COURT FILE NO.: CV-15-536174-00CP DATE: 2020/06/15 ONTARIO SUPERIOR COURT OF JUSTICE.
BETWEEN:
JOSEPH S. MANCINELLI, CARMEN PRINCIPATO, DOUGLAS SERROUL, LUIGI CARROZZI, MANUEL BASTOS and JACK OLIVEIRA in their capacity as THE TRUSTEES OF THE LABOURERS’ PENSION FUND OF CENTRAL AND EASTERN CANADA, and CHRISTOPHER STAINES Plaintiffs
– and –
ROYAL BANK OF CANADA, RBC CAPITAL MARKETS LLC, BANK OF AMERICA CORPORATION, BANK OF AMERICA, N.A., BANK OF AMERICA CANADA, BANK OF AMERICA NATIONAL ASSOCIATION, THE BANK OF TOKYO MITSUBISHI UFJ LTD., BANK OF TOKYO-MITSUBISHI UFJ (CANADA), BARCLAYS BANK PLC, BARCLAYS CAPITAL INC., BARCLAYS CAPITAL CANADA INC., BNP PARIBAS GROUP, BNP PARIBAS NORTH AMERICA INC., BNP PARIBAS (CANADA), BNP PARIBAS, CITIGROUP, INC., CITIBANK, N.A., CITIBANK CANADA, CITIGROUP GLOBAL MARKETS CANADA INC., CREDIT SUISSE GROUP AG, CREDIT SUISSE SECURITIES (USA) LLC, CREDIT SUISSE AG, CREDIT SUISSE SECURITIES (CANADA), INC., DEUTSCHE BANK AG, THE GOLDMAN SACHS GROUP, INC., GOLDMAN, SACHS & CO., GOLDMAN SACHS CANADA INC., HSBC HOLDINGS PLC, HSBC BANK PLC, HSBC NORTH AMERICA HOLDINGS INC., HSBC BANK USA, N.A., HSBC BANK CANADA, JPMORGAN CHASE & CO., J.P.MORGAN BANK CANADA, J.P.MORGAN CANADA, JPMORGAN CHASE BANK NATIONAL ASSOCIATION, MORGAN STANLEY, MORGAN STANLEY CANADA LIMITED, ROYAL BANK OF SCOTLAND GROUP PLC, RBS SECURITIES, INC., ROYAL BANK OF SCOTLAND N.V., ROYAL BANK OF SCOTLAND PLC, SOCIÉTÉ GÉNÉRALE S.A., SOCIÉTÉ GÉNÉRALE (CANADA), SOCIÉTÉ GÉNÉRALE, STANDARD CHARTERED PLC, UBS AG, UBS SECURITIES LLC and UBS BANK (CANADA) Defendants
Counsel:
Reidar Mogerman, Louis Sokolov, Charles Wright, Daniel Bach and Rebecca Coad for the Plaintiffs
Donald Houston, Shane D’Souza and Caroline Humphrey for the Defendants, Credit Suisse Group AG, Credit Suisse Securities (USA) LLC, Credit Suisse AG and Credit Suisse Securities (Canada), Inc. Subrata Bhattacharjee, Caitlin Sainsbury, and Pierre Gemson for the Defendant Deutche Bank AG Allan D. Coleman and Robert Carson for the Defendants Royal Bank of Canada and RBC Capital Markets LLC Paul Le Vay, Brendan Van Niejenhuis, and Ben Kates for the Defendants Toronto Dominion Bank, TD Bank, N.A., TD Group US Holdings, LLC, TD Bank USA, N.A. and TD Securities Limited
Proceeding under the Class Proceedings Act, 1992
HEARD: In writing
PERELL, J.
REASONS FOR DECISION - COSTS
A. Introduction and Factual Background
[1] In this action under the Class Proceedings Act, 1992, the Plaintiffs, Joseph S. Mancinelli, Carmen Principato, Douglas Serroul, Luigi Carrozzi, Manuel Bastos, and Jack Oliveira, in their capacity as The Trustees of the Labourers’ Pension Fund of Central and Eastern Canada, and Christopher Staines, sued eighteen groups of bank financial institutions. Fourteen of the groups of Defendant banks have entered into settlements agreements.
