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No deep freeze in Ontario

|Written By Gretchen Drummie

Having a so-called loser pays costs system in Ontario has held the pause button on unnecessary steps in class action litigation, says a lawyer who works in the field.

‘If costs awards have a moderating effect on the general temperature of class actions litigation, this is a welcome trend,’ says Adrian Lang.

And, while some have predicted large costs awards could create a “chilling effect” on access to justice, there’s no sign of a deep freeze in this province, says Adrian Lang, a partner with the litigation department in the Toronto office of Stikeman Elliott LLP.  

In fact, instead she says there’s been an increase in the speed with which class proceedings are commenced, and “the sophistication of the plaintiffs’ counsel syndicates which get formed.”

Whether it’s because most plaintiffs’ counsel now routinely “indemnify representative plaintiffs from costs liability, or because the presence of the Class Proceedings Fund, class proceedings continue to flourish despite the risk of a large costs award,” says Lang.

“If costs awards have a moderating effect on the general temperature of class actions litigation, this is a welcome trend.”

Even though costs can be onerous - especially if the case is on a contingency basis - they’re actually under control and not getting wildly out of whack, Lang tells Law Times.

 “I think probably the most recent developments in costs really stem from the Kerr v. Danier Leather Inc. case, but for costs in class actions in general in Ontario, I don’t think there’s an increase in costs awards and I don’t think there’s a decrease,” says Lang.

 “I think what we’re seeing is that while in the early days there was more of an emphasis on the fact that this was a new breed of case that warranted special cost considerations, the courts are now willing to take a harder look at the underlying motions themselves for which costs are sought and say, ‘Is this an unusual motion, forget that it’s in the context of a class proceeding.’ And if it’s not, there are going to be the same costs consequences as any other kind of case.”

It’s the “right approach,” adds Lang who is defence counsel.

“I think that we have a costs regime that is a loser pays regime and I do think that causes people to think before they start any litigation,” she says.

Lawyers counsel clients that they can start a proceeding, but tell them that, “‘You have to keep in mind that if we bring a motion that’s unnecessary, or take an unnecessary step, you will have to pay not only your own costs you’ll have to pay the other side’s legal costs.’ I wouldn’t call it a chilling effect but I’d call it a sober second thought and I think that’s a good thing in our system.”

Lang says the concern in jurisdictions with a no-costs regime for class actions would be that you would have people “taking fliers on cases knowing that they won’t have to pay for costs for unnecessary steps in litigation so you would be faced with an increase in both unnecessary actions and steps in actions. . . . Now whether that’s actually borne out or not, I don’t know, but I believe that in Ontario certainly the costs regime has created more of a pause on unnecessary steps on both sides of the case both defence and plaintiffs.”

As for access to justice, Lang doesn’t think the prospect of costs is affecting the issue, mainly because “we have a very healthy plaintiffs’ counsel bar here and so we don’t see a lot of really frivolous actions here. I think plaintiffs’ counsel think quite carefully about the cases that they do bring because they are often doing them on contingency and they’ve usually indemnified the plaintiffs and so they themselves are careful about the cases they bring.”

She notes that access to justice is also paved in this province with the Class Proceedings Fund. Under the fund, a representative plaintiff can apply for funding for disbursements to insulate themselves from an adverse costs award, she says. When the application is accepted, the defendant’s claim for costs is against the fund rather than the representative plaintiff. In exchange, the recipients must repay amounts received and give the fund a 10-per-cent share of an award or settlement.

Because the fund indemnifies the plaintiffs’ counsel entirely for the disbursements, they are protected.

Lang says indemnification against potential adverse awards removes a barrier, and a favourable result allows a plaintiff to “predict his or her own liability for costs and significantly limit the likelihood that those with valid claims will stay home for fear of risking an adverse costs award.”

Meanwhile, Lang says, “if costs awards have a moderating effect on the general temperature of class actions litigation, this is a welcome trend.” In fact, she adds that the courts should continue to make adverse cost awards against unsuccessful representative plaintiffs as they have not resulted in a chilling effect and “do not defeat the objectives of the Class Proceedings Act, but rather reflect the risks involved in pursuing high stakes class actions.”

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