Court File and Parties

COURT FILE NO.: CV-14-507026 COURT FILE NO.: CV-17-567522 DATE: 2019/01/22

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Elia Broutzas and Meagan Ware Plaintiffs

– and –

Rouge Valley Health System, C.S.T. Consultants Inc., Knowledge First Financial Inc., Global RESP Corporation, Nellie Acar, Shaida Bandali, Esther Cruz, Gavriel Edry, Polina Edry, Munish Sethi, Subramaniam Sulur, Jane Doe “A”, Jane Doe “B”, John Doe, Registered Education Savings Plan Corporation, and Jane Doe “C” Defendants

AND BETWEEN:

Anne Kouvas Plaintiff

• and –

Scarborough and Rouge Hospital, Global RESP Corporation, Esther Cruz and Nellie Acar Defendants

Counsel:

Shantona Chaudhury and Brodie Noga for the Plaintiffs and the Law Foundation of Ontario

Patrick J. Hawkins, Markus Kremer, and Daniel Girlando for the Defendants Rouge Valley Health System and Scarborough and Rouge Hospital David S. Young, for the Defendant, C.S.T. Consultants Inc. Michael Arbutina, for the Defendant, Global RESP Corporation Catherine Beagan Flood and Nicole Henderson, for the Defendant, Knowledge First Financial Inc. Saba Ahmad, for the Defendant, Nellie Acar Brian N. Radnoff, for the Defendants, Gavriel Edry and Polina Edry

Proceeding under the Class Proceedings Act, 1992

HEARD: In writing

REASONS FOR DECISION - COSTS

PERELL, J.

[1] I heard together two motions to certify two proposed class actions. The first action was Broutzas v. Rouge Valley Health System, in which the Plaintiff, Elia Broutzas alleged that the Defendants Shaida Bandali, Esther Cruz, and Munish Sethi, three former employees of the Defendant Rouge Valley Health System (“Rouge Valley”), retrieved patient contact information about mothers of newborns.

[2] The Broutzas Action Plaintiffs alleged: (a) that Mr. Sethi, who, in addition to being a Rouge Valley hospital employee, was a sales representative of an RESP investment dealer, used the contact information to sell RESPs; (b) that Nurse Cruz, a hospital employee, sold contact information to Ms. Acar, an RESP sales representative of the Defendant Global RESP Corporation (“Global”), who used the contact information to sell RESPs; (c) that Ms. Bandali, another hospital employee, sold contact information to the Defendants Polina Edry and Gavriel Edry, who were RESP sales representatives of the Defendant Knowledge First Financial Inc., (“Knowledge First”), who used the contact information to sell RESPs; and (d) that Ms. Bandali also sold contact information to Subramaniam Sulur, who was an RESP sales representative of the Defendant C.S.T. Consultants Inc., (“CST”), who used the contact information to sell RESPs.

[3] The second proposed class action was Kouvas v. Scarborough and Rouge Hospital. In this action, the Plaintiff, Anne Kouvas, alleged that Ms. Cruz, a nurse employed both by Rouge Valley and also The Scarborough Hospital, retrieved patient information of mothers of newborns at The Scarborough Hospital. It is alleged that Nurse Cruz sold the information to Ms. Acar, who, as noted above, was a representative of Global.

[4] I also heard at the same time as the certification motions, a third motion in the Broutzas Action. Ms. Broutzas brought a motion under Rule 21 of the Rules of Civil Procedure for the determination of a question of law as against Rouge Valley.

[5] I dismissed the certification motions.[^1] I dismissed the Rule 21 motion.[^2]

[6] I directed that if the parties could not agree about the matter of costs, they may make submissions in writing beginning with the submissions of the Defendants - Rouge Valley, CST, Global, Knowledge First, the Edrys, and Ms. Acar - within twenty days of the release of these Reasons for Decision followed by the submissions of the Plaintiffs within a further twenty days.

[7] I advised the parties that given the novelty of the issues and the public interest in them, that I was inclined to make no order as to costs.

[8] Ms. Acar requests partial indemnity costs of $9,500, all inclusive for the certification motions.

[9] Mr. and Mrs. Edry requests partial indemnity costs of $8,594.27, all inclusive for their costs exclusive of the certification motion.

[10] Global requests partial indemnity costs of $93,407.26, all inclusive for the certification motions.

