zesta Engineering Ltd. v. Cloutier (2002), 2002 CanLII 25577 (ON CA), 21 C.C.E.L. (3d) 161 (Ont. C.A.) at para. 4 where it said:
In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.
See also Stellarbridge Management Inc. v. Magna International (Canada) Inc., 2004 CanLII 9852 (ON CA), [2004] O.J. No. 2102 (C.A.) para. 97.
38The assessment of reasonableness is discretionary and very much dependent upon the circumstances of each case. In some cases, it may be reasonable for the successful party to make exhaustive efforts and to commit enormous legal resources, and in those cases, it might be said that the unsuccessful party could reasonably expect to pay those costs. In other cases, however, the successful party may have been well served by giving his or her lawyer instructions to make exhaustive efforts, but it might be disproportionate and unreasonable to expect the unsuccessful party to pay those costs, even if he or she would have expected or anticipated that his or her foe would have marshalled those legal resources.
39In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.) at para. 52, Justice Epstein stated that the overriding principle in awarding costs is reasonableness. She stated:
- As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher [Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.)], this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said: "[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice."
40The same approach is applied to the recovery of fees paid to an expert witness. In Pearson v. Inco Ltd., [2002] O.J. No. 3532 (S.C.J.), Justice Nordheimer stated at para. 20:
[T]he approach to the recovery of fees paid to expert witnesses ought to be exactly the same as the approach to the fees to be recovered by counsel. The court should consider what is fair in terms of hours and rates as well as the overall amount and should then fix an amount which it is reasonable for the losing party to pay. In so doing, the court is not bound by what the client may have actually had to pay the expert.
41The 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.
42In the assessment of costs, there is a debate about whether the Costs Grid is an anachronism 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 regard the Costs Grid as something simply to consider when exercising the court’s discretion as to costs.
43Subject to the costs consequences provisions of the offer to settle rule, only in exceptional cases are costs awarded on a substantial indemnity scale: Foulis v. Robinson (1978), 1978 CanLII 1307 (ON CA), 21 O.R. (2d) 769 (C.A.). Costs on a substantial indemnity scale or full indemnity scale are reserved for rare and exceptional cases, where the conduct of the party against whom costs is ordered is reprehensible or where there are other special circumstances that justify costs on the higher scale: St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 280, supp. reasons 2010 ONCA 479; McBride Metal Fabricating Corp. v. H & W Sales Co. (2002), 2002 CanLII 41899 (ON CA), 59 O.R. (3d) 97 (C.A.); Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.).
44Among other circumstances, costs may be awarded on a substantial indemnity basis where there is reprehensible conduct by a party either in the circumstances giving rise to the claim or during the course of the proceedings: Mortimer v. Cameron (1994), 1994 CanLII 10998 (ON CA), 17 O.R. (3d) 1 (C.A.); Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3 (S.C.C.); Prinzo v. Baycrest Centre for Geriatric Care (2002), 2002 CanLII 45005 (ON CA), 60 O.R. (3d) 474 (C.A.).
45Costs may be awarded on a substantial indemnity basis where a party pleads but fails to prove that his or her opponent perpetrated a fraud or committed a criminal act or engaged in other dishonest or reprehensible conduct or makes unfounded allegations that impugn the integrity or good reputation of his or her foes: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303 (S.C.C.); Toronto-Dominion Bank v. Leigh Instruments Ltd. (Trustee of) (1999), 1999 CanLII 3778 (ON CA), 45 O.R. (3d) 417 (C.A.), leave to appeal refused 188 D.L.R. (4th) vi (S.C.C.).
46In McNaughton Automotive Limited v. Co-operators General Insurance Company, 2005 CanLII 1058 (ON SC), [2005] O.J. No. 179 (S.C.J.), leave to appeal ref’d, 2008 ONCA 597, where the plaintiff alleged that the defendant insurer had been intentionally dishonest, following Hamilton v. Open Window Bakery, supra at para. 26, the Court of Appeal held that unproven allegations of dishonesty, as well as fraud, are capable of attracting substantial indemnity costs. See also Lewis v. Cantertrot Investments Limited, 2010 ONSC 5679.
