Court File and Parties

COURT FILE NO.: CV-15-22778 CP DATE: 20200323 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Richard Marchand and Kenneth Mortier, Plaintiffs AND: Ford Motor Company and Ford Motor Company of Canada, Limited, Defendants

BEFORE: Justice R. Raikes

COUNSEL: John Archibald and Paul J. Bates, Counsel for the Plaintiffs Hugh M. DesBrisay, Counsel for the Defendants

HEARD: July 3, 2019

Endorsement

[1] There are two motions before me:

1. The plaintiffs seek an order that Ford has failed to implement the terms of the approved settlement as required and the court should impose the remedial relief detailed below as a consequence; and
2. Plaintiffs’ counsel seek approval of additional class counsel fees in the action.

Background

[2] The parties entered into a Settlement Agreement dealing with exhaust odours for 2011-2015 Ford Explorers.

[3] At the time, there were two class proceedings commenced in Canada: one in Quebec for Quebec residents and one in Ontario for residents in the rest of Canada.

[4] The plaintiffs moved in Ontario and Quebec for approval of the settlement. The CBA protocol for multijurisdictional disputes was used so that the hearings for settlement approval were heard at the same time using video link between the two courtrooms.

[5] On January 30, 2018, I approved the settlement of this action pursuant to s. 29 of the Class Proceedings Act, 1992, S.O. 1992, c. 6: see 2018 ONSC 685.

[6] The Quebec class proceeding was also approved.

[7] Once approved, counsel then attempted through to resolve the issue of class counsel fees payable by Ford pursuant to section 10 of the Settlement Agreement. They were unable to reach agreement and a motion was brought by plaintiffs’ counsel for the court to fix the amount of class counsel fees in the Ontario action. That motion was heard May 7, 2018.

[8] On May 24, 2018, I fixed class counsel fees at $500,000 plus disbursements and HST and directed that whether class counsel was entitled to more and how much was deferred until after the report by the Administrator as to the number of Phase I and Phase II repairs done for warranty and non-warranty class members: see 2018 ONSC 3245.

[9] The motion for additional class counsel fees was brought returnable May 23, 2019. It was apparent early in the motion that the plaintiffs were alleging non-compliance with the approved settlement and were looking to the court for relief. No motion had been brought for that purpose; rather, the issue was raised in the context of the fee motion.

[10] Ford counsel advised that he was unprepared to argue compliance with the settlement and had not appreciated that relief was being sought against his client. At first blush, it appeared to me that the issue raised was part of justifying an increased fee.

[11] I directed that the plaintiffs bring a separate motion concerning compliance. A timetable was agreed upon for delivery of responding and reply materials.

[12] Both motions were argued July 3, 2019 after which additional material was forwarded to me and a case conference was held by telephone to address that irregularity.

[13] I raised the issue of jurisdiction at the outset of the motions on July 3, 2019; specifically, whether the issue was one affecting class members in both class proceedings and, if so, should a joint hearing with the Quebec action be held. Plaintiffs’ counsel took the position that there was nothing in the earlier orders or Agreement that made the non-compliance issue one of shared jurisdiction. Any order I might make applies only to class members covered by the Ontario action.

[14] Defence counsel indicated that he was ready to argue the motion. He submitted that if the plaintiffs were alleging wrongdoing by Ford on a national basis, there would be shared jurisdiction given that both courts approved the settlement. He agreed that any decision I make on this motion binds only class members in the Ontario action.

[15] I decided to proceed with argument of the motion for the following reasons:

1. The settlement has been approved by both courts and the terms of the Settlement Agreement are thereby binding. By contrast, if either court had failed to approve the settlement, the approval order would be set aside and the Settlement Agreement would be of no force and effect;
2. Any order I make binds only the class members in the Ontario action and has no effect on members of the Quebec class;
3. I am not sufficiently familiar with contract law in Quebec or, for that matter, with what other provisions exist in the Civil Code that might respond to the alleged wrongdoing by Ford. I was unable to say with any confidence that a joint hearing would provide any assistance in determining the issues raised; and
4. The parties were ready to proceed. The matter had already been delayed as above.

[16] I will deal first with the motion seeking remedial relief for non-compliance with the approved Settlement Agreement. Counsel agreed that the evidence filed on the settlement approval motion forms part of the evidence on the remedial relief motion.