[11] CST Consultants requests partial indemnity costs of $85,214.78 for the certification motion.

[12] Knowledge First requests partial indemnity costs of $119,372.75 for the certification motion.

[13] Rouge Valley requests partial indemnity costs of $24,422.94 for the Rule 21 motion.[^3]

[14] Rouge Valley requests partial indemnity costs of $350,000 for the certification motions.

[15] In class proceedings, a plaintiff's exposure to costs may be assumed by the Law Foundation of Ontario pursuant to the Law Society Amendment Act (Class Proceedings Funding),[^4] which was enacted contemporaneously with the Class Proceedings Act, 1992. The Legislature established the Class Proceedings Fund with the broad purpose of increasing access to justice.[^5] In the case at bar, the Law Foundation of Ontario responded to the several defendants’ claims for costs.

[16] A plaintiff may apply to the Class Proceedings Fund for support. In determining whether to provide support and thus shield the representative plaintiff from costs and expose itself to a corresponding liability, the Class Proceedings Committee of the Law Foundation is directed by the Law Society Act and the related regulations to have regard to: (a) the merits of the plaintiff's case; (b) whether the plaintiff has made reasonable efforts to raise funds from other sources; (c) whether the plaintiff has a clear and reasonable proposal for the use any funds awarded; (d) whether the plaintiff has appropriate financial controls to ensure that any funds awarded are spent for the purposes of the award; (e) any other matter that the Committee considers relevant; (f) the extent to which the issues in the proceeding affect the public interest; (g) the likelihood that the proceeding will be certified; and (h) the available money in the fund.[^6]

[17] If the Fund accepts the application, it will pay for disbursements, excluding the plaintiff's legal fees, and, the Fund will indemnify the plaintiff for the costs he or she must pay the defendant if ordered to do so in the class proceeding. The Law Foundation has the right to make costs submissions.

[18] In the case at bar, the Law Foundation submitted that given the novelty of the issues and the public interest in them there should be no order as to costs. The Law Foundation summarized its submissions in paragraphs 4-6 of its written submissions as follows:

4. The case at bar engaged significant matters of public interest. The plaintiffs' proposed class actions and the resulting certification motions emerged from a series of high-profile privacy breaches whereby hospital employees, in breach of statute, obtained and sold the information of new mothers to the defendant RESP sales representatives. These events sparked a fury of public condemnation, legislative amendments, investigations, administrative proceedings and criminal/quasi-criminal prosecutions. Further, the defendants' misconduct occurred in the context of highly regulated spheres of activity. Although the action was not certified, the Plaintiffs' claims nevertheless raised important public policy questions about legal responsibilities placed on custodians and purveyors of patient information.

5. The Plaintiffs' claims also involved legally significant novelty. This was the first class action concerning patient information that was improperly obtained for a commercial purpose. Multiple class actions had previously been certified against hospitals where there had been malicious breaches of privacy by their employees, but the breaches in those cases were not affected for a commercial purpose. It was a novel question whether the for-profit purpose heightened the offensiveness of the intrusion, even if the information intruded upon was arguably less sensitive. Further, as Your Honour recognized, this was also the first case to seek compensation against the purchasers of purloined patient information. Given the embryonic nature of Canadian privacy law, there was no law on point that would have warned the plaintiffs that they should proceed no further because their claims were doomed to fail.

6. Although the certification motion was dismissed, this motion nonetheless advanced the goals of access to justice and judicial economy of the Class Proceedings Act, 2002 ("CPA") because it addressed preliminary legal issues, thereby simplifying any claims that may be brought by class members in the future.⁹ This litigation also contributed to the behaviour modification goal of the CPA. While there were regulatory and criminal responses to the privacy breaches in this particular instance, there has historically been a poor track record for prosecuting such breaches. The potential of a class proceeding for breach of privacy is a powerful incentive to ensure that parties uphold their regulatory obligations under Personal Health Information Protection Act, 2004, [“PHIPA] and the Personal Information Protection and Electronic Documents Act, ["PIPEDA”] and the Securities Act.

