COURT FILE NO.: CV-17-00588044-00CP DATE: 20220223

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DOV MARKOWICH, Plaintiff

AND:

LUNDIN MINING CORPORATION, PAUL K. CONIBEAR, MARIE INKSTER, PAUL MCRAE, LUKAS H. LUNDIN, and STEPHEN GATLEY, Defendants

BEFORE: Glustein J.

COUNSEL: Joseph Groia, Scott Robinson, Jay Strosberg, Justin Smith, Kevin Richard, Bethanie Pascutto, and Steven Chadwick, for the Plaintiff Lara Jackson, John Picone, and Anna Tombs, for the Defendants

COSTS REASONS

Overview

[1] By reasons for decision dated January 6, 2022 (the Reasons), I dismissed Markowich’s [^1] motion (i) for leave to commence a secondary market securities class action under Part XXIII.1 of the Securities Act, and (ii) to certify the action as a class proceeding.

[2] Pursuant to the Reasons, the parties delivered written costs submissions. I have reviewed those costs submissions and set out my costs reasons below.

[3] The defendants seek substantial indemnity costs of $932,339.80 [^2], and in the alternative, partial indemnity costs of $694,032.64. The defendants delivered a costs outline with a lawyer’s certificate attesting that the hours, rates, and disbursements were correct and incurred as claimed.

[4] Markowich submits that (i) costs should not be ordered on a substantial indemnity basis; (ii) the costs claimed are excessive; and (iii) the costs claimed should be discounted under s. 31(1) of the CPA, due to the alleged “novel and public interest nature of this litigation”. Markowich submits that the appropriate quantum of partial indemnity costs is $450,000.

[5] Markowich did not file a costs outline, even though invited to do so in the Reasons.

[6] In brief, I fix costs on a partial indemnity scale at $693,805.39. [^3] While I agree with Markowich that substantial indemnity costs are not appropriate for the motion, I do not find the partial indemnity costs sought by the defendants to be excessive, particularly as Markowich chose not to file evidence of his own legal costs. Further, I find no basis to discount costs under s. 31(1) of the CPA, as this case does not raise a novel legal point or involve a matter of public interest.

The applicable law

General principles applicable to costs on leave and certification motions

[7] Costs in class proceedings, as for all proceedings, are within the discretion of the court, having regard to the relevant factors set out in Rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and must be considered in light of the specific facts and circumstances of the case: Pearson v. Inco Ltd. (2006), 2006 ONCA 360, 79 O.R. (3d) 427 (C.A.), at para. 6.

[8] The amount awarded for costs in class proceedings should reflect the reasonable expectations of the parties and should be fair and reasonable in all the circumstances: Singer v. Schering-Plough Canada Inc., 2010 ONSC 1737, 87 C.P.C. (6th) 345, at para. 16.

[9] In Pearson, the Court of Appeal identified the following principles for fixing costs on a certification motion: (i) the normal rule that costs will ordinarily follow the event applies; (ii) costs must reflect what is fair and reasonable; (iii) costs should, if possible, reflect costs awards made in closely comparable cases, recognizing that comparisons will rarely provide firm guidance; (iv) 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; (v) costs expectations of the parties can be determined by the amount of costs that an unsuccessful party could reasonably expect to pay; (vi) the complexity of the issues; (vii) whether the case raises an issue of public importance; and (viii) a fundamental objective of the CPA is to provide enhanced access to justice: at para. 13.

[10] Costs on a leave motion can be substantial because by its nature, the court must review the merits of the claim. The materials that are filed are often voluminous and include expert reports. The stakes are high since a successful disposition of the leave motion can mean the end of the litigation: Goldsmith v. National Bank of Canada, 2015 ONSC 4581, at para. 14; Dugal v. Manulife Financial Corp., 2013 ONSC 6354, at para. 11.

[11] It is reasonable to expect “that the certification battle is likely to be both lengthy and expensive”, and that “a defendant will respond to a certification motion utilizing all of its available effort and resources”, since “a class proceeding represents a significant risk to a defendant given the enormous potential liability that attaches to such claims if the procedure is certified”: Gariepy v. Shell Oil Co., at para. 5.

