Court File and Parties
COURT FILE NO.: CV-06-304181CP DATE: 2019/12/19 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: CATERINA IOVINE, BRUNO IOVINE, SHARON MACFARLANE and CLYDE MACFARLANE Plaintiffs
- and - TORONTO SUN WAH TRADING INC. and HOLLEND ENTERPRISES INC. Defendants
Counsel: Paul J. Pape for the Law Foundation of Ontario and for the Plaintiffs Newton Wong, Ross Morrison, and Taras Kuper for the Defendants
Proceeding under the Class Proceedings Act, 1992
HEARD: November 22, 2019
PERELL, J.
Reasons for Decision
A. Introduction
[1] In this certified class action under the Class Proceedings Act, 1992, the Representative Plaintiffs, Caterina Iovine, Bruno Iovine, Sharon MacFarlane, and Clyde MacFarlane bring a motion pursuant to s. 28 of the Act for leave of the Court to dismiss the action.
[2] The Defendants, Toronto Sun Wah Trading Inc. and Hollend Enterprises Inc. obviously do not oppose the motion, but they seek $60,004.70 in partial indemnity costs for the costs of a withdrawn summary judgment motion and for the costs associated with the Representative Plaintiffs’ motion to abandon the class action. The costs are broken down as counsel fee $58,391.62 inclusive of HST plus disbursements of $1,613.08.
[3] The Defendants also seek costs of $690,020.61, all inclusive, on a partial indemnity basis for defending the class action. The breakdown is $626,970 for fees inclusive of HST plus $63,050.61 for disbursements. Thus, the Defendants are seeking costs of $750,025.31 for the Representative Plaintiffs’ unsuccessful class action.
[4] The Class Proceedings Fund of the Law Foundation of Ontario (the “Fund”) provided financial support to the Plaintiffs, and pursuant to s. 59.4 of the Law Society Act, the Fund is responsible for adverse costs awards. The Fund submits that in the circumstances of this case, the Defendants’ costs claim is unreasonably high. The Fund submits that the Defendants should recover $65,000, all inclusive.
[5] For the reasons that follow, I grant the Representative Plaintiffs leave to abandon their class action which shall be dismissed with costs payable to the Defendants. I grant the Defendants costs on a partial indemnity basis of $25,000, all inclusive, for the costs incurred for the period January 9, 2019 to the date of hearing of the Representative Plaintiff’s motion for leave to abandon the class action and costs of $275,000, all inclusive, for the abandoned class action for a total award of $300,000, all inclusive.
B. Facts
[6] Toronto Sun Wah Trading is one of the nine major bean sprout producers in Ontario. It commands approximately 20 to 30 percent of the market. It has state of the art facilities and no record of health code violations. The Defendants serves restaurants and grocery stores in the Greater Toronto Area and nearby cities and towns.
[7] In Ontario, in the fall of 2005, there was an outbreak of salmonellosis, a bacterium found in food that causes an illness known as Salmonella.
[8] An investigation by the City of Toronto Public Health Unit discovered evidence that the source of the bacteria may have been Mung bean sprouts produced by the Defendants Sun Wah Trading Inc. and Hollend Enterprises Inc. The Public Health Unit issued an order against the Defendants requiring them to halt all production and distribution of the bean sprouts. Sun Wah and Hollend Enterprises issued a recall of the Mung bean sprouts that they produced and distributed in Ontario.
[9] On January 16, 2006, Caterina Iovine, Bruno Iovine, Sharon MacFarlane, and Clyde MacFarlane commenced a proposed class action against Sun Wah and Hollend Enterprises on behalf of those infected by the contaminated sprouts.
[10] The Plaintiffs retained Sutts, Strosberg LLP as Class Counsel. The firm was also retained by the Ministry of Health. Glyn Hotz, who has his own law firm, was Co-Counsel for the Plaintiffs.
[11] The Fund agreed to assume the Representative Plaintiffs’ exposure to an adverse costs award. As noted above, pursuant to s. 59.4 of the Law Society Act, the Fund is responsible for adverse costs awards. Pursuant to rule 12.04 of the Rules of Civil Procedure, the Fund has the right to make submissions with respect to the costs of a class action.
