Court File and Parties

Court File No.: CV-21-00001058-00CP Date: 2023-11-09 Ontario Superior Court of Justice

Between: Steven Scott, Plaintiff/Moving Party And: Subaru Canada, Inc. and Subaru Corporation, Defendants/Responding Parties

Counsel: M.D. Baer, J. Bradford, for the Plaintiff/Moving Party N. Rabinovitch, A.J. Freedman, for the Defendants/Responding Parties

Heard: October 16, 2023

Justice L.C. Leitch

Reasons for Judgment

[1] The Plaintiff moves for (1) an Order approving the retainer agreement between Class Counsel and the representative Plaintiff; (2) an Order approving Class Counsel’s legal fees, disbursements, and applicable taxes; and (3) an Order that the Defendants pay Class Counsel’s legal fees, disbursements, and applicable taxes.

[2] The Plaintiff is seeking recovery of legal fees (based on a multiplier of two) and disbursements (mainly in relation to expert fees) plus applicable taxes after the certification motion has been withdrawn.

[3] The Defendants assert that there is no basis in law for such an unprecedented order which they say is not authorized under the Class Proceedings Act (the “CPA”) or the retainer agreement. They note that pursuant to R.37.09 of the Rules of Civil Procedure the Defendants could seek their costs of the abandoned motion unless the Court orders otherwise. However, the relief the Defendants seek is a denial of the Plaintiff’s requested relief.

Background Facts

[4] The action was commenced on June 8, 2021. The action alleges that the Defendants were negligent in the design, research, development, testing, manufacturing, marketing, advertisement, promotion, distribution, warning, sale, leasing, warranting, servicing, and/or repair of the Class Vehicles. The action further alleges that the Class Vehicles suffer from an electrical defect which subjects the vehicle batteries and their electrical systems to a continuous parasitic drain, which predisposes the Class Vehicles to sudden and unexpected battery failure and premature battery replacement.

[5] In December 2021, counsel agreed that the Plaintiff would serve and file his certification record by March 31, 2022. That filing was accomplished. Thereafter, at a case conference on May 2, 2022, a timetable for a contested certification motion was established.

[6] Litigation in the United States alleging the same defect was commenced prior to this action in that five complaints were filed between March 2, 2020 and April 23, 2020. A consolidated complaint was filed June 18, 2020. The American litigation was resolved, and the settlement received court approval on June 25, 2022.

[7] The Defendants note that the U.S. Court was advised in May 2021, one month before this action was commenced, that mediation was being pursued and a settlement in principle was achieved November 9, 2021.

[8] On September 29, 2022, Defendants’ Counsel advised that their responding motion record would be filed later than agreed in the certification timetable.

[9] On October 12, 2022 the responding motion record was filed. The Defendants took the position that the action “served no purpose” as the Plaintiff and Class Members would receive an enhanced warranty that included compensation for costs incurred due to the alleged defect.

[10] The Plaintiff acknowledges that the Canadian enhanced warranty offered by the Defendants to Class Members is virtually identical to the benefits offered under the American settlement except that references are to Canadian dollars and kilometres instead of American dollars and miles; Subaru is administering the warranty program instead of a third party; and the claims process is simpler. In addition, the Canadian enhanced warranty does not require Class Members to release the Defendants and it extends to more model years and more vehicles than the action addresses.

[11] In these circumstances the Plaintiff determined that “it no longer made sense to proceed with” the contested certification motion.

Relevant provisions of the CPA

[12] The Plaintiff relies on s.12 of the CPA, which grants the Court broad discretion in relation to the conduct of a proceeding as follows:

12 The court, on its own initiative or on the motion of a party or class member, may make any order it considers appropriate respecting the conduct of a proceeding under this Act to ensure its fair and expeditious determination and, for the purpose, may impose such terms on the parties as it considers appropriate.

[13] Section 32 requires solicitors to obtain the Court’s approval of retainer agreements. Section 32(2.1) outlines the factors the Court should consider in determining fair and reasonable legal fees and disbursements - the results achieved, the degree of risk assumed and the proportionality of the fees and disbursements in relation to the amount of any monetary award or settlement funds.

