Canada: Costs Principles In Class Actions Are Not Asymmetrical

Last Updated: May 20 2015
Article by Margot Finley and David Di Paolo

Most Read Contributor in Canada, September 2016

FISCHER V. IG, 2015 ONSC 2491

In the recent case of Fischer v. IG, 2015 ONSC 2491, the Divisional Court has settled any debate as to whether s. 31(1) of the Class Proceedings Act, 1992, S.O. 1992, c. 6 ("CPA") is intended to apply asymmetrically in favour of plaintiffs; it is not.

Section 31(1) of the CPA reads:

31.(1) In 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.

Over the years, class action plaintiffs' counsel has attempted to argue that this section of the CPA is intended to provide protection only to plaintiffs and not defendants. They have argued that it is not open to the court to reduce or deny a costs award to a successful plaintiff. Plaintiffs have relied upon the Ontario Law Reform Commission Report on Class Actions (1982), in which the Commission noted a concern that the risks inherent in the costs regime at the time operated to discourage potential representative plaintiffs from commencing meritorious class actions. Though the Commission recommended a "no costs" regime, the legislature instead adopted the ordinary costs rules that govern individual actions. These rules were, however, adjusted in two ways: (1) consideration of the three factors identified in s. 31(1) of the CPA and (2) the availability of the Class Proceedings Fund to cover adverse costs awards against representative plaintiffs.

Plaintiffs' counsel also relied upon Garland v. Consumers' Gas Co. (1995), 22 O.R. (3d) 451 (OCJ) in which Winkler J. (as he then was) declined to award costs to the successful defendant in light of the s. 31(1) factors. He stated, "The case law reflects the Court's inclination to refrain from awarding costs against unsuccessful plaintiffs in class proceedings where some or all of the criteria in s. 31(1) are present."

The argument that s. 31(1) of the CPA should operate asymmetrically has been rejected before. In Holley v. Northern Trust Co., 2014 ONSC 3047, Perell J. said in respect of s. 31(1): "An adverse costs system is what the Legislature intended; it did not intend a costs regime that removes the risk. And it did not impose a public interest burden on defendants, who are also entitled to access to justice, by imposing an asymmetrical system of costs."

In Fischer v. IG, the plaintiffs had originally been unsuccessful on the certification motion. The defendant mutual fund companies had argued that the proposed class action did not meet the "preferable procedure" criterion in s. 5(1)(d) of the CPA – required for a class action to be certified – because a probe by the Ontario Securities Commission that resulted in settlements totaling over $150 million with five mutual fund companies had accomplished what the proposed class action intended to do – compensate investors. On the certification motion, Perell J. agreed with the defendants' position and declined to certify the action.

Given the novel nature of the argument and the fact that the action would have been certified but for the novel argument, the motion judge ordered that each side should bear its own costs. The certification decision was appealed all the way up to the Supreme Court and the action was ultimately certified. Perell J. was asked to revisit his costs decision given the plaintiffs' ultimate success on certification. The plaintiffs claimed $500,000 for the certification motion. The motion judge considered the issue de novo and again decided that there should be no order as to costs given the novelty of the arguments. The plaintiffs sought leave to appeal.

Harvison Young J., sitting as the Divisional Court, dismissed the motion for leave to appeal. She held, "I see no support, either in the wording or legislative history of s. 31(1), or in the case law, for the proposition that the discretion may only be applied asymmetrically in favour of plaintiffs."

The plaintiffs also argued that the principle of access to justice demands that costs arising from novelty must be asymmetrically applied. Harvison Young J. acknowledged that access to justice is important and is a factor to be considered in costs decisions, but it is not a principle that operates only to the benefit of plaintiffs. She found no support for the proposition that access to justice concerns must always entitle plaintiffs to their costs of successful certification motions.

David Di Paolo and Margot Finley acted as counsel for the defendant AIC Ltd. in this matter.

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