Canada: Test Cases, Novel Points Of Law, And Matters Of Public Interest: A Costs Shield For Unsuccessful Defendants

One of the means by which the law seeks to encourage class actions is to limit the extent to which members of a plaintiff class can be held liable for the costs of unsuccessful steps in such proceedings. Thus, for example, section 31(2) of the Ontario Class Proceedings Act, 1992 provides that class members, other than a representative plaintiff, are not liable for costs except with respect to the determination of their own individual claims.¹ The class proceedings statutes of other common-law provinces contain similar limitations on the liability of class members. ² As a result, in class actions, defendants are usually at greater risk of being held liable for a costs award than are plaintiffs.

That said, class proceedings law permits the court to consider other factors in making a costs decision. Under section 31(1) of the Ontario CPA, for example, the court may, in exercising its discretion with respect to costs, consider whether the class proceeding was a test case, raised a novel point of law, or involved a matter of public interest. In the recent case of Fischer v IG,³ the plaintiffs contended that this provision could not be used to reduce or deny a costs award to a plaintiff, arguing on policy grounds that it could only apply asymmetrically in favour of plaintiffs.

Fortunately for the defendants, the Ontario Superior Court of Justice rejected the notion that any such principle exists. Accordingly, at least in Ontario, unsuccessful defendants in class proceedings may be able to resist a costs award when the proceedings in question involved a test case, a novel point of law, or a matter of public interest. The background to the Fischer v IG decision includes the decision of the Supreme Court of Canada in AIC v Fischer, in which the certification of the class proceeding was contested by the defendants.⁴ The plaintiffs are investors who claimed to have suffered losses due to the trading practices of the defendant mutual fund managers. Following an investigation by the Ontario Securities Commission ("OSC"), the fund managers entered into agreements with the OSC that resulted in millions in settlement payments being made to the investors.

The investors also sought to certify a class proceeding against the fund managers. The fund managers contested certification on the basis that, in light of the settlement arranged by the OSC, class proceedings were not the "preferable procedure" for the resolution of common issues, as required by the Ontario CPA. The Supreme Court of Canada approved of the certification, however, and in the process, provided substantial guidance on how courts should determine whether a class proceeding is the "preferable procedure."⁵ Despite the plaintiffs' success on the certification issue, the motions judge decided that, in light of the novelty of the issues, each party should bear their own costs of the certification motion. The plaintiffs sought leave to appeal that costs decision, but in Fischer v IG, leave was denied by the Ontario Superior Court of Justice. The plaintiffs argued, among other things, that a court could not rely on section 31(1) of the Ontario CPA to reduce or deny a costs award to a plaintiff, because the principle of access to justice demands that costs arising from novelty be asymmetrically applied. The Court rejected this argument, noting that access to justice is a principle that operates in favour of both plaintiffs and defendants.⁶ The Court found no reason to conclude that access to justice always entitles plaintiffs to their costs when they are successful in certification motions.⁷ As a result, defendants that are unsuccessful in class proceedings may be able to avoid paying the plaintiffs' costs where the matter was a test case or involved a novel point of law or matter of public interest.

Footnotes

1. SO 1992, c 6 ("Ontario CPA").

2. British Columbia: Class Proceedings Act, RSBC 1996, c 50, s. 37(4); Saskatchewan: The Class Actions Act, SS 2001, c C-12.01, s. 40(4); Manitoba: Class Proceedings Act, CCSM, c C130, s. 37(4); New Brunswick: Class Proceedings Act, RSNB 2011, c 125, s. 39(2); Nova Scotia: Class Proceedings Act, SNS 2007, c 28, s. 40(4); Newfoundland and Labrador: Class Actions Act, SNL 2001, c C-18.1, s. 37(4).

3. 2015 ONSC 2491.

4. 2013 SCC 69, [2013] 3 SCR 949.

5. Ibid at paras 19-49.

6. Fischer v IG, supra note 3 at para 26.

7. Ibid at para 27.

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