A continuing theme this year relates to the approach by the courts to awarding legal costs to a successful party.Courts have sent mixed signals on the extent to which a party can recover costs at various stages of a class proceeding. This is an important issue given that the scale of costs in class proceedings can be so substantial. Parties and their counsel should be mindful of their (to some degree unpredictable) potential to recover costs when successful or, conversely, the risk of being ordered to pay the other party’s costs, and factor this in when assessing strategy at various stages of the litigation.
Courts have examined the issue of costs in the context of approving class counsel fees following the conclusion of a class proceeding. In one decision late last year, Belobaba J. of the Ontario Superior Court of Justice expressed skepticism towards basing class counsel’s fees on billable hours, noting that this approach could result in over-lawyering and docket-padding. In that decision, he approved class counsel fees which were instead a percentage of the settlement under a contingency fee arrangement.
Similarly, in another case that was settled, an arbitrator awarded class counsel fees of $10.45 million by applying a multiplier to the class counsel’s base fees. The appropriateness of the multiplier depended on the risk incurred by class counsel in continuing the proceeding under a contingency agreement, and the degree of success achieved.
A Dutch Date At Court?
In an earlier set of decisions, Belobaba J. had voiced reservations about awarding large amounts of costs against a plaintiff who was unsuccessful at the certification stage. He feared that large cost awards could limit access to justice. This approach would see parties absorbing their own costs to a large extent regardless of the outcome.
Picking Up The Tab
However, in a decision later this year, Perell J., also of the Ontario Superior Court of Justice, affirmed that the intent behind the province’s Class Proceedings Act is to institute a cost system whereby the loser pays at least some of the winner’s costs. The system is symmetrical between plaintiffs and defendants. Perell J. had no trouble awarding a significant cost award in favor of a successful defendant where the plaintiff’s allegations required the defendant to incur significant expenses in reasonably defending the claim.
Strathy J. (as he then was) similarly awarded a successful defendant $1.85 million in costs at summary judgment. He cited the sum being claimed by the plaintiff ($3 billion) and the complexity and importance of the issues, requiring substantial work by counsel.
Throughout 2014, the courts have shown a complex contextual approach to awarding costs, which introduces an element of unpredictability. While a defendant who is successful in court generally can expect to recover some of its legal costs from the unsuccessful plaintiff, meaningful recovery is not a certainty in the class proceeding context.