Date: 20120209
Docket: A-160-10
Citation: 2012 FCA 45
CORAM: PELLETIER
J.A.
EVANS
J.A.
LAYDEN-STEVENSON
J.A.
BETWEEN:
BERNARD VINCENT CAMPBELL,
SHARLE EDWARD WIDENMAIER,
LENARD ROY LINK, and WILLIAM A. HEIDT
Appellants
and
THE ATTORNEY GENERAL OF CANADA
and THE MINISTER OF NATIONAL DEFENCE
Respondents
REASONS FOR JUDGMENT
PELLETIER J.A.
[1] The issue in this appeal is
the scope of Rule 334.39(1) of the Federal Courts Rules, SOR/98-106 [the
Rules], which confers a certain immunity from costs on parties to class
proceedings. Madam Justice Hansen of the Federal Court (the Motions Judge or
the Judge), in a decision reported as Campbell v. Canada (Attorney General),
2010 FC 279, [2010] F.C.J. No. 576, decided that the defendants, the Attorney
General of Canada and the Minister of National Defence (collectively Canada),
were entitled to their costs, up to but not including the motion for
certification. The issue of costs arose because the action was discontinued
before the certification motion was heard. The plaintiffs appeal from this
order.
[2]
For the
reasons that follow, I would allow the appeal and return the matter to the
Motions Judge to determine if, in light of paragraphs 334.39(1) (a), (b)
or (c) of the Rules, an award of costs should be made.
THE FACTS
[3]
The
appellants, former members of the Canadian forces, allege that they were
exposed to chemical and biological warfare compounds at various locations in Canada between 1940 and 1945. They
allege that they suffered injury as a result.
[4]
The
appellants’ statement of claim was issued on November 7, 2006. On May 28, 2007
they served and filed their certification motion with supporting affidavits.
At the same time, Canada served and filed a motion to
strike out the statement of claim. Cross-examinations on the parties’
affidavits took place in October 2007 over a period of some seven days in
Saskatoon, Victoria and Montreal.
[5]
The
hearing of the motion to strike out the statement of claim and the motion for
certification was scheduled for December 11 to 14, 2007. The argument with
respect to the motion to strike was completed on December 13, 2007 and judgment
was reserved. By consent, the argument of the certification motion was
adjourned to February 19 to 22, 2008 so as to permit it to be heard in one
sitting.
[6]
To this
point, the proceedings were a model of procedural orderliness. However, from
the close of sittings in December 2007 until the eventual discontinuance of the
action in January 2009, procedural orderliness gave way to disarray and a
duplication of efforts already expended.
[7]
In January
2008, in addition to requesting further production of documents, the appellants
circulated an amended statement of claim that had not yet been filed. At a Case
Management Conference in late January, the appellants undertook to file this
amended statement of claim. The Court then asked for submissions as to the
effect of the amended statement of claim on the motions that were pending
before the Court. On January 24, 2008, the Court decided that the amended
statement of claim rendered Canada’s motion to strike moot,
dismissed it, and reserved its decision on the matter of costs.
[8]
In early
February 2008, Canada served and filed another
motion to strike out the appellants’ statement of claim, as amended, together
with a motion seeking an adjournment of the certification motion. The request
for an adjournment of the certification motion was granted. Canada was also granted leave to
file new affidavits and to conduct further cross-examination on the appellants’
affidavits.
[9]
In March
2008, the Court determined that Canada’s
second motion to strike should be heard before the appellants’ motion for
certification. The Court also set out a timetable with respect to the
certification motion. In April 2008, Canada
served the appellants with four affidavits, comprised of 996 pages in total, in
support of its motion to strike and in June 2008, it served and filed its
motion record for its second motion to strike.
[10]
On June
25, 2008, the appellants served Canada
with a notice of discontinuance of their action without having obtained leave
of the Court. Subsequently, in July 2008, the appellants and others commenced
a proposed class action, in relation to substantially the same subject matter,
in the Court of Queen’s Bench for Saskatchewan.
[11]
On July
15, 2008, the Court ruled that the appellants were required to obtain leave of
the Court to discontinue their action. On September 3, 2008, the Court heard
argument on the motion for discontinuance and on January 9, 2009, it gave the
appellants leave to discontinue their action. The issue of costs remained
outstanding.
[12]
In due
course, Canada brought a motion seeking its
costs for all steps taken in the action, arguing that since the action had
never been certified as a class proceeding, the normal rule as to costs
applied.
THE DECISION UNDER APPEAL
[13]
Rule
334.39(1) is set out below:
|
334.39
(1) Subject to subsection (2), no costs may be awarded against any party to a
motion for certification of a proceeding as a class proceeding, to a class
proceeding or to an appeal arising from a class proceeding, unless
(a) the
conduct of the party unnecessarily lengthened the duration of the proceeding;
(b)
any step in the proceeding by the party was improper, vexatious or unnecessary
or was taken through negligence, mistake or excessive caution; or
(c) exceptional
circumstances make it unjust to deprive the successful party of costs.
|
334.39 (1) Sous réserve du paragraphe (2), les dépens ne sont
adjugés contre une partie à une requête en vue de faire autoriser l’instance
comme recours collectif, à un recours collectif ou à un appel découlant d’un
recours collectif, que dans les cas suivants :
a) sa
conduite a eu pour effet de prolonger inutilement la durée de l’instance;
b) une
mesure prise par elle au cours de l’instance était inappropriée, vexatoire ou
inutile ou a été effectuée de manière négligente, par erreur ou avec trop de
circonspection;
c) des
circonstances exceptionnelles font en sorte qu’il serait injuste d’en priver
la partie qui a eu gain de cause.
|
[14]
Subsection
(2), referred to in the opening words of the subsection 334.39(1), is not
material to this appeal.
