Smith Estate v. Nat. Money Mart,

• Jurisdiction: Ontario
• Judge: Moldaver, Armstrong and Juriansz, JJ.A.
• Neutral Citation: 2011 ONCA 233
• Citation: 2011 ONCA 233,(2011), 276 O.A.C. 237 (CA),106 OR (3d) 37,331 DLR (4th) 208,[2011] OJ No 1321 (QL),276 OAC 237,(2011), 276 OAC 237 (CA),106 O.R. (3d) 37,[2011] O.J. No 1321 (QL),276 O.A.C. 237,331 D.L.R. (4th) 208
• Date: 25 October 2010
• Court: Court of Appeal (Ontario)

Smith Estate v. Nat. Money Mart (2011), 276 O.A.C. 237 (CA)

MLB headnote and full text

Temp. Cite: [2011] O.A.C. TBEd. AP.005

Kenneth Smith, as Estate Trustee of the Last Will and Testament of Margaret Smith, deceased, and Ronald Oriet (plaintiffs/appellants) v. Sutts, Strosberg LLP, Heenan Blaikie LLP, Paliare Roland Rothstein Rosenberg LLP and Koskie Minsky LLP (appellants) and National Money Mart Company and Dollar Financial Group, Inc. (defendants/respondents)

(C51893; 2011 ONCA 233)

Indexed As: Smith Estate et al. v. National Money Mart Co. et al.

Ontario Court of Appeal

Moldaver, Armstrong and Juriansz, JJ.A.

March 28, 2011.

Summary:

Plaintiffs in a class proceeding alleged that they were charged a criminal rate of interest by the defendants for "payday loans". A mid-trial mediation led to settlement which included payment of $27.5 million to the settlement class, forgiveness of indebtedness and provision of future transaction credits. Class counsel sought approval of a counsel fee of $27.5 million.

The Ontario Superior Court, in a decision reported at [2010] O.T.C. Uned. 1334, approved the settlement, allowed the representative plaintiff compensation of $3,000 to be paid out of class counsel fees and fixed class counsel fees at $14.5 million. Class counsel appealed regarding class counsel fees.

The Ontario Court of Appeal allowed the appeal only to the extent of ordering that the $3,000 compensation for the representative plaintiff was to be paid out of the settlement fund.

Barristers and Solicitors - Topic 3006.3

Compensation - General - Entitlement - To reasonable fee - [See fourth Barristers and Solicitors - Topic 3311 ].

Barristers and Solicitors - Topic 3311

Compensation - Measure of compensation - Class actions - Counsel for the plaintiffs in a class action appealed from an order fixing their counsel fees - The Ontario Court of Appeal discussed "the difficulties that stem from the fact that class counsel fees are determined in a non-adversarial forum", noting that nothing in the legislation discouraged the court from exercising its inherent jurisdiction to ensure that the proceedings before it were fair or from resorting to its authority to appoint an amicus - Monitors had been appointed in some Ontario cases - In the U.S., it was not uncommon for the courts to appoint a guardian ad litem for the settlement fund - The court discussed each of these strategies briefly, concluding that "[c]ourts should not be reticent in resorting to one of the strategies discussed above when they consider that confrontation of counsel's unopposed position would be helpful and reasonably warranted in the circumstances. Such resort is, of course, discretionary. Appointment of amicus or a guardian is neither necessary nor desirable in every case." - See paragraphs 15 to 33.

Barristers and Solicitors - Topic 3311

Compensation - Measure of compensation - Class actions - The Ontario Court of Appeal discussed the differences between the determination of class counsel fees under ss. 32(4) and 33(7) of the Class Proceedings Act - The court's authority to determine class counsel fees under s. 32(4) was distinct from its authority to determine class counsel fees under s. 33(7) - The court's authority to determine fees under s. 32(4) arose "if an agreement is not approved by the court" - The court's authority to determine fees under s. 33(7) arose "on the motion of the solicitor who has entered into an agreement under [s. 33(4)]." - The mode of analysis open to the court under the two sections was different - The court's authority under s. 32(4) was far more expansive than its authority under s. 33(7) - Section 33(7) provided only for the base fee/multiplier approach, whereas s. 32(4) provided the court with broad discretion to set the fee, direct a reference or direct the fee be determined "in any other manner" - The court's jurisdiction to determine class counsel fees under s. 33(7) depended on the existence of a fee agreement providing for payment of fees and disbursements only in the event of success and which permitted class counsel to make a motion to the court to have his or her fees increased by a multiplier - The court's jurisdiction under s. 33(7) was brought into play by a motion of a solicitor "who has entered into an agreement under subsection (4)" - An agreement under s. 33(4) was one that permitted counsel to make a motion to the court to have his or her fees increased by a multiplier - See paragraphs 45 to 61.