[12] In Rosen v. BMO Nesbitt Burns Inc., 2013 ONSC 6356, 56 C.P.C. (7th) 182, the court set out the following principles, at para. 5:

I will generally be content with costs outlines certified by counsel. I will not require either side to submit actual dockets. If they wish to do so, that is up to them.

I will (briefly) review the certified costs outlines to ensure that the hourly rates being charged by counsel fall within the range set out by the Rules Committee in its Information to the Profession.

I will also review the costs outline for any obvious excesses in fees or disbursements. Apart from any obvious excesses, I will accept the costs outline as is. I will not drill down into any of the detail.

If the unsuccessful party wants to argue unreasonableness (beyond hourly-rate compliance or obvious excesses) it should submit its own certified costs outline showing what it actually spent (on a partial indemnity scale) on the certification motion. If a parallel costs outline is not submitted by the unsuccessful party (and none is required) I will probably conclude that the amount being requested by the successful party is not unreasonable.

I will consider seriously historical costs awards in similar cases. Such comparisons can never be determinative but, as I have already noted, they provide useful guideline as to what amounts or percentages have been awarded in the past.

[13] The above principles are consistent with general costs law, in that if an unsuccessful party does not file a costs outline, it is a “permissible inference” for the court to draw that the fees incurred by the unsuccessful party approximated those incurred by the successful party. However, the court must still address any “significant concerns about the bill” raised by the unsuccessful party “whether or not the losing party has filed his or her own bill of costs”: Smith Estate v. Rotstein, 2011 ONCA 491, 106 O.R. (3d) 161, at para. 51, leave to appeal refused, [2011] S.C.C.A. No. 441.

[14] In Granger v. Ontario, 2020 ONSC 4101, the court adopted the above principles and added, at para. 93:

However, even with Ontario not filing a costs outline, a plaintiff does not have carte blanche for any quantum of costs it proposes. The court always retains a discretion to fix costs in the amount an unsuccessful party would reasonably expect to pay.

Awarding substantial indemnity costs on a certification motion or leave application

[15] The general principle governing the award of substantial indemnity costs is that “[c]osts may be awarded on a substantial indemnity basis where a party pleads but fails to prove that his or her opponent perpetrated a fraud or committed a criminal act or engaged in other dishonest or reprehensible conduct or makes unfounded allegations that impugn the integrity or good reputation of his or her foes”: Hughes v. Liquor Control Board of Ontario, 2018 ONSC 4862, at para. 68.

[16] In Hughes, partial indemnity costs were sought, and ordered, on each of the six summary judgment motions.

[17] However, on a certification motion, the court is not asked to determine whether a party “fails to prove” allegations of fraud, since the certification test is not merits-based. Even on a leave motion, the low threshold of the “reasonable possibility” test requires a “robust” review of the evidence, but is not a mini-trial resulting in findings of fact.

[18] Consequently, in the rare cases where substantial indemnity costs were ordered in preliminary class action proceedings, the court was asked to make a finding that the evidence or pleading did not support the fraud allegations, or held that the proceeding had been litigated in an abusive manner. By way of example:

(i) In McNaughton Automotive Ltd. v. Co-operators General Insurance Company, 2008 ONCA 597, 95 O.R. (3d) 365, partial indemnity costs were awarded to all parties on the various summary judgment, strike and certification motions except where the insurer defendant obtained summary judgment on limitation periods and the plaintiffs had failed to establish fraudulent concealment on the merits: at paras. 5, 56-64; and

(ii) In Del Giudice v. Thompson, 2021 ONSC 6974, the court ordered substantial indemnity costs on a certification motion, based on the conduct of plaintiff’s counsel, including a finding that “[t]he Plaintiffs' submission about unprofessional and improper conduct by the Defendants' lawyers was uncalled for and was without a scintilla of merit”: at paras. 46-47.

