Court File and Parties

COURT FILE NO.: CV-17-567691-CP

DATE: 2020-12-30

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ROBERT MAGINNIS and MICHAEL B. MAGNAYE

Plaintiffs

• and -

FCA CANADA INC., FCA US LLC, ROBERT BOSCH INC., ROBERT BOSCH GMBH, ROBERT BOSCH LLC, and SCARSVIEW MOTORS LTD.

Defendants

Proceeding under the Class Proceedings Act, 1992

BEFORE: Justice Edward P. Belobaba

COUNSEL: David Sterns, Daniel Bach, Jean-Marc Leclerc, Mohsen Seddigh, Stefani Cuberovic and Eva Markowski for the Plaintiffs Peter Pliszka, Antonio Di Domenico, Zohaib Maladwala and Caroline Youdan for the FCA Defendants Robert Kwinter and Nicole Henderson for the Bosch Defendants Robert Bell and Rebecca Shoom for Scarsview Motors Ltd.

HEARD: February 12 and 13 and September 10, 2020

costs award

[1] In a decision released on September 18, 2020, I dismissed the plaintiffs’ motion for certification.[^1] I alluded to the underlying problem in the opening two paragraphs of my decision:

This is another emission “defeat device” case – but with one major difference.

Unlike the motions for certification that were granted by this court in Volkswagen[^2] and Mercedes Benz[^3], here the alleged emissions defeat device[^4] is being repaired by the defendant automobile manufacturer at no cost to the customer. The impugned vehicles are being recalled and the defeat device is being reprogrammed and rendered compliant with all applicable emission control regulations.[^5]

[2] I refused to certify the proposed class action because the defeat device had already been or was in the process of being fixed and there was no evidence of compensable harm. This decision would not have come as a surprise to class counsel. They were warned repeatedly as the case progressed, both by opposing counsel and by this court, that their proposed class action could well fail at the threshold because of the absence of any evidence of compensable harm.

[3] Class counsel ignored these warnings and forged ahead. The three defendants – the FCA auto manufacturer, the Bosch emissions device supplier, and the Scarsview dealership – were obliged to respond in kind and mounted a comprehensive defence that covered not only the compensable harm point but each of the requirements set out in s. 5(1) of the Class Proceedings Act.[^6] It also didn’t help matters when the certification motion was adjourned mid-hearing at the behest of the plaintiffs to allow them to file more evidence.

[4] Suffice it to say, the costs incurred by the defendants on this misguided certification motion are significant. To their credit, the parties tried to resolve costs on their own but were unable to do so. They have forwarded the following cost submissions.

The parties’ submissions

[5] The FCA defendants ask for $830,000 all-inclusive. The Bosch defendants request $77,868 all-inclusive; and the Scarsview defendant $57,143.[^7] The total Grid-based partial indemnity costs claim on an all-inclusive basis is therefore $965,012

[6] The plaintiffs, or more accurately class counsel trying to reduce the exposure of their third-party funder, argue that the $965,012 is excessive and unreasonable and urge a maximum award of no more than about $125,000. The plaintiffs have submitted their own certified costs outline that totals $550,263.

[7] This was a hard-fought certification motion with a voluminous record and an extensive array of issues, many of which arguably impact on the costs award. Given my overall approach as further explained below, it is not necessary to dissect each of these issues.

[8] I can, however, make a number of preliminary points that respond to the main issues in dispute.

Preliminary points

[9] I begin with the appropriate scale and the continuing value of the so-called Grid.

[10] The appropriate scale is partial indemnity. This is not a case where the plaintiff’s certification submissions on their face were frivolous or destined to fail. This is a case where plaintiffs’ counsel presented a formidable array of arguments supporting certification and filed detailed charts of various evidentiary points – all of which required careful review and response by the defendants. Even the plaintiffs’ motion to add a defendant class of dealers with Scarsview as the representative defendant was not on its face untenable. The costs award will be significant but, in my view, the appropriate scale throughout must be partial indemnity.

[11] The Grid rates may well need updating. But I continue to use the Grid rates as one factor to consider because, as it turns out, they reflect the Court of Appeal’s suggested up-date, namely “55 to 60 per cent of a reasonable actual rate.”[^8] And 60 per cent of a reasonable actual rate is pretty much the rate that is set out in the Grid.[^9]

[12] In any event, hourly rates and docketed time are not determinative. As the Court of Appeal has noted repeatedly:

[F]ixing costs of a proceeding … on a partial indemnity basis…is not simply an exercise of multiplying hourly rates by the amount of time expended. The court must balance the discretionary factors set out in r. 57.01(1) and, in the end, arrive at an amount that is reasonable and fair in the circumstances and that bears some relationship to the amount that an unsuccessful party could reasonably expect to pay.[^10]

[13] I conclude this section by making three specific points about the plaintiffs’ submissions.

(i) The plaintiffs must take full responsibility for their requested adjournment to file more evidence.[^11] The plaintiffs’ submission that the adjournment was caused by FCA’s and Bosch’s refusal “to admit the authenticity of documents” is without basis. I agree with the defendants that the “authenticity of documents” was never in issue: FCA and Bosch were never requested by plaintiffs to authenticate any documents and never refused to do so. The issue that prompted the adjournment was the insufficiency of the plaintiffs’ evidence regarding the conspiracy allegation against Bosch.