[2] The latest of the settling Defendants is the Bank of Montreal (“BMO”). BMO is Bank of Montreal, BMO Financial Corp., BMO Harris Bank N.A. and BMO Capital Markets Limited. The Plaintiffs and BMO settled after a certification motion was argued and while Reasons for Decision were being written and before a settlement approval hearing. I have now certified the claim against BMO for settlement purposes. Mancinelli v. Royal Bank of Canada, 2020 ONSC 3468. I am continuing to reserve judgment with respect to BMO pending the settlement approval hearing.
[3] As a result of the settlements with thirteen groups of defendants, Class Counsel has received compensation for legal fees in excess of $13 million and reimbursement for disbursements in excess of $845,000. Pursuant to orders made April 13, 2017 and September 18, 2017, Class Counsel has drawn down up to $1 million from the settlement proceeds to defray future disbursements.
[4] The remaining four groups of Defendants did not settle. They resisted settlement. Credit Suisse is Credit Suisse Group AG, Credit Suisse Securities (USA) LLC, Credit Suisse AG and Credit Suisse Securities (Canada) Inc. Deutsche Bank is Deutsche Bank AG. RBC is Royal Bank of Canada and RBC Capital Markets LLC. TD is Toronto Dominion Bank, TD Bank, N.A., TD Group US Holdings, LLC, TD Bank USA, N.A. and TD Securities Limited.
[5] Subject to certain qualifications and modifications, I certified the action against Credit Suisse, Deutsche Bank, RBC, and TD. Mancinelli v. Royal Bank of Canada, 2020 ONSC 1646. I certified five causes of action for a class defined as follows:
All persons in Canada who, between January 1, 2003 and December 31, 2013 (the “Class Period”), entered into an FX Instrument transaction with a named Defendant’s salesperson either directly or through an intermediary.
[6] This Class Definition defined an enormously large class membership but was substantially smaller than the ginormous size class membership sought by the Plaintiffs. I concluded that the Plaintiffs’ proposed Class Definition was over-inclusive. Therefore: (a) I removed from class membership persons who purchased FX Instruments using the Defendants’ proprietary electronic trading platforms; (b) I removed from class membership persons who entered into FX Instrument transactions with non-Defendant banks; and (c) I removed from class membership persons who entered into FX Instrument transactions indirectly, the so-called Indirect Purchaser Class Members.
[7] For the certification motion, the Plaintiffs seek partial indemnity costs and disbursements of $1,391,715.45, inclusive of taxes (being $923,010.39 in partial indemnity fees and $468,705.06 in disbursements).
[8] The Defendants submit that Mr. Staines should recover no costs and the Labourers’ Fund should recover $150,000 payable immediately and $200,000 payable in the cause, provided that the Labourers’ Fund satisfies the Court that it incurred fees in those amounts relating to certification for which it has not already been indemnified in the settlements; and (b) that the Labourers’ Fund not recover for disbursements unless and until it demonstrates that it has incurred disbursements relating to certification for which it has not already been indemnified from the settlements.
B. The Plaintiffs’ Submissions
[9] The Plaintiffs’ submissions were straightforward. They were the successful party in a very complex, very hard fought, and very much resisted certification motion defended by “some of the world’s largest financial institutions.” The Plaintiffs submit that any assertions that there was divided success because of the variation in class size are false and there should be no distributive costs award. The Plaintiffs submit that the Defendants’ success was modest and the changes in the class definition are mostly about apportionment not the quantum of liability. The Plaintiffs say that the costs of $1.4 million is within the reasonable expectations of the Defendants especially having regard to the manner in which certification was so strenuously resisted as demonstrated by the enormous legal resources expended in resisting certification. The Defendants have not disclosed the amount of their legal expenditures in resisting certification.
C. The Defendants’ Submissions
[10] In contrast to the Plaintiffs’ submissions, the four Defendants’ submissions were intricate, elaborate, and extensive. The Defendants proceeded much like a lumberjack chopping down a $1.4 million tall redwood tree of costs. In no particular order, the chopping was as follows.
[11] One chop at the award is that the Defendants submit that because of their substantial success at the certification motion, the costs awarded to the Plaintiffs should be reduced. The Defendants point out that the putative Class Members, who were to be represented by Mr. Staines, are no longer a part of the action and that the quantum of the claims for the Class Members represented by the Labourers’ Fund has been very substantially reduced. Relying on McKenna v. Gammon Gold Inc., 2010 ONSC 3630, the Defendants submit that the costs award should be significantly reduced to reflect the Defendants’ success in significantly reducing the class size, significantly reducing the value of the claims, and significantly reducing the Defendants’ potential liability. The Defendants dispute that a reduced award would be a distributive costs award.