Costs awards in comparable cases

[19] Only the defendants provided the court with case law purported to be comparable to the present case. In each of those cases, significant costs were ordered on a partial indemnity scale. In brief:

(i) In Mask v. Silvercorp Metals Inc., 2015 ONSC 7780, the court dismissed the leave motion and awarded the successful defendants $500,000 in costs after a three-day hearing: at para. 16;

(ii) In Yip v. HSBC Holdings plc, 2018 ONCA 626, 141 O.R. (3d) 641, leave to appeal refused, [2018] S.C.C.A. No. 410, the Court of Appeal ordered $800,000 in costs to the successful defendant who had opposed the leave motion: at para. 94; and

(iii) In Cappelli v. Nobilis Health Corp., 2019 ONSC 3376, the successful defendant was awarded $537,696.39 in costs after a single day leave hearing: at paras. 4 and 15.

Costs for class proceedings which raise a novel legal point or involve a matter of public interest

[20] A legal issue is not novel in a certification or leave motion based solely on the issue being unprecedented or previously undecided. A novel point of law “is found in the circumstance that the existing case law is inadequate to resolve the issue and there would be no proper reason for the party advancing the issue to expect to fail”: Frank v. Farlie, Turner & Co., LLC, 2012 ONSC 6715, at para. 9.

[21] A matter is in the public interest if it can be found to “transcend the immediate interests of the litigants and engage broad societal concerns of significant importance” or serves to “facilitate[e] access to justice through class proceedings by persons or groups who have historically faced significant disadvantages when seeking legal redress for alleged wrongs”: Das v. George Weston Limited, 2018 ONCA 1053, at para. 248, leave to appeal refused, [2019] S.C.C.A. No. 69.

[22] A class action does not raise issues of public importance simply because it is funded by the Class Proceedings Fund (the Fund). While the Fund can consider public interest as a factor to provide financial support, it is only if “the motion judge or trial judge also concludes that the litigation involves a matter of ‘public interest’”, that the court could consider the cost consequences under s. 31(1) of the CPA: Das, at para. 250.

[23] The Fund is not required to find public interest in a class proceeding as a basis for funding. Consequently, I accept the defendants’ submission that “[t]he mere involvement of the Class Proceedings Fund does not satisfy the public interest test, as alleged [by Markowich]”.

Analysis

[24] In the present case, there are three issues before the court:

(i) whether costs should be ordered on a substantial indemnity basis,

(ii) whether the costs claimed are excessive, and

(iii) whether the costs claimed should be discounted under s. 31(1) of the CPA.

[25] I address each of these issues below.

Issue 1: Should costs be ordered on a substantial indemnity basis?

[26] I find no basis to award costs on a substantial indemnity basis.

[27] The defendants submit that there were allegations of dishonest conduct made against them with respect to Markowich’s allegation in the claim that the defendants had engaged in an intentional attempt to conceal the significance of the Pit Wall Instability and Rock Slide by adding “confounding information” to the News Release.

[28] Markowich relied on that allegation both to address damages issues arising under s. 138.5(3) of the Securities Act, as well as a basis for a claim of punitive damages.

[29] However, the decision of the court to deny leave was not based on the merits of the allegations, but only on the failure of Markowich to establish that the Pit Wall Instability or Rock Slide constituted a material change. If there had been a material change, the court would have certified PCI 12, which addressed whether the defendants were deprived of possible s. 138.5(3) damages discounts due to the alleged confounding information. The allegation of the confounding information was relevant to whether that issue could be certified, and not for the merits.

[30] Markowich did not allege fraud against the defendants, which was affirmed on cross-examination. There is no suggestion that Markowich or counsel engaged in any inappropriate conduct with respect to the litigation. The defendants acknowledged that Markowich was bringing the action in good faith as the first component of the leave test under s.138.8(1) of the Securities Act.

[31] Consequently, none of the factors relied upon in the cases cited by the defendants arises in the present case.

[32] Further, the decision of the court on the leave motion to not certify the punitive damages issue does not result in substantial indemnity costs. Certification is a “no merits” test based on limited evidence. Partial indemnity costs have been awarded in several other cases where the court failed to certify punitive damages: Kaplan v. Casino Rama, 2019 ONSC 2025, 145 O.R. (3d) 736, at para. 83; and Kaplan v. Casino Rama, 2019 ONSC 3310.

