COURT FILE NO.: CV-15-537029CP
DATE: 2019/09/24
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MATTHEW ROBERT QUENNEVILLE, LUCIANO TAURO, MICHAEL JOSEPH PARE, THERESE H. GADOURY, AMY FITZGERALD, RENEE JAMES, AL-NOOR WISSANJI, JACK MASTROMATTEI, JAY MACDONALD, JOSEPH SISSINONS CHIROPRACTIC P.C., ANDREW JAMES BOWDEN, and CHRISTINA LYN VICKERY
Plaintiffs
– and –
VOLKSWAGEN GROUP CANADA, INC., VOLKSWAGEN AKTIENGESELLSCHAFT,
VOLKSWAGEN GROUP OF AMERICA, INC., AUDI CANADA, INC., AUDI AKTIENGESELLSCHAFT, AUDI OF AMERICA INC. and VW CREDIT CANADA, INC.
Defendants
Luciana P. Brasil for the Plaintiffs
Cheryl Woodin and Ilan Ishai for the Volkswagen/Audi Defendants
Proceeding under the Class Proceedings Act, 1992
HEARD: In writing
PERELL, J.
REASONS FOR DECISION - COSTS
A. Introduction
[1] In this settlement-approved class action[^1] the Defendants made an ill-advised request for costs to be paid by Class Counsel personally, and Class Counsel made a regrettable and disappointing response to that request. The result is a cause célèbre out of what should have been a straightforward assessment of costs.
[2] The Defendants requested that Class Counsel personally pay costs of $17,840, all inclusive, on a partial indemnity basis for a motion to interpret the terms of a Settlement Agreement. This request was not made because of any misconduct by Class Counsel, but because it was no secret that Class Counsel had agreed to indemnify the Representative Plaintiffs against any adverse cost awards. Thus, without pretending that their request for costs was being made in the normal course of having the unsuccessful party on a motion pay costs, the Defendants sought to do directly what would have happened indirectly had they just not made their provocative request.
[3] Class Counsel, who had received $10.275 million in legal fees in the court approved settlement, responded to the idea that they pay costs personally with censorious outrage. Class Counsel submitted that making a costs award against them personally was inimical to the access to justice purposes of the Class Proceedings Act, 1992. [^2] Notwithstanding that their client had sought costs had their motion succeeded, Class Counsel submitted that there be no order as to costs.
[4] For the reasons that follow, I award the Defendants the costs requested but payable by the Representative Plaintiffs, who may have recourse to their costs indemnity as against Class Counsel as they may be advised.
B. Factual Background
[5] In a settlement-approved class action under the Class Proceedings Act, 1992,[^3] Matthew Robert Quenneville, Luciano Tauro, Michael Joseph Pare, Therese H. Gadoury, Amy Fitzgerald, Renee James, Al-Noor Wissanji, Jack Mastromattei, Jay MacDonald, Joseph Sissinons, Chiropractic P.C., Andrew James Bowden, and Christina Lyn Vickery sued Volkswagen Group Canada, Inc., Volkswagen Aktiengesellschaft, Volkswagen Group of America, Inc., Audi Canada, Inc., Audi Aktiengesellschaft, Audi of America Inc. and VW Credit Canada, Inc. (collectively “VW”).
[6] For present purposes, several features of the Settlement Agreement should be noted; namely:
a. Under the Settlement Agreement, a benefit for Class Members was the installation of an Emissions Complaint Repair (“ECR”) to their vehicles.
b. Under the Settlement Agreement, VW was obliged to provide details of all of the effects of the ECR on the performance and drivability of the vehicles.
c. Under the Settlement Agreement, Class Members had until May 31, 2019, to submit their claim forms and until August 31, 2019, to confirm their choice of benefits, accept the offer, and have the ECR installed by an Authorized Dealer.
d. Under the Settlement Agreement Class Members reserved the right to seek additional remedies if the ECR causes a substantial, material adverse degradation, above and beyond the “Reduced Performance levels” as defined by the Settlement Agreement.
e. Under the Settlement Agreement, with court approval, Class Counsel received in excess of $10 million in fees, but under the agreement, the class members were precluded from seeking further costs as part of the administration of the settlement.