Alleged Failure to Properly Implement Settlement

[17] The plaintiffs seek the following relief:

1. A declaration that the defendants failed to implement the terms of the Settlement Agreement in good faith as required by section 7.3 of the Settlement Agreement;
2. A declaration that, as a result of Ford's failure to implement the terms of the Settlement Agreement in good faith, the affected settlement class members have been deprived of significant benefits to which they were entitled under the settlement; and
3. An order providing remedial relief as set out in Schedule “A” to the notice of motion.

[18] In Schedule “A”, the plaintiffs seek an order:

1. Directing Ford to issue a court approved Field Service Action to its Authorized Ford Dealers pursuant to which the dealers must perform the sealing actions described in steps 17 - 22 of the 2016 Exhaust Order TSB on class vehicles of affected settlement class members.
2. Directing that, within 30 days, Ford send a court approved notice to the affected settlement class members notifying them about and recommending that their vehicles receive the sealing actions that dealers will perform free of charge.
3. Requiring Ford to provide a $250 voucher to any affected settlement class member who re-attends at a Ford dealer to have the sealing actions performed on his or her vehicle as compensation for the inconvenience and loss of opportunity resulting from his or her re-attendance. The voucher may be applied toward any future repair, service or part that the affected settlement class member receives from the dealer in respect of his or her vehicle or any other Ford vehicle he or she currently owns or leases or purchases within the next three years.
4. Providing affected settlement class members 120 days from the date they receive the notice in (2) above to re-attend at the dealer for the sealing actions.

[19] The plaintiffs’ claim in this action was for damages arising from an alleged design defect in 2011-2015 Ford Explorers that caused exhaust emissions to leak into the vehicle including passenger compartments. The claim paralleled similar class proceedings in the United States where a settlement was reached.

[20] For its part, Ford vigourously denied any defect and any potential safety or health risk. Its investigations concluded that the exhaust odour issue was present in a very small percent of vehicles and, to a degree, was a matter of individual sensitivity or perception. However, in an effort to provide reassurance to its customers, Ford developed a Technical Service Bulletin (“TSB”) to provide guidance to its dealers to deal with the issue. The TSB evolved with subsequent iterations. As at the date of the settlement, the most recent Exhaust Odour TSB was TSB 16-0166.

[21] Negotiations took place to settle the Canadian litigation on terms substantially consistent with those in the US litigation. The parties entered into a Settlement Agreement on August 17, 2017.

[22] Recitals E and F to the Settlement Agreement state:

E. AND WHEREAS, in connection with those settlement negotiations, Class Counsel provided Ford its comments on a draft form of the 2016 Exhaust Odour TSB (defined below) to address Exhaust Odour in the Class Vehicles (defined below); F. AND WHEREAS, Ford issued and directed Authorized Ford Dealers to implement, pursuant to Ford’s New Vehicle Limited Warranty, the 2016 Exhaust Odour TSB;

[23] The subject 2016 Exhaust Odour TSB is defined at section 1.1 of the Settlement Agreement as follows:

“2016 Exhaust Odour TSB” means a new TSB that Ford issued on December 15, 2016 describing updated procedures to address Exhaust Odour in the Class Vehicles. It includes two phases of service: (1) A/C recalibration and sealing of passenger compartment gaps (“Phase 1 Service”), and (2) in Class Vehicles equipped with 3.5L TiVCT engines, additional services including installation of a modified exhaust pipe if, upon re-presentment of the Class Vehicle for Exhaust Odour following completion of the Phase 1 Service, the dealer determines in good faith and based on the professional judgment of its employee(s) who inspect the Settlement Class Member’s Class Vehicle, that the Phase 1 Service has not solved the Exhaust Odour (“Phase 2 Service).

[24] TSB 16-0166 describes the issue as follows:

ISSUE Some 2011-2015 Explorer vehicles may exhibit an exhaust odor in the vehicle with the auxiliary climate control system on. Customers may indicate the odor smells like sulfur, or that exhaust odors are entering the vehicle cabin. This condition may be worsened when the climate control system is in recirculate mode and the vehicle is heavily accelerated for an extended period. Whether and to what extent any customer or occupant of a 2011 Explorer vehicle experiences the exhaust odor will be affected by driving habits, weather and individual sensitivities.

[25] Under “Action”, dealers are directed to follow “each and every step” of the Service Procedure in procedure 1 to improve the condition. The following caution is found at the beginning of the Service Procedure section:

Note: The body sealing steps in this procedure are critical elements in helping to manage subjective odor concerns. [Bold in original.]

[26] The Service Procedure under the TSB consists of two separate repairs. These are referred to in the Settlement Agreement as Phase 1 Service Repair and Phase 2 Service Repair.

