Court File and Parties

Court File No.: 46300CP Date: 2017/07/21 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: 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, Sarah Bowden, and M. Gregory, for the plaintiffs Crawford Smith, and James Gotowiec, for the defendants

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, Sarah Bowden, and M. Gregory for the plaintiffs Crawford Smith, and James Gotowiec, for the defendants

Endorsement

[1] The plaintiffs move for relief pursuant to Rule 59.06 (2) (c) of the Rules of Civil Procedure, because they say that paragraph 33 of the Court’s trial judgment of October 1, 2010 has not been carried into operation as intended.

[2] The prohibition order set out at paragraph 33 of the judgment, enjoined the defendants “…from debiting, expensing or otherwise deducting from the participating accounts any costs or expenses incurred by the defendants in the defence of these actions, except by leave of the court on notice to the class representatives.”

[3] The plaintiffs further submit that paragraph 34 of the judgment imposed on the defendants a duty to cooperate. It stated: “This court orders and declares that the defendants shall take all reasonably necessary steps and to do all things reasonably appropriate to fully cooperate in carrying into effect this judgment.”

[4] Following the release of the judgment and the subsequent appeals, class counsel wrote to defence counsel on several occasions inquiring about the defendants’ compliance with the judgment and advising of the plaintiffs’ reservation of rights in respect of any compliance issues. Specifically, class counsel wanted confirmation from defence counsel that the prohibition at paragraph 33 was being observed. In other words, they wanted assurance that legal costs were not being charged to the participating accounts (Par accounts).

[5] The first response from defence counsel was “…with respect to the issue of defence costs, there is also nothing that the defendants are required to produce. The defendants confirm that they have complied with the orders of the Court.”

[6] The plaintiffs moved for an order for disclosure. As a result of this court’s order dated January 12, 2016, the defendants disclosed that between the commencement of the litigation in 2005 and the date of the judgment (October 1, 2010), the defendants incurred legal fees of $10,271,816.00 and disbursements of $3,445,117.74.

[7] It was not until that time that the court and the plaintiffs learned that throughout the course of the litigation, the defendants had allocated 50% of the defence’s legal costs of these actions to the Par accounts.

[8] This resulted in the Par accounts having been allocated a total of $6,858,466.88, being $3,429,233.44 to LL and GWL’s Par accounts, respectively.

[9] The defendants further confirmed that since the date of the judgment, costs have no longer been allocated between the respective Par accounts, which they say accords with the prohibition order.

The Judgment:

[10] The wording of paragraph 33 was proposed by counsel for the plaintiffs in their draft order which was submitted as part of their closing argument at trial.

[11] Paragraph 33 originally read as follows:

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 the 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.

[12] The italicized portion was struck by the Court of Appeal at the request of the defendants. The remainder of the prohibition remained intact, as did the duty to cooperate contained in paragraph 34.

[13] The defendants argue that the prohibition order is forward looking or prospective and is only effective from the date it is pronounced. They say an order can only have a retrospective effect if it expressly says so, by specifying a date in the past from which it is to operate.

[14] The plaintiffs argue that the words are plain and clear that the prohibition encompasses any costs or expenses incurred by the defendants in the defence of these actions, whenever they were incurred. [my emphasis]

[15] Because there is no stated effective date in the prohibition order, the defendants argue, it can have prospective effect only, commencing on the date of judgment. On the other hand, the plaintiffs submit that the absence of a date may also mean that there is no historical cut-off date, but rather the order operates to preclude any and all legal costs from being allocated to the participating accounts in the past, present and into the future.

Jurisdiction:

[16] The defendants challenge the jurisdiction of this court. They say that this court is functus.

[17] As already noted, the plaintiffs rely on Rule 59.06 (2) (c).

[18] Rule 59.06 (2) (c) states:

A party who seeks to,

…(c) carry an order into operation;

may make a motion in the proceeding for the relief claimed.

[19] In Doucet-Boudreau v. Nova Scotia, (Department of Education), 2003 SCC 62, the Court held that a rule, such as Ontario’s R. 59.06(2) (c) allows courts to vary or add to their orders so as to carry them into operation if necessary. It noted as follows:

…, the rules of practice in Nova Scotia and other provinces allow courts to vary or add to their orders so as to carry them into operation or even to provide other or further relief than originally granted… this shows that the practice of providing further direction on remedies in support of a decision is known to our courts, and does not undermine the availability of appeal. Moreover, the possibility of such proceedings may facilitate the process of putting orders into operation without requiring resort to contempt proceedings.

[20] The defendants argue that by framing their motion as the plaintiffs have done, they are effectively asking this court to interpret its judgment and in effect, vary its terms to provide an outcome not supported by its plain words.

[21] The plaintiffs submit that the plain words of paragraph 33 do not require any amendment.

Analysis:

[22] The scope of paragraph 33 of the judgment applies to a specific discrete subject matter, namely “any legal costs and expenses incurred by the defendants in the defence of these actions”.

[23] To hold that the judgment only has prospective application would ignore the subject matter of the prohibition order and render it virtually moot, or at least would substantially undermine its effect. The vast majority of the defendants’ costs and expenses, 80% of the total costs to date, were incurred before the date of the judgment.

[24] The prohibition order contemplated that the defendants could seek leave on notice to the class representatives in the event that they wished to charge legal costs and expenses against the Par accounts. They did not seek leave.

[25] The trial proceeded without a whisper of evidence that the defendants had decided to allocate 50% of defence legal costs to the Par accounts. Both sides acknowledged that no disclosure was made of the allocation throughout the litigation.

[26] It is not necessary to comment on whether the allocation of defence costs and expenses would have been authorized had leave been sought. There is no evidentiary record before me now to make such a determination. Clearly, the defendants failed to seek leave and to provide the factual and legal justification for what they had done.

[27] In my view, Rule 59.06(2)(c) is the appropriate mechanism by which to grant relief.

[28] The proper interpretation of paragraph 33 of the judgment is that no legal costs or expenses, whenever incurred could be charged to or allocated to the Par accounts at any time without leave of the court and on notice.

[29] Accordingly, an order is granted directing the defendants to move on notice for leave to charge all or some of the legal costs that in fact have been allocated to the Par accounts until the date of judgment.

“Justice J.N. Morissette” Justice J. N. Morissette Date: July 21, 2017