Court File and Parties
COURT FILE NO.: CV-20-00642921 DATE: 20230706 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: SURENDRARAJ NAVARATNARAJAH, Plaintiff – and – FSB GROUP LTD., FSB INSURANCE LTD. and FSB COMMERCIAL LTD., Defendants
BEFORE: Justice E.M. Morgan
COUNSEL: Andrew Monkhouse and Alexandra Monkhouse, for the Plaintiff Stephen Gleave and Richelle Pollard, for the Defendants
HEARD: Cost submissions in writing
Costs Endorsement
Background and Entitlement to Costs
1On May 31, 2023, I released my judgment decertifying this class action: Navartnarajah v. FSB Group Ltd., 2022 ONSC 2574. The Defendants were entirely successful in establishing that a class action was no longer the preferable form of proceeding now that every class member but three – one of which is deceased and one of which cannot be located – have opted out of the action.
2In my reasons for judgment, I commented, at para 42, that the entire class had rejected the representative Plaintiff’s desire to pursue a class action, “and yet, he and his counsel have fought hard to pursue just that goal even after it has become crystal clear that the class at large want nothing to do with this claim. One has to ask oneself why.”
3In their written costs submissions, class counsel has answered this rhetorical question with the same response that they gave at the hearing of the decertification motion: “[c]lass Counsel have a duty to class members and would submit this includes a duty to ensure class members are not missed.” While that is an accurate statement of the law when stated at a level of generality, it does not explain the rather strident way the decertification motion was defended.
4The entire class had opted out, and they had done so for reasons which not only the Defendants, but the Court in certifying the matter in the first place, had said were predictable. In my reasons for decision in the original certification motion, I had stated: “What Defendants’ counsel’s argument suggests is that at some point, the majority of class members may find that their financial interest was hijacked by the claim rather than advanced by the claim… I find myself in some agreement with Defendants’ counsel about the risks of this action to the proposed class members”: Navartnarajah v. FSB Group Ltd., 2021 ONSC 5418, at paras 29-30.
5The predictable risk having come to pass, the Defendants found it surprising that the Plaintiff would defend the decertification motion with such zealous advocacy. Frankly, I found the Plaintiff’s continued enthusiasm for a class in which he would likely be all alone a little surprising myself. After all, decertification did not undermine his right to pursue an action on his own behalf, and there was no one else to represent.
6Class counsel do have a recognized duty to the class as a whole. I therefore understand why counsel wanted to double check on whether they had contacted all potential class members before concluding that a class action was futile. But I still do not understand why they had to triple, quadruple, and quintuple check on that question. In doing so, they put the Defendants through an ordeal that was not deserved.
7Class counsel asked the Defendants for confirmation of the identity of two decades’ worth of “producers”, as the putative class members are called. Once the Defendants retrieved all of that information from their data storage system, class counsel insisted on cross-examining the Defendants’ CEO on the issue. And when the CEO, not surprisingly, did not personally know more than the company’s electronic data storage software could produce, they brough a refusals motion.
8Although the CEO is an adult and can take a few verbal punches, the cross-examination of him was rather aggressive given what was at stake. At some point during the cross-examination, the Defendants’ CEO had had enough and stopped answering further questions about whether he somehow had more data than the Defendants’ system had produced (mainly because there was no answer to those questions – the Defendants, like all modern companies, store their employment and other records on computers and not in their CEO’s head). At that point, he was asked whether he knew that a false answer under oath could result in imprisonment.
9Following the cross-examination, class counsel sought to adjourn the decertification motion and schedule a separate hearing just to address the refusals. Then they searched an independent database of licensed insurance professionals, and found that some of the Defendants’ personnel were registered licensees. They then demanded to know why those individuals were not on the Defendants’ “producers” list.
10The Defendants responded with what seems to me to be a perfectly acceptable answer. As they explained it, those individuals whom class counsel had identified were already full time employees of the Defendants’. They were not independent producers and so were not in the putative class (which was composed of producers who, the claim contended, should have been full employees). Upon learning this, class counsel asked for production of those non-class members’ employment records. I commented in my decision, at para 16, that disgorging employment information about non-class members would be an “unwarranted intrusion” on those individuals.
11I did not adjourn the motion as requested by class counsel. That would have wasted not only the parties’ time, but the time of all others seeking to book valuable hearing time in a busy motions court. However, both sides were given the opportunity to argue all these points in full at the decertification motion. I advised class counsel that if questions were improperly refused by the Defendants’ deponent, they could ask for an adverse inference to be drawn.