[12] Another hack at the $1.4 million award is that the Defendants submit that amounts in respect of fees already paid by settling defendants should be taken into account when awarding costs against the Defendants who resisted certification. Thus, the Defendants submit that the court should limit any costs awarded to the Labourers’ Fund to disbursements and fees incurred after May 2018. The Defendants submit that the Plaintiffs have by virtue of the settlements already been indemnified for all of their fees and disbursements incurred before June 2018. The Defendants repeatedly point out that the Plaintiffs have refused to identify what amounts for costs they now seek that have not already been recovered from settlement funds.
[13] The Defendants point out that Class Counsel has been awarded fees amounting to 2.5 times the full indemnity costs for all the hours spent on this proceeding from inception through May 31, 2018 (i.e., 2.5 times $5.2 million for a total of $13 million). The Defendants submit that it appears that Class Counsel wishes to be paid again for a number of the tasks, including factual investigation, preparation of pleadings, and preparation of the first four certification motion records.
[14] Another hack at the $1.4 million award are similar submissions about the disbursements. The Defendants argue that it appears that at least some of the $468,705.06 the Plaintiffs are now seeking have been recovered from funds in the settlements.
[15] Yet another hack by the Defendants is their submission that the award should be reduced to take into account the inevitable circumstance that a consortium of Class Counsel are inefficient. Relying on Peter v. Medtronic Inc., the Defendants submit that any costs awarded to the Labourers’ Fund should be modestly discounted to reflect this fact.
[16] After all these deductions or reductions, in a major swing at reducing the costs award, the Defendants submit that there should be a 20% reduction of the already reduced award because of the settlement (not yet approved) with BMO. The Defendants assume that it is a part of the settlement that BMO will be released from having to pay costs of the certification motion.
[17] It would appear that the Defendants also assume that BMO would have been unsuccessful on the certification motion and argue that where a successful party has accrued a costs claim against all unsuccessful parties but later releases a costs claim against one of the unsuccessful parties, courts reduce costs awards to account for the portion of the costs that were voluntarily released. The Defendants submit that this practice compels a reduction of 20% to take into account the costs that the Labourers’ Fund presumably elected to release as part of its settlement with BMO.
[18] And yet another chop at the tall redwood tree of costs, the Defendants submit that this is an appropriate case in which some of the costs should be awarded in the cause. The Defendants proffer three reasons in support of costs in the cause. First, the Plaintiffs should not be completely compensated now when there are obvious and serious risks inherent in establishing their claim. Second, most of the disbursements at issue were for expenditures that the class will leverage at trial, and, therefore, the Defendants should not be expected to finance litigation costs on certification where these expenditures will necessarily be used mostly to prove the (untested) merits of the case. Third, the Defendants submit that they were successful in significantly streamlining the class action and by awarding some costs in the cause, the court has an additional tool to recognize a defendant’s entitlement to reasonably oppose certification, given that such resistance may be productive and even in the interests of Class Members, who will have a proceeding that is manageable and the preferable procedure to achieve access to justice.
D. General Principles – Costs and Class Proceedings
[19] Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage and sanction inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements. Reynolds v. Kingston (City) Police Services Board (2007), 2007 ONCA 375, 86 O.R. (3d) 43 (C.A.); 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 82 O.R. (3d) 757 (C.A.); British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371 (S.C.C.); Somers v. Fournier (2002), 60 O.R. (3d) 225 (C.A.); Fong v. Chan (1999), 46 O.R. (3d) 330 (C.A.).
[20] The court's discretion in awarding costs arises under the authority of s. 131 of the Courts of Justice Act and is to be exercised by a consideration of the factors in rule 57.01(1) of the Rules of Civil Procedure. The traditional discretionary principles developed for costs awards are codified in rule 57.01 (1), which states:
Factors in Discretion
57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party’s denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and
(i) any other matter relevant to the question of costs.