[19] Having regard to the findings that I made on the certification motion and to the truth that only some of the defendants were implicated in wrongdoing, the Law Foundation ought not to have spoken in such broad and sweeping terms of the defendants’ “misconduct,” etc.; however, I agree with the sentiment and thrust of its submission that given the novelty of the issues and the public interest in them there should be no order as to costs for the certification motion and the Rule 21 motion. I also agree with the Law Foundation’s submission that there were novel legal issues about privacy law that were explored in the cases at bar.

[20] The normal rules and principles the guide the court’s discretion in awarding costs apply to class actions, and under the normal rules, the court has the discretion to reduce the amount of costs or to order that there be no order as to costs when the proceeding raises novel issues, particularly where the resolution of this issue is in the public interest.[^7] The court has the discretion to reduce the amount of costs or to order that there be no order as to costs when the state of the law is uncertain or under development or underdeveloped and it is in the public interest that the question be resolved.[^8] I regard the case at bar as falling under these principles.

[21] Under s. 31 of the Class Proceedings Act, 1992, 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.[^9] Section 31 states:

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.

[22] Another important factor in awarding costs in class actions is the principle that the court should have regard to the underlying goals of the Class Proceedings Act, 1992; namely: (1) access to justice; (2) behaviour modification; and (3) judicial economy.[^10] With respect to access to justice, defendants, just as much as plaintiffs, are entitled to access to justice, and the court in exercising its discretion must be aware of the access to justice implications of its award to both plaintiffs and defendants.[^11] In my opinion, the underlying goals of the Class Proceedings Act, 1992 would be best served by making no order as to costs in the immediate case.

[23] While there is a juridical "I know it when I see it" quality[^12] in characterizing a case as justifying no order as to costs because of the novelty of the issues and the public interest in them and while it is de rigueur for the losing party, be it plaintiff or defendant, in class proceedings to say that the case was a matter of public interest in the requisite sense, the case at bar has many objective indicia that support the conclusion that there should be no order as to costs.

[24] In the case at bar, some, but not all, of the defendants were legally or morally culpable in appropriating information from hospital records and the disclosure of this misconduct was a scandal for the hospitals. The discovery of the use being made of the hospital records resulted in dismissals from employment and significant criminal and regulatory consequences for some of the defendants. The Information Privacy Commissioner of Ontario launched an investigation and issued PHIPA Order HO-013. An investigation was launched by the Ontario Securities Commission's Joint Serious Offenses Team. Ms. Cruz and Ms. Acar were convicted under s.426(1) of the Criminal Code for secret commissions. Ms. Bandali, Mrs. Edry, and Mr. Sulur were convicted of violations of the Securities Act. Global was found by the Office of the Privacy Commissioner of Canada to have breached PIPEDA principles.

[25] The media and the public’s interest in these events was not prurient or meddlesome because the treatment or mistreatment of hospital records and the scope of the law’s protection of personal privacy are significant and worthy matters of concern and inquiry by all citizens in the province, all of whom will at some time or another be involved with the health care system. Privacy law is nascent and still developing. And, in the case at bar there was a high degree of regulatory oversight of the defendants, including both the public sector and the private sector defendants and there is a significant public interest in the regulation and protection of privacy.

[26] In this last regard, I agree with the submission made at paragraph 25 of the Law Foundation’s submission, where it stated:

25. The fact that the defendants' conduct occurred in heavily regulated spheres of activity further demonstrates the public interest in this case. Courts have repeatedly held that the public interest in an action is greater where the defendants' misconduct occurred in the context of regulated activity. Here, the defendants' impugned conduct fell within the regulatory regimes of PHIPA, the Securities Act, PIPEDA, and the Criminal Code. This jurisprudence contradicts Knowledge First's submission that the “broader public has no interest in the development of sales leads by a private investment firm". To the contrary, where private commercial conduct impacts the public and contravenes regulatory measures intended to protect the public, the public interest is engaged.

[27] In short, I was not dissuaded from my initial impression, which I indicated to the parties, that there should be no order as to costs for the certification motions and for the Rule 21 motion.

Perell, J.