47The decision to award costs is discretionary, and the court has the discretion to reduce the amount of costs or to order that there be no order as to costs in a variety of circumstances including:
- the proceeding raises novel issues, the resolution of which is in the public interest, including, for example, the interpretation of a statute: Re Canada 3000 Inc., 2005 CanLII 18858 (ON SC), [2004] O.J. No. 1962 (C.A.); Dam Investments Inc. v. Ontario (Minister of Finance), 2007 ONCA 527, [2007] O.J. No. 2674 (C.A.) at para. 20; Sutcliffe v. Ontario (Minister of the Environment), 2004 CanLII 34994 (ON CA), [2004] O.J. No. 4494 (C.A.) at para. 1; Valpy v. Ontario (Commission on Election Finances), 1989 CanLII 4330 (ON SC), [1989] O.J. No. 66 (Div. Ct.) at para. 22; Gombu v. Ontario (Assistant Information and Privacy Commissioner), [2002] O.J. No. 2570 (Div. Ct.) at paras. 3-4; Mahar v. Rogers Cablesystems Ltd., [1995] O.J. No. 3711 (Gen. Div.) at paras. 2, 7; College of Optometrists of Ontario v. SHS Optical Ltd., [2003] O.J. No. 3499 (S.C.J.) at paras. 3-4; Seetal v. Quiroz, [2009] O.J. No. 3124 (S.C.J.); O’Dea v. Real Estate Council of Ontario, [2011] O.J. No. 247 (S.C.J.) at paras. 9-11; Kelly v. Ontario, [2014] O.J. No. 3373 (S.C.J.) at paras. 49-51;
- the proceeding is a test case: Dickason v. University of Alberta, 1992 CanLII 30 (SCC), [1992] S.C.J. No. 76 at para. 56;
- the state of the law is uncertain or under development or underdeveloped and it is in the public interest that the question be resolved: Woodhouse v. Woodhouse, 1996 CanLII 902 (ON CA), [1996] O.J. No. 1975 (C.A.) at para. 57; Guelph (City) v. Wellington-Dufferin-Guelph Health Unit, 2011 ONSC 7523, [2011] O.J. No. 6009 (S.C.J.) at paras. 1, 4, 46;
- the unsuccessful party qualified as a public interest litigant: Incredible Electronics Inc. v. Canada (Attorney General), 2006 CanLII 17939 (ON SC), [2006] O.J. No. 2155 (S.C.J.);
- the unsuccessful party is a government or public authority or regulator acting in the public interest; Re Canada 3000 Inc., supra, at paras. 8-9, 12-13, 15; Guelph (City) v. Wellington-Dufferin-Guelph Health Unit, supra; College of Optometrists of Ontario v. SHS Optical Ltd., supra.
48In Pearson v. Inco Ltd., supra at para. 13 the Court identified the following principles for fixing costs on a certification motion: (1) Ontario, unlike other class proceedings jurisdictions such as British Columbia, has not sought to interfere with the normal rule that costs will ordinarily follow the event; (2) the costs must reflect what is fair and reasonable; (3) the costs should, if possible, reflect costs awards made in closely comparable cases, recognizing that comparisons will rarely provide firm guidance; (4) a motion for certification is a vital step in the proceeding and the parties expect to devote substantial resources to prosecuting and defending the motion; (5) the costs expectations of the parties can be determined by the amount of costs that an unsuccessful party could reasonably expect to pay; (6) the complexity of the issues; (7) whether the case raises an issue of public importance; and (8) a fundamental object of the Class Proceedings Act, 1992 is to provide enhanced access to justice.
49A class proceeding should not become a means for either defendants or plaintiffs to overspend on legal expenses simply because the economies of scale of a class proceeding makes it worthwhile to enlarge the investment in the defence or prosecution of the case: 2038724 Ontario Ltd. v. Quizno's Canada Restaurant Corp., 2010 ONSC 5390 at para. 19.
50In anticipating costs, a defendant should rein in any tendency to commit more resources than are necessary to fairly test and challenge the propriety of certifying the class proceeding: Lavier v. MyTravel Canada Holidays Inc., 2008 CanLII 44697 (ON SC), [2008] O.J. No. 3377 (S.C.J.) at paras. 31 and 32; Singer v. Schering-Plough Canada Inc., 2010 ONSC 1737, [2010] O.J. No. 1243 (S.C.J.).