[21] The most general rule about costs, not to be departed from without good reason, is that costs at a partial indemnity scale follow the event, which is to say that normally costs are ordered to be paid by the unsuccessful party to the successful party on a partial indemnity scale. Hague v. Liberty Mutual Insurance Co., [2005] O.J. No. 1660 (S.C.J.); Pike's Tent and Awning Ltd. v. Cormdale Genetics Inc. (1998), 27 C.P.C. (4th) 352 (Ont. Gen. Div.); Bell Canada v. Olympia & York Developments Ltd. (1994), 17 O.R. (3d) 135 (C.A.); McCracken v. Canadian National Railway, 2012 ONSC 6838. This is the "loser-pays" principle.
[22] A critical controlling principle for the awarding of costs is that the sum awarded reflect the fair and reasonable expectations of the unsuccessful litigant. McGee v. London Life Insurance Co., [2008] O.J. No. 5312 (S.C.J.); Caputo v. Imperial Tobacco Ltd. (2005), 74 O.R. (3d) 728 (S.C.J.); Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.); Lee v. General Motors Co. of Canada, [2004] O.J. No. 2245 (S.C.J.). In Boucher v. Public Accountants for the Province of Ontario, after a two-day hearing of a judicial review application, the motions judge fixed costs on a partial indemnity scale at $187,682.51, all inclusive. On appeal, the Court of Appeal reduced the aggregated award to $63,000, all inclusive. At para. 24 of his judgment, Justice Armstrong stated:
- The appellants submit that the motions judge accepted the bills of costs that were presented to her without any deductions. The bills were prepared in accordance with the calculation of hours times dollar rates provided by the costs grid. While it is appropriate to do the costs grid calculation, it is also necessary to step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable. This approach was sanctioned by this court in Zesta Engineering Ltd. v. Cloutier (2002), 21 C.C.E.L. (3d) 161 (Ont. C.A.) at para. 4 where it said:
In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.
See also Stellarbridge Management Inc. v. Magna International (Canada) Inc., [2004] O.J. No. 2102 (C.A.) para. 97.
[23] The assessment of reasonableness is discretionary and very much dependent upon the circumstances of each case. In some cases, it may be reasonable for the successful party to make exhaustive efforts and to commit enormous legal resources, and in those cases, it might be said that the unsuccessful party could reasonably expect to pay those costs. In other cases, however, the successful party may have been well served by giving his or her lawyer instructions to make exhaustive efforts, but it might be disproportionate and unreasonable to expect the unsuccessful party to pay those costs, even if he or she would have expected or anticipated that his or her foe would have marshalled those legal resources.
[24] In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.) at para. 52, Justice Epstein stated that the overriding principle in awarding costs is reasonableness. She stated:
- As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.)], this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said: "[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice."
[25] The same approach is applied to the recovery of fees paid to an expert witness. In Pearson v. Inco Ltd., [2002] O.J. No. 3532 (S.C.J.), at para. 20, Justice Nordheimer stated:
[T]he approach to the recovery of fees paid to expert witnesses ought to be exactly the same as the approach to the fees to be recovered by counsel. The court should consider what is fair in terms of hours and rates as well as the overall amount and should then fix an amount which it is reasonable for the losing party to pay. In so doing, the court is not bound by what the client may have actually had to pay the expert.
[26] Although the unsuccessful party is not obliged to disclose what he or she expended on costs, where the unsuccessful party submits that the costs claimed by the successful party are excessive, evidence of what he or she expended is relevant to the determination of what is reasonable and of what the unsuccessful party might reasonably have expected to pay and the failure to proffer this evidence tempers and diminishes the unsuccessful party’s criticism of the excessiveness of the costs claim. Chapman v. Benefit Plan Administrators Ltd., 2014 ONSC 537 at paras. 11-12; MacDonald v. BMO Trust Co., 2012 ONSC 2654 at para. 27; Hague v. Liberty Mutual Insurance Co. (2005), 13 C.P.C. (6th) 37 at para. 15 (S.C.J.). An attack on the quantum of the opponent’s claim for costs without disclosing one’s own bill of costs is no more than an attack in the air. United States of America v. Yemec, [2007] O.J. No. 2066 (Div. Ct.) at para. 54; Risorto v. State Farm Mutual Automobile Insurance Co. (2003), 64 O.R. (3d) 135 at para. 10 (S.C.J.).
[27] 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. 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] O.J. No. 1453 (Div. Ct.).