[27] Procedure 1 contains 28 steps. Steps 17-22 inclusive are relevant to this motion. Those steps are:

17. Raise the vehicle on a hoist. Refer to WSM, Section 100-02.
18. Lower and support the rear section of the exhaust system.
19. Clean areas on the underside of the vehicle where seam sealer will be applied. (Figures 3-5)
20. Cover the exhaust system and verify the auxiliary climate control drain tape is still in place.
21. Apply a generous amount of Motorcraft Seam Sealer to the following areas: a. The rear horizontal sheet metal lap joints on left and right sides of the vehicle. b. The rear sheet metal overlap flange across the rear of the vehicle. (Figure 3-5)
22. Spray a generous amount of 3M Rubberized Undercoating around the auxiliary air conditioning lines and seam sealer areas. (Figure 6)

[28] In his affidavit sworn January 9, 2018 in support of the settlement approval motion, Robert Stodola, the Product Liability Manager of Ford Canada, explained that most vehicles will not require the Phase 2 Service Repair. He explained that the sealing contemplated in a Phase 1 Service Repair “is to plug or fill any holes that could possibly allow for the ingress of exhaust odor into the cabin through the body of the vehicle” (see para. 11). At para. 13, he deposed:

13. The sealing involves the marking of the location of any identified leaks and the use of seam sealer and rubberized undercoat in all areas so identified. The rear horizontal sheet metal lap joints on the left and right sides of the vehicle, the rear sheet metal overlap flange across the rear of the vehicle and around all of the auxiliary air conditioning lines are also sealed.

[29] Mr. Stodola also described Customer Satisfaction Program 17N03 at paras. 22-23 of his affidavit. That program was not exhibited to his affidavit but was referred to and relied upon by both parties at the settlement approval hearing. He deposed:

22. In late 2017, Ford of Canada implemented a customer satisfaction program (the “CSP”) to offer free of charge (parts and labour) a reprogramming of the climate control module on all Explorer vehicles and to inspect rear of vehicle sealing and repair. This program in Canada replicates a program instituted by Ford Motor Company in the United States. [Italics added.]
23. Although there are some similarities between the work being undertaken under this CSP and a Phase 1 repair described above, the inspection, testing and diagnostics under the Phase 1 repair are more rigorous than under the CSP. There will be instances where a dealer determines (following a customer complaint) to implement all of this diagnostic testing. In those instances, a class member who is beyond the warranty period can claim under the settlement for his or her additional remuneration to cover the costs for those Phase 1 diagnostic services beyond what are included in the CSP. Ford believes that the $230 reimbursement amount under the settlement is likely to cover all or substantially all of those remaining diagnostic services under the Phase 1 repair. …

[30] Notwithstanding that CSP 17N03 was already in place and expressly referred to in the earlier motion materials, the plaintiffs now complain that the directive by Ford to its Authorized Dealers undermines TSB 16-0166; specifically, they assert that the CSP Bulletin permits dealers to do less than is contemplated by the TSB – notably with respect to sealing.

[31] CSP 17N03 dated November 3, 2017 (see Exhibit “C” to the affidavit of Douglas Lamb sworn May 30, 2019) states under the heading “Service Action”:

At the request of the customer, dealers are to reprogram the climate control module (using IDS release 107.04 or higher), inspect rear of vehicle sealing and repair as necessary. This service must be performed at no charge to the vehicle owner. [Italics added.]

[32] According to the plaintiffs, the November 3, 2017 CSP to its dealers introduces a discretion on the part of the dealer not to do the sealing contemplated by steps 17-22 of TSB 16-0166 above. The words “as necessary” suggest that dealers have the option not to inspect and seal which is not what the parties contemplated when they entered into the agreement, nor is it consistent with the Settlement Agreement that reimburses class members for expenses incurred for a TSB repair. The CSP tells dealers that they do not have to do the full TSB Phase 1 procedure and customers entitled to same got less than should.

[33] The plaintiffs contend that the Settlement Agreement was premised on Ford having earlier directed all Authorized Ford Dealers to perform the 2016 Exhaust Odour TSB. Dealers were required to implement TSB 16-0166 to deal with exhaust odour issue and that includes the sealing contemplated in steps 17-22 above. Every Class Vehicle that came to a Ford dealership was to receive the TSB procedure(s). The above sealing steps are mandatory and not a matter of dealer discretion.

