1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2017 ONSC 4612

CITATION: 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2017 ONSC 4612

COURT FILE NO.: 60680CP

DATE: 20170809

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1688782 Ontario Inc., Plaintiff

AND:

Maple Leaf Foods Inc. and Maple Leaf Consumer Foods Inc., Defendants

Proceedings under the Class Proceedings Act, 1992

BEFORE: Leitch J.

COUNSEL: Kevin L. Ross, Rebecca Case, for the Plaintiff

L. Scott Smith, for the plaintiff

Elizabeth Bowker, for the defendants

Written submissions: filed in accordance with the time table set at the February 2, 2017 case management conference.

ENDORSEMENT ON COSTS

[1] The plaintiff seeks to recover the costs of three contested motions: a motion for leave to bring a certification motion, a certification motion, and a summary judgment motion.

BACKGROUND

[2] In 2008, RTE meats manufactured by the defendants were found to contain listeria, which resulted in an outbreak of listeriosis in Canada and a recall of the product. It was widely reported throughout Canada that the affected products were sold at Mr. Sub restaurants. As a result, the plaintiff experienced a drop in sales and eventually closed. The plaintiff commenced a class action on the grounds that the defendants owed and breached a duty of care to the plaintiff and the class.

[3] The plaintiff issued a statement of claim on December 30, 2008, and the defendants responded with a notice of intent to defend on April 1, 2009.

[4] In August 2010, the defendants advised the plaintiff that it would be defending this action on the merits. As a result, the plaintiff asserts it commenced a full investigation to ensure a complete evidentiary record. The plaintiff issued an amended statement of claim and served its certification record on December 4, 2014.

[5] Thereafter, the defendants advised that they would be resisting the plaintiff’s motion for certification and on May 12, 2015, the defendants brought a motion for summary judgment.

[6] Both motions were set to be heard in late April 2016.

[7] On April 4, 2016, the defendants advised the plaintiff in their responding factum that the plaintiff failed to seek leave to proceed with its motion for certification and argued that leave should not be granted.

[8] At the hearing, the certification proceeded on consent with respect to sections 5(1)(b), (d) and (e) and the defendants did not take issue with the fact that there was commonality under s. 5(1)(c) of the Class Proceedings Act, 1992, S.O. 1992, c. 6 (the “CPA”).

[9] The certification motion and the summary judgment motion involved similar legal issues. On the certification motion the significant contentious issue was whether the statement of claim disclosed a cause of action. Findings were made in favour of the plaintiff and the action was certified. As a result of the summary judgment motion, the defendants were granted summary judgment in relation to common issue b(iii), which dealt with whether the defendants owed a duty to warn in relation to any positive tests regarding the present of listeria monocytogenese in their Bartor Road Plant and RTE Meats. But, their motion was dismissed in relation to common issue b(i), which addresses whether the defendants owed a duty of care to the Class in relation to the production, processing, sale and distribution of the RTE Meats and b(ii), which dealt with whether the defendants owed a duty of care with respect to any representations made that the RTE Meats were fit for human consumption and posed no risk of harm. The defendants were also not successful in their motion for summary judgment on the issue of the plaintiff’s claims for damages arising out of economic losses.

COMPETING POSITIONS

[10] The plaintiff states that it was successful on all three motions. It was entirely successful on its motion for leave and its certification motion. Further, the plaintiff argues that it was also successful on the motion for summary judgment. The plaintiff obtained summary judgment on two of the three common issues; the defendants’ motion for summary judgment was dismissed with respect to the claims for economic loss; and, the plaintiff received a favourable ruling regarding the evidence related to the duty to warn in that the court observed that such evidence will be relevant to the issue of whether the defendants were negligent in the supply of the RTE meats.