(ii) The plaintiffs are wrong to suggest that all costs incurred before the AEM2 repair must be excluded. As I noted in the certification decision, the plaintiffs failed to show “some basis in fact” for compensable loss prior to - and separate and apart from - the AEM. The plaintiffs failed to adduce any evidence that “anyone paid a ‘premium price’ for the EcoDiesel feature”[^12] and “no…evidence” of any reduced trade-in value because of the alleged defect.[^13] Further, as FCA points out, there was no finding in the certification decision that the “slight engine hesitation” experienced by just a fraction of drivers post-AEM1 (and specifically addressed by AEM2) would have constituted a compensable loss sufficient to justify certification. In short, the AEM2 repair has no significance as a time-post or otherwise for cost award purposes.

(iii) The plaintiff argues that Scarsview is precluded from claiming costs because its legal expenses will be indemnified by FCA. This submission is contrary to accepted practice. The mere fact of indemnification – for example, if a party’s costs are paid by an insurer or as here by a third-party funder – does not extinguish the appropriateness of a costs award to the successful party. Scarsview is entitled to costs notwithstanding any indemnification promise from FCA. Otherwise, here instead of Scarsview claiming costs, FCA would be doing so as the indemnifier. Nothing is gained. In my view, it is better to stay with the existing law and practice.

[14] I now turn to the costs award.

A fair and reasonable costs award

[15] Recall that the defendants ask for $965,012 in total. The plaintiffs suggest a much lower amount and remind the court that their own costs, on a partial indemnity basis, were only $550,263.

[16] In my view, a fair-minded measure of the costs that “an unsuccessful party could reasonably expect to pay”[^14] are the costs that they themselves reasonably incurred. I recognize that I advised counsel to consider the average costs award data as set out in several of my decisions released in 2013.[^15] Based on the data, I concluded that the costs awarded to successful defendants who sought more than $500,000 was on average $341,000. Adjusted for inflation, the average amount is $388,740.[^16]

[17] The $550,263 in costs incurred by the plaintiffs is certainly higher than the historical average. However, given the number and complexity of the issues on certification as presented by the plaintiffs and the number of discrete defendant groups, I am satisfied that a total costs award in the range of $550,000 to $575,000 is wholly appropriate.

[18] Reviewing the submissions of the parties, giving due consideration to the historical averages, balancing the factors set out in Rule 57.01(1) and paying heed to the plaintiffs’ own certified costs outline, I find that a fair and reasonable total costs award is $560,000 all-inclusive.

Disposition

[19] Costs are fixed at $560,000 all-inclusive payable within 30 days to the three defendant groups pro rata as follows: $481,650 to the FCA defendants; $45,189 to the Bosch defendants; and $33,161 to Scarsview Motors.

[20] My thanks again to all counsel.

[21] Order to go accordingly.

Signed: Justice Edward P. Belobaba

Notwithstanding Rule 59.05, this Judgment [Order] is effective from the date it is made, and is enforceable without any need for entry and filing. In accordance with Rules 77.07(6) and 1.04, no formal Judgment [Order] need be entered and filed unless an appeal or a motion for leave to appeal is brought to an appellate court. Any party to this Judgment [Order] may nonetheless submit a formal Judgment [Order] for original signing, entry and filing when the Court returns to regular operations.

Date: December 30, 2020

[^1]: Maginnis and Magnaye v. FCA Canada et al, 2020 ONSC 5462. [^2]: Quenneville v. Volkswagen, 2016 ONSC 7959. [^3]: Kalra v. Mercedes Benz, 2017 ONSC 3795. [^4]: Some diesel-vehicle manufacturers and auto part suppliers have (allegedly) programmed the emissions control system to “defeat” or “cheat” government pollution testing and make it appear that the vehicle is fully compliant with applicable environmental regulations when in normal driving it is not. [^5]: Supra, note 1, at paras. 1-2. [^6]: Class Proceedings Act, 1992, S.O. 1992, c. 6. [^7]: Scarsview also asks for the $5000 owing from the “in the cause” portion of a costs award that I made in an earlier procedural motion. This is a misreading of that particular endorsement. Had the plaintiffs prevailed on the certification motion, they would have been entitled to a further $5000 from Scarsview, not the other way around. [^8]: Bain v. UBS Securtieis Canada Inc., 2018 ONCA 190, at para. 32. [^9]: See the discussion in Goldsmith v. National Bank of Canada 2015 ONSC 4581, at para. 9-12; and Mask v. Silvercorp Metals Inc., 2015 ONSC 7780, at paras. 8-10. [^10]: Akagi v. Synergy Group (2000) Inc., 2015 ONCA 771, at para. 55. [^11]: Under s. 5(4) of the Class Proceedings Act, 1992, S.O. 1992, c. 6. [^12]: Supra, note 1, at para 26(i). [^13]: Supra, note 1, at para 26(iii). [^14]: Akagi, supra, note 10, at para. 55. [^15]: See, for example, Rosen v. BMO Nesbitt Burns Inc., 2013 ONSC 6356. [^16]: I can take judicial notice of the data provided by Statistics Canada that the core inflation rate in Canada between 2013 and 2020 was 1.92 percent per annum, or about 14 percent overall. The “over $500,000 average amount” is therefore increased from $341,000 to $388,740.