[34] The plaintiffs assert that the defendants have breached their duty of good faith performance of the Settlement Agreement. Section 7.3 of the Settlement Agreement expressly obligates the parties to implement the terms of the Settlement Agreement in good faith. The plaintiffs submit that:

1. Ford represented to Class Counsel and the court that the CSP would augment, not derogate from, the Phase 1 Service of the TSB;
2. Ford unilaterally sent notices to Settlement Class Members in conjunction with the settlement approval advising them that the “necessary repairs” to address the exhaust odour issue would be performed for free under the CSP;
3. Ford consented to revised approval notices aimed at reducing potential confusion among Settlement Class Members arising from the CSP notices from Ford and knew that the revised approval notices relied on the information about the differences between the TSB and CSP from the settlement approval;
4. Ford unilaterally sent the Dealer Bulletin about the CSP through Ford's vehicle recall system and linked that Bulletin to the VIN of each Class Vehicle; and
5. The CSP sent was materially different than and did not substantially overlap the Phase 1 Service under the TSB. Ford omitted the sealing actions and gave unfettered discretion to dealers whether to perform any repairs beyond HVAC recalibration, and failed to make any labour allocations for sealing actions. Ford did so while repeatedly stating to dealers that the vehicles are safe.

[35] The defendants disagree with the plaintiffs’ characterization of the terms of the Settlement Agreement, what was required of Ford and its dealers, and the scope of the application of TSB 16-0166 and CSP 17N03. Ford submits that:

1. It never agreed to have dealers recommend a repair on a vehicle that did not require a repair;
2. The TSB is a procedure to be followed to remedy a problem or issue that actually exists. It applies only to those vehicles where there is an express customer complaint of an odour issue. It is not the same as a recall notice where every vehicle is to be repaired regardless whether or not there is any complaint or problem. The wording of the TSB supports that conclusion;
3. The CSP is not the equivalent of a TSB and does not require that dealers do the full Phase 1 procedure. It allows for lesser inspections, testing and repair “as needed” at no cost. It is not intended to be a comprehensive repair program for exhaust odour issues; and
4. None of the members of the class have complained that they have been deprived of a benefit to which they are entitled under the settlement. The only evidence is that obtained by plaintiffs’ counsel using private investigators who posed as persons who do not actually own a settlement vehicle but expected to get title to one through a matrimonial settlement.

[36] As I understand Ford’s position, a customer who came in specifically complaining about exhaust odour in the vehicle was entitled to and did receive the full Phase 1 Service Repair under TSB 16-0166. There is no evidence otherwise. The inspections and testing are more rigorous under the TSB than the CSP. The cost of the TSB Phase I repair is roughly $800. Most of that cost is picked up through the CSP that covers some but not all of the same work as the TSB. The difference is roughly equivalent to the amount that customers would be reimbursed under the Settlement Agreement - $230 (see sections 4.2 and 4.4)

[37] On the other hand, if a customer came in and mentioned that they had read or heard about the exhaust odour issue but did not say that he or she was experiencing any issue with exhaust odour, the dealer would do what inspections were felt necessary under the CSP. The inspections and testing under the CSP are less rigorous but they are free.

Analysis

[38] The starting point is to determine the scope of Ford’s obligations under the Settlement Agreement. Section 4 is titled “Consideration for the Settlement”. This section details what Ford is required to do vis-à-vis individual Settlement Class Members and includes the right to arbitrate.

[39] The following provisions in section 4 are relevant:

4.1 As consideration for Settlement, Ford will provide Settlement Class Members the benefits provided for in the following Sections 4.2 to 4.11. 4.2 Warranty Repair Owners. Any Settlement Class Member who, during the New Vehicle Limited Warranty Coverage Period applicable to his or her Class Vehicle and prior to the Pre-Approval Notice Date (1) obtained one or more Exhaust Odour Repairs to his or her Class Vehicle or was denied an Exhaust Odour Repair after an Authorized Ford Dealer diagnosed an Exhaust Odour in his or her Class Vehicle (“Warranty Repair Owner”), and incurs Out-of-Pocket Expenses obtaining a Phase 1 Service repair (as described in the 2016 Exhaust Odour TSB or as may be described in any Future Exhaust Odour TSB) to that same Class Vehicle within the later of (1) four years/85,000 kilometres after his or her Class Vehicle was placed in service (whichever comes first) and (2) 60 days after the Effective Date, may submit a Claim for and, if an Eligible Claimant will receive, reimbursement from Ford of Canada towards such Out-of-Pocket Expenses up to a maximum of $230 per repair per Class Vehicle. If the Warranty Repair Owner incurs Out-of-Pocket Expenses obtaining a Phase 2 Service repair (as described in the 2016 Exhaust Odour TSB or as may be described in Future Exhaust Odour TSB) to that same Class Vehicle within the later of (1) 4 years/85,000 kilometers after his or her Class Vehicle was placed in service (whichever comes first) and (2) 60 days after the Effective Date, he or she may submit a Claim for and, if an Eligible Claimant will receive reimbursement from Ford of Canada towards such Out-of-Pocket Expenses for a maximum of one Phase 2 Service repair up to a maximum of $655, per Class Vehicle. 4.3 A Warranty Repair Owner may submit Claims for up to a maximum of two qualifying Exhaust Odour Repairs per Class Vehicle under this Section. 4.4 No-Warranty Repair Owners. Any Settlement Class Member who did not, prior to the Pre-Approval Notice Date, obtain an Exhaust Odour Repair or obtain a documented diagnosis of an Exhaust Odour from an Authorized Ford Dealer during the New Vehicle Limited Warranty Coverage period applicable to his or her Class Vehicle (“No-Warranty Repair Owner”), and incurred or incurs Out-of-Pocket Expenses within the later of (1) 60 days after the Effective Date or (2) 60 days after expiration of his/her Class Vehicle’s New Vehicle Limited Warranty Coverage period may submit a Claim for and, if an Eligible Claimant will receive, reimbursement from Ford of Canada towards such Out-of-Pocket Expenses up to a maximum of $230 per repair, per Class Vehicle. 4.5 A No-Warranty Repair Owner may submit Claims for up to two qualifying Exhaust Odour Repairs per Class Vehicle under this Section. 4.6 Settlement Class Members who are within their original or extended warranty on or after the Effective Date will continue to have all contractual and/or warranty rights they possessed without regard to this Settlement Agreement. 4.7 Inability to Repair Remedy. Subject to section 4.8, any Settlement Class Member who obtains one or more Exhaust Odour Repairs to his or her Class Vehicle during the New Vehicle Limited Warranty Coverage period or during the pendency of a Ford Extended Warranty, and who receives a repair to the same Class Vehicle under the 2016 Exhaust Odour TSB (including, if applicable, installation of a modified exhaust system in a Class Vehicle equipped with a normally aspirated 3.5-liter TiVCT engine) or any then applicable Future Exhaust Odour TSB Repair that fails to resolve the presence of Exhaust Odour in his or her Class Vehicle may submit for mediation followed by (if necessary) binding arbitration to CAMVAP a claim for breach of Ford's New Vehicle Limited Warranty which claim may include, among other relief, damage is for any Out-of-Pocket Expenses that he or she incurred for the unsuccessful repairs.

[40] Section 1 of the Settlement Agreement is the definition section. The following definitions are helpful to understanding the above terms:

1.8 “Claim” means a properly completed Claim Form submitted by or on behalf of a Settlement Class Member with the required supporting documentation to the Settlement Administrator, as described in Section 6.4. 1.17 “Effective Date” means thirty (30) days after the Settlement Approval Date … 1.20 “Exhaust Odour” means the entry into the passenger compartment of a Class Vehicle of fumes from that Class Vehicle’s exhaust system. 1.21 “Exhaust Odour Repair” means a repair by an Authorized Ford Dealer to address Exhaust Odour, including repairs performed under TSB 12-12-4, TSB 14-0130, and the 2016 Exhaust Odour TSB, and any Future Exhaust Odour TSB. 1.26 “New Vehicle Limited Warranty Coverage Period” means the 3-year or 60,000 kilometre period, whichever comes first, during which Ford’s New Vehicle Limited Warranty provides repairs to Ford vehicles at no cost to the owner or lessee. 1.33 “Out-of-Pocket Expense” means the documented amount paid to an Authorized Ford Dealer for the parts and labor required to obtain an Exhaust Odour Repair. 1.53 “TSB” means Technical Service Bulletin.

[41] Sections 4.2 and 4.4 do not require that Ford, through its dealers, perform a Phase 1 Service repair under TSB 16-0166 or any other TSB on each and every Class Vehicle. There is no obligation in the Settlement Agreement to give notice to class members that they should take their vehicles to an authorized Ford dealer for the TSB 16-0166 repair. There is no contractually mandated recall of the vehicles to provide this repair.