51An important factor in awarding costs in class actions is s. 31 of the Class Proceedings Act, 1992, which provides that:
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.
52Under s. 31 of the Act, in class proceedings, the approach to fixing costs is the same as in ordinary actions, but 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 CanLII 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 CanLII 7179 (ON SC), 22 O.R. (3d) 767 (Gen. Div.), aff’d (1996), 1996 CanLII 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 (S.C.J.) at para. 11.
53Under the Ontario class action legislation, the effect of s. 31(1) 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 CanLII 5962 (ON SC), [2008] O.J. No. 599 (S.C.J.)
54In Holley v. Northern Trust Company, 2014 ONSC 3057, I noted that s. 31 is essentially precatory. I stated at paras. 22 and 23:
For good or for ill, the Legislature gave very little to plaintiffs in class actions with the enactment of s. 31 of the Class Proceedings Act, 1992. Regardless of the existence of s. 31, when a court exercises 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. Section 31 is essentially precatory and simply reminds the court of a discretion that the court already has when awarding costs. As noted above, this discretion is exercised from time to time, but is not inevitably exercised so as to create an asymmetrical costs regime.
There is no doubt that the risk of having to pay costs is a deterrent to plaintiffs (and their lawyers) bringing class actions, but there is no doubt that undertaking that risk brings the potential award of significant costs, which would have been available to Ms. Holley in the case at bar. An adverse costs system is what the Legislature intended; it did not intend a costs regime that removes the risk. And it did not impose a public interest burden on defendants, who are also entitled to access to justice, by imposing an asymmetrical system of costs.
2. Comparable Awards
(a) Awards for Plaintiffs
- In Labourers’ Pension Fund of Central and Eastern Canada (Trustees of) v. Sino-Forest Corp., 2015 ONSC 6354, the plaintiffs were awarded $673,398.92 following certification of the action and leave to commence a claim under the Ontario Securities Act, R.S.O. 1990, c. S.5.
- In Andersen v. St. Jude Medical, Inc. (2006), 2006 CanLII 85158 (ON SCDC), 264 D.L.R. (4th) 557 (Ont. Div. Ct.), the plaintiffs were awarded $610,700 following certification of the action as a class proceeding.
- In Lambert v. Guidant Corp., 2009 CanLII 68460 (ON SCDC), [2009] O.J. No. 5264 (Div. Ct.), the plaintiffs were awarded costs of $600,000 following certification of the action as a class proceeding.
- In Green v. Canadian Imperial Bank of Commerce, 2016 ONSC 3829, the plaintiff was awarded $2,679,277 for certification and for leave to commence an action under the Ontario Securities Act, R.S.O. 1990, c. S.5.
- In Trillium Motor World v. General Motors Canada Limited, 2016 ONSC 1725, the plaintiff was awarded $5,478,005.32 following a 41-day common issues trial.
(b) Awards for Defendants
In Fresco v. Canadian Imperial Bank of Commerce, 2010 ONSC 1036, reversed on other grounds, 2012 ONCA 444, the defendants were awarded $525,000;
In Cannon v. Funds for Canada Foundation, 2012 ONSC 3009, the plaintiffs were awarded costs of $800,000 following certification of the action as a class proceeding and dismissal of the defendants’ summary judgment motions.
In Martin v. AstraZeneca Pharmaceuticals PLC, 2012 ONSC 4666, the defendants were awarded $655,407.
In 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2016 ONSC 5496, the defendant was awarded $1,506,883 plus taxes following a common issues summary judgment motion.
In Smith v. Inco Ltd., 2012 ONSC 5094, the defendant was awarded $1,766,000 from the date of certification through the trial of common issues.
In Fairview Donut Inc. v. TDL Group Corp., 2014 ONSC 776, the defendants were awarded $1,850,000 where the action would have satisfied the criterion for certification but where the plaintiffs’ claim failed on the defendants’ summary judgment motion.
