In a recent costs award, Belobaba J. has again taken costs in certification motions to task. In Baroch v. Canada Cartage, Belobaba J. made the following obiter remarks regarding the perception of ever-declining costs awards at certification:

…certification requirements under the Class Proceedings Act are modest at best and the legal fees should reflect this reality. Again, the monetary reward for assuming the many risks of class action work will not be found in costs outlines but in generous, court-supported contingent fee agreements.

Belobaba J.’s above statement is likely to add to the unpredictability of costs awards on certification.

Certification Requirements are Modest at Best?

Belobaba J.’s assertion that lower costs are justified because of the ‘modest’ requirements of certification proceedings seemingly contradicts the guidance given in the Ontario Court of Appeal’s decision in Pearson v. Inco that, “a motion for certification is a vital step in the proceeding and the parties expect to devote substantial resources to prosecuting and defending the motion.”

It also seems to contradict Belobaba J.’s own acknowledgment of this reality in his series of costs awards released in late 2013, which garnered attention both within and beyond the legal community. In that series of decisions, he expressly acknowledged the Court of Appeal’s direction in Pearson v. Inco and stated as follows:

I have taken the liberty of juxtaposing [the directions of the Court of Appeal] with my commentary that is added in italics.

(i) A motion for certification is a vital step in the proceeding and the parties expect to devote substantial resources to prosecuting and defending the motion.

I understand this direction. Class actions often involve claims in the many millions of dollars and will therefore be rigorously prosecuted and defended. It follows from this that the costs awards (even on a partial indemnity basis) will be substantial.

Policy Concerns: ‘No-Costs’ vs. ‘Loser Pays’

In late 2013, we posted about Belobaba J.’s series of decisions wherein he lamented the cost and ‘excess’ of certification motions and the perceived decline in the number of new class actions. The overarching messages arising from the series of decisions is that a ‘no-costs’ regime in class actions would further three major goals of class action legislation: judicial efficiency, increased access to courts, and behaviour modification.

Belobaba J.’s policy concerns are not unique. Currently, the Law Commission of Ontario is in the process of reviewing class action procedure. Among the issues that it will address is whether Ontario should become a ‘no-costs’ class action jurisdiction rather than a ‘loser-pays’ jurisdiction (see our earlier post). The final research paper is due on April 15, 2015.

However, there are other policy concerns in play. Perell J.’s decision in Holley v. The Northern Trust Company, where two defendants in a proposed class action were awarded sizeable costs on a partial indemnity scale, mentions the importance of costs in allocating risks. As support for his decision, Perell J. noted that “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.”

Until formal guidance is provided, either by legislature or the appeal of a cost decision, the terrain remains uncertain. The only guidepost available is the fact that Pearson v. Inco remains good law, as does the understanding that, given the complexity of class actions, certification will continue to be a costly endeavour with the potential for large cost consequences.