[7] There was a dispute about whether the ECR posed a safety risk, and in the administration of the settlement, the Representative Plaintiffs brought a production motion seeking: (a) production of the data and analysis relating to VW’s investigation of the lag/surge issues reported by Class Members with 3.0L Generation Two Vehicles; (b) an extension of the Claims Period Deadline (August 31, 2019) until the issues relating to the lag/surge could be analyzed and resolved; and (c) costs payable by VW.
[8] I dismissed the motion.[^4]
[9] VW, the successful party on the motion, seeks costs of $17,840 on a partial indemnity basis, comprised of counsel fee of $15,148, plus taxes of $1,969 and disbursements of $723. VW requested that the costs be paid personally by Class Counsel.
[10] Ignoring the circumstance that VW requests the costs be paid by Class Counsel rather than the Representative Plaintiffs, I can quickly say that the costs requested are reasonable and fair and ought to be paid by the Representative Plaintiffs.
[11] The only issues to be determined in the immediate case are whether the costs should be paid by Class Counsel personally or at all because of Class Counsel’s submission that having Class Counsel pay costs in the circumstances of the immediate case would be inimical to the access to justice purposes of the Class Proceedings Act, 1992.
C. Discussion and Analysis
[12] I begin the discussion by noting that with one observation, I agree with the three starting premises of Class Counsel’s argument about how costs should be awarded, if at all, in the immediate case.
[13] The first premise is that Class Counsel is under an obligation to vigorously and tenaciously protect Class Members and that this obligation continues into the administrative phase of a class action; i.e., Class Counsel cannot abandon the Class Members once the action is settled, and Class Counsel’s obligations continue after a class action settlement is approved by the court.[^5]
[14] The second premise of Class Counsel’s argument is that in the immediate case, Class Counsel were motivated by their obligations to the Class Members who had raised legitimate and genuine concerns: (a) about the safety and performance of their vehicles; and (b) about whether they should take up the repairs offered as part of the benefits received by the Class Members under the Settlement Agreement.
[15] The third premise of Class Counsel’s argument is that it was responsible, reasonable, and to be anticipated that Class Counsel would respond to the concerns of the Class Members by taking instructions to bring a motion to interpret the Settlement Agreement, and it would have been irresponsible for Class Counsel to leave unchallenged VW’s “trust-me” response that there were no safety problems as the repair kit had been scrutinized by the government regulators.
[16] Before moving on to how Class Counsel employs these premises in its argument, my one observation is that it should go without saying that counsel of record for a party in any action, including a class actions, has an ongoing duty not to abandon and to protect the interests of their clients.
[17] Based on the above three premises, Class Counsel makes an argument in paragraphs 18 to 31 of its costs submissions that each party should bear their own costs for the motion.
[18] Since I am disappointed by Class Counsel’s argument as it reflects on them and on Class Counsel generally and since I shall need to explain why I disagree with the argument, I shall set out Class Counsel’s argument in full.
[19] Paragraphs 18 to 31 of Class Counsel’s costs submissions make the following argument:
Awarding Costs to VW Undermines Access to Justice
This court has broad discretion in awarding costs. In the context of a contested motion, the court is presented the option of fixing costs to be paid within 30 days, referring the issue of cost for assessment, or making a different order if “satisfied that a different order would be more just.”
The instant case is an example of a circumstance where a different order would be more just, as an order for costs in this instance would only undermine the concept of access to justice.
Much has been written about “access to justice”, and those words may mean different things for different class members at different points in time in the life of a class action. However, if we are to promote confidence in the judicial system and in the class action. process as a whole, access to justice surely ought to include ensuring that class members have a reasonable amount of confidence that counsel appointed to represent their interests will vigorously do so. This includes continuing to act to advance the positions and interests of Class Members after a settlement has been approved and class counsel have been paid.
Imposing costs for advancing class members’ concerns during the implementation of a settlement would create unnecessary barriers to the representation of Class Members, which in turn could give rise to a very negative perception that Class Counsel has abandoned the class.
As noted above, Class Counsel brought the Motion in order to preserve the claims of Class Members and to advance concerns that were unquestionably raised by Class Members, and which were accepted, for the purpose the Motion, as genuine concerns of Class Members as noted above.
To award costs in these circumstances would work against the courts’ aspiration to ensure Class Counsel remain actively engaged with Class Members throughout the class proceeding, even after settlement has been agreed. Faced with a complaint from a Class Member in relation to the implementation of an approved settlement, even a legitimate complaint, Class Counsel might be tempted not to advance the issue if concerned about the prospects of an adverse costs award. That would be a very regretful outcome which has the potential to undermine rather than promote access to justice.