[28] In Pearson v. Inco Ltd. (2006), 79 O.R. (3d) 427 (C.A.), at para. 13, the Court of Appeal identified the following principles for fixing costs on a certification motion: (1) Ontario, unlike other class proceedings jurisdictions such as British Columbia, has not sought to interfere with the normal rule that costs will ordinarily follow the event; (2) the costs must reflect what is fair and reasonable; (3) the costs should, if possible, reflect costs awards made in closely comparable cases, recognizing that comparisons will rarely provide firm guidance; (4) a motion for certification is a vital step in the proceeding and the parties expect to devote substantial resources to prosecuting and defending the motion; (5) the costs expectations of the parties can be determined by the amount of costs that an unsuccessful party could reasonably expect to pay; (6) the complexity of the issues; (7) whether the case raises an issue of public importance; and (8) a fundamental object of the Class Proceedings Act, 1992 is to provide enhanced access to justice.
[29] In class actions, distributive costs awards, in which the major issues are identified and the successful party on each issue is awarded costs, are to be avoided. Lau v. Bayview Landmark Inc., [1999] O.J. No. 4385 at paras. 2-4 (S.C.J.); Pearson v. Inco Ltd. (2006), 79 O.R. (3d) 427 at para. 5 (C.A.).
E. Discussion and Analysis
[30] I shall begin the discussion with the disbursements of $468,705.06. I order these payable in the cause. In the circumstances of the immediate case, there is merit to the Defendants’ argument that the value of these disbursements will accrue to the benefit of the remaining prosecution of the case. And, it is difficult to determine the extent to which the disbursements have been recovered by the disbursement awards in the previous approved partial settlements of the class action.
[31] That leaves the Plaintiffs’ claim of $923,010.39 for partial indemnity fees. For the reasons that follow, I award $700,000, inclusive of legal fees and HST payable forthwith.
[32] I shall not be making any deduction on account of the pending settlement with the BMO. On the contested certification motion, BMO had its own particular and unique arguments, and the merits of those arguments have not yet been determined. If one assumes that BMO would have been successful, it would have had its own several, i.e., independent, claim for costs against the Plaintiffs. If one assumes that BMO was unsuccessful on the certification motion, then BMO would have been jointly and severally liable for the Plaintiffs’ claim for costs. If the settlement with BMO is approved, it cannot be said who released whom for a costs claim. I, therefore, will make no deduction on account of the BMO settlement of the remaining joint and several liability of the Defendants.
[33] I shall not be making any deduction on account of there being a consortium of Class Counsel. There is no clear evidence of redundancies or overcharging. In any event, because I am reducing the costs award for other reasons, any deduction for these inefficiencies, if any, is taken into account.
[34] I make no deduction for the fee awards made in the prior settlements. The proper approach is to identify the costs occurred that are just associated with the contested certification motion. If the class is successful in achieving certification, then Class Counsel are obliged to seek to recover costs from the unsuccessful defendant, and the recovered costs belong to the class and will indemnify them for their expenditure of legal fees and disbursements for the certification motion.
[35] In the immediate case, the key then is to identify the costs incurred for prosecuting the certification motion. The Plaintiffs cannot claim the costs for services associated with settling with other defendants. That would be a charge unrelated to the certification motion. While it may sometimes be difficult to differentiate costs that relate from the costs that do not relate to the certification motion, the Plaintiffs cannot claim for costs that would have been incurred independent of the certification motion. Work associated with other motions; for example, the motions connected to the partial settlements, is not legal work for the certification motion.
[36] I have not been provided with detailed dockets, but it does not appear that very much of the $923,010.39 is attributable to work not connected to the certification motion. In any event, because I am reducing the costs award for other reasons, any deduction for improper charges shall be taken into account.
[37] For the reasons that follow, I reduce the costs award to $700,000 inclusive of legal fees and HST. This sum is to be paid forthwith.
[38] I do not regard this reduced award as a distributive costs award. I reduce the $923,000 to $700,000 to reflect the potential class size and potential recovery in the proposed class proceeding compared with the actual class size and the potential recovery claimed in the certified class proceeding. And, I make the reduction to reflect the importance of the issues to both parties but most particularly for the importance to the Defendants who were very successful in reducing the class size and their potential liability.
[39] I understand the logic and the merits of the argument that courts should not make distributive costs awards and courts should not analyze costs awards as if one were grading a law school exam with a marking grid for each question. Thus, I would not, generally speaking, reduce a costs award if a plaintiff advanced numerous causes of action but not all of them were certified or if a plaintiff advanced numerous common issues and some of them were not certified. I would not, generally speaking, reduce a costs award if a class definition was reduced for overbreadth. To do so might be to engage in the frowned upon distributive costs award.
