In his recent decision in 1146845 Ontario Inc. v. Pillar to Post Inc., Justice Perell of the Ontario Superior Court refused to relieve class plaintiffs of their exposure to costs in their unsuccesful defense of a motion to stay the class action. The decision highlights the Ontario courts’ reticence to reduce costs awards against unsuccessful litigants, even in the context of class actions, given that in the overwhelming majority of cases the prime motivation of the parties are commercial and neither altruistic nor for the greater public good.

The underlying motion in this case, which we have previously written about, involved issues regarding the effect of the statutory right to associate under franchise legislation, the Arthur Wishart Act (Franchise Disclosure), on an arbitration provision in a franchise agreement.

Justice Perell acknowledged in his decision that section 31(1) of the Class Proceedings Act, 1992 encourages the court to recognize that class actions tend toward being test cases, the determination of novel points of law, or the adjudication of matters of public interest, and courts, therefore, should respond to these tendencies when making decisions about costs. However, Justice Perell found that whether or not the case at bar involved matters that were novel or in the public interest, ultimately the litigation was hard fought and financially motivated, and the plaintiffs, had they been successful on the motion, likely would not have foregone costs. Justice Perell noted that in the case at bar, as in many class actions, an unsuccessful party will submit after-the-fact of the outcome that they should be relieved of costs because of the novelty or public interest value of the case despite the party’s expectation before-the-fact that they would recover costs if they were successful. Such after-the-fact submissions should, Justice Perell noted, be “taken with more than a grain of salt”. In concluding his reasons, Justice Perell in fact commended a practice where parties agree, prior to the outcome of their contested motions, on whether or not the case at hand classifies as novel or public interest litigation so as to avoid after-the-fact pleas for relief based on claims of novelty or public interest.

Notably, Justice Perell also rejected the plaintiffs’ argument that the defendants had not been “totally successful” on their motion because they had only achieved a stay of proceedings, and the merits of the plaintiffs’ grievance had not yet been decided.

This decision illustrates that while the Class Proceedings Act, 1992 emphasizes the fact that class actions are intended, by design, to be in the public interest and often raise novel issues, whether or not a particular case raises a novel legal issue or is in the public interest has a somewhat “I know it when I see it” quality to be determined at the judge’s discretion, and that it will be a relatively rare occasion where courts will exercise that discretion to negate or diminish a costs award.