Barristers and Solicitors - Topic 3311

Compensation - Measure of compensation - Class actions - Plaintiffs in a class proceeding alleged that they were charged a criminal rate of interest by the defendants for "payday loans" - A mid-trial mediation led to settlement which included payment of $27.5 million to the settlement class, forgiveness of indebtedness and provision of future transaction credits - Class counsel sought approval of a counsel fee of $27.5 million - Perell, J., approved the settlement and fixed class counsel fees at $14.5 million - Class counsel appealed, asserting, inter alia, that Perell, J., erred in failing to apply the analytical framework of s. 33(7) (base fee/multiplier approach) of the Class Proceedings Act in assessing an appropriate counsel fee - The Ontario Court of Appeal dismissed this ground of appeal - The determination of counsel fees here was governed by s. 32(4) of the Act, not s. 33(7) - The fee agreement did not satisfy the requirements of s. 33(4) because it did not permit counsel to apply to the court for a multiplier, but instead stipulated how counsel fees were to be calculated and that this would be enforceable only if it were approved by the court - As the fee agreement was not approved, under s. 32(4), the court could determine the amount owing to counsel - A court acting under s. 32(4)(a) had the authority to determine the fees owing after considering and weighing all relevant factors - Perell, J., was not bound to apply the base fee/multiplier analysis in s. 33(7) - He committed no error in exercising his authority under s. 32(4) to determine class counsel fees without applying the base fee/ multiplier analysis - See paragraphs 62 to 78.

Barristers and Solicitors - Topic 3311

Compensation - Measure of compensation - Class actions - Plaintiffs in a class proceeding alleged that they were charged a criminal rate of interest by the defendants for "payday loans" - A mid-trial mediation led to settlement which included payment of $27.5 million to the settlement class, forgiveness of indebtedness and provision of future transaction credits - Class counsel sought approval of a counsel fee of $27.5 million - Perell, J., approved the settlement and fixed class counsel fees at $14.5 million - Class counsel appealed, asserting, inter alia, that Perell, J., erred in failing to allow class counsel fees that were fair and reasonable - The Ontario Court of Appeal dismissed this ground of appeal - Perell, J., refused to accept class counsel's assertion that they deserved fees of $27.5 million for achieving a settlement that was worth $120 million because he disagreed that the settlement was worth $120 million - There was "an abundant basis" for his finding that the settlement was not worth $120 million - Another important factor was the $13 million that became available for distribution to the class on fixing class counsel fees at $14.5 million, rather than $27.5 million - Perell, J., stressed that the approved settlement was one in which class counsel's fees did not "take up all the cash portion of the settlement" - Perell, J., noted that placing importance on providing fair and reasonable compensation to counsel and providing incentives to lawyers for undertaking class actions did not mean that the court "should ignore the other factors that are relevant to the determination of a reasonable fee" - There was no reason for interfering with Perell, J.'s exercise of discretion here - See paragraphs 79 to 102.

