COURT FILE NO.: CV-14-497479-00CP DATE: 2020/07/10 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
PETER SCOTT HARRIS Plaintiff
- and - BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT and BMW CANADA INC. Defendants
Counsel: Kathryn Podrebarac, Margaret L. Waddell and Tina Q. Yang for the Plaintiff Peter J. Pliszka and Kimberly E. Potter for the Defendants
Proceeding under the Class Proceedings Act, 1992
HEARD: In writing
PERELL, J.
REASONS FOR DECISION - COSTS
A. Introduction
[1] Pursuant to the Class Proceedings Act, 1992, the Plaintiff, Peter Scott Harris, sues Bayerische Motoren Werke Aktiengesellschaft and BMW Canada Inc. (collectively “BMW”). The action is on behalf of all persons or entities in Canada who are or were owners or lessees of certain Mini Cooper vehicles. Mr. Harris alleges that the vehicles had two safety risks arising from a defective power steering system. He alleges that the defective power steering system can cause: (a) a dangerous loss of power steering; or (b) a car fire. Mr. Harris brought a motion to have his action certified as a class action.
[2] On the certification motion, BMW admitted that its power steering system was defective for a period of time and that the power steering could fail, but it denied that a loss of power steering was dangerous. It asserted about a dozen reasons that there is no basis in fact for Mr. Harris’ allegation that a loss of power steering is dangerous. Further, although BMW admitted that there was a period of time when its power steering system would cause localized smoldering in the engine compartment, it denied that the defective power steering system causes car fires. BMW provided about a half-dozen reasons that there is no basis in fact for the fire allegation.
[3] On the certification motion, I thought that BMW’s arguments about the absence of some basis in facts for Mr. Harris’ allegations were without merit. I concluded that while BMW may have a defence on the merits to Mr. Harris’ proposed class action, it had no basis in law or in fact for resisting the certification motion. Mr. Harris had a viable cause of action, the first certification criterion, and he had some basis in fact for the four other certification criteria. I certified Mr. Harris’ action as a class action. [Harris v. Bayerische Motoren Werke Aktiengesellschaft, 2020 ONSC 1647]
[4] Mr. Harris seeks his costs of the certification motion. He seeks $367,210.28, inclusive of legal fees, disbursements and HST. This cost claim is comprised of $250,000 for fees inclusive of HST and $117,210.28 for disbursements inclusive of HST. The certification motion was argued on March 4-6, 2020, and Mr. Harris seeks cost on a partial indemnity basis up to March 14, 2019, at which time the Plaintiff delivered an Offer to Settle the certification motion, and he seeks substantial indemnity costs for the period after March 14, 2019.
[5] If Mr. Harris’ costs are calculated on a partial indemnity basis throughout, then the legal fees are $200,000 inclusive of HST plus the disbursements for a claim of $317,210.28, all inclusive.
[6] BMW submits that a costs award in the range of $225,000 to $285,000, all inclusive of HST and disbursements is a fair and reasonable amount to be awarded to Mr. Harris for this certification motion.
[7] In my opinion, for the reasons that follow, the appropriate award is $300,000, on a partial indemnity basis, all inclusive.
[8] My explanation for this costs award begins by noting that while I have considered the arguments of both parties as to how costs should be approached in the immediate case, my own approach is to assess costs simply in the normal fashion for a contested certification motion.
[9] Thus, notwithstanding the arguments of Mr. Harris, I see no reason to award costs on a substantial indemnity basis, which for reasons that I will explain below, should rarely be awarded on a certification motion, even if, as occurred in the case at bar, the plaintiff makes an offer and the outcome of the certification motion is better than the offer.
[10] Thus, notwithstanding the arguments of BMW, it has not been substantiated or proven that there was overbilling and costs mongering by Class Counsel who are not subject to the scrutiny of a client who actually has to foot the legal bill.