[11] The plaintiff originally requested costs in the amount of $235,146.67 on a partial indemnity basis broken down as follows, inclusive of fees, disbursements, and HST:

▪ motion for leave: $19,549.62 (including disbursements of $298.94)

▪ motion for certification: $162,135.44 (including disbursements of $17,184.41)

▪ summary judgment motion: $53,461.61 (including disbursements of $1,467.77)

▪ total: $235,146.67

[12] However, in response to the defendants’ costs submissions, which revealed the defendants’ costs (as set out below), the plaintiff reduced its fee request by approximately 15 percent and requested fees of:

▪ motion for leave: - $10,000

▪ motion for certification: $120,000

▪ summary judgment motion: $30,000

As a result, the plaintiff’s revised cost request totalled $200,000 once disbursements (which were not contentious) and HST are included. The plaintiff mainly reduced the costs sought in relation to the leave and summary judgment motion.

[13] The plaintiffs submit that the goals of the CPA, specifically access to justice, are best served if the costs are ordered payable immediately and the costs to which the representative plaintiff is entitled are not reduced by a “play by play analysis” following a successful certification motion (see Pearson v. Inco Ltd., 2006 CanLII 7666 (ON CA), 79 O.R. (3d) 427 at para. 5, 2006 CarswellOnt 1527 (Ont CA), citing Winkler J. in Lau v. Bayview Landmark Inc., 1999 CarswellOnt 3783 at para. 3, [1999] O.J. No 4385 (Ont Sup Ct)).

[14] The defendants state that the plaintiff was required by statute to bring the following two of the three motions: the leave and the certification motions. On the motion for summary judgment, the defendants argue that they achieved success in striking the plaintiff’s allegations of a duty to warn.

[15] In their responding costs submissions, the defendants attached their Bill of Costs, which outlined the following actual costs:

▪ motion for leave: $7,744.52 (including disbursements of $902.61)

▪ motion for certification: $60,590.29 (including disbursements of $1,264.72)

▪ summary judgment motion: $20,932.98 (including disbursements of $2,085.71)

▪ total: $89,267.79

[16] The defendants further point out that their Bill of Costs reflects 300 hours of work, while the plaintiff’s reflects 883.35 hours of work.

[17] The defendants suggest that an order for no costs should be made and assert both that there is divided success on the summary judgment motion and the fact that the plaintiff was required by statute to bring the leave motion. Alternatively, the defendants state that the objective of judicial economy would be furthered in this case by a reduced award of costs, and they claim that the costs incurred by the plaintiff are excessive, fall well outside the defendants’ reasonable expectations, and arose, in part, due to a tactical and deliberate delay for more than six years.

DISCUSSION

[18] Should costs be awarded to the plaintiff, and if so, what is the quantum that should be awarded?

[19] Modern cost rules, according to the Superior Court in Labourers’ Pension Fund of Central and Eastern Canada (Trustees of) v. Sino-Forest Corp., 2015 ONSC 6354 at para. 117, 258 A.C.W.S. (3d) 680, are designed to further five fundamental goals, which are

(1) To indemnify successful litigants for the costs of litigation;

(2) To encourage settlements;

(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 facilitate access to justice.

[20] Judicial discretion in awarding costs is grounded in s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “CJA”), which provides that:

Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.

[21] When exercising this discretion, under s. 131 of the CJA, the court may also consider the factors outlined under r. 57 in the Rules of Civil Procedure, R.R.O. 1990, Reg 194.

[22] In class actions, the approach to determining costs is the same as in ordinary actions; however, special consideration should also be given to the following factors under s. 31(1) of the CPA:

(1) whether the proceeding was a test case;

(2) whether the proceeding raised a novel point of law; and

(3) whether the proceeding involved a matter of public interest.

[23] If these factors apply, the court should give them significant weight in the course of exercising its discretion in determining costs: see Ruffolo v. Sun Life Assurance Company of Canada, 2009 ONCA 274 at para. 29, 95 O.R. (3d) 709.

[24] The goals of the CPA should also be kept in mind—access to justice, behaviour modification, and judicial economy (see Sino-Forest, at para. 123).