Barristers and Solicitors - Topic 3311

Compensation - Measure of compensation - Class actions - Plaintiffs in a class proceeding alleged that they were charged a criminal rate of interest by the defendants for "payday loans" - A mid-trial mediation led to settlement which included payment of $27.5 million to the settlement class, forgiveness of indebtedness and provision of future transaction credits - Class counsel sought approval of a counsel fee of $27.5 million - Perell, J., approved the settlement and fixed class counsel fees at $14.5 million, including disbursements of $1,053,621.31 - The disbursements included the fees of certain consultants and other counsel retained by class counsel that they had requested be treated as contingency fees - Class counsel appealed, asserting, inter alia, that Perell, J., had erred by refusing to treat the fees payable to the consultants, PricewaterhouseCoopers and Anand, on the contingency basis on which they were retained - The Ontario Court of Appeal dismissed this ground of appeal - The grammatical and ordinary sense of ss. 32 and 33 of the Class Proceedings Act, which dealt with fees and disbursements, read in the context of the entire statute and considered in light of its purpose led the court to conclude that the legislature did not intend to grant the court jurisdiction to allow service providers a premium for providing their services on a contingency basis - The legislature's intent was to authorize the court to allow class counsel a premium or multiplier for the risk incurred if they took a case on a contingency basis - The court agreed with Perell, J., that what class counsel was seeking "would amount to a fundamental change to the design of the Act" - See paragraphs 103 to 115.

Barristers and Solicitors - Topic 3311

Compensation - Measure of compensation - Class actions - Plaintiffs in a class proceeding alleged that they were charged a criminal rate of interest by the defendants for "payday loans" - A mid-trial mediation led to settlement which included payment of $27.5 million to the settlement class, forgiveness of indebtedness and provision of future transaction credits - Class counsel sought approval of a counsel fee of $27.5 million - Perell, J., approved the settlement and fixed class counsel fees at $14.5 million, including disbursements of $1,053,621.31 - The disbursements included the fees of certain consultants and other counsel retained by class counsel that they had requested be treated as contingency fees - Class counsel appealed, asserting, inter alia, that Perell, J., had erred by refusing to treat the fees payable to the consultants, Fraser Milner Casgrain LLP and Krishna, on the contingency basis on which they were retained - Class counsel asserted that these consultants were lawyers who became part of the class counsel team and that their fees were to be treated as class counsel fees - The Ontario Court of Appeal dismissed this ground of appeal - As the material before Perell, J., did not show that the representative plaintiff made or was even aware of any change in the composition of counsel representing him or that either of these consultants functioned in a solicitor and client relationship with him, there was no error in the treatment of these fees as disbursements rather than as part of class counsel fees - See paragraphs 116 to 132.

Courts - Topic 2004

Jurisdiction - General principles - Inherent jurisdiction (incl. parens patriae jurisdiction and jurisdiction to stay an action) - [See first Barristers and Solicitors - Topic 3311 ].

Practice - Topic 209.6

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Representative plaintiff - Compensation to - Plaintiffs in a class proceeding alleged that they were charged a criminal rate of interest by the defendants for "payday loans" - A mid-trial mediation led to settlement which included payment of $27.5 million to the settlement class, forgiveness of indebtedness and provision of future transaction credits - Class counsel sought approval of a counsel fee of $27.5 million - Perell, J., approved the settlement, allowed the representative plaintiff compensation of $3,000 to be paid out of class counsel fees and fixed class counsel fees at $14.5 million - Class counsel appealed, asserting, inter alia, that Perell, J., erred by not ordering that the representative plaintiff's compensation was to be paid out of the settlement fund - The Ontario Court of Appeal allowed this ground of appeal - Generally, the representative plaintiff's fee should be paid out of the settlement fund and not out of class counsel fees - Class counsel fees were predicated on the work done for the class - Allocating a part of that fee to a layperson, especially a representative plaintiff, raised the specter of fee splitting - The $3,000 compensation for the representative plaintiff was to be paid out of the settlement fund - See paragraphs 133 to 136.

Practice - Topic 687

Parties - Adding or substituting parties - Intervenors - Amicus curiae - [See first Barristers and Solicitors - Topic 3311 ].

Statutes - Topic 502

Interpretation - General principles - Intention of Parliament or legislature - [See fifth Barristers and Solicitors - Topic 3311 ].

Statutes - Topic 516

Interpretation - General principles - Ordinary meaning of words - [See fifth Barristers and Solicitors - Topic 3311 ].

Cases Noticed:

McCarthy et al. v. Canadian Red Cross Society et al., [2001] O.T.C. 470; 8 C.P.C.(5th) 349 (Sup. Ct.), refd to. [para. 17].

Lawrence et al. v. Atlas Cold Storage Holdings Inc. et al. (2009), 257 O.A.C. 39; 311 D.L.R.(4th) 323 (C.A.), refd to. [para. 18].

