Ontario Superior Court judge seeks ‘no costs’ rule in class actions

Ontario Superior Court judge seeks ‘no costs’ rule in class actions by Julius Melnitzer, November 12, 2013, Financial Post
Justice Edward Belobaba of the Ontario Superior Court of Justice says that class actions are becoming too expensive to promote their goals of achieving access to justice. “Normally, costs awards are routine and can be easily adjudicated. Not so in the world of certification motions. Here, excess appears to be the norm in every aspect of the proceeding – in the amount of time spent by legal counsel, the volume of material filed with the court, the number of days scheduled for the oral hearing and the over-litigation of most issues. No wonder, then, that the costs that are typically sought by the successful party are in the hundreds of thousands of dollars. No wonder, also, that the number of class actions on an annual basis is declining. Access to justice, even in the very area that was specifically designed to achieve this goal, is becoming too expensive.”
The comments come in Rosen v. BMO Nesbitt Burns Inc., in the context of considering a costs award. He suggests that most lawyers on both sides of the class action bar are in agreement that a “no costs” rule would “be much more sensible.” Judge Belobaba goes on to state that he was wrong in his previously-expressed view that costs should “follow the event” in class actions. “I . . .  wish that the recommendations on costs as set out in the Ontario Law Reform Commission’s Report on Class Actions had been accepted,”  Judge Belobaba writes. “Instead, the provincial legislature decided to adopt the views of the Attorney-General’s Advisory Committee and continue the ‘costs follow the event’ convention for the very different world of class actions as well. I was a member of that Advisory Committee. I now realize that I was wrong and that the OLRC was right. I understand that the provincial Law Commission is undertaking a review of the Class Proceedings Act, including the costs provisions. Hopefully, our mistake will be corrected.”

The case is one of three released on Nov. 8 in which the judge issued cost orders that are dramatically lower than the sums requested by plaintiffs’ counsel. Judge Belobaba was also critical of the reasons given by judges for current costs awards, saying that many are “wordy, use unreliable metrics and are analytically unclear.” As he saw it, the guidance in the Rules of Procedure and from the Court of Appeal “can only take you so far.”

What follows in the judgement is a close analysis of the Court of Appeal’s directions on costs in Pearson v. Inco, taking considerable pains to point out the practical difficulties, including the lack of reliable data, to implement them fully.

This having been said, Judge Belobaba goes on to outline the procedure he will follow in costs awards in certification motions, apart from the ones within the categories of test cases, novel point of law, or matters of public interest. The highlights are as follows:

1. Costs outlines certified by counsel will be adequate, with actual dockets not required;

2. Hourly rates must fall within the range set out by the Law Society’s Rules Committee in its Information to the Profession;

3. Apart from “obvious excesses in fees or disbursements, I will accept the costs outline as is,” and “will not drill down into any of the detail”;

4. A party who wishes to argue that a submission is unreasonable should submit its own costs outline showing what it spent on the 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.”

5. Historical costs awards in similar cases will be considered. The judgment contains a useful table of historical costs that Judge Belobaba has compiled.

6.  The objective of the final award is to make one that is “fair and reasonable to both sides, always remembering that the fundamental objective of the Class Proceedings Act is access to justice.”

7. Finally, Judge Belobaba adds that ”In cases where the final fees or disbursement amount is dramatically above the norm, I will consider making a costs award in two parts: a portion that is payable immediately and a further portion that is payable in the cause.”

The result in this case, which involved the first certification of an “unpaid overtime” case regarding investment advisors, was a costs award of $290,000. The plaintiff had requested $575,000; the defendant argued that the award should not exceed $315,000. [Emphasis added]

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