[25] When determining costs for a certification motion specifically, the Ontario Court of Appeal in Pearson, at para. 13, set out the following principles for the courts to follow:

(1) costs will ordinarily follow the event;

(2) costs must reflect what is fair and reasonable;

(3) costs should, if possible, reflect 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) costs expectations of the parties can be determined by the amount of costs that an unsuccessful party could reasonably expect to pay;

(6) the views of the motion judge concerning the complexity of the issues and what is fair and reasonable;

(7) whether the case raises an issue of public importance; and

(8) a fundamental object of the CPA is to enhance access to justice.

[26] Ultimately, the objective is to fix an amount that is fair and reasonable. This includes considering the reasonable expectations of the unsuccessful party: see Sino-Forest, at para. 126.

[27] I agree with the plaintiff that these factors should also be considered when determining costs on other interlocutory motions in class proceedings.

[28] I will deal first with the costs requested on the leave motion.

[29] I agree with the plaintiff’s submission that the fact that leave is required by statute and a certification motion is mandatory is irrelevant to the issue of costs.

[30] The defendants raised the issue of leave in their factum filed on the certification motion and contested the plaintiff’s leave motion.

[31] In resisting a costs award against them, the defendants in essence reargue their position on the leave motion. These arguments did not lead to the plaintiff being denied leave and they do not justify an order that the plaintiff bear its own costs of the leave motion.

[32] I note that the jurisprudence considered on the leave motion is not helpful in relation to the issue of costs, because costs were either not considered or the entire case was not one for costs.

[33] The plaintiff was required to prepare and file its leave motion quickly in response to the defendants’ factum. The leave motion was argued as efficiently as possible and with appropriate written material and oral submissions.

[34] The plaintiff is entitled to its costs. Considering the issue on the motion (and when it was put in contention) and the materials filed, I am prepared to award the plaintiff its revised claim for costs of $10,000.00 plus disbursements and HST.

[35] I turn next to a consideration of s. 31(1) of the CPA in relation to the costs of the certification motion.

[36] As outlined above, if the factors listed in s. 31(1) of the CPA are applicable, they should be considered by the court when determining costs. Neither party argues that the proceeding was a test case or that it involved a public interest. However, whether a novel point of law was raised in these proceedings is in contention. The resolution of this issue is relevant to the costs to be awarded on the certification motion and as well, the summary judgment motion.

[37] The defendants submit that the issue of whether a duty of care existed in the circumstances of this case is a novel point of law, which was discussed both in the defendants’ motion for summary judgment and the plaintiff’s motion for certification.

[38] In Mancinelli v. Royal Bank of Canada, 2017 ONSC 1196 at para. 6, 276 A.C.W.S. (3d) 545, Perell J. stated that novelty of a legal issue is found when existing case law is inadequate to resolve the issue and there is no proper reason that the party advancing the issue would expect to fail. The defendants submit that this is the case here.

[39] The defendants argue that there was no case law which held that “a manufacturer owes a duty of care to an entity, with whom it has no contractual relationship, to ensure that the manufacturer does not conduct its own business in such a way that may affect the financial stability of the other company, and that there was no case law holding a duty to supply product in the absence of a contract.” Given the lack of guidance in the existing case law, the defendants submit that it was reasonable for the defendants to have their day in court to debate this issue and that it was not unreasonable for them to expect to succeed in their endeavour.

[40] The defendants point out that novelty affects the quantum of costs regardless of whether the party was successful or not: see Fischer v. IG Investments Management., 2015 ONSC 2491 at para. 13, 336 O.A.C. 9.

[41] The defendants also seek to distinguish Good v. Toronto (Police Services Board), 2016 ONCA 250 at para. 117, 396 D.L.R. (4th) 411, which is a case relied on by the plaintiff for the proposition that a finding that a novel issue of law was raised should only be considered to insulate the plaintiff from any adverse cost awards or it should be subsumed with the consideration of the complexity of the proceedings.

[42] The defendants emphasize that the motion judge in Good found the proceedings complex, and they submit that such a finding has not been made in the current proceedings.

[43] Additionally, the defendants note that Good was an appeal by a plaintiff submitting that the novelty of the issues should increase the amount of costs payable by a defendant. In the current proceedings, it is the defendants who draw attention to the issue of novelty to decrease any award of costs payable. The defendants submit that it is appropriate for the court to consider the novelty in this case to support a finding that no costs should be awarded or, alternatively, that the quantum of costs should be reduced.

