Ontario’s Class Proceedings Fund: A Good (if Less Than Perfect) Class Action Costs Model

AuthorJon Bricker
Jon Bricker1
For the policy-makers charged with designing a suitable costs regime,
even the simplest forms of litigation can give rise to difficult challenges.
On one hand, costs must not be too onerous, lest would-be plaintiffs
simply decide to stay home rather than assert their legal rights in court.
On the other hand, any attempt to relieve plaintiffs of liability for costs
carries with it a significant risk — that plaintiffs will come forward in
droves, overwhelming the courts, and unfairly subjecting defendants to
expensive and potentially frivolous litigation.
Indeed, in the last few decades, litigation costs have become a major
preoccupation for Canadian law-makers. Witness the rise of legal aid
programs and small claims courts. Or consider the sheer number of costs
provisions currently found in legislation. In Ontario, the Rules of Civil
Procedure alone contain more than a hundred different sections and sub-
sections specifically pertaining to costs. Additional litigation costs rules
can be found in virtually every piece of provincial legislation imaginable,
from the Absconding Debtors Act to the Veterinarian’s Act.
Nowhere, however, does the costs dilemma loom larger than in the
class action context. From the plaintiff perspective, class action litiga-
tion is almost always an expensive endeavour. The potential rewards, by
contrast, are often small and far from certain. Meanwhile, class action
litigation is even less attractive from the defendant’s perspective. An
unfavourable court ruling can severely hurt a defendant’s bottom line,
not to mention its corporate reputation. And even if a defendant is suc-
cessful in court, it may nonetheless wind up on the hook for legal costs
that far exceed those typically incurred in conventional, non-class action
1 Jon Bricker is an LL.B. Candidate at Osgoode Hall Law School. He will spend
his articling year (2008–09) as a Clerk for the Superior Court of Justice in
litigation. Given considerations like these, it’s little wonder that costs are
frequently identified as the single most important issue for policy-makers
to consider when designing class action regimes.2
But while costs are widely considered to be vital to the overall health
of any class action regime, there is little consensus on what an ideal
costs model might look like. Legislators and courts in different jurisdic-
tions have arrived at wildly different conclusions about the appropriate
approach to contingency fees, multipliers, cost-shifting, and the extent to
which class counsel, class members, and non-parties should be respon-
sible for financing class action litigation.
Nor are these debates solely taking place between jurisdictions.
Rather, variation is also evident within each jurisdiction; most class
action regimes contain several costs measures clearly intended to pro-
mote access for potential representative plaintiffs, and several more
clearly designed to ensure that defendants are also treated fairly. The
result is usually a costs regime that looks less like a single coherent policy
and more like a patchwork of statute, common law, and informal funding
arrangements, each one of which is designed to address a different aspect
of the costs dilemma.
This paper is concerned with one particular set of costs — the adverse
costs that are typically awarded once class action litigation is complete.
It begins with a review of the leading approaches to adverse costs. First,
it looks at two-way and modified two-way rules, with a particular focus
on the current costs rule in Ontario. The paper then reviews the no-way
and modified no-way models currently used elsewhere in Canada. Finally,
it explores informal funding arrangements whereby class counsel or
third-party investors agree to indemnify representative plaintiffs against
potential adverse cost awards. While the merits of all three models are
acknowledged, the paper suggests that each model has drawbacks that far
outweigh its merits.
Next, the paper looks at one particular feature of Ontario’s class
action costs patchwork — the Class Proceedings Fund (CPF). It also
points to several reasons why, at least in theory, the CPF model does the
best job of addressing the interests of all those with a stake in Ontario’s
class proceedings regime. Mind you, while the CPF model is a good one
in theory, in practice, it has not lived up to expectations. Therefore some
of the possible reasons why the CPF has not lived up to its potential are
2 Ontario Law Reform Commission, Report on Class Actions (Toronto: Ministry of
the Attorney General, 1982) at 647 [OLRC Report].
VOL UME 4, No 2, march 2008 401
also explored. The paper concludes with a look at the road ahead, and at
reforms that may help the CPF live up to its potential in the future.
1) Two-Way and Modified Two-Way Models
One possible policy response to adverse costs is, in fact, a non-response.
Instead of designing a special rule for class actions, law-makers may sim-
ply opt to treat class actions the same way that they treat other litigation.
Thus, if a class action claim succeeds, the representative plaintiff can
usually expect to have his or her legal bills paid, at least in part, by the
unsuccessful defendant. If that claim fails, however, that same representa-
tive plaintiff can usually expect to pay not only his or her own legal costs,
but a significant portion of the defendant’s costs, as well.
The arguments in favour of a two-way rule are compelling. Two-
way models are thought to deter frivolous and vexatious litigation.
Furthermore, they are widely thought to promote fairness by ensuring
that successful parties are not unduly made to incur large legal bills.3
Given arguments like these, it is perhaps no surprise that many jurisdic-
tions have declined to carve out a special rule for class action litigation,
and have instead maintained the conventional two-way rule. Here in
Canada, Ontario, Québec, and Alberta have all retained the usual two-
way rule, albeit with some modifications.4 Internationally, similar rules
have been either adopted or proposed in jurisdictions including Australia,
South Africa, and Scotland.5
But while seemingly popular among policy-makers, two-way models
are not without significant drawbacks. Foremost among these drawbacks:
two-way models are often said to be among the single biggest barriers
3 Rachael Mulheron, The Class Action in Common Law Legal Systems: A
Comparative Perspective (Portland, OR: Hart, 2004) at 436 [Mulheron, The
Class Action in Common Law Legal Systems].
4 Class Proceedings Act, 1992, S.O. 1992 c. 6, s. 31 [Ontario CPA]; An Act
Respecting the Class Action, L.R.Q., c. R-2.1 [Québec CPA]; Class Proceedings Act,
S.A. 2003, c. 16.6, s. 3.
5 Federal Court of Australia Act 1976 (Cth.), s. 43; South African Law Reform
Commission, Recognition of Class Actions and Public Interest Actions in South
African Law (1998) at 31, online: www.saflii.org/za/other/zalc/report/1998/5/;
Scottish Law Commission, Multi-Party Actions: Court Proceedings and Funding
(Edinburgh: Scottish Law Commission, 1994) at 243.

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