COURT FILE NO.: CV-18-00597284-00CP
DATE: 20210623
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Graham wright
Plaintiff
- and -
HORIZONS ETFS MANAGEMENT (CANADA) INC.
Defendant
Alistair Crawley, Clarke Tedesco, Michael L. Byers and Alexandra Grishanova for the Plaintiff
Seumas M. Woods, Ryan A. Morris and Greg Sainsbury for the Defendant
Proceeding under the Class Proceedings Act, 1992
HEARD: In writing
PERELL, J.
REASONS FOR DECISION - COSTS
[1] This is a costs decision after a bifurcated certification contest between the plaintiff, Graham Wright, and the Defendant, Horizons ETFS Management (Canada) Inc.
[2] Mr. Wright lost the first phase, when I judged that he had no causes of action and I dismissed his action. However, the judges of the Court of Appeal held that he did have two causes of action and remitted the second phase to me. In the second phase, I certified a common law negligence claim but not a statutory misrepresentation claim under s. 130 of the Ontario Securities Act.[^1]. In the result, Mr. Wright’s action was certified.
[3] Having agreed to pay Horizons $225,000 when he lost the causes of action criterion in the first phase, Mr. Wright seeks partial indemnity costs of $290,704, all inclusive, for his victory in the bifurcated certification contest.
[4] Although Horizons disavows that it is seeking a distributive costs award, it submits that the fair and reasonable outcome, reflecting Mr. Wright’s divided success, the complexity of the issues, the conduct of the parties and Horizons’ reasonable expectations is that Mr. Wright should receive a partial indemnity costs award of no more than $145,000, all inclusive, in respect of the certification of the common law negligence claim, being 50% of the amount claimed in respect of both the negligence claim and the unsuccessful statutory claim.
[5] The more detailed background to this costs decision is as follows:
a. The Defendant Horizons ETFS Management (Canada) Inc. (“Horizons”) created and managed an “ETF” (exchange traded fund). ETFs are issued pursuant to a prospectus, which is the instrument used for primary market distributions of securities, but ETFs are purchased and sold in the secondary market for securities.
b. The Plaintiff Graham Wright purchased Horizons’ HVI-ETF. Overnight on February 5, 2018, the value of this ETF collapsed. All the investors in Horizons’ HVI-ETF lost almost their investments, totaling tens of millions of dollars.
c. Pursuant to the Class Proceedings Act, 1992,[^2] on May 4, 2018, Mr. Wright commenced a proposed class action. He advanced two causes of action; namely: (a) a common law action for negligence of the pure economic loss genre of negligence claim - but not a negligent misrepresentation claim, for which reliance would be a constituent element; and (b) a statutory cause of action under Part XXIII, s. 130 of the Ontario Securities Act[^3] for misrepresentation in the primary market.
d. Notably, Mr. Wright did not advance a statutory cause of action under Part XXIII.1 of the Ontario Securities Act for misrepresentations in the secondary market for securities. At the time when Mr. Wright commenced his action, the legal question of the nature of a misrepresentation claim with respect to ETFs had not been determined in the jurisprudence.
e. In 2019, Mr. Wright moved for certification of his action as a class proceeding. I dismissed his motion and his action on the grounds that he had not pleaded a reasonable cause of action.[^4] I held that: (a) there was no duty of care to support his claim in negligence; and (b) while he would have had a claim under Part XXIII.1 of the Ontario Securities Act, I held that he did not have a statutory claim under Part XXIII, s.130 of the Act.
f. Mr. Wright agreed to pay Horizons’ costs of $225,000 for the dismissal of the proposed class action.
g. Mr. Wright appealed the decision dismissing his proposed class action to the Court of Appeal.
h. The Ontario Court of Appeal reversed my decision.[^5] The Court held that Mr. Wright has a cause of action in negligence. It agreed that there was a claim under Part XXIII.1 of the Ontario Securities Act, but it also found that Mr. Wright could have a cause of action under Part XXIII, s. 130 of the Ontario Securities Act, if he pleaded that he had purchased “Creation Units.
i. Horizons was ordered to pay Mr. Wright $35,000 for his costs of the appeal, inclusive of HST and disbursements, as agreed by the parties.