[40] However, I do not see the reductions in the immediate case as reflecting a distributive award approach. In the immediate case, the Defendants were unsuccessful in resisting certification and a $700,000 costs award to the successful Plaintiffs is a fair award and below what the Defendants would have expected to pay had they been totally unsuccessful on the certification motion. But the Defendants were not totally unsuccessful, and rather they achieved substantial success on issues that were very important to both parties and particularly to the Defendants.
[41] The Defendants argued that some recognition should be given to them in significantly streamlining the class. They submit that the court should have a tool to recognize a defendant’s entitlement to reasonably oppose certification that may be productive and in the interests of Class Members. While, I would not expressed the idea as did the Defendants, I generally agree with those particular arguments, and I do think that there should be some component in the class action regime to discourage Representative Plaintiffs and Class Counsel from a pleadings and claims gluttony that arises because there is no risk of consequences because they are, in any event, going to succeed with their not overambitious claims.
[42] In the immediate case, I view the streamlining of the action as not so much as being in the interests of Class Members but more as being in the interests of the integrity of the class actions regime. It does not serve the class actions regime to have Class Members who will likely be disappointed by their participation in the proceeding. In the immediate case, an easy example of disappointment is including persons who purchased FX Instruments using the Defendants’ proprietary electronic trading platforms. They were not affected by what was going on in the chat rooms.
[43] I agree with the Defendants’ argument in paragraph 16 of their written submissions,
- Accordingly, the Defendants’ success on the motion has been substantial. The costs award on a certification motion “should reflect the limited success achieved” by the Plaintiffs. For example, in McKenna v. Gammon Gold Inc., 2010 ONSC 3630, Strathy J. (as he then was) stated: “Standing back and looking at the results, it is clear that the plaintiff was successful on the primary issue [i.e., certification of a national class]. It is also clear that the plaintiff was unsuccessful on the additional issues, as I did not certify a global class and I found that the common law claim was not appropriate for certification.” Accordingly, Justice Strathy held that the plaintiff “should receive some costs, but that the costs should reflect that limited success.” Reducing the amount of costs to reflect the Plaintiffs’ limited success would not amount to a distributive costs award.
[44] In Matoni v. C.B.S. Interactive Multimedia Inc., [2008] O.J. No. 4910, Justice Hoy, as she then was, stated at paragraphs 20 and 21:
[…] Moreover, while not entitling the defendants to costs, in my view the costs awarded to the plaintiffs should reflect that the common issues and the class definition have been significantly narrowed from those proposed by the plaintiffs. So doing does not amount to a distributive costs award.
In commenting on distributive costs awards in Pearson v. Inco, the Court of Appeal endorsed the comments of Winkler J. (as he then was) in Lau v. Bayview Landmark Inc., [1999] O.J. No. 4385 (S.C.J.). In that case, the defendants argued that they should be entitled to their costs in respect of all causes of action for which certification was not granted and Winkler J. concluded that such an approach was contrary to the goals of the CPA. In Murphy v. Alexander, [2004] O.J. No. 720, 236 D.L.R. (4th) 302 (C.A.), also cited in Pearson v. Inco, the Court of Appeal describes a distributive costs award as one where the major issues are identified and the party who is successful on each issue is awarded costs for the time and expense attributable to that issue. I have not taken that approach.
[45] One of the purposes of modern costs awards is to encourage settlements and who’s to say whether the certification motion could have settled with a changed class definition. Unexposed to any risk on a certification motion, the Plaintiffs had no incentive to make even small changes to the class definition such as taking out electronic platform transactions that were impervious to the alleged chat room conspiracy.
[46] In the context of class actions, in my opinion, to encourage the settlement of the certification motion and to encourage manageable and efficient class actions, it is within the court’s discretion to reduce a costs award to take into account the degree of success achieved by both parties on the certification motion.
[47] In the circumstances of the Covid-19 emergency, these Reasons for Decision are deemed to be an Order of the court that is operative and enforceable without any need for a signed or entered, formal, typed order.
[48] The parties may submit formal orders for signing and entry once the court re-opens; however, these Reasons for Decision are an effective and binding Order from the time of release.
Perell, J.
Released: June 15, 2020