[12] On May 17, 2006, the Ontario Ministry of Health and Long Term-Care released an investigative report entitled “Outbreak of Salmonella Enteritidis Phage Type 13 associated with Mung bean sprouts in Ontario 2005, Outbreak Investigation”. The Outbreak Report detailed 552 confirmed cases of Salmonella Phage Type 13 across Ontario from May 2005 to October 2005. 247 of the cases were linked to the consumption of Mung bean sprouts. The Outbreak Report identified Sun Wah Trading and two other suppliers as a possible source of the outbreak. The Report stated: “The epidemiological and traceback investigations implicated a single Mung bean sprouts producer [the defendant Sun Wah]. This producer distributed the majority of their product in Ontario, with only a few accounts in another province”.
[13] On July 12, 2006, a Fresh Statement of Claim was delivered. The Plaintiffs alleged that the Defendants were negligent in the manner in which they grew and distributed Mung bean sprouts.
[14] On January 31, 2008, Justice Hoy certified the action as a class action.
[15] In resisting the certification motion, the Defendants delivered an affidavit from John Lee, who was the Vice-president of operations at Toronto Sun Wah Trading. In his affidavit, Mr. Lee swore that the Defendants had retained the services of epidemiological experts to review the outbreak investigation report.
[16] In her Reasons for Decision, Justice Hoy noted that most of the Class Members’ claims would be less than $10,000. She stated at paragraph 49 of her judgment:
- When asked to provide some guidance to the Court as to the expected range of damages, plaintiffs’ counsel referred me to Heimler v. Calvert Caterers Ltd. (1975), 8 O.R. (2d) 1 (C.A.). There, an award of damages in the amount of $3,283.33 to a plaintiff who consumed contaminated food at a wedding reception and as a result contacted typhoid few was upheld. As indicated above, counsel for the plaintiffs believes that most class members’ claims would be for an amount with Small Claims Court jurisdiction and does not expect that any would exceed the $50,000 monetary upper limit for the simplified procedure under Rule 76 of the Rules of Practice. The cost of determining the common issues would presumably be a deterrent to individual litigation and certification can therefore to that extent be seen as facilitating access to justice.
[17] On February 8, 2008, Justice Hoy awarded the Plaintiffs costs of $87,500, all inclusive, for the certification motion. The Plaintiffs had sought costs of $139,321.58, all inclusive. In her costs’ decision, Justice Hoy stated at paragraphs 9-10, 15:
The conduct of the defendants delayed the determination of the certification motion. They repeatedly failed to comply with the litigation schedule. Some of their conduct was, in my view, calculated to impede the plaintiff’s progress,
While the factum delivered by the defendants on Friday before the Monday certification motion hearing disclosed that they would oppose only certain aspects of the order sought, this was the first time that the defendants indicated, even indirectly, that the issues might be narrowed, and the plaintiffs only expressly conceded the issues at the hearing. Had these concessions been made earlier, the plaintiff’s costs on this motion would have been significantly less.
I have considered that a total of 552 laboratory confirmed cases of Salmonella Enteritidia Phage Type 13 cases were identified in Ontario during the outbreak and that plaintiff’s counsel advised that it expects that most claims will be within the then Small Claims Court jurisdiction of $10,000. Many claims could be significantly less than $10,000. Having regard to the amount that might ultimately be recovered in this action, if the class was successful at the common issues trial, and individual class members are successful, the amount sought on this certification motion is in my view high.
[18] After the action was certified, the action proceeded to the discovery stage with an exchange of affidavits of documents. There were examinations for discovery and a refusals motion. There was an unsuccessful motion by the Plaintiffs to obtain medical records for Public Health Units across the province. See Iovine v. Toronto Sun Wah Trading Inc., 2014 ONSC 6555. There were case conferences from time to time, but overall, there was glacial progress in the 10 years after the action was certified.
[19] Finally, on April 6, 2018, Class Counsel made a motion for summary judgment. The motion was supported by an export report from Dr. Elliot Ryser, Ph.D. dated September 26, 2017. Dr. Ryser is a professor in the Department of Food Sciences and Human Nutrition at Michigan State University.