j. The Court remitted Mr. Wright’s certification motion to me for consideration of the other certification criteria.
k. Horizons’ application for leave to appeal the Court of Appeal’s decision to the Supreme Court of Canada and Mr. Wright’s cross application for leave to appeal the Court of Appeal’s decision were both dismissed on December 23, 2020.[^6]
l. The remitted certification motion resumed. Mr. Wright submitted that all of the certification criteria have been satisfied and that his action should be certified as a class proceeding. Horizons submitted that none of the certification criteria have been satisfied, including the cause of action criterion.
m. In the result, I certified as a class proceeding Mr. Wright’s action for common law negligence. I did not certify the claim under s. 130 of the Ontario Securities Act.[^7]
[6] On this motion in writing to settle the costs, the premise of Horizons’ argument, which also explains its disavowal of a distributive costs award, is the submission that Mr. Wright effectively brought two motions for certification.
[7] Horizons submits that the first certification motion was in respect of the negligence claim and the second was in respect of the statutory misrepresentation claim. Horizons, without asking for costs for the second motion, submits that Mr. Wright is not entitled to his costs of the second motion where he was unsuccessful in having the claim under s. 130 of the Ontario Securities Act certified. Horizons submits that although the two distinct certification motions were heard together, that procedural fact does not entitle Mr. Wright to the costs of both motions.
[8] The premise of Horizons’ argument is incorrect. There was one certification motion heard in two phases on one factual footprint about trading in ETFs. Mr. Wright is entitled to the costs of his successful motion. Mr. Wright achieved a certification order. He was the successful party.
[9] I agree with Mr. Wright’s submissions that he was the successful party in a legally and factually complex motion in a substantial class action that was very hard fought and where the amount claimed for costs is within the range of what has been granted for costs in similar circumstances. Horizons did not take issue with the time spent or rates of plaintiff’s counsel.
[10] I see no unfairness in awarding costs to Mr. Wright notwithstanding that he was unsuccessful in certifying the statutory claim, which as I noted in my decision raised unique problems that warrant a look by the Legislature or the Ontario Securities Commission. Horizons can take comfort that its success on the statutory claim means that subject to more appeals, it does not have to deal with the statutory claim as the certified class action proceeds.
[11] It is not uncommon in class proceedings that a representative plaintiff’s aspirations are not totally fulfilled, but - as a general rule - that does not mean that his or her costs claim for a successful certification motion should be reduced. I repeat what I said in Bennett v. Lenovo (Canada) Inc.[^8]
It is not uncommon in class actions, as was the situation in the immediate case, that the unsuccessful party enjoys a measure of success because it has reduced the class size or prevented the class from expanding or because it has had an influence in shaping the common issues or the litigation plan, but this measure of success does not necessarily mean that the court should reflect the unsuccessful party's measure of success by diminishing what in every other respect is a fair claim for costs by the successful party. I am not persuaded that there should be any reduction in the costs award claimed.
[12] There will be cases where there is genuine divided success or where there are other reasons to reduce a successful plaintiff’s costs award because he or she fell short of having all of his or her claims or proposed common issues certified, but this is not one of those cases. I award Mr. Wright the costs as claimed.
Perell, J.
Released: June 23 2021
COURT FILE NO.: CV-18-00597284-00CP
DATE: 20210623
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Graham wright
Plaintiff
- and -
HORIZONS ETFS MANAGEMENT (CANADA) INC.
Defendant
REASONS FOR DECISION - COSTS
PERELL J.
Released: June 23, 2021.
[^1]: R.S.O. 1990, c. S.5.
[^2]: S.O. 1992, c. 6.
[^3]: R.S.O. 1990, c. 5.
[^4]: Wright v. Horizons ETFS Management (Canada) Inc., 2019 ONSC 3827.
[^5]: Wright v. Horizons ETFS Management (Canada) Inc., 2020 ONCA 337.
[^6]: Wright v. Horizons ETFS Management (Canada) Inc., [2020] S.C.C.A. No. 257.
[^7]: Wright v. Horizons ETFS Management (Canada) Inc., 2021 ONSC 3120
[^8]: Bennett v. Lenovo (Canada) Inc., 2017 ONSC 6839 at para. 6.