In this case, Class Counsel opted for fulfilling their obligations to the Class and bringing the Motion.
E. No Order Sought Against Counsel Personally
Although the ultimate order sought by VW is that “Class Counsel pay within 30 days VW’s costs of the motion”, an application for costs payable by counsel personally engages very different issues such as failure to discharge professional responsibilities, none of which are engaged in this case.
Rule 57.07 provides that a solicitor may be directed to personally pay costs or to reimburse the client for costs ordered to pay to another party where the solicitor has caused costs to be incurred without reasonable cause, or has caused costs to be wasted by undue delay, negligence or other default. None of these considerations have any application to this case.
The practical problem raised by VW’s request for costs is the “who pays for it” issue. Aside from the rare instances where the Court may find that it is appropriate for counsel to pay for costs, which is submitted is not the case in this instance, imposing costs on the representative plaintiff to advance other Class Member’s concerns following approval of a settlement creates additional problems. If a representative plaintiff is exposed to an adverse cost ward in these circumstances, this creates a risk that they may never instruct Class Counsel to advance the additional concerns of other Class Members once the claim of the representative plaintiff has been resolved.
Furthermore, this motion was a request on behalf of a limited subgroup of a Gen 2 owners for information and time to consider same, over VW’s prior rejection of the requests for the information. It was effectively an appeal for that subgroup. Under the Settlement Agreement (although albeit for purposes of an appeal from a decision of the Arbitrator), the parties agreed that no costs can be awarded against a Class Member in such an appeal (see s. 6.8.7). In addition, the settlement agreement is otherwise built on the premise that VW is absorbing its counsel and other fees for administration and implementation (see, for example, s. 13.7).
F. VW’s Expectations
As VW acknowledges, the settlement agreement prohibits Class Counsel from seeking additional counsel fees and costs after the Court awarded their legal fees. VW obviously understood that it could not and did not reasonably expect to pay costs if the motion was successful.
It is submitted that VW should not reasonably have expected to be paid costs if it was successful. To accept VW’s current submission that it could receive but not pay costs as part of the administration and implementation of the settlement would create a one-way costs system that encourages VW (and other defendants) to be unreasonable on issues relating to settlement administration and implementation.
While the claims process has come to an end, that does not mean that there will not be any further implementation issues that need to be considered and addressed. It is thus imperative the Court does not create a disincentive for Class Counsel to continue to support Class Members through the resolution of any perceived issues.
[20] To summarize Class Counsel’s argument, Class Counsel argues that given the circumstances of this class action, that arose from VWs attempt to deceive consumers and regulators, Class Counsel had the responsibility to ensure that Class Members would receive as much information as reasonably possible about the repair kit and given the safety concerns associated with the repairs, it was reasonable and responsible for Class Counsel to prosecute the production motion.
[21] Further, Class Counsel argues that imposing costs on Class Counsel personally in connection with Class Counsel’s advancement of concerns raised by Class Members during the implementation of a settlement has the potential to dampen the willingness of Class Counsel to seek resolution of Class Member’s concerns.
[22] Further still, Class Counsel assets that it is imperative that the court not create a disincentive for Class Counsel to continue to support Class Members through the resolution of any perceived issues.
[23] Moreover, Class Counsel argues that awarding costs to VW would set a precedent that would undermine access to justice.
[24] Finally, Class Counsel submits that while not much money is involved, VW’s request for costs raises a matter of importance to class action practice and that awarding costs to VW would undermine access to justice and disincentive Class Counsel from carrying out their obligations to Class Members.
[25] Turning to the analysis of why I disagree with Class Counsel’s argument and why I am awarding costs of $17,840, all inclusive, payable by the Plaintiffs, I begin with the observation that it was all of unnecessary, provocative, unfortunate, and wrong for VW to request that Class Counsel pay the costs of the production motion personally.
[26] That Class Counsel had agreed to indemnify the Representative Plaintiffs for adverse costs consequences is a matter between Class Counsel and the Representative Plaintiffs. Who ultimately picks up the tab is typically not a factor in deciding who pays the costs of a motion. Party and party costs are typically paid by the parties. VW should not have requested that Class Counsel pay costs personally for the production motion.