12In the result, there was no adverse inference to be drawn. The Defendants and their CEO had disgorged more than ample information to satisfy the court that the certified class was down to one living person whose whereabouts were known. Indeed, this had been obvious ever since the opt-out deadline had passed with no one left standing but the representative Plaintiff himself.
Scale of Costs
13In short, the Plaintiff’s approach to the motion, and that of counsel on his behalf, was excessive. Class counsel have a duty to the class, but all parties have responsibility for costs if they run them up unnecessarily. Rules 57.01(1)(e), (f), and (g) of the Rules of Civil Procedure collectively provide that where that happens, the other party’s remedy is to seek costs on a substantial indemnity basis.
14Class counsel submit that the effect of awarding costs on the elevated scale authorized by the Rules will be to chill future class actions. One could just as easily point out, however, that what the Rules are designed to chill is the overly zealous pursuit of procedures for their own sake. Litigation lawyers must take care to advocate their clients’ rights, but they must equally take care not to allow their zeal for procedure to run unchecked or to be pursued without any realistic goal in sight. The Defendants have to make their case, but they do not have to subsidize lawyering by their opponents’ counsel that requires them to do more than make their case.
15Finally, I feel compelled to comment on class counsel’s submission that, “The Defendant’s actions worked to eliminate the class action, but should not result in financial disaster for the Plaintiff.” In the first place, it was the actions of the putative class members in opting out en masse, and not anything done by the Defendants, that caused this class action to come to an abrupt halt.
16More importantly, it would be very surprising to find that the Plaintiff had to personally bear any costs. In my original certification decision, at para 32, I found that the Plaintiff was adequate to the task of being a representative Plaintiff for a class action. It did not occur to me to investigate the details of his counsel’s retainer agreement to ensure that it contained the standard indemnity for costs, as that is so accepted as standard that it is not typically part of the inquiry into the appointment of class counsel: see MacBrayne v. LifeLabs Inc., 2020 ONSC 2674, at para 9.
17On the rare occasion when courts have been alerted to this kind of gap in the retainer agreement, they have opined that an indemnification against an adverse costs award is expected of class counsel. Without an indemnity clause, class counsel may not be in a position to play that role at all: Azar v. Strada Crush Limited, 2019 ONSC 4436, at paras 17-18.
18At the very least, a prospective representative plaintiff must be advised with respect to the potential for costs and the availability (or otherwise) of an indemnity agreement. If not, counsel has not fulfilled their duty to the client. In any case, whatever the situation is here, it is certain that the Defendants should not have to bear the price of alleviating the Plaintiff or his counsel of this burden.
Quantum of Costs
19Defendants’ counsel has presented a Costs Outline in which they seek $135,652.18 on a substantial indemnity scale or, alternatively, $101,950.95 on a partial indemnity scale (both on an all-inclusive basis). Class counsel in their written submissions state that a reasonable amount for costs would be $14,682.29, which I take to be their own costs of the decertification motion.
20Rule 57.01(1)(0.a) mandates the court to take into account the principle of indemnity when fixing costs, while Rule 57.01(1)(0.b) mandates the court to take into account the reasonable expectation of parties in fixing costs. The magnitude of the Defendants’ request here probably is beyond what the Plaintiff would have expected, but under the circumstances I cannot blame the Defendant for that.
21Costs are always discretionary under section 131 of the Courts of Justice Act. The motion was pursued with unnecessary fervor on the Plaintiff’s behalf. The Defendants costs are higher than for the typical half-day motion, but I am willing to accept that they incurred the costs that allowed them to overcome the Plaintiff’s challenge. I am not inclined to pick apart their Costs Outline in an effort to criticize how many lawyers engaged in each task or how much time each task took.
22That said, the amount claimed by the Defendants is so much higher than that incurred by the Plaintiff that the two requests hardly seem to come from the same piece of litigation. I do not quite know what to make of the fact that one side apparently prepared a motion record, conducted cross-examinations, reviewed the evidence for a motion on refusals, researched and wrote a factum, and appeared at a hearing to argue the motion for the low price of approximately $14,000, while the other side apparently took parallel steps in the same proceeding for a cost of roughly ten times that much.
23Given this disparity, with the Plaintiff’s costs being on the low side for a motion like this and the Defendant’s being on the high side, some compromise is called for. Although, as indicated, the Plaintiff should pay an elevated level of costs, I am willing to do somewhat more than the usual minimal rounding down of the Defendants’ bill.
24The Plaintiff shall pay the Defendant $100,000 in costs of the decertification motion, inclusive of all fees, disbursements, and HST.
Date: July 6, 2023 Morgan J.