[44] In relation to the “novelty” issue, I agree with the plaintiff’s submission that the motions did not raise a novel issue of law. Rather, the relationship between the parties fell within a recognized duty of care and the claim fell under a recognized category for which economic losses are compensable. As the plaintiff asserts, the court’s conclusion on the summary judgment motion that a duty of care was owed is consistent with the reasoning in earlier decisions reviewed by the court. Referencing Mancinelli, the existing case law was adequate to resolve the issues. With that conclusion I need not address the issues arising from the interpretation of Good.

[45] I turn next to the issue of entitlement to costs of the certification motion.

[46] The defendants state that where success on a motion is divided, it is not appropriate for the court to award costs: see Freedman v. Toronto (City), 2009 CanLII 62073 (ON SC), 2009 CarswellOnt 6939, 81 C.C.L.I. (4th) 93 (Ont Sup Ct). The defendants successfully struck the plaintiff’s allegation of a duty to warn and the plaintiff successfully argued the issue of duty to care. As a result, the defendants argue that success on the summary judgment motion was divided and therefore no costs should be awarded for that motion.

[47] As noted, the defendants did obtain summary judgment on the common issue related to the duty to warn. However, I agree with the plaintiff that the defendants achieved less success than the plaintiff on the summary judgment motion. Overall, I conclude that the plaintiff is the successful party on the summary judgment motion and it is entitled to an award of costs in its favour on the summary judgment motion, as well as on the certification motion.

[48] I turn next to deal with the quantum of costs to be awarded to the plaintiff on the certification motion and the summary judgment motion.

[49] Both parties agree that there are traditionally two ways in which the reasonable expectation of the unsuccessful party can be ascertained, by looking at

(i) the unsuccessful party’s costs (see Hague v. Liberty Mutual Insurance Co., 2005 CanLII 13782 (ON SC), 2005 CarswellOnt 1361 at para. 15, 21 C.C.L.I. (4th) 300 (Ont Sup Ct); and

(ii) comparable cases (see Canadian National Railway Corp. v. Royal and SunAlliance Insurance Co. of Canada, 2005 CanLII 33041 (ON SC), 77 O.R. (3d) 612 at para. 10, 2005 CarswellOnt 4402(Ont Sup Ct)).

[50] At the time that the plaintiff submitted their original cost submission, the defendants had not yet provided their dockets and therefore a comparison could not be made. However, the quantum of the defendants’ costs was addressed in the plaintiff’s Reply Cost Submissions once defendants’ costs became available and the plaintiff adjusted its request for costs as set out above.

[51] The plaintiff submits that the process of considering the unsuccessful party’s costs is not determinative: see Andersen v. St. Jude Medical Inc., 2006 CanLII 85158 (ON SCDC), 2006 CarswellOnt 710 at para. 27, 208 O.A.C. 10 (Ont Div Ct), where the court indicated that the adverse inference that is drawn by the court where a party chooses not to disclose costs is not determinative.

[52] The defendants point out that the courts admonish a “money is no object approach”: see Canada National Railway, at para. 11 where the court held that an award based only on the Bill of Costs by the successful party, which was four times the amount of the unsuccessful party’s cost, would be unfair.

[53] The defendants argue that the discrepancy between their Bill of Costs and that of the plaintiff indicates that the plaintiff “over-lawyered”. As an example, the defendants point out that they spent under 180 hours drafting all of their motion materials, whereas the plaintiff spent nearly 170 hours drafting the facta for the certification material alone. Similarly, the defendants’ lawyers spent 45 hours preparing for and attending cross-examinations, while the plaintiff spent 106 hours on the same tasks.

[54] The defendants submit that when faced with over-lawyering, the courts can make a significant reduction in cost awards: see Moon v. Sher, 2004 CanLII 39005 (ON CA), 2004 CarswellOnt 4702 at paras. 1, 44, 192 O.A.C. 222 (Ont CA), where the court reduced the award by almost 50 percent of the successful party’s costs.