There are cases where no costs have been awarded to successful defendants in class actions, including: Ragoonan v. Imperial Tobacco Canada Ltd. (endorsement of Justice Cullity, March 10, 2006); Caputo v. Imperial Tobacco Ltd., 2005 CanLII 63806 (ON SC), [2005] O.J. No. 842 (S.C.J.); Joanisse v. Barker, [2003] O.J. No. 4081 (S.C.J.); M.C.C. v. Canada (Attorney General), [2002] O.J. No. 687 (S.C.J.); Williams v. Mutual Life Assurance Co. of Canada, 2001 CanLII 62796 (ON SC), [2001] O.J. No. 445 (S.C.J.); McNaughton Automobile Ltd. v. Co-operators Insurance Company (2001), 2000 CanLII 22409 (ON SC), 50 O.R. (3d) 300 (S.C.J.); Mahar v. Rogers Cablesystems Ltd. (1995), 1995 CanLII 7129 (ON SC), 25 O.R. (3d) 690 and [1995] O.J. No. 3711 (Gen. Div.); Elliott v. Canadian Broadcasting Corp., 1995 CanLII 244 (ON CA), [1995] O.J. No. 1710 (C.A.); Cianna v. York University, [2000] O.J. No. 3482 (C.A.); Abdool v. Anaheim Management Ltd., 1993 CanLII 5430 (ON SC), [1993] O.J. No. 1820 (Gen. Div.); and Moyes v. Fortune Financial Corp., [2002] O.J. No. 1820 (S.C.J.).
There are cases where very modest costs have awarded to successful defendants in class actions, including: Taub v. Manufacturers Life Insurance Co. (1998), 1998 CanLII 14853 (ON SC), 40 O.R. (3d) 379 (Gen. Div.), aff’d (1999), 1999 CanLII 19922 (ON SC), 42 O.R. (3d) 576 (Div. Ct.); Hollick v. Metropolitan Toronto (Municipality) (1998), 168 D.L.R. (3d) 379 (Ont. Gen. Div.), aff’d (1999), 42 O.R. (3d) 576 (Div. Ct.); and Controltech Engineering Inc. v. Ontario Hydro, [1998] O.J. No. 5350 (Gen. Div.).
(c) Analysis
55Although the Plaintiffs advanced the argument that the proposed class action was in the public interest and involved novel points of law and they submitted that these factors militated in favour of a reduced award, they did not suggest that Sun Life should receive no costs.
56Rather, the Plaintiffs’ primary arguments were that: (a) Sun Life was not entitled to costs on a substantial indemnity basis; (b) there was divided success on the summary judgment motion; (c) a $3.6 million award would not reflect the fair and reasonable expectations of the parties; (d) the requested costs award would have a chilling effect on access to justice; (e) the excesses of Sun Life’s costs request was revealed by comparing it to Class Counsel’s docketed time; (f) there should be no costs for the cross-examinations; (g) there should be no costs for preparing costs submissions; and (h) Sun Life claimed improper disbursements. The Plaintiffs submitted, therefore, that the appropriate award should not exceed $775,000.
57The Plaintiffs have essentially conceded that $775,000 on a partial indemnity basis would be an appropriate award. Sun Life, however, seeks $3,661,815.52 on a substantial indemnity basis.
58As I have already indicated, my view is that the appropriate award is $$1.0 million all inclusive. My rationale for this award begins with my opinion that the case at bar is not one in which it would be appropriate to exercise my discretion to award costs on a substantial indemnity basis.
59I do not agree with the Plaintiffs that Sun Life does not qualify for a substantial indemnity award. It does have an argument that it qualifies for such an award, but it is a weak argument and, in any event, costs remain discretionary and in the particular circumstances of this case, I do not think a punitive costs award is called for.
60The most damning allegation of fraud or dishonesty that the Plaintiffs failed to prove was the allegation that the MetLife agents had made misrepresentations when they sold the insurance policies. The Plaintiffs’ allegations were made in good faith, and Sun Life essentially made the same allegation in its indemnity litigation with MetLife, which it settled at some undisclosed sum.
61There has never been a determination of any of the misrepresentation claims on a class-wide basis, which would only have occurred if the action had been certified, but that could not be, because the misrepresentation issue was entirely idiosyncratic and not a common issue. Even the several Plaintiffs’ misrepresentation claims were not determined on their merits; rather, they were dismissed as statute-barred. These are not the circumstances for a punitive costs award.