[33] In McNaughton, the Court of Appeal held, at para. 60:

While the allegations of fraud and improper conduct solely in support of punitive damages appear to be extreme, and would probably not have succeeded had the actions proceeded to trial, I do not believe that they can support an award of substantial indemnity costs since the issue of punitive damages was never resolved.

[34] For the above reasons, I order costs on a partial indemnity scale.

Issue 2: Are the costs claimed excessive?

[35] Markowich claims that the defendants’ costs are excessive, yet provided no costs outline for the legal fees and disbursements he incurred. In such circumstances, and given the similarity in costs sought by the defendants with those sought in comparable proceedings, I draw the inference that the fees incurred by the unsuccessful party (Markowich) approximated those incurred by the successful party (the defendants).

[36] As I discuss above, the court must still address any “significant concerns about the bill” raised by the unsuccessful party “whether or not the losing party has filed his or her own bill of costs” (see Smith Estate and Granger). However, Markowich provides no basis or support for his bald assertion that “there are ‘obvious excesses’ in the defendants’ fees”.

[37] Markowich challenges the quantum of costs on the following bases, which I address below.

(i) The footnote reference

[38] Rather than indicate any particular costs concerns, Markowich relies on a footnote reference, “See e.g. p. 3 of the defendants’ costs outline”, to submit that the defendants’ costs are excessive.

[39] However, as the court commented in Yip, Markowich ought to have “expected that a claim of this size would be vigorously contested by the respondent”: at para. 82. Similarly, the court commented in Mask that, “[t]he defendants went into full-battle mode on the leave motion (as they had every right to do)”: at para. 12.

[40] The costs set out at page 3 of the defendants’ costs outline (the basis of the footnote reference) refer to cross-examinations, factum and book of authorities, and preparation and attendance at hearing. Given the importance of this motion to the defendants, there is nothing that suggest that the hours spent were excessive.

(ii) Disbursements for experts

[41] While Markowich acknowledges that “[t]he defendants’ disbursements are not shocking”, he appears to suggest that there should be some discount to expert costs because (i) “their experts were not ‘crucial to the outcome’”; (ii) “[a]ll expert evidence was accepted, despite the defendants’ disproportionate ‘scorched earth’ attempts to bar the plaintiff’s experts at all costs, which was not reciprocated”; (iii) “[t]he defendants even alleged intentional misleading by the plaintiff’s experts [which] was all rejected”; and (iv) “[t]he defendants lost on ‘materiality’”.

[42] I do not agree.

[43] There is no basis to find that the disbursements for experts are unreasonable. The defendants acknowledge the reasonableness of those fees (albeit by saying that those fees are “not shocking”). The fact that the court held that the evidence of Markowich’s experts was admissible does not detract from the reasonableness of the cost of the experts. Even if the expert evidence was not “crucial to the outcome”, both parties reasonably engaged the experts to assist the court in establishing the required elements for leave. Finally, regardless of the decision on materiality, Markowich was the unsuccessful party, and cannot deduct costs on an issue by issue basis after having unsuccessfully sought leave.

[44] Consequently, I would make no deduction for expert fee disbursements.

(iii) Online research disbursements

[45] Markowich submits that “online research is not disbursable”, citing Pinon v. Ottawa (City), 2021 ONSC 2482. The amount of that disbursement is $227.25. In Pinon, MacLeod R.S.J. held, at para. 7:

I agree that online legal research charges are not a proper disbursement. This is how legal research is conducted and the fees associated with using a value added or premium service are a cost of doing business. It may be proper to charge those fees to a client pursuant to the retainer agreement, but I do not believe they are appropriate in party and party costs.

[46] It is unclear from the decision in Pinon as to whether the court was satisfied that all of the research claimed as a disbursement could have just as successfully and quickly been done on a non-cost basis, or whether there was no evidence that a separate cost had been incurred outside the standard law firm overhead.