[11] I commend Mr. Harris for attempting to settle the certification motion. Making an offer to settle a certification motion or making an offer to narrow the issues on a certification motion is a very good idea, and it is a practice that should be encouraged. However, in my opinion the encouragement should not be implemented by adverse costs consequences if the settlement offer is refused.
[12] The policy rationale and the technical requirements of Rule 49, and in particular the policy rationale and the technical requirements of discretionary Rule 49.13, which extends the Offer to Settle regime to interlocutory motions, are an ill fit for a certification motion. In these regards, it should be noted that unlike most interlocutory and purely procedural motions, a certification motion must be brought; it is a mandatory motion but it does not decide the merits of the case. Even if the certification motion is brought on consent, the court is obliged to determine whether the case satisfies the certification criterion. In other words, in every event, the plaintiff must prepare a certification motion record and deliver a factum that satisfies the court that certification should be granted. These are unavoidable legal expenses, and the court cannot simply rubber stamp a consent order submitted by the parties. The court is obliged to be satisfied that the action is certifiable.
[13] Further, and in any event, Rule 49 is awkward to apply in the context of a certification motion. In the immediate case, given the overwhelming success of Mr. Harris in achieving his goals for the common issues he sought to have certified, it was easy to say that BMW would have been better off had it accepted Mr. Harris’ offer, however, in many if not most cases it will not be easy at all and it will be a mugs game for the court to try to make the assessment.
[14] Further still, in the context of the statutory regime, it is not a bad thing that a defendant takes up its right to oppose certification. A defendant’s resistance to certification is often productive in the sense that the outcome of the motion is a manageable class action that optimizes access to justice and judicial economy. A manageable class action also optimizes the productivity and economy of legal resources of the Class Members and of the Defendant.
[15] Further still, there is an unfair asymmetry in applying the adverse costs consequences rules to a motion that does not decide the merits and that does avail itself easily to an offer to settle by the defendant.
[16] If, as occurred in the immediate case, the defendant wages war, yields no quarter and forces the plaintiff and Class Counsel to fight for every inch of legal territory, then it will be an expensive legal endeavor, and if the defendant loses what is just one battle of the war, then it will pay a hefty enough price in accordance with the normal rules of costs that prescribe that the loser pays costs on a partial indemnity basis.
[17] In other words, in the context of a contested certification motion, there is no need to pile on substantial indemnity costs for a defendant who is entitled to resist certification but who will pay significant costs on a partial indemnity basis, which costs could have been avoided if the defendant held fire for a determination on the substantive merits of the claim.
[18] In the immediate case, as an alternative justification for its claim for substantial indemnity costs, Mr. Harris argues that the yield-no-quarter approach of BMW comes within the discretionary criteria of conduct that tended to lengthen the duration of the proceeding unnecessarily. However, I would not say that BMW’s conduct tended to lengthen the proceeding unnecessarily. It is being sued for multi-millions of dollars, and it is entitled to resist certification and obliged to pay the costs of its unsuccessful resistance for certification.
[19] Conversely, in the immediate case, I largely disagree with BMW’s arguments that Class Counsel overbilled or overworked the file or charged inappropriate rates especially when the costs claim on a partial indemnity basis was discounted by 30% from the partial indemnity rates, which reflected an approximately 60% discount from Class Counsel’s actual rates.
[20] The circumstance that BMW provided its own Bill of Costs that revealed a $163,000 inclusive of HST partial indemnity fee as compared to Class Counsel’s $200,000 inclusive of HST partial indemnity fee did not persuade me that there was any overbilling or overcharging or inefficiencies or redundancies in the legal services provided by Class Counsel.
[21] Once the substantial indemnity costs are removed the parties are actually not that far apart, and approaching costs in the normal fashion appropriate for a class action, I conclude that the appropriate award is $300,000, on a partial indemnity basis, all inclusive, and payable forthwith.
[22] This award is a modest reduction from the $317,210.28 claimed by Mr. Harris on a partial indemnity basis, which brings the award in line with what I regard as fair and within the reasonable expectations of the losing party on the certification motion.
[23] 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.
[24] 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.