Towards a New Class Action Certification Costs Framework?

Introduction

In a succession of decisions issued in November 2013, Justice Belobaba articulated a new framework for determining the appropriate level of costs to be awarded on class action certification motions.¹  Citing the fundamental objective of access to justice, Belobaba J. expressed a preference for a no costs regime in class proceedings.  His Honour indicated that granting costs awards following certification motions required further transparency and more reliable metrics, notwithstanding Rule 57.01(1) and the Court of Appeal’s guidance in Pearson v Inco.²  In all five decisions, the new framework resulted in lower cost awards than were requested by counsel.

The New Certification Costs Framework

In finding that the “excess appears to be the norm” in costs awards on certification motions, Belobaba J. concluded that access to justice in the class actions arena is becoming too expensive.

For cases that do not fall within section 31 of the Class Proceedings Act, 1992 (“CPA”), Belobaba J. proposed the following procedure for determining costs following a certification motion:³

• generally accept costs outlines certified by counsel and not require actual dockets;
• review the certified costs outlines to ensure that hourly rates comply with the ranges set by the Rules Committee in its Information to the Profession;
• review the costs outlines for any obvious excesses in fess or disbursements;
• if the unsuccessful party wants to argue unreasonableness (beyond hourly-rate compliance or obvious excess) 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, it is likely that the court will conclude that the amount requested by the successful party is not unreasonable;
• seriously consider historical costs awards in similar cases;
• stand back and reassess the amount that is before the court (after the reductions and removals of any excesses), in light of the factors set out in Rule 57.01(1), the guidance of the Court of Appeal, and the historical costs awards, and come to a final amount that is fair and reasonable to both sides, remembering that the fundamental objective of the CPA is access to justice; and
• in cases where the final fees or disbursement amount is dramatically above the norm, consider making a costs award in two parts: a portion that is payable immediately and a further portion that is payable in the cause.⁴

With respect to historical costs awards, a review of average costs awards over the past six years was divided by party and whether the costs sought were over or under $500,000. Where costs sought were less than $500,000, the average all-inclusive award for the successful defendant was $148,870 and the average all-inclusive award for the successful plaintiff was $169,250.  Where costs sought were over $500,000, the average all-inclusive award for the successful defendant was $341,000 and the average all-inclusive award for the successful plaintiff was $496,118.⁵

Impact of the Framework

In all five costs decisions in which this framework was applied, its application resulted in a reduction of the costs award sought by the successful party.  Costs awarded ranged from $130,000 for a “relatively complex certification motion,”⁶ to $467,234 plus $100,000 in the cause for a “hard-fought and legally challenging certification and leave motion that required nuanced expert opinion evidence.”⁷

Since Belobaba J. issued his decisions, the costs of several certification motions have been fixed. In Chapman, the court relied upon Belobaba J.’s cost awards averages, but the framework as a whole was not applied.⁸ Many others have not adopted the proposed framework.⁹

Predictability Enhances Access to Justice

The CPA is intended to facilitate access to justice. The class proceedings mechanism imposes a substantial procedural step on plaintiffs, who must bring a certification motion in order to access the intended benefits. As Justice Belobaba acknowledged, costs on certification motions are becoming a barrier to access to justice. Although his analysis demonstrates that plaintiffs tend to pay slightly less in absolute terms when unsuccessful, the relative impact of a costs award on a representative plaintiff with modest means and a small individual claim is undoubtedly much greater than the impact of a similar award on a well-funded or insured corporate defendant or group of defendants. However, since the legislature has dictated that, subject to s. 31 of the CPA, costs of a certification motion should be fixed in accordance with the “loser pays” principle, the court does not generally have the option to impose no costs.

In the absence of either a no costs regime or a willingness on the part of the Courts to recognize the profound economic disparity between the parties on a certification motion when making costs awards, perhaps the best that litigants can ask for is a certification costs regime that is predictable and consistent. Providing some degree of certainty would permit plaintiffs and their counsel to better evaluate the financial risk of potential class actions and assess the compensability of resources to be dedicated to the certification motion. It would permit the Class Proceedings Fund and other third party funders to more reliably estimate the risk of assuming plaintiffs’ potential costs liability. The ability to more reliably assess and manage this risk will itself enhance access to justice, as well as judicial economy.

It is unfortunate that other class actions judges have not commented on the framework proposed by Belobaba. Although this new certification costs methodology may require further refinement, or an entirely different approach, the desire to bring increased predictability to the certification costs regime is laudable.

¹ Crisante v DePuy Orthopaedics Inc, 2013 ONSC 6351, Dugal v Manulife Financial Corp, 2013 ONSC 6354 [Dugal], Rosen v BMO Nesbitt Burns Inc, 2013 ONSC 6356, Sankar v Bell Mobility Inc, 2013 ONSC 6886, and Brown v Canada (Attorney General), 2013 ONSC 6887.

² (2006), 79 OR (3d) 427.

³ SO 1992, c 6, s 31, which states, “[i]n exercising its discretion with respect to costs under subsection 131 (1) of the Courts of Justice Act, the court may consider whether the class proceeding was a test case, raised a novel point of law or involved a matter of public interest.”

⁴ 2013 ONSC 6351 at para 5, 2013 ONSC 6354 at para 5, 2013 ONSC 6356 at para 5, 2013 ONSC 6886 at para 5, and 2013 ONSC 6887, Appendix.

⁵ 2013 ONSC 6351 at para 5, 2013 ONSC 6354 at para 5, 2013 ONSC 6356 at para 5, 2013 ONSC 6886 at para 5, and 2013 ONSC 6887, Appendix.

⁶ 2013 ONSC 6887 at paras 7 and 9-10.

⁷ Dugal, 2013 ONSC 6354 at paras 12 and 18-19.

⁸ Chapman, 2014 ONSC 537 at paras 8 and 15.

⁹ See, for example: Fairview Donut Inc v TDL Group Corp, 2014 ONSC 776, Pasian v Academic Clinicians’ Management Services, 2014 ONSC 901, and Brigaitis v IQT Ltd, 2014 ONSC 1192.