The Dirty Dozen: Unpredictability and Uncertainty in the Application of Party-and-party Costs at the Failed Certification Stage

• Author: Trevor Shaw
• Pages: 399-435

399

THE DIRTY DOZEN:

UNPREDICTABILITY AND

UNCERTAINTY IN THE APPLICATION

OF PARTY-AND-PARTY COSTS AT THE

FAILED CERTIFICATION STAGE

Trevor Shaw1

A. IN TRODU CTION

The legal landscape in Canada underwent a period of reform and renewal

at the end of the twentieth century. This modern transformation took

place amid a legal landscape where complexity and cost were often prov-

ing prohibitive to many individuals seeking to put forward meritorious

claims, were wasting judicial resources, and were, in some cases, making

the law an ineffective tool for preventing harmful behaviour. In the mod-

ern legal landscape, the need for reform was clear.

With an aim to reform the modern legal landscape, Ontario legalized

class proceedings by enacting the Class Proceedings Act, 1992,2 which,

for the first time, provided a system through which multiple similar dis-

putes could be resolved, or at least advanced, by at least one individual

on behalf of an entire class. With both the U.S. and Quebec as models,

and utilizing the research of both the Ontario Law Reform Commission’s

Report on Class Actions3 and the Ontario Attorney General’s Advisory

1 Trevor Shaw graduated this past spring from Queen's Law School as a member

of the class of 2005. While at Queen’s, he was very involved in the Faculty

of Law and was the Law Students’ Society President in 2004–2005. Trevor is

currently articling at Lerners LLP in Toronto where he summered in 2004. He

wishes to thank Lisa Munro of Lerners LLP for the initial introduction into

class proceedings in Ontario, Professor Larissa Katz of Queen’s Faculty of Law

for her assistance in the initial drafts of the paper, and Denise Sayer for her edi-

torial guidance and support.

2 Class Proceedings Act, 1992, S.O. 1992, c. 6 [CPA].

3 Ontario Law Reform Commission, Report on Class Actions (Toronto: Ministry of

the Attorney General, 1982) [OLRC Report].

400 THE CANADIAN CLASS ACTION REVIEW

Committee on Class Action Reform’s Report on Class Action Reform,4

Ontario introduced comprehensive class proceedings legislation. The

CPA necessarily reformulated the modern legal landscape by creating a

procedural mechanism which has provided for greater access to justice

for individual litigants, increased judicial economy to the benefit of all

litigants, and encouraged the behavioural modification of those actors

committing harms.

Relying on the research of the very similar OLRC Report and the

Report on Class Action Reform, the CPA strongly reflects their recom-

mendations. The most significant difference between the two reports,

a difference reflected in the CPA, was with regards to the disposition of

costs. The cost provisions ultimately enacted in the CPA reflected the

recommendations of the Report on Class Action Reform,5 a report which

recommended that costs be left largely to the discretion of the courts with

some statutory guidance.

Section 31(1) of the CPA was held by the court in Garland v.

Consumers’ Gas Co.6 to be the enactment of this statutory guidance and

is a reflection of the recommendation of the Report on Class Action

Reform.7 Section 31(1) states that costs remain in the discretion of the

court in accordance with section 131 of the Courts of Justice Act,8 while

also directing the court, in exercising its discretion, that it “may consider

if the class proceeding was a test case, raised a novel point of law, or

involved a matter of public interest.”9

Since the CPA was enacted with the three underlying objectives

of access to justice, judicial economy, and behavioural modification, it

would be reasonable to assume it would create the framework neces-

sary for those goals to be achieved. Yet with regards to the disposition

of party-and-party costs, it is unclear the extent to which these three

underlying objectives are being achieved, or the extent to which they are

to be considered when rendering decisions. Through an examination of

costs jurisprudence decided under section 31(1), it is evident that section

31(1) has provided at best uncertain, if not ambiguous, statutory direc-

tion for dealing with costs in class proceedings.

4 Ontario, Attorney General’s Advisory Committee on Class Action Reform,

Report of the Attorney General’s Advisory Committee on Class Action Reform

(Toronto: The Committee, 1990) [Report on Class Action Reform].

5 Ibid.

6 (1995), 22 O.R. (3d) 767 (Gen. Div.) at 776 [Garland].

7 Report on Class Action Reform, above note 4 at 49.

8 Courts of Justice Act, R.S.O. 1990, c. C.43.

9 CPA, above note 2, s. 31(1).

VOL UME 2, No 2, december 2005 401

The uncertain statutory direction of section 31(1) is important

because without clear direction, party-and-party costs remained solely

to be dealt with by the courts’ residual discretion as provided for under

section 131 of the Courts of Justice Act.10 While the courts in Canada have

always retained discretion for the disposition of costs,11 this discretion has

developed within the regular litigation environment on the basis of an

underlying principle of fairness. This principle of fairness creates a loser

pays system of costs and is premised on the idea that the party who lost

during the litigation process ought to have known they were going to lose

and, as such, it is only fair that they be burdened with the unnecessary

costs incurred by the other party in participating in the litigation. This

underlying principle of fairness applies best in situations where a system’s

substantive law, procedural practices, and judicial staffing provide a

degree of predictability to the legal system and its decisions. During the

first twelve years of the CPA it lacked both the procedural practices and

the substantive law to provide this degree of predictability.

Class proceedings litigation is distinct from traditional litigation in

a number of ways, most notably in the need for the class proceeding to

be certified by the courts as an appropriate case before it can proceed

as such. While the CPA explicitly provides in section 5(1)12 the criteria

under which the court shall grant certification of a class proceeding, the

listed criteria have gone through considerable judicial interpretation

since they were enacted. During the initial period of class proceeding liti-

gation, the lack of decided case law in relation to the certification criteria

necessarily meant that success could not easily be predicted by either

the representative plaintiff or the defendant. It was likely this foreseen

environment of unpredictability that the OLRC Report sought to address

in its recommendation for no-costs at the certification stage. During the

twelve years the CPA has existed, the development and interpretation of

the certification criteria under section 5(1) has contributed significantly

to the predictability of certification motions, while its initial absence sug-

gests that the costs based on an underlying principle of fairness, was, at

least in the beginning of the CPA, inappropriate.

Not only did the undeveloped certification criteria of section 5(1)

provide a representative plaintiff with inadequate direction as to potential

10 Courts of Justice Act, above note 8.

11 Discretion over costs has evolved from the courts of Equity in Britain and was

integrated into our legal framework during our time as a developing British

colony.

12 CPA, above note 2, s. 5(1).