[42] Similarly, none of the provisions in the Settlement Agreement, including sections 4.2 and 4.4, mandate that Ford perform a Phase 1 Service repair on every vehicle that comes into a dealership for service, whether for an exhaust odour problem or not. For example, if a class member came in with his or her 2013 Ford Explorer for an oil change, there is nothing in the agreement that requires Ford through the dealer to inquire whether the customer is experiencing an exhaust odour issue or to offer to do the Phase 1 Service repair.

[43] The Settlement Agreement does not even specify or require that every exhaust odour complaint be repaired using TSB 16-0166. Sections 4.2 and 4.4 provide only for reimbursement of out-of-pocket expenses incurred by class members for exhaust odour repairs. The class member had an issue, brought the vehicle to an authorized Ford dealer to address it and a repair was done under TSB 16-0166 or one of its earlier iterations. The class member incurred an expense and paid money for the repair. In that case, the class member is entitled to apply to the Claims Administrator for reimbursement up to $230.

[44] The TSB for exhaust odour was developed with input from experts engaged by plaintiffs’ counsel in the US litigation. It was reviewed by the plaintiffs’ expert in this litigation. The TSB was communicated to authorized Ford dealers for service departments to use to deal with the issue if a vehicle came in and a customer expressed a concern about fumes or an odour in the vehicle. It has not been withdrawn or cancelled by Ford. It remains the procedure to follow to remedy an issue.

[45] The CSP is not referred to anywhere in the Settlement Agreement. It was developed by Ford after the parties entered into the Settlement Agreement and before the settlement was approved by this court and in Quebec. The parties did not amend the Settlement Agreement to incorporate the CSP and both relied on its existence on the settlement approval motion to satisfy the courts as to the reasonableness of the settlement.

[46] Plaintiffs’ counsel raised no concerns about the effect of the CSP on the motion to approve the settlement. There was no suggestion that the CSP undermined or impacted the use of TSB 16-0166. Where a Phase 1 Service repair is done, the CSP picks up some of the labour costs that would otherwise be charged to the class member. To that extent, it provides a benefit to class members that is not required by the terms of the settlement.

[47] It is undisputed that Ford is obliged to perform its part of the Settlement Agreement in good faith. That obligation is set out at section 7.3. It also arises at common law: Bhasin v. Hrynew, 2014 SCC 71, at paras. 65-66, 73.

[48] The plaintiffs assert that the CSP potentially deprives class members of the full repair under TSB 16-0166 because it leaves it open to the dealer to decide what sealing is done. TSB 16-0166 requires that all steps in procedure 1 be done. That includes vital sealing steps. The CSP allows for something less. They submit that the Settlement Agreement is predicated on the understanding that any repair or service done to class vehicles will be under the TSB. They argue that the CSP sent by Ford to its dealers is in breach of its good faith obligations.

[49] I disagree for the following reasons:

1. The Settlement Agreement does not require that exhaust odour issues be repaired using TSB 16-0166. Nevertheless, that TSB remains the applicable repair procedure for any class vehicle that presents with an exhaust odour issue. It has not been withdrawn;
2. There is no evidence that any class member who presented at a Ford dealer with that issue did not receive the Phase 1 Service repair;
3. Nothing in the CSP tells dealers not to use TSB 16-0166 or to try doing something less when a class vehicle is experiencing the exhaust odour issue;
4. The Settlement Agreement does not require Ford to do a Phase 1 Service repair to every class vehicle or every class vehicle that comes in to be serviced for another reason. If Ford did so, class members would be faced with a potential out-of-pocket expense for a repair for an issue they were not experiencing and did not want;
5. There is no evidence that any class vehicle with an exhaust odour issue was repaired under the CSP and did not receive the sealing contemplated by steps 17-22 of TSB 16-0166; and
6. There is no agreement or admission by Ford that the class vehicles are unsafe. That is clear from the Settlement Agreement. Telling its dealers that the vehicles are “safe” is not improper or a breach of its duty of good faith.

[50] There is simply no evidence that the CSP sent by Ford to its dealers has resulted in class members not getting needed and proper repairs. The CSP does not undercut the TSB which remains the applicable procedure to repair a vehicle where the issue is present. If the plaintiffs wished to have every class vehicle undergo a Phase 1 Service repair, they should have negotiated same into the agreement.

[51] The fact that sealing may not be done under the CSP on class vehicles that were not experiencing an exhaust odour issue does not, in my view, amount to a breach of the Settlement Agreement or a breach of the defendants’ duty of good faith under that agreement. There is simply no evidence that any class vehicle with an exhaust odour issue did not get the appropriate repair. The plaintiffs’ position assumes that dealers will knowingly or inadvertently not do a TSB repair where one is needed, and that was Ford’s intent when it issued the CSP. That is not apparent to me on the evidence filed.