Killough et al. v. Canadian Red Cross Society et al., [2001] B.C.T.C. 198; 85 B.C.L.R.(3d) 233 (S.C.), refd to. [para. 25].

Killough et al. v. Canadian Red Cross Society et al., [2001] B.C.T.C. 1060; 91 B.C.L.R.(3d) 309 (S.C.), refd to. [para. 26].

Baxter et al. v. Canada (Attorney General) et al., [2006] O.T.C. 1346; 83 O.R.(3d) 481 (Sup. Ct.), refd to. [para. 27].

Frohlinger v. Nortel Networks Corp. et al., [2007] O.T.C. 85; 40 C.P.C.(6th) 62 (Sup. Ct.), refd to. [para. 27].

Zucker v. Franklin (2004), 374 F.3d 221 (3rd Cir.), refd to. [para. 29].

Weinberger v. Great Northern Nekoosa Corp. (1991), 925 F.2d 518 (1st Cir.), refd to. [para. 29].

Miller v. Mackey International Inc. (1976), 70 F.R.D. 533 (S.D. Fla.), refd to. [para. 30].

Crown Bay Hotel Limited Partnership v. Zurich Indemnity Co. of Canada - see Bird et al. v. Zurich Indemnity Co. of Canada.

Bird et al. v. Zurich Indemnity Co. of Canada (1998), 62 O.T.C. 71; 40 O.R.(3d) 83 (Gen. Div.), agreed with [para. 56].

Nantais v. Telectronics Proprietary (Canada) Ltd. (1996), 28 O.R.(3d) 523 (Gen. Div.), agreed with [para. 57].

Garland v. Enbridge Gas Distribution Inc., [2006] O.T.C. 1293; 56 C.P.C.(6th) 357 (Sup. Ct.), agreed with [para. 59].

Gagne v. Silcorp Ltd. (1998), 113 O.A.C. 299; 41 O.R.(3d) 417 (C.A.), refd to. [para. 61].

Martin v. Barrett, [2008] O.J. No. 3813 (Sup. Ct.), refd to. [para. 69].

Vitapharm Canada Ltd. v. F. Hoffmann-La Roche Ltd. - see Ford et al. v. Hoffman-La Roche Ltd. et al.

Ford et al. v. Hoffmann-La Roche Ltd. et al., [2005] O.T.C. 208 (Sup. Ct.), refd to. [para. 72].

Fantl v. Transamerica Life Canada (2009), 249 O.A.C. 58; 95 O.R.(3d) 767 (C.A.), dist. [para. 119].

Windisman v. Toronto College Park Ltd. (1996), 10 O.T.C. 375; 3 C.P.C.(4th) 369 (Gen. Div.), refd to. [para. 134].

McCutcheon v. Cash Store Inc., [2008] O.J. No. 5241 (Sup. Ct.), refd to. [para. 134].

Walker v. Union Gas Ltd., [2009] O.T.C. Uned. 361; 74 C.P.C.(6th) 366 (Sup. Ct.), refd to. [para. 134].

Statutes Noticed:

Class Proceedings Act, S.O. 1992, c. 6, sect. 32 [para. 52]; sect. 33 [para. 50].

Authors and Works Noticed:

Watson, Gary, Settlement Approval - The Most Difficult and Problematic Area of Class Action Practice (2008), generally [para. 23].

Winkler, C.J.O., and Matthews, Sharon D., Caught In a Trap - Ethical Considerations for the Plantiff's Lawyer in Class Proceedings (2008), online: ‹‹http://www.ontario courts.on.ca/coa/en/ps/speeches/caught.htm››, generally [para. 24].

Counsel:

Terrence J. O'Sullivan and James Renihan, for the appellants;

Chris Hubbard, for Money Mart (not participating in appeal);

Mahmud Jamal and Jason MacLean, for Dollar Financial Group, Inc. (not participating in appeal).

This appeal was heard on October 25, 2010, by Moldaver, Armstrong and Juriansz, JJ.A., of the Ontario Court of Appeal. On March 28, 2011, Juriansz, J.A., delivered the following judgment for the court.