[27] Class Counsel is not a party plaintiff. Without any misconduct, Class Counsel prosecuted a motion on proper instructions from the Representative Plaintiffs. The Representative Plaintiffs lost, and the normal rule is that the losing party pays costs not the losing party’s lawyer of record.
[28] In the case at bar and in other class actions the Representative Plaintiffs are real plaintiffs who expose themselves to adverse costs awards if they are unsuccessful in the proceedings. It is no longer a secret that Class Counsel, or the Class Proceedings Fund, or third-party funders, or after-the-fact costs insurers provide protection to the plaintiffs, but that does not alter the principles about parties paying costs.
[29] In the immediate case, VW might take comfort in knowing about the indemnity agreement between Class Counsel and the Representative Plaintiffs, but VW had no right to enforce that indemnity agreement. It was a needless provocation for VW to ask Class Counsel to pay costs personally.
[30] That said, Class Counsel’s response to VW’s request was disappointing. The simple response should have been for Class Counsel to say that there was no basis for VW to make a costs claim directly against Class Counsel and then to address the matter of costs, as if the claim for costs was being properly made. In the immediate case, the moving party was the Representative Plaintiffs, and they lost the motion, and just as they expected to receive costs if they had succeeded, the Representative Plaintiffs ought to have expected liability to pay costs if they failed on the motion.
[31] In this last regard, I pause to note that nowhere in its costs submissions does Class Counsel dispute the quantum of the costs requested, and I note that had the Representative Plaintiffs been successful, they undoubtedly would have expected VW to pay a similar if not greater sum for its lack of success on the motion.
[32] It was misconceived for Class Counsel to submit that were the court to award costs in the circumstances of the immediate case it would undermine the concept of access to justice. VW had settled the litigation, and the issue before the court was a matter of interpreting the Settlement Agreement. Both parties were entitled to access to justice to resolve that dispute, and access to justice in Ontario comes with costs consequences to the losing party.
[33] Instead of shuffling off VW’s provocative request with a simple answer, it was disappointing for Class Counsel to submit that access to justice means ensuring that Class Members have a reasonable amount of confidence that Class Counsel will vigorously advance their cases including continuing to act to advance the positions and interests of Class Members after a settlement has been approved and Class Counsel have been paid.
[34] In the immediate case, Class Counsel acted in accordance with their professional and ethical responsibilities in taking instructions to bring a motion to have the Settlement Agreement interpreted. Properly taking instructions would not expose Class Counsel to a direct claim to pay costs to VW, who is not privy to the indemnity agreement between Class Counsel and the Representative Plaintiffs. That is all Class Counsel had to say. Access to justice and ensuring that Class Counsel does its job should not have had have been raised as an issue in resolving VWs claim for costs in the immediate case.
[35] In any event and in all circumstances, the Representative Plaintiffs and Class Members should and would have had the confidence that their lawyers would not abandon them. Class Counsel, like all lawyers have professional and fiduciary responsibilities to their clients and in the immediate case, Class Counsel’s duties to their clients were not diminished because Class Counsel had agreed to indemnify their clients for adverse costs consequences. It is not for the court to incentivise lawyers to do their job.
[36] That Class Counsel may have already been paid and that Class Counsel had agreed to indemnify the Representative Plaintiffs for an adverse costs award were immaterial to whether the Class has confidence that Class Counsel will not abandon their clients after a class action has settled. Typically, as was the situation in the immediate case, there is further work to be done to implement a settlement and the anticipated expense of that work is factored in when the court approves Class Counsel’s fee. Class Counsel does not have the right to down tools and abandon the Class Members if it turns out, as it did in the case at bar, that there would be adverse costs to be paid to resolve disputes about the interpretation of the Settlement Agreement.
[37] In awarding costs, even if they were awarded directly against Class Counsel by way of enforcing the indemnity agreement, the court would not, as Class Counsel would have it, “create unnecessary barriers to the representation of Class Members, which in turn could give rise to a very negative perception that Class Counsel has abandoned the class”. In awarding costs, the court would just impose the normal burden on a genuine party in an adverse costs regime where the loser pays costs.