[52] Accordingly, the motion is dismissed. If the parties cannot agree on costs of this motion, they may make written submissions not exceeding 3 pages within 21 days hereof.

Counsel Fees

[53] On May 7, 2018, class counsel sought counsel fees of $1,938,243.90 comprised of $1.7 million for fees, disbursements of $17,243.94 and applicable HST. In my endorsement dated May 24, 2018, I made an interim award of $500,000 plus disbursements and applicable HST. That amount has been paid.

[54] In my endorsement, I indicated at para. 33 that:

Whether and how much more should be paid will be determined following a report from the Administrator as to the number of Phase I and II repairs for warranty and non-warranty class members.

[55] The report of the Administrator has been received. It shows that:

1. The Administrator received 144 claim form submissions in respect of 141 claims;
2. The Administrator approved six claims;
3. The value of the approved claims was $1,104.67; and
4. No appeals were taken from the Administrator’s decisions.

[56] Class counsel renew their request for the counsel fee sought on May 7, 2018, less the monies awarded and paid to date.

[57] They have incurred additional time and expense investigating Ford’s compliance with the Settlement Agreement, bringing the motion above seeking to find that Ford has not complied with its obligations, and dealing with implementation and administration of the settlement. The time docketed after settlement approval is $127,925. They have expended an additional $12,358.79 in disbursements inclusive of HST since February 15, 2018. Most of those disbursements are for expert and consultant fees for the motion.

[58] Class counsel assert that through their efforts, the class have received tangible benefits; notably,

• Counsel had direct input into the updated TSB 16-0166 which ensures that those vehicles that have an exhaust odour issue will get an appropriate repair;
• Some vehicles were repaired using TSB 16-0166;
• Some vehicle owners were reimbursed through the claims process;
• More than 15,000 class vehicles in Canada received at least the free CSP inspection and service; and
• Police fleet vehicles obtained free service under a different CSP.

[59] Class counsel assert that all or some of the work done by Ford dealers under the CSP should be taken into account in determining their counsel fee because:

1. Dealers treated the work done under the CSP as substantially equivalent to the TSB repair. The value of a CSP repair is $500 per vehicle;
2. The CSP work includes several of the steps required for a Phase 1 Service repair; and
3. But for the confusing and inappropriate CSP notice to class members, there would likely have been a greater number of TSB Phase 1 Service repairs.

[60] The defendants take the position that no further fees should be awarded to class counsel. The CSP is a voluntary program introduced by Ford after the settlement was entered into and was not required by the terms of the settlement. Class counsel should not be credited for the value of work done under the CSP.

[61] Further, they submit that the benefit of the reimbursement program reflected in the Settlement Agreement is extremely modest as is shown by the Administrator’s report. Counsel have been very generously compensated to date and should not get more.

[62] The principles applicable to the determination of class counsel fees are set out in my endorsement of May 24, 2018 at paras. 24-28, which includes the quote from Lozanski v. The Home Depot Inc., 2016 ONSC 5447, at paras. 86-90, and need not be repeated. Equally, I need not repeat my analysis at para. 29 of that endorsement.

[63] I now have the report of the Administrator and am in a better position to assess the results achieved by class counsel for the purpose of determining a fair and reasonable fee.

[64] The Administrator’s report shows that only six class members benefitted from the reimbursement program created by the Settlement Agreement. The total amount paid out is $1,104. By any measure, the financial benefits derived by the class are extremely modest.

[65] I do not agree with class counsel that every CSP done by Ford should be taken into account as a benefit to the class in the assessment of class counsel fees. The Settlement Agreement says nothing about the CSP. The uncontradicted evidence before me is that the CSP is a voluntary program put in place by Ford to mirror what it was doing for US customers. It did not come about through anything done by class counsel and, in fact, did not come into existence until after the parties had entered into the Settlement Agreement.

[66] I disagree with class counsel’s submission that the CSP notices to dealers led to fewer TSB repairs or inadequate repairs of an exhaust odour issue in class vehicles. There is simply no evidence that any class vehicle with an exhaust odour issue did not get a needed TSB Phase 1 Service repair.

[67] According to the information provided on the settlement approval motion, Ford’s warranty data indicated that well under 1% of Ford Explorer vehicles had the exhaust odour issue. That figure represents those vehicles whose owners/lessees returned to Ford dealers and specifically raised the exhaust odour issue. There may be owners/lessees who experienced it and simply tolerated it.

