Last month, Justice Belobaba released five costs decisions with a strong message for the class action bar: access to justice is becoming too expensive and the excesses of counsel are at least partly to blame (Rosen v BMO Nesbitt Burns Inc., 2013 ONSC 6356; Crisante v DePuy Orthopaedics, 2013 ONSC 6351; Dugal v Manulife Financial, 2013 ONSC 6354; Brown v Canada (Attorney General), 2013 ONSC 6887; and Sankar v Bell Mobility Inc., 2013 ONSC 6886). He found that excess appears to have become the norm, causing access to justice to become too expensive in class actions, an area of law specifically designed to achieve this fundamental objective. As a result, he suggested that a "no costs" rule would be much more sensible in the world of class actions, a world "very different" from other litigation.
In 1982, the Ontario Law Reform Commission (the OLRC, now the Law Commission of Ontario) recommended establishing class action legislation with a distinctive no-costs regime as a general rule, whereby costs would not be awarded to any party to a class action, at any stage of the proceedings, including an appeal. A similar regime was already in place in the United States. Instead of following the OLRC's recommendation, the provincial legislature adopted the views of the Attorney General's Advisory Committee, of which Justice Belobaba was a member, to follow Ontario's general rule that "costs follow the event". Now, Justice Belobaba says the OLRC was right and he was wrong. He hopes that the mistake will be corrected in the course of the Law Commission of Ontario's current review of Ontario's class action legislation, which is now underway. There is already a no-costs regime in British Columbia and certification costs awards are capped in Quebec.
So as the annual number of Ontario class actions declines, Justice Belobaba clarified that, while he will continue to consider and apply the factors set out in the Rules of Civil Procedure and the various binding directions of the Court of Appeal, he will also aim for more transparent and predictable costs decisions in conventional certification motions. Historical costs awards in similar cases will be seriously considered. In cases where the final fees or disbursement amount is dramatically above the norm, the costs award may be made in two parts: a portion that is payable immediately and a further portion that is payable in the cause.
With the "access to justice" objective keenly in mind, Justice Belobaba's anticipated results are: 1) lower than expected costs awards, 2) leaner and more focused certification motions, with a greater measure of predictability, and 3) overall, the continuing viability of class actions.
Justice Belobaba's decisions appear to be part of a growing trend. Justice Perell released a costs decision last month as a result of a motion for documentary productions (The Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund v SCN Group Inc., 2013 ONSC 7122). The successful defendant claimed close to $100,000 in fees and disbursements for resisting an interlocutory motion in an already certified class action. Justice Perell noted that access to justice is an entitlement of defendants just as it is for plaintiffs and that spiraling costs in class proceedings have become a threat to the viability of the class action regime. Fashioning a creative hybrid solution, he ultimately held that the appropriate award was costs in any event of the cause in the full amount claimed by the defendant, but with only 25 percent payable forthwith and the balance to be paid either a) as a set off against any future costs awards made against the defendant or b) to the defendant should it ultimately be successful in defending the class action at trial.
A no-costs regime is not imminent and, as Justice Belobaba acknowledges, it remains to be seen how his approach will play out. Assuming that significant adverse cost awards act as a disincentive for plaintiffs' lawyers to commence class actions, then reducing that risk may increase the prospect of class actions going forward. However, some members of the plaintiff bar argue that access to justice will actually be further denied, given that plaintiffs' lawyers are often the beneficiaries of costs awards. They suggest that defendants will have incentive to drive up the costs of certification motions, forcing plaintiffs' lawyers to spend more time but be compensated with less, thereby bearing increased risks.