Canada: Costs In The Cause Where Success Divided Still Reflects Access To Justice Concerns

In two recent decisions, Fantl v. Transamerica Life Canada, 2013 ONSC 5198 (CanLII) ("Fantl") and Kang v. Sun Life Assurance Company of Canada, 2013 ONSC 4800 (CanLII), Justice Perell awarded costs in the cause for motions under the Class Proceedings Act, 1992 ("CPA") where he found that success was divided.  Justice Perell found that neither proposed class proceeding "was a test case, raised a novel point of law or involved a matter of public interest" under s. 31 of the CPA that would warrant special consideration in awarding costs. Justice Perell affirmed that absent special consideration, costs in class action litigation follow the normal rules, and are intended to award successful litigants. His reasons suggest that the access to justice concerns underlying class action proceedings remain a relevant consideration and may be consistent with ordering costs payable in the cause where success is divided.

In Fantl Justice Perell found that the normal rule that a successful plaintiff on a certification motion should receive his or her costs forthwith does not apply where there is divided success on the motion. Both parties sought their costs forthwith and opposed costs in the cause, asserting that they had succeeded on the certification motion. Mr. Fantl was supported in his submissions by the Law Foundation of Ontario.

Mr. Fantl claimed for breach of an express or implied term of the contract and negligent misrepresentation relating to an investment instrument in 53 Transamerica insurance policies. On the certification motion, Justice Perell certified a class action for 5 of the 53 policies. Notably, the certification for those 5 policies was unopposed. Transamerica succeeded in opposing certification of the remaining 48 policies. Further, Mr. Fantl's tort and aggregate damages claims were not certified, and his claims for implied breach of contract were struck. As such, Justice Perell found that "Transamerica achieved a substantial substantive success in resisting Mr. Fantl's certification motion."

Perell J. acknowledged that a major policy goal of the CPA is facilitating access to justice, that the Legislature was aware that adverse costs awards could chill access to justice, and that, through s. 31 of the CPA, the Legislature signalled to the courts that they should be "alert to circumstances when it would be appropriate to make no costs award." However, he also noted that the Legislature had rejected a no-costs rule for class actions, and, absent such circumstances, "intended that costs play their normal role in class action litigation."

While Justice Perell found that the circumstances of Fantl did not qualify for special consideration and purported to apply the normal principles that guide the courts' discretion respecting costs, this rested on his finding that the defeat of all opposed claims for certification resulted in divided success. Under the normal rules, costs are intended to indemnify successful litigants. Traditionally, situations of divided success result in awards of costs in the cause. Justice Perell found that it would be unfair to award either party costs forthwith where it is premature to assess their success. He therefore awarded costs in the cause, to account for both parties' limited success on the motion and leave open for the party who succeeds on the merits to be indemnified. His decision not to award the substantially successful defendant its costs of the motion forthwith suggests that Perell J. considered access to justice for the plaintiff.

Similarly, in Kang v. Sun Life Assurance Company of Canada, 2013 ONSC 4800 (CanLII), and under further reconsideration in 2013 ONSC 5193 (CanLII), Perell J. ordered costs in the cause on a motion to strike numerous paragraphs in the plaintiff's Revised Fresh as Amended Statement of Claim in a proposed class action, on the basis that there had been divided success. The proposed class action alleged, inter alia, fraudulent misrepresentation against the insurance company. 

At first instance,  Perell J. ordered costs against the plaintiff on a motion to strike numerous paragraphs in his Revised Fresh as Amended Statement of Claim in a proposed class action (2011 ONSC 7436 (CanLII)). Although the plaintiff satisfied the first criterion for certification under s. 5(1)(a) of the CPA (i.e. that the pleadings disclose a cause of action), he found that success was not divided between the plaintiff and Sun Life. Sun Life challenged 69 of 120 paragraphs of the pleading, and succeeded in having 60 paragraphs struck without leave to amend: 32 paragraphs were struck because of egregious violations of the rules of pleading, and 28 were struck for failure to plead a reasonable cause of action. Justice Perell awarded Sun Life its costs on the motion in any event of the cause, but ordered that the plaintiff pay these costs at the conclusion of the litigation. He found that the action did not warrant special consideration under s. 31 of the CPA, and rejected the argument that the costs award against the plaintiff would have a chilling effect on class proceeding and would discourage meritorious actions.  However, his decision to delay the payment of the costs to the end of litigation despite the plaintiff's defeat suggests access to justice concerns.

On appeal, in 2013 ONCA 118 (CanLII), the Court of Appeal restored 18 paragraphs of the amended pleading and permitted three causes of action that had been struck. The court awarded the five representative plaintiffs costs of their appeal. In 2013 ONCA 387 (CanLII), the Court of Appeal directed Perell J. to reconsider his costs order on the motion to strike. On reconsideration, in 2013 ONSC 4800 (CanLII), Perell J. reasoned that in light of the Court of Appeal's decision, success was divided between the plaintiffs and Sun Life. The plaintiffs preserved three causes of action and Sun Life succeeded in striking paragraphs that "egregiously did not comply with the rules of pleading." Like in Fantl, because of the divided success, Perell J. ordered costs in the cause (he affirmed his decision on further reconsideration in 2013 ONSC 5193 (CanLII)).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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