[55] The defendants further argue that the plaintiff was not cautious of duplication of efforts, as evidenced by the overlapping roles of multiple processionals over the course of preparing for the motions as outlined in the plaintiff’s Bill of Costs. In cases where duplication of efforts is evident, the courts will apply a reduction of costs: see Adult Entertainment Assn. of Canada v. Ottawa (City), 2005 CarswellOnt 5237 at para. 8, 143 A.C.W.S. (3d) 243 (Ont Sup Ct), where a 25 percent reduction was given and St. Mary’s Cement Inc. v. Clarington (Municipality), 2011 ONSC 4631 at paras. 10, 12, 205 A.C.W.S. (3d) 912.

[56] The defendants further state that there was no significant act or omission on the part of the defendants that could justify the excessive amounts spent by the plaintiff.

[57] Ultimately, the defendants submit that the plaintiff has proceeded with a “money is no object” approach and it would be unfair and unreasonable to expect the defendants to pay for such an approach, especially in light of the modest costs incurred by the defendants.

[58] I agree with the plaintiff’s submission that simply because the defendants’ costs are lower does not mean that the plaintiff’s costs are unreasonable. The rates may be lower because defendants’ counsel are less senior and because counsel gave their clients a preferred rate. In considering these arguments of the defendants, I note that the court has stated that the successful party does not necessarily need to match the costs of an unsuccessful party: see Sobeys Capital Inc. v. Bayview Summit Development Ltd., 2013 ONSC 1014 at para. 16, 226 A.C.W.S. (3d) 40.

[59] As a result, a strict comparison may not an appropriate metric to determine the defendants’ reasonable expectations (and comparable cases should also be considered as set out above).

[60] The plaintiff further submits that its time was not excessive and there was no duplication of effort on its behalf.

[61] In considering these issues, I acknowledge as the plaintiff asserts, that it is not unusual on a certification motion for a plaintiff to spend more time in pre-trial proceedings and, in this case, the plaintiff was required to respond to additional issues raised by the defendants. The plaintiff also filed far more materials than the defendants, summarised on p. 7 of the plaintiff’s Reply Cost Submissions. A plaintiff must satisfy the entire evidentiary burden, gather the majority of evidence from the defendants through cross examination, and respond to the issues raised by the defendants.

[62] I also accept that the plaintiff notes it had the same number of listed timekeepers as the defendants. Additionally, one of their timekeepers became necessary due to the replacement of one of the lawyers on the file. I agree with the plaintiff that it has provided an explanation as to how it worked to streamline the roles of the timekeepers and prevent duplication.

[63] The plaintiff asserts that defendants were fully aware of the following that would increase costs:

(1) significant additional work required by the plaintiff in carrying the evidentiary burden;

(2) that the defendants’ position would influence costs;

(3) the vast difference in the volume and complexity of the materials prepared by the parties;

(4) the need of the plaintiff to make changes to the staff who had carriage of the matter;

(5) the difference in experience of counsel; and

(6) the special rates that the defendants may have negotiated with their own counsel and the impact that this might have had on the hourly rates applied in this case.

[64] I cannot conclude that the plaintiff has taken a “money is no object” approach to these motions or that these motions have been over-lawyered.

[65] Additionally, the plaintiff states that the defendants’ costs are well below the average for certification motions and the defendants could not reasonably expect that the plaintiff’s costs would match their own.

[66] On assessing the comparatively larger amount of their own costs the plaintiff notes the following:

• The plaintiff states that counsel did their best to ensure the work was done effectively and efficiently. The two firms involved divided the tasks between them and consulted with each other to ensure that work was performed by the counsel best suited to the task. Additionally, tasks were delegated to other lawyers, students and law clerks where appropriate. At pp. 17–19 in the Plaintiff’s Cost Submissions, the plaintiff outlined the role of each counsel and their rates.

• The plaintiff also states that tasks related to both the certification and the summary judgment motion were divided equally when accounting for costs.

