Court File and Parties

COURT FILE NO.: CV-16-566618-CP DATE: 20181005 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: George Leon, in his capacity as Trustee of The George Leon Family Trust, Plaintiff AND: Volkswagen Aktiengesellschaft, Defendant

BEFORE: Justice Edward P. Belobaba

COUNSEL: Andrew Morganti, Margaret Waddell, Albert Pelletier, and Jennie Brodski for the Plaintiff / Responding Party Cheryl Woodin, Jonathan Bell and Jason Berall for the Defendant / Moving Party

HEARD: July 10, 2018

Proceeding under the Class Proceedings Act, 1992 Jurisdiction and certification – costs award

Endorsement

[1] In a decision released on August 15, 2018 I dismissed this securities class action against the defendant VWAG on the basis of both jurisdiction and forum non conveniens. [1] I invited costs submissions and made the following observation:

The costs of this jurisdiction motion and the related certification motion that was scheduled to be heard at the same time and is now moot will no doubt be significant. There may be room for an argument that the costs incurred on the companion certification motion would have been much less if VWAG had advanced this jurisdiction motion in a more timely fashion. Or perhaps not. In any event, I encourage the parties to agree on costs. If the parties cannot agree on costs, the defendant should forward a brief costs submission within 14 days and the plaintiff within 14 days thereafter.

[2] The parties could not agree on costs and have now advanced two polar positions. The successful defendant seeks $696,393 in partial indemnity costs - $405,707 for the jurisdiction motion and $290,685 for the certification motion. The plaintiff suggests $75,000 at most on the jurisdiction motion and no costs at all on the certification motion.

Discussion

[3] The defendant’s legal fees component is not excessive in terms of the time docketed or the “grid” rates being charged. The expert fees component, however, is unusually high – the $94,002 paid to foreign law experts on the jurisdiction motion is aggressive but acceptable. However, the $162,429 paid to the “efficient market” experts is questionable given this court’s unequivocal rejection of the “fraud on the market/inferred reliance” approach. [2] Expert evidence about “efficient markets” was not needed, however much it may have been advanced by the plaintiff. The defendant’s cost request for the certification motion should be adjusted to remove the “efficient market” expert report disbursement, leaving a total cost request in the amount of approximately $534,000 - that is $405,707 for the jurisdiction motion and $128,256 for the certification motion.

[4] The plaintiff says that if the defendant had advised him of its intention to bring a jurisdiction motion in a timely fashion, the plaintiff would not have advanced the certification motion until after jurisdiction was resolved. Rather than contesting jurisdiction at the outset, says the plaintiff, the defendant let 10 months go by and only told the plaintiff that it would be contesting jurisdiction in January, 2018 - by which time a great deal of work had been done by both sides on the certification motion. The plaintiff submits that no costs should be awarded to the defendant for the certification motion.

[5] The problem with this submission, although compelling in principle, is that on the evidence herein, the plaintiff never complained explicitly about the timing of the jurisdiction challenge. The plaintiff was determined from the outset to advance the certification motion as quickly as possible. When the defendant raised its concern about forum in May 2017, the plaintiff, and in due course the defendant, agreed that the forum issue could be addressed and resolved in the context of the preferability analysis under s. 5(1)(d) of the Class Proceedings Act, 1992. [3] When the defendant raised the jurisdiction simpliciter issue at the end of January 2018, the plaintiff complained but not about the timing of the motion. The plaintiff objected on the ground that the defendant had already attorned to this court’s jurisdiction. There was no suggestion that certification would have been delayed if the plaintiff had known about the jurisdiction motion sooner. In short, the plaintiff’s submission that if the defendant had advised him of its intention to bring a jurisdiction motion in a timely fashion, the plaintiff would not have advanced the certification motion until after jurisdiction was resolved is not supported by the correspondence between counsel.

[6] I am therefore satisfied that on the facts herein the defendant is entitled to some costs on the certification motion. But the costs award will have to take two things into account. First, that only two of the s. 5(1) factors would have been seriously contested, namely common issues and preferability (both raising the individual reliance problem) and secondly, that the costs attributed to the forum/preferability factor would also have been included in the costs of the jurisdiction and forum motion. I would therefore award just under half of the amount requested by the defendant (that is just under half of the adjusted $128,256 amount) or $60,000.

[7] The jurisdiction motion requires a bit more analysis. Cost awards in jurisdiction motions has been as low as $64,279 [4] and as high as $800,000. [5] Much, of course, depends on the complexity of the jurisdiction and forum analyses and the attendant counsel fees and expert report disbursements.

[8] Here the release of this court’s decision in Yip v HSBC Holdings [6] in September 2017 played an important role. In his decision, Justice Perell provided an analytical template that could be applied, with very little adjustment, to the facts herein. Given this helpfully analogous decision, the jurisdiction issue in this action could have been framed and resolved in a relatively straight-forward fashion.

[9] This doesn’t mean that the defendant should not have presented a fully researched and argued motion. But it does mean that in assessing and fixing an appropriate costs award, the court should consider the level of difficulty that confronted counsel for the defendant on the jurisdiction challenge. Here, it was moderate at best. I say this knowing that the decision in Yip was appealed (and later affirmed [7]). In my view, no more than half of the requested $405,707, or about $200,000, would be an appropriate costs award on the jurisdiction motion.

[10] The total costs award is therefore in the range of $260,000.

[11] The nub of the matter is this. It appears that the plaintiff was confident that he would prevail on both jurisdiction and forum even after this court’s decision in Yip. He was content to have jurisdiction and certification heard at the same time. His counsel’s only complaint about the defendant’s late-breaking jurisdiction motion was the possibility of attornment, not the problem of timing. The defendant is therefore entitled to some costs on both the jurisdiction and certification motions. But the costs should be relatively moderate.

[12] Having considered the factors set out in Rule 57.01(1) of the Rules of Civil Procedure, and in particular the proposition that the costs award must be fair and reasonable to the losing plaintiff, I fix costs in the amount of $260,000 all-inclusive, payable forthwith by the plaintiff to the defendant.

Justice Edward P. Belobaba Date: October 5, 2018

Footnotes

[1] Leon v. Volkswagen AG, 2018 ONSC 4265. [2] See the discussion in Coffin v. Atlantic Power Corp., 2015 ONSC 3686, at para. 134 et seq. [3] Class Proceedings Act, 1992, S.O. 1992, c. 6. [4] Paniccia v. MDC Partners Inc., 2014 ONCA 580. [5] Yip v HSBC Holdings plc, 2018 ONCA 626. [6] Yip v HSBC Holdings plc, 2017 ONSC 5332. [7] Supra, note 5.