[14] Section 33 permits solicitors to enter into an agreement providing for payment of fees and disbursements only in the event of success and to seek Court approval of fees increased by a multiplier applied to a base fee (defined as the product of the number of hours worked multiplied by an hourly rate). This approval motion is to be heard by a judge who has given judgment on common issues or approved a settlement benefitting all class members.

[15] Sections 32(2.1) and 33 reference judgments, monetary awards and settlements.

[16] The CPA provides in s. 1(4) that “success in a proceeding” includes:

(a) a judgment on common issues in favour of some or all class members; and (b) a settlement that benefits one or more class members.

The relevant terms of the retainer agreement

[17] The contentious issue on this motion is not whether the retainer agreement complies with the provisions of the CPA but whether there are fees payable under that agreement which the Defendants should be responsible for.

[18] Paragraph 3 of the retainer agreement includes confirmation that the Plaintiff understands that, under the CPA, “success” in a class proceeding includes the events described in s.1(4) of the CPA – i.e., a judgment or settlement.

[19] The contingency fee is described in para. 9 and 10 of the agreement as:

…thirty percent (30%) of the value of the benefit recovered in the class action, in addition to disbursements and applicable taxes. Such benefit may include a settlement, court award, pre-judgment interest and/or post judgment interest, but does not include costs.

In the event of success, the legal fees, disbursements and applicable taxes of McKenzie Lake, if they are appointed Class Counsel, shall be as ordered and approved by the Court.

[20] Paragraph 14 provides that Class Counsel may be reimbursed for disbursements and taxes as a first charge on any funds received as a result of a judgement or settlement. Paragraph 15 reflects that, if a class proceeding is successful, legal fees, disbursements, and taxes payable to Class Counsel are to be approved by the Court.

The positions of the parties

[21] The Plaintiff notes that the Defendants offered the Class Members the benefits they were seeking in this action, which as described, were at least as valuable as the benefits offered pursuant to the settlement in the United States.

[22] The position of Class Counsel is set out in para. 27 of Mr. Peerless’ affidavit sworn January 31, 2023:

The benefits the Defendants are providing to their customers with respect to the allegations in this action, are a direct result of this litigation. The benefits are virtually identical to those negotiated in the US litigation. It is not only fair, but in the interest of justice, that the Plaintiff in this action be able to take credit for these benefits.

[23] The Plaintiff contends that the Defendants implemented a settlement of this action unilaterally without court approval – an improper tactic which they say defeats the class action and is unfair and unjust. The Plaintiff asserts that s. 12 provides the mechanism for the Court to address such unfairness. The Plaintiff emphasizes that the definition of “success” under the CPA is an inclusive one and includes more than a settlement or judgement.

[24] The representative Plaintiff supports Class Counsel and deposes in his affidavit sworn January 26, 2023 that Class Counsel should receive credit for the benefits obtained by the Class and be paid their fees accordingly.

[25] On the other hand, the Defendants assert that this action played no role in the delivery of the Canadian enhanced warranty. Mr. Leko the Director, Service Operations at Subaru Canada Inc. outlined in his affidavit sworn September 19, 2023 at para. 23 instances where U.S. class actions against Subaru America were settled with warranty enhancements being issued to U.S. customers. Subaru Canada subsequently issued equivalent Canadian warranty enhancements despite there having been no parallel class action commenced in Canada.

[26] He highlighted the assertions in Mr. Peerless’ affidavit that the benefits conferred by the Canadian enhanced warranty were a result of this action and stated the following in para. 25:

25. Contrary to Mr. Peerless stated position, Subaru Canadas aforementioned corporate practice of coordinating warranty enhancement benefits provided to Canadian customers with those provided to the brand`s U.S. customers is carried out entirely without regard to whether related litigation has been commenced in Canada. Therefore, once Subaru America agreed to the U.S. Warranty Enhancement Settlement in the U.S. Battery Drain Class action, it followed that the Canadian Enhanced Warranty would be issued irrespective of whether or not there was outstanding litigation in Canada. Accordingly, the decision by Subaru Canada to issue the Canadian Enhanced Warranty was not a result of this Action.