• The plaintiff submits that these matters were fundamental to the continuation of these proceedings and had the plaintiff not been successful on the motions, it is likely that the plaintiff or the class would not be able to pursue their claims against the defendants.

• The plaintiff further states that although the parties and their counsel worked co-operatively, the defendants’ actions contributed to the costs of the plaintiff. Specifically, the defendants failed to concede in a timely fashion that certain elements of certification were met, and the plaintiffs were forced to bring a contested motion for leave. As a result, the plaintiff is entitled to be indemnified for these increases in costs.

[67] As previously noted, both parties acknowledge that a comparison of closely comparable cost awards can be instructive in determining what the unsuccessful party should reasonably expect to pay. However, there are limitations in utilizing this method as many instances are fact-specific, and caution must be exercised.

[68] The plaintiff submits that the following cases support a cost award of $128,275.25 for the certification motion and taking into account that there was also an additional contested motion for leave and a motion for summary judgment, it is with reasonable expectations considering comparable cases, for a total cost award of $235,146.67.

[69] In Crisante v. DePuy Orthopaedics Inc., 2013 ONSC 6351 at para. 5, 57 C.P.C. (7th) 399, Belobaba J. concluded that $169,250 was the average from 2007–2013 of a cost award on a certification motion for a single class action where less than $500,000 was requested. In Crisante, costs were fixed at $175,000 for a relatively uncomplicated certification motion and the causes of action were not in dispute. Additionally, there were no additional motions before the court.

[70] In Sankar v. Bell Mobility Inc., 2013 ONSC 6886, 52 C.P.C. (7th) 111, costs were fixed at $150,000 for a certification motion with causes of action in issue heard over three days where there were no expert reports and cross-examinations had lasted less than a day. Costs were fixed at $110,000 on a subsequent summary judgment motion that was heard over half a day where there were no cross-examinations and only two, but novel, legal issues.

[71] In Locking v. McCowan, 2016 ONSC 7854, 274 A.C.W.S. (3d) 270, two motions were heard to determine the viability of causes of action in which there was divided success. The court fixed costs for the successful motion at $31,089. Afterwards, a certification motion proceeded on consent, where costs were awarded in the amount of $65,235.

[72] The defendants argue that none of the cases cited by the plaintiff are “closely comparable,” other than the fact that they involved a certification motion or a motion for leave. The defendants highlight that the only decision where an award was granted higher than $175,000 was Dugal v. Manulife Financial, 2013 ONSC 4083, 44 C.P.C (7th) 80, where the motion for certification required leave under the Ontario Securities Act and required review of the merits and expert reports.

[73] However, as the plaintiff noted in its reply, the amount sought for the certification motion is $152,784.41, all-inclusive and the defendants conflated this amount with the total amount of costs sought in relation to the three motions in their comparison.

[74] The defendant also notes that in Belobaba J.’s table outlining the historical average cost awards cited by the plaintiff, the awards were reduced, on average, to 63 percent of the total cost claimed. The defendants submit that the court may use Belobaba J.’s chart to support a reduction of the plaintiff’s claim for costs to 63 percent as well.

[75] The plaintiff argues in reply that utilizing Belobaba J.’s table to reduce costs by 37 percent is a dangerous precedent as it would create incentive for counsel to increase the amount of costs sought to account for the reduction. Further, Belobaba J. did not suggest applying a reduction to all costs sought by successful plaintiffs. I agree with both of these observations noted by the plaintiff.

[76] Considering the foregoing, while the revised costs sought by the plaintiff are double the costs of the defendants on the certification motion, I am prepared to award those costs to the plaintiff. I am satisfied the plaintiff has provided a sufficient explanation for the extent of its costs, they are consistent with comparable cases and the defendants’ costs are at the low end of the spectrum of costs on certification. In relation to the summary judgment motion, I award the plaintiff costs of $20,000.00 plus disbursements and HST (comparable to the defendants’ actual costs).

“Justice L. C. Leitch”

Justice L.C. Leitch

Date: August 9, 2017