[47] However, to the extent that a party incurs a disbursement through a “value added or premium service” that assists counsel in a manner otherwise unavailable (or more costly due to longer research time), which is outside standard overhead costs, I would find that such disbursements are reasonable.

[48] In Moon v. Sher (2004), 2004 ONCA 720, 246 D.L.R. (4th) 440 (Ont. C.A.), the court held, at para. 39:

It would seem, therefore, that amounts disbursed for Quicklaw services, courier services, stationary and postage may be recoverable under Tariff item 35 if the service or expense is "reasonably necessary for the conduct of the proceeding", the amount is reasonable and has been charged to the client, and the disbursement does not fall within standard office overhead. Indeed, as Quicklaw and similar search vehicles have become convenient aids to research, although not found in the Tariff, their costs should be recoverable as disbursements provided they are not excessive and have been charged to the client. It is for the party seeking recovery of the disbursements to satisfy these criteria.

[49] In the present case, there is no evidence from the defendants’ costs outline as to whether the online research which was “incurred as claimed” was part of general overhead costs (which would not be compensable under Moon) or “does not fall within standard office overhead” (which would be compensable under Moon). Consequently, since it is the defendants’ onus to satisfy the propriety of the disbursement, I do not allow the $227.25 disbursement.

Issue 3: Should the costs claimed be discounted under s. 31(1) of the *CPA*?

[50] Markowich relies on the costs decision in Peters v. SNC-Lavalin Group Inc., 2021 ONSC 6161, in which Perell J. reduced costs since he found that the issues before him based on inferred reliance and material change raised “legal novelty” and a “matter of public interest” since the action had “some specific, special significance for, or interest to, the community at large beyond the interests of the parties to the litigation”: at paras. 10-15.

[51] However, even if the above issues raised matters of “legal novelty” or “public interest” when first considered in Peters, a “second kick at the can” does not raise such matters under s. 31(1).

[52] In his factum and at the hearing, Markowich repeatedly submitted that Peters was wrongly decided and should not be followed. It appears from the motions decision in Peters that many of the same submissions raised before the court in Peters were raised before the court on the present motion.

[53] Consequently, with respect to the test for legal novelty under the CPA, as set out in Frank, the issues before the court (i) were not “unprecedented”, and (ii) had been “decided before”. It was not the case that “the existing case law is inadequate to resolve the issue”. For those reasons, I find that the test of legal novelty is not met.

[54] Similarly, even if the issues raised before the court in Peters had “some specific, special significance for, or interest to, the community at large beyond the interests of the parties to the litigation”, such a conclusion would have been based on the importance of the issues of inferred reliance and material change.

[55] However, relitigating those same issues in a second case does not elevate those issues into matters of public importance. The secondary market class action is based on an alleged material change in Lundin – it is not a matter which would “transcend the immediate interests of the litigants and engage broad societal concerns of significant importance”: Das, at para. 248.

[56] The proposed class was not historically disadvantaged, nor did this case determine rights, privileges, obligations or the welfare of the public at large: Vennell v. Barnado’s, 73 O.R. (3d) 13 (S.C.), at para. 31.

[57] Consequently, I find no basis to reduce fees based on s. 31(1) of the CPA.

Conclusion

[58] For the above reasons, I fix costs at $693,805.39, payable by Markowich to the defendants within 30 days of this order.

GLUSTEIN J. Date: 20220223

COURT FILE NO.: CV-17-588044-00CP DATE: 20220223 ONTARIO SUPERIOR COURT OF JUSTICE DOV MARKOWICH Plaintiff AND: LUNDIN MINING CORPORATION, PAUL K. CONIBEAR, MARIE INKSTER, PAUL MCRAE, LUKAS H. LUNDIN and STEPHEN GATLEY Defendants

COSTS REASONS Glustein J. Released: February 23, 2022

Footnotes

[^1]: All defined terms are as set out in the Reasons. [^2]: (all costs amounts in these costs reasons include disbursements and taxes) [^3]: I reduce the $694,032.64 sought by $227.25 for a disbursement for online research which I do not accept as I set out below.