[38] Respectfully, it was disappointing for Class Counsel to submit that to award costs in the immediate case “would work against the courts’ aspiration to ensure Class Counsel remain actively engaged with Class Members throughout the class proceeding, even after settlement has been agreed.” The court has no such aspirations. Class Counsel was on the record and the court expects lawyers of record to fulfill their professional responsibilities, which ironically is actually what occurred in the immediate case.
[39] Respectfully, it was disappointing for Class Counsel to submit that if costs were awarded in the immediate case, “Class Counsel might be tempted not to advance [an] issue if concerned about the prospects of an adverse costs award” and that such an outcome “would be a very regretful outcome which has the potential to undermine rather than promote access to justice”.
[40] Where Class Counsel enters into an agreement to indemnify the Representative Plaintiff for adverse costs consequences, Class Counsel must take instructions and advance the Representative Plaintiff’s case as if there was no such agreement. Although in the entrepreneurial model of Ontario’s class proceedings regime, counsel enhances access to justice by a contingency fee retainer and by indemnifying the Representative Plaintiffs for adverse costs consequences, Class Counsel’s professional responsibilities are not diluted nor is the law about costs consequences changed.
[41] In the immediate case, Class Counsel insults themselves and Class Counsel generally by submitting that they “opted to fulfill their obligations to the Class” by bringing the motion that ultimately was unsuccessful. There was no opting about it, Class Counsel simply fulfilled their professional and ethical obligations to the Class in bringing the motion under a retainer in which Class Counsel had undertaken to indemnify the Representative Plaintiffs, who were charged with giving instructions on behalf of the class. The Representative Plaintiffs lost the motion and costs payable by the litigants normally follow the event.
D. Conclusion
[42] I shall treat the matter of costs in the immediate case in accordance with the norms of class action proceedings and litigation generally.
[43] The Representative Plaintiffs, who are charged with instructing Class Counsel, are genuine and real parties, and they instructed counsel to bring a motion that was a reasonable and appropriate motion to be brought. Class Counsel agreeing to indemnify the Representative Plaintiffs from an adverse costs award was irrelevant to the Representative Plaintiffs responsibilities to the class in prosecuting that motion, and if the instructions were proper, as they were, then Class Counsel was obliged to follow those instruction or get off the record.
[44] In the immediate case, the instructions from the Representative Plaintiff were proper, but the motion was lost. The Representative Plaintiffs as the losing party are responsible for costs. The quantum of costs claimed was fair and reasonable, but VW ought not to have asked that they be paid by Class Counsel.
[45] Therefore, I award VW the costs requested, but the costs are payable by the Representative Plaintiffs, who may have recourse to the costs indemnity as against Class Counsel as they may be advised. Order accordingly.
Perell, J.
Released: September 24, 2019
COURT FILE NO.: CV-15-537029CP
DATE: 2019/09/24
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MATTHEW ROBERT QUENNEVILLE, LUCIANO TAURO, MICHAEL JOSEPH PARE, THERESE H. GADOURY, AMY FITZGERALD, RENEE JAMES, AL-NOOR WISSANJI, JACK MASTROMATTEI, JAY MACDONALD, JOSEPH SISSINONS CHIROPRACTIC P.C., ANDREW JAMES BOWDEN, and CHRISTINA LYN VICKERY
Plaintiffs
– and –
VOLKSWAGEN GROUP CANADA, INC., VOLKSWAGEN AKTIENGESELLSCHAFT, VOLKSWAGEN GROUP OF AMERICA, INC., AUDI CANADA, INC., AUDI AKTIENGESELLSCHAFT, AUDI OF AMERICA INC. and VW CREDIT CANADA, INC.
Defendants
REASONS FOR DECISION - COSTS
PERELL J.
Released: September 24, 2019
[^1]: See Quenneville v. Volkswagen Group Canada, Inc., 2018 ONSC 2516.
[^2]: S.O. 1992, c. 6.
[^3]: S.O. 1992, c. 6.
[^4]: Quenneville v. Volkswagen Group Canada, Inc., 2019 ONSC 4668
[^5]: Sweetland v Glaxosmithkline Inc., [2019] N.S.J. No 177 at para 36; Sondhi v Deloitte Management Services LP, 2018 ONSC 271 at para 56; Ainslie v. Afexa Life Sciences Inc., 2010 ONSC 4294, at para. 54; Epstein v MCA, Inc., 126 F 3d 1235 (9th Cir. 1997) vacated on other grounds, 179 F 3d 641 (9th Cir. 1999)