[20] On October 9, 2018, the Defendants delivered the expert reports of Dr. Thabane, Ph.D. dated October 1, 2018. Dr. Thabane is professor and Associate Chair of the Department of Health Research Methods, Evidence at McMaster University and the Impact Director of the Biostatistics Unit of St. Joseph’s Healthcare in Hamilton, Ontario.
[21] Dr. Thabane was highly critical of the Outbreak Report. She said that there were major flaws in its methodology and that it was a poor and unreliable report.
[22] Dr. Ryser reviewed Dr. Thabane’s report, and on November 8, 2018, Dr. Ryser advised Class Counsel that he agreed with Dr. Thabane’s opinion.
[23] In these circumstances, the Plaintiffs gave Class Counsel instructions to withdraw the summary judgment motion, because there was now no reasonable prospect of success in the action. They also instructed Class Counsel to seek leave to discontinue; i.e., abandon and have dismissed the action.
[24] With respect to the action itself, Sutts, Strosberg LLP’s hours of legal work total 1,412.9 hours. There are also 734.2 hours of legal work by Mr. Hotz. The total hours engaged for the Representative Plaintiffs totals 2,147.1 hours. Counsel for the Defendants were engaged for a total of 2,354.4 hours in defending the action for their clients. I will have more to say about the expenditure of hours on legal services below when I discuss in more detail the Defendants’ claim for costs.
C. Discussion and Analysis
1. Introduction
[25] There are two main questions to be resolved on this motion. The first question is whether the court should grant leave for the discontinuance/abandonment/dismissal of the Representative Plaintiffs’ certified class action. The second question is: what costs should the Defendants receive for the abandoned summary judgment motion and for the Representative Plaintiffs’ abandonment of their certified class action?
[26] For the reasons that follow, I grant the Representative Plaintiffs leave to abandon their class action which shall be dismissed with costs payable to the Defendants. I grant the Defendants costs on a partial indemnity basis of $25,000, all inclusive, for the costs incurred for the period January 9, 2019 to the date of hearing of the motion for leave to abandon the class action and costs of $275,000, all inclusive, for the abandoned class action for a total award of $300,000, all inclusive.
2. Discontinuance, Abandonment and Settlement of Class Actions
[27] Section 29 of the Class Proceedings Act, 1992 requires court approval for the discontinuance, abandonment, or settlement of a class action. Section 29 states:
Discontinuance, abandonment and settlement
- (1) A proceeding commenced under this Act and a proceeding certified as a class proceeding under this Act may be discontinued or abandoned only with the approval of the court, on such terms as the court considers appropriate.
Settlement without court approval not binding
(2) A settlement of a class proceeding is not binding unless approved by the court.
Effect of settlement
(3) A settlement of a class proceeding that is approved by the court binds all class members.
Notice: dismissal, discontinuance, abandonment or settlement
(4) In dismissing a proceeding for delay or in approving a discontinuance, abandonment or settlement, the court shall consider whether notice should be given under section 19 and whether any notice should include,
(a) an account of the conduct of the proceeding;
(b) a statement of the result of the proceeding; and
(c) a description of any plan for distributing settlement funds.
[28] A motion for discontinuance or abandonment should be carefully scrutinized, and the court should consider, among other things: whether the proceeding was commenced for an improper purpose, whether, if necessary, there is a viable replacement party so that putative class members are not prejudiced, or whether the defendant will be prejudiced. See Logan v. Canada (Minister of Health), [2003] O.J. No. 418 (S.C.J.), aff’d (2004), 71 O.R. (3d) 451 (C.A.).
[29] In the immediate case, it is clear that the Class Members will not be prejudiced by the abandonment and dismissal of their certified class action. They will not be prejudiced because the action is hopeless of success. Given the passage of time and the glacial progress of the class action, the Class Members probably have forgotten the class action even existed.