[68] Assuming that 1% of all class vehicles experienced the exhaust odour issue and there are roughly 50,000 class vehicles in Canada, that means 500 vehicles needed the Phase 1 Service repair. Some of those repairs would have been covered by warranty at no cost to the owner. Even if two thirds of that number were not covered by warranty, that is 334 vehicles for whom a claim could have been made for up to $230. The amount that would be paid out if every one of the 334 vehicle owners claimed for the maximum $230 is $76,820. Again, a very modest number in comparison to the fees claimed.

[69] I am aware that the plaintiffs’ expert opined that exhaust could be entering the vehicle and not be noticed. Individual sensitivities will vary. But the plaintiffs settled the action on the basis of a reimbursement program, not a guaranteed repair of each and every vehicle. The results must be considered in light of the take up of that program. While it was possible that every class vehicle might come into a dealership for a Phase 1 Service repair, not merely the free CSP work, the numbers simply have not borne out that result, nor would that be a reasonable expectation based on what was known when the settlement was reached.

[70] Further, the bulk of the time spent by class counsel after approval of the settlement relates to the investigation of Ford’s compliance with the Settlement Agreement and the motion above for remedial relief. It is time and disbursements spent without merit. I do not agree that that time should be rewarded.

[71] Class counsel have already received payment of $500,000 for fees. Should they receive more? Should they be entitled to the $1.2 million more that they seek?

[72] The claims of class members in this case were such that the economics of litigation meant they were unlikely to pursue a remedy through the courts unless aggregated in a class proceeding. I am mindful that it is essential to the ultimate utility of class proceedings that counsel be sufficiently incentivized to take on the risks that class proceedings entail, and not merely those cases where the numbers justify a large fee.

[73] I do not agree that class counsel should be paid the additional $1.2 million they seek. That amount is not grounded in reality and strikes me as grossly excessive. In this case, class counsel were invited to put in place a settlement mirroring the US litigation settlement which is what they did. They did not have to reinvent the wheel so to speak. The results achieved are of limited potential benefit to the class and, as the report of the Administrator demonstrates, provided actual benefit to but a handful of class members.

[74] The principle of proportionality is part of the analysis of what constitutes a fair and reasonable fee. In Lavier v. My Travel Canada Holidays Inc., 2013 ONCA 92, at paras. 31-33, MacPherson J. wrote:

[31] Gagne [Gagne v. Silicorp (1998), 41 O.R. (3d) 417 (C.A.)], at p. 425, is also instructive for what it suggests about proportionality as part of the framework by which fair compensation to class counsel might be considered:

One yardstick by which this can be tested is the percentage of gross recovery that would be represented by the multiplied base fee. If the base fee as multiplied constitutes an excessive proportion of the total recovery, the multiplier might well be too high. A second way of testing whether the ultimate compensation is fair in reasonable is to see whether the multiplier is appropriately placed on a range that might run from slightly greater than one to three or four in the most deserving case. Thirdly, regard can be had to the retainer agreement in determining what is fair and reasonable. Finally, fair and reasonable compensation must be sufficient to provide a real economic incentive to solicitors in the future to take on this case and to do it well.

[32] The principle of proportionality has been recognized and utilized by lower courts, who have indicated that fees should not be “clearly excessive” or “unduly high” in the sense of having little relation to the risk undertaken or the result achieved: Parsons v. Canadian Red Cross Society (2000), 49 O.R. (3d) 281 (S.C.), at para. 58; [Martin v. Barrett, [2008] O.J. No. 2105, at para. 43]; Boulanger v. Johnson & Johnson Corp., 2010 ONSC 2359, at para. 15.

[33] Proportionality in this sense is important precisely because of the objectives of the Act. If the objective is to compensate class members who have been injured, through the judicial economy of the class proceeding, courts should ensure that it is they and not class council who are benefitting.

[75] I am satisfied that a very modest amount should be paid in addition to the fees and disbursements already paid. The additional amount recognizes that some time was spent after settlement approval dealing with notice issues that arose and settlement administration. It also provides a minimal premium on time spent by counsel having regard to the limited risk assumed and the results obtained. I fix the further fee payable at $75,000 plus HST. That figure is inclusive of disbursements.

[76] If the parties cannot agree on costs of the motion for further fees, they may make written submissions not exceeding 3 pages within 21 days hereof.

Justice R. Raikes Date: March 23, 2020