Released: January 22, 2019

COURT FILE NO.: CV-14-507026

COURT FILE NO.: CV-17-567522

DATE: 2019/01/22

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Elia Broutzas and Meagan Ware

Plaintiffs

– and –

Rouge Valley Health System, C.S.T. Consultants Inc., Knowledge First Financial Inc., Global RESP Corporation, Nellie Acar, Shaida Bandali, Esther Cruz, Gavriel Edry, Polina Edry, Munish Sethi, Subramaniam Sulur, Jane Doe “A”, Jane Doe “B”, John Doe, Registered Education Savings Plan Corporation, and Jane Doe “C”

Defendants

AND BETWEEN:

Anne Kouvas

Plaintiff

• and -

Scarborough and Rouge Hospital, Global RESP Corporation, Esther Cruz and Nellie Acar

Defendant

REASONS FOR DECISION – COSTS

PERELL J.

Released: January 22, 2019

[^1]: Broutzas v. Rouge Valley Health System 2018 ONSC 6315 [^2]: Broutzas v. Rouge Valley Health System 2018 ONSC 6317. [^3]: To be more accurate, Rouge Valley claimed somewhat more than a partial indemnity; i.e. $30,000 but its more appropriate claim was just for a partial indemnity. [^4]: 1992, S.O. 1992, c. 7. See also O. Reg. 771/92. [^5]: 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.); Martin v. Barrett, [2008] O.J. No. 3813 at paras. 6-8 (S.C.J.). [^6]: Law Society Act, 1992, S.O. 1992, c. 7, ss. 59.2-59.3; Ont. Reg. 772/92, s. 5. [^7]: Fischer v. IG Investment Management Ltd., [2010] O.J. No. 2036 (S.C.J.) and 2014 ONSC 6260 (Div. Ct.); Dam Investments Inc. v. Ontario (Minister of Finance), 2007 ONCA 527, [2007] O.J. No. 2674 (C.A.); Sutcliffe v. Ontario (Minister of the Environment), 2004 CanLII 34994 (ON CA), [2004] O.J. No. 4494 (C.A.); Re Canada 3000 Inc., 2005 CanLII 18858 (ON SC), [2004] O.J. No. 1962 (C.A.); Gombu v. Ontario (Assistant Information and Privacy Commissioner), [2002] O.J. No. 2570 (Div. Ct.); Valpy v. Ontario (Commission on Election Finances), 1989 CanLII 4330 (ON SC), [1989] O.J. No. 66 (Div. Ct.); C.U.P.E. Local 43 v. Metropolitan Toronto (Municipality) (1988), 1988 CanLII 4692 (ON SC), 65 O.R. (2d) 47 (Div. Ct.). [^8]: Guelph (City) v. Wellington-Dufferin-Guelph Health Unit, 2011 ONSC 7523, [2011] O.J. No. 6009 at paras. 1, 4, 46 (S.C.J.); Woodhouse v. Woodhouse, 1996 CanLII 902 (ON CA), [1996] O.J. No. 1975 at para. 57 (C.A.). [^9]: Sutherland v. Hudson's Bay Co., [2008] O.J. No. 602 at para. 11 (S.C.J.); Caputo v. Imperial Tobacco Ltd. (2005), 2005 CanLII 63806 (ON SC), 74 O.R. (3d) 728 at para. 32 (S.C.J.); Joanisse v. Barker, [2003] O.J. No. 4081 (S.C.J.); Fehringer v. Sun Media Corp., [2002] O.J. No. 5514 (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.). [^10]: Green v. Canadian Imperial Bank of Commerce, 2016 ONSC 3829; Brown v. Canada (Attorney General), 2013 ONCA 18 at para. 37; Smith v. Inco Ltd., 2012 ONSC 5094 at paras. 74-109; Ruffolo v. Sun Life Assurance Co. of Canada, 2009 ONCA 274 at para. 37; KRP Enterprises Inc. v. Haldimand (County), [2008] O.J. No. 3021 (S.C.J.); McNaughton Automotive Ltd. v. Co-operators General Insurance Co., 2007 CanLII 12709 (ON SCDC), [2007] O.J. No. 1453 (Div. Ct.). [^11]: 2038724 Ontario Limited v. Quizno's Canada Restaurant Corporation, at para. 17, leave to appeal to Div. Ct. denied 2011 ONSC 859 (Div. Ct.); Fresco v. Canadian Imperial Bank of Commerce, 2010 ONSC 1036 at para. 18. [^12]: As a matter of legal history, the expression “I know it when I see it” is attributable to United States Supreme Court Justice Potter Stewart in discussing the test for obscenity in Jacobellis v. Ohio (1964) 378 U.S. 184.```