3. The Defendants’ Claim for Costs
[30] For a variety of reasons, the Fund submits that the Defendants’ claim for costs for both the summary judgment motion and for the overall action is excessive. The Fund makes the point that by its reckoning, Co-Class Counsel’s expenditure of time (2,154.2 hours) on the class action is 200.2 hours less than Defence Counsel’s total expenditure of time (2,354.4 hours). The Fund argues that this is evidence that there was excessive or surplus time expended by the Defendants Counsel. The Fund suggests that the Defendants’ Bill of Costs be reduced by 50% on this account. The Fund also submits that the Defendants should be faulted and their claim for costs should be reduced on account of the Defendants’ delay in producing the epidemiological expert’s report that ultimately overwhelmed the Representative Plaintiffs’ class action.
[31] For my part, there is little weight to be given to these submissions by the Fund. It is entirely speculative what the Representative Plaintiffs’ response would have been had the epidemiologists on both sides weighed in early in the proceedings. As it is, the Class Counsel and the Representative Plaintiffs could be faulted for putting the Defendants through 14 years of a case that they could not substantiate.
[32] In the circumstances of the immediate case, little is to be learned from a comparison between Class Counsel’s expenditure of time and Defence Counsel’s expenditure of time. Rather, what is required is an examination of what precisely Defence Counsel did and the extent to which the expenditure of legal services is recoverable on a partial indemnity assessment of party and party costs.
[33] Rule 1.03 provides that “‘partial indemnity costs’ mean costs awarded in accordance with Part I of Tariff A, and ‘on a partial indemnity basis’ has a corresponding meaning”. Part I of Tariff A states:
The fee for any step in a proceeding authorized by the Rules of Civil Procedure and the counsel fee for motions, applications, trials, references and appeals shall be determined in accordance with section 131 of the Courts of Justice Act and the factors set out in subrule 57.01(1).
Where students-at-law or law clerks have provided services of a nature that the Law Society of Ontario authorizes them to provide, fees for those services may be allowed.
[34] Part I of Tariff A is somewhat of an anacronism. For decades, Part I of Tariff A set out items (steps in a proceeding) for which costs could be awarded with some monetary guidance, but the contemporary version of the tariff relies on the court’s discretion to award costs as may be appropriate without listing the steps of a proceeding authorized by the Rules of Civil Procedure.
[35] As demonstrated by the problems I shall discuss in the immediate case, it, nevertheless, remains the case that there is a difference between the costs recoverable between a party and his and her opponent and the fees that a lawyer can charge his or her own client for legal services. Many services provided by a lawyer for his or her client are not tied to the steps in a proceeding. This difference between party and party costs on a partial indemnity scale and what a lawyer can charge his or her client has been ignored in the immediate case.
[36] As noted at the outset of these Reasons for Decision, the Defendants claim $60,004.70 in partial indemnity costs for the costs of a withdrawn summary judgment motion and for the costs associated with the Representative Plaintiffs’ motion to abandon the class action. The Bill of Costs for these steps in the action covered the period after January 9, 2019. I have analyzed the Defendant’s Bill of Costs for the period January 9, 2019 to the date of the Representative Plaintiffs’ motion for leave to abandon the class action, in terms of steps in a proceeding and in terms of other items that are outside the tariff.
[37] My analysis reveals the following breakdown of the expenditure of hours:
a. 12.7 hours - summary judgment motion; b. 23.2 hours - correspondence and telephone attendances with client, co-counsel, court, opposing counsel; and, c. 178.8 hours – motion to discontinue and preparing Bill of Costs.
[38] As appears from this analysis, very little of the time expenditure for the period after January 9, 2019 had anything to do with the summary judgment motion and an inordinate and exceptional amount of time was spend on preparing a Bill of Costs for the motion with respect to the Plaintiffs’ abandonment of the class action. There was, for instance, 46 hours expended just on gathering, assembling, or organizing time dockets and preparing the costs outline for the motion to discontinue the action. Time was also spent on legal research associated with making a claim for costs in an abandoned class action. And time was spent on drafting the Bill of Costs.