62The situation in the case at bar is somewhat similar to the situation in Hodge v. Neinstein, 2014 ONSC 6366, where I declined to exercise the court’s discretion to make a punitive costs award in a context where the plaintiff’s certification motion failed. In that case, I stated at paras. 62-65 of my decision:
I accept that Ms. Hodge’s proposed class proceeding disparaged the reputation, professionalism and integrity of the Respondents. I also note that in their costs submissions, Ms. Hodge and the Fund continue to reiterate that the Respondents are wrongdoers and disparage their professional reputation and integrity. I also accept that there is a well-established principle that costs may be awarded, on a substantial indemnity basis, where a party pleads but fails to prove that his or her opponent engaged in dishonest or reprehensible conduct or where a party makes unfounded allegations that impugn the integrity or good reputation of his or her foes.
The problem, however, in the immediate case is that neither a certification motion nor the determination of the costs for the certification motion is a determination of the merits of Ms. Hodge’s (and now the Fund’s) disparaging allegations of wrongdoing.
The Respondents, naturally enough, were motivated to vigorously resist and ultimately to defeat Ms. Hodge’s certification motion, but there is no vindication or repairing the reputational harm of a class action by defeating certification. It remains to be seen whether there is any truth to Ms. Hodge’s allegations of wrongdoing. It remains to be seen whether the allegations can be substantiated or proven. It remains to be seen whether there are substantive defences to the allegations of wrongdoing.
The Respondents are in no different position than any other defendant to a certification motion that succeeds in defeating certification. Not infrequently, the defendant will be demonized, but if the defendant wants vindication, it is not available just by defeating certification. If it is vindication a defendant wants, then he or she should consent to certification and prove that the representative plaintiff’s claim is without merit.
63I, therefore, shall approach this case as a case in which partial indemnity costs should be awarded. Approached on this basis, the range of the award is now between $775,000 and $2,521,777.07 based on the assumption that Sun Life was the ultimate successful party.
64However, while it is true that Sun Life was the ultimate successful party, technically speaking, it was the unsuccessful party on the summary judgment motion.
65The purpose of the summary judgment motion was to have the Plaintiffs’ claims dismissed as statute-barred and to end the litigation. That purpose failed. The Plaintiffs’ breach of contract claims regarding COI and Administrative Fee increases for its Flexiplus and Optimet insurance policies for the years after 008 were not statute-barred. The claims for deceit (fraudulent misrepresentation), breach of the duty of good faith and fair dealing, and rescission were not statute-barred.
66Had the summary judgment motion not been combined with the certification motion and been a discrete motion in advance of the certification motion, it would not have derailed the certification motion for the breach of contract, deceit, breach of good faith, and rescission claims.
67Sun Life failed in its mission to have the action dismissed. It is a nice question to decide whether standing alone as a discrete summary judgment motion, and without the prescience of knowing then what would happen at the certification motion, I would have made no order as to costs, ordered costs in the cause, or awarded the Plaintiffs costs as the most successful party coming out of the summary judgment motion. However, the motions were heard together, and as I view matters now, Sun Life technically lost the summary judgment motion or at least cannot claim to have been the successful party, but it achieved a tactical and strategic victory for the certification motion where I could observe firsthand why the case was not certifiable.
68Where this view of the matter leaves the analysis of Sun Life’s claim for a partial indemnity award of $2,521,777.07 is that the claim is unreasonable and unfair and beyond the reasonable expectations of the parties and out of line with the comparable awards in class proceedings where the certification motion is combined with a summary judgment motion.
69Applying the normative principles described above, I conclude that the appropriate award is $1.0 million, all inclusive.
70I arrive at this award having considered the submissions of both parties; however, by and large, apart from setting the range for the costs award, I did not find their submissions that helpful. Sun Life overstated its success on the summary judgment motion. Sun Life overstated its indignation in the Plaintiffs having maligned its reputation because it had already maligned MetLife’s reputation in the indemnity litigation.
71The Plaintiffs underestimated their success on the summary judgment motion and focused their attention on their weaker arguments set out above, but it is not necessary for me to determine the merits of the Plaintiffs’ various weak arguments because taking a step back and considering the range of possible awards and reflecting on what is the fair and reasonable amount that the Plaintiffs should pay, I conclude that that sum is $1.0 million all inclusive.
D. CONCLUSION
72I award Sun Life costs on a partial indemnity basis of $1.0 million, all inclusive.
Perell, J.
Released: April 11, 2017