Discussion

[27] On this evidentiary record I cannot accept the assertion of Class Counsel that the benefits offered to Class Members stem from this action. The settlement benefits have not been implemented as a direct response to this action. The Canadian enhanced warranty was offered voluntarily by the Defendants. I cannot conclude that this class proceeding has been successful notwithstanding the inclusive definition of “success” in s.1(4) in the CPA.

[28] As a result of this conclusion, there is no basis on which Class Counsel are entitled to fees and disbursements pursuant to their retainer agreement or the related provisions of the CPA. As noted above, sections 32(2.1) and 33 reference judgments, monetary awards and settlements and authorize fees only when those events have occurred. The retainer agreement contains comparable provisions and speaks of legal fees being payable “in the event of success” which references the definition in the CPA.

[29] Of note also is that para. 9 of the retainer agreement states that compensation is to be paid for Class Counsel’s services “in establishing damages within the framework of a class proceeding” and the fee is to be calculated as a percentage of “the benefit recovered in the class action”. As earlier noted, on this record there is no basis to conclude that the Canadian enhanced warranty program is a benefit recovered in this action. Further, Class Counsel were not involved in the settlement of the American litigation or the offering of the Canadian enhanced warranty program.

[30] I also do not accept Class Counsel’s argument that s. 12 of the CPA provides the Court with jurisdiction to craft a “creative solution” to achieve a fair and efficient conclusion to this action.

[31] I agree with previous interpretations of s. 12 that this provision, granting the court wide discretion and broad case management powers in relation to “the conduct of a proceeding”, is confined to matters of procedure and does not permit the Court to override other provisions of the CPA (see Heller v. Uber Technologies Inc., 2021 ONSC 5518 at paras. 126, 136-137; Nor-Dor Developments Ltd. v. Redline Communications Group Inc., 2011 ONSC 591 at para. 8 and Leblanc et al. v. The Attorney General of Canada et al., 2022 ONSC 3257 at para. 14 referencing Bourque v. Insight Productions, 2022 ONSC 174).

[32] Lastly, I note and accept the risks assumed by Class Counsel in commencing this action as described in para. 68 of their factum – liability risk, recovery risk, the risk the action will not be certified and the risks on the merits – and acknowledge the factors to consider in a risk analysis set out in para. 69 (referencing Gagne v. Silcorp Ltd. (1998), 41 O.R. (3d) 417 at paras. 16-18 and Osman v. Cadbury Adams Canada Inc., 2010 ONSC 2752 at para. 23). However, I do not accept the argument, as set out in para. 70 of the Plaintiff’s factum, that the Defendants’ conduct created an additional and unanticipated risk which will discourage class actions:

70. By any measure, the case at bar was complex and had a degree of risk. Class Counsel understood the risks involved in bringing the Action. However, Class Counsel did not anticipate the risk that the Defendants would attempt to provide settlement benefits to putative Class Members outside of the usual court-approved settlement process. This conduct introduces a novel risk to class proceedings that would alter the incentive structure that is designed to encourage class counsel to take on risks to bring forward class proceedings that further the principal goals of class actions – judicial economy, behaviour modification and access to justice.

[33] This record, and prior case law, establishes that the Defendants could voluntarily offer the relief sought in the action, whether or not litigation had been commenced in the United States as Mr. Leko deposed. As the Defendants note, certification has been denied where the court found there was no compensable harm, and a class action was not the preferable procedure (see. Maginnis and Magnaye v. FCA Canada et al, 2020 ONSC 5462 where a recall was issued prior to certification).

[34] Belobaba J. in FCA Canada stated at para. 39, that “absent compensable harm, there are no access to justice concerns” where a device has been or is being repaired “and thus behavior has been modified”. I agree with those observations. The voluntary conduct of the Defendants reflects behavior modification and has provided access to justice. Judicial economy is also achieved. This result fulfills the policy goals of the CPA.

[35] I find that the Plaintiff is not entitled to an order requiring the Defendants to pay legal fees, disbursements and applicable taxes.

[36] I note that the Defendants seek their costs of this motion. I urge counsel to endeavour to resolve that issue, failing which brief written submissions may be made within 45 days.

Justice L.C. Leitch Released: November 9, 2023