[39] I appreciate that $750,000 (to over a $1.0 million in costs was involved, if an award of substantial indemnity costs was made), but this is a grossly excessive expenditure of time for preparing a Bill of Costs, and it is not within the reasonable expectations of the unsuccessful party. Moreover, the Bill was not a proper Bill of Costs in the sense that it did not correspond to the directive of Part I of Tariff A. I, therefore award $25,000, all inclusive, for the period January 9, 2019 to the date of hearing of the motion for leave to abandon the class action.
[40] Turning now to the costs associated with the abandoned class action, I have analyzed the Bill of Costs entries for the (11-year period from January 2008 to January 2019). I have excluded the costs claimed for the prior period up to the certification motion. I agree with the Fund’s submission that the Defendants cannot recover costs for the period in which they were ordered to pay costs.
[41] My analysis reveals the following breakdown of the expenditure of hours. For present purposes, it was only necessary to analyze the hours expended by Newton Wong, who was called to the bar in 1989 and who did much more work on the file than any body else.
[42] For the complete action, Mr. Wong expended 1,136.6 hours. The next closest contributor was Joanne Hwang, a 2007 call who expended 206.4 hours. V. Ross Morrison, external co-counsel, a 1975 call, expended 116.5 hours. Five other lawyers expended hours ranging from 7.0 to 87.4 for an average contribution of 35 hours.
[43] My analysis reveals the following breakdown of the expenditure of hours by Mr. Wong:
a. 18.5 hours– Public Health Units’ motion re medical records; b. 34.8 hours – attendance at Case Conferences; c. 35.9 hours – drafting Statement of Defence; d. 39.1 hours – miscellaneous negotiations with opposing counsel with respect to resolving action; e. 198 hours – documentary discovery, examinations for discovery; refusals and undertakings; f. 205.7 hours – correspondence and telephone attendances with client, co-counsel, court, opposing counsel;
[44] The expenditure of legal costs and time related to items “a” to “e” (326.3 hours) relate to steps in the class action and these hours are within the reasonable expectations of the party paying costs.
[45] Most but perhaps not all of Joanne Hwang’s 206.4 hours and V. Ross Morrison’s 116.5 hours relate to steps in the action and are within the reasonable expectations of the party paying costs.
[46] It is unscientific but still discretionary, but I would guestimate that some portion of the time expended on correspondence and telephone attendances could have been docketed as a proper party and party partial indemnity item. Having reviewed the dockets my guestimate is no more 20% or 41 hours. A review of the dockets reveals that very much of the correspondence and communications did not deal with items that even remotely fall within the tariff. For example, there is a docket where the Defendant was being advised about its current health and safety practices at its plant. There were many dockets associated with a dispute that the Defendants were apparently having with their insurer about insurance coverage.
[47] Thus, only approximately 675 hours of time expended by the Defendants for the 11-year period from January 2008 to January 2019 is reasonable and should have been within the reasonable expectations of the Representative Plaintiffs and their Class Counsel, who it may be recalled expended 2,146 hours in prosecuting the action.
[48] In my opinion, this expenditure of time would also have been within the reasonable expectations of the Fund, although its expectations, strictly speaking, are not pertinent to deciding the quantum of costs.
[49] Factoring in the other relevant factors to an award of costs between parties, which are set out in rule 57.01, in the exercise of my discretion, I would grant the Defendants $275,000, all inclusive, for the 11year period from January 2008 to January 2019, all inclusive of taxes and disbursements.
D. Conclusion
[50] For the above reasons, I grant the Representative Plaintiffs leave to abandon their class action which shall be dismissed with costs payable to the Defendants. I grant the Defendants costs on a partial indemnity basis of $25,000, all inclusive, for the costs incurred for the period January 9, 2019 to the date of hearing of the motion for leave to abandon the class action and costs of $275,000, all inclusive, for the abandoned class action for a total award of $300,000, all inclusive.
Perell, J.
Released: December 19, 2019
COURT FILE NO.: CV-06-304181CP DATE: 2019/12/19 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: CATERINA IOVINE, BRUNO IOVINE, SHARON MACFARLANE and CLYDE MACFARLANE Plaintiffs - and - TORONTO SUN WAH TRADING INC. and HOLLEND ENTERPRISES INC. Defendants
REASONS FOR DECISION
PERELL J. Released: December 19, 2019