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Costs In (Ontario) Class Actions: When You Start A Fire, You May Get Burned

Hughes v. Liquor Control Board of Ontario, 2018 ONSC 4862

In a recent decision from the Ontario Superior Court, Justice Perell awarded significant costs to defendants who were successful on summary judgment motions pre-certification, affirming that defendants are entitled to access to justice in having meritless claims dismissed.

The representative plaintiffs, David Hughes and 631992 Ontario Inc., brought a proposed class proceeding against the LCBO, The Beer Store, Labatt, Molson, and Sleeman seeking $2 billion in damages arising from an alleged decades-long criminal and civil conspiracy designed to increase the price of beer in Ontario.  The defendants brought summary judgment motions and the plaintiff brought a cross partial summary judgment motion.  The defendants were successful and four out of five defendants sought their partial indemnity costs, the remaining defendant, Sleeman, having settled its costs with the plaintiff. 

The defendants sought their partial indemnity costs in the aggregate of $2.3 million, with the individual claims ranging from $414,926.57 to $793,626.69.  Actual costs for the defendants were estimated to be $6.5 million.  The plaintiffs' partial indemnity costs were approximately one million and actual costs were estimated at $1.6 million.  The plaintiffs had partnered with the Class Proceedings Fund.  The plaintiffs argued that the court ought to award $600,000 in the aggregate to the successful defendants.

Justice Perell canvassed the case law on costs generally and in the context of class actions, noting that in addition to the underlying goals of the Class Proceedings Act, 1992, the court may consider such factors as: "(a) conduct or poor judgment that unduly prolonged the preparation or argument of the motion for certification; (b) failure to follow the schedule; (c) improper case-splitting; (d) delays in abandoning causes of action and issues that were ultimately dropped; (e) failing to communicate the revised list of common issues; and (f) refusing to acknowledge the significance of submissions and concessions."  Further, 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."

 Justice Perell ultimately concluded, however, that there was no reason to depart from the status quo that partial indemnity costs follow the event.  He stated at paragraph 14, "the Defendants have justified their claims for costs; and the Plaintiffs and the Fund have not justified any reduction from the amounts claimed.  The Plaintiffs lit the costs fire, and the immediate case is not the occasion for judicial disaster relief."

Justice Perell reduced an expert witness fee from $270,890.14 to $150,000, but did not alter the remaining partial indemnity costs proposed by the defendants, awarding a little over $2.2 million.  In reaching his decision, Justice Perell noted at paragraphs 78 and 121 that that defendants are entitled to access to justice in having meritless claims dismissed.

This decision provides a helpful overview of the law on costs and reminds class action litigants about the high stakes in prosecuting and defending class proceedings.  The court is not permitted to consider the Fund's exposure to an adverse costs award; rather, the Fund ought to consider the risks when assessing an application and, in any event, the quid pro quo for accepting such a risk is a 10% share of any damages awarded.