[15]
After
summarizing the arguments of the parties, the Judge reviewed some of the
jurisprudence from British Columbia upon which Canada relied in support of its motion for
costs. Canada argued that the British Columbia jurisprudence supported the
conclusion that until an action was certified, the normal rule as to costs
applied: see Consumers' Assn. of Canada v. Coca-Cola
Bottling Co., 2007 BCCA 356, [2007] B.C.J. No.
1625 [Consumers’ Assn.], at para. 12; Killough
v. Canadian Red Cross Society, [1998] B.C.J. No.
3019 [Killough], at para. 15; and Edmonds
v. Actton Super-Save Gas Stations Ltd., [1996]
B.C.J. No. 2051, 5 C.P.C. (4th) 105, [Edmonds], at para. 4.
[16]
The Judge found that the cases relied upon by Canada did not
support its contention that immunity from costs did not come into play until a
proposed class proceeding was certified.
[17]
The Judge found that Canada’s claim
for costs in respect of the certification motion was at odds with the wording
of Rule 334.39(1), which specifically precludes an award of costs in relation
to a motion for certification. The Judge also rejected Canada’s
argument that it was entitled to costs in relation to other steps taken in the
action on the basis of the exceptions set out in Rule 334.39(1). She rejected
the latter argument, reasoning that the exceptions were meant to apply only to
the proceedings described in Rule 334.39(1); they could not be used as a basis
for awarding costs with respect to other proceedings. The Judge also found
that the exceptions did not apply to the motion for certification in this case
since “at the time the motion was filed and the work was done by the parties,
it was an appropriate and timely step in the proceedings”: see paragraph 15.
[18]
In the end, the Judge awarded Canada its costs
for all steps taken in the proceeding other than the certification motion. The
Judge relied on Rule 402 of the Rules which provides that a party
against whom an action is discontinued is, unless otherwise ordered, entitled
to costs. While acknowledging that the Rules incorporate a “no costs”
regime in relation to class proceedings, the Judge found that nothing in the
circumstances of the case warranted a departure from Rule 402.
[19]
However, the Judge did not award Canada its full
claim for costs. After reviewing a number of considerations, the Judge awarded
costs in a lump sum “in light of the history of the matter”, by which I assume
she meant the fractious relationship between the parties and their counsel.
The Judge awarded Canada costs of $60,000, inclusive
of disbursements. This was a substantial discount on the original $137,676.59
sought by Canada. The Judge discounted Canada’s claim
for the costs of the certification motion itself on the basis of Rule
334.39(1).
ANALYSIS
Standard of Review
[20]
A trial
judge’s decision on costs is a discretionary decision and is entitled to
deference from an appellate court. The latter will not interfere unless the
decision is based on an error of law, a misapprehension as to the facts or the
judge has failed to take into account all relevant considerations: see Monsanto
Canada Inc. v. Schmeiser, 2002 FCA 449, [2002] F.C.J. No. 1604 at para. 2.
The Interpretation of Rule 334.39(1)
[21]
At the
hearing of this matter, the argument centered on the question of whether Rule
334.39(1) applied at all, since the appellants discontinued their action prior
to certification. The Attorney General argued that Rule 402, which deals with
costs in the event of a discontinuance, applied to the facts of this case. The
appellants argued that the policy behind the “no costs” rule should inform the
interpretation of Rule 334.39(1) so that no costs should be awarded, whether in
respect of the certification motion itself or any other proceeding ancillary to
that motion. The Motions Judge, as noted, took the position that the immunity
from costs applied only to the proceedings described in Rule 334.39(1) but not
to other proceedings.
[22]
There has
been little consideration of this issue in the jurisprudence of the Federal
Court. Aside from the present case, the question of costs under Rule 334.39(1)
has only been considered in two cases. The first is Pearson v. Canada
(Minister of Justice), 2008 FC 1367, [2008] F.C.J. No. 1797 [Pearson],
a proposed class action in which the statement of claim was struck out, prior
to the hearing of the certification motion, for failing to disclose a cause of
action . At paragraph 52 of his reasons dismissing the plaintiffs’ claim,
Hughes J. wrote:
This is a motion brought before the
action has been certified as a class action and is dispositive of the action.
The class action rules and concepts such as one-way costs, even if applicable
at a later stage, are not yet engaged.
[23]
To my
knowledge, the only other Federal Court case in which the question of costs
arose is Always Travel Inc v. Air Canada, 2004 FC 675, [2004] F.C.J. No.
832 [Always Travel], a proposed class action by travel agents against a
number of airlines. In that case, it appears that the motion for certification
had been filed, though no further steps were to be taken with respect to that
motion until further order. In disposing of two motions after the filing of the
certification motion, Hugessen J. awarded costs against the plaintiffs in one
of the motions, and declined to award costs against certain defendants in the
other. In both cases, the learned Judge relied upon the exceptions to the rule
limiting costs in class actions.
[24]
In
the case of the plaintiffs, Hugessen J. found that their conduct was vexatious
and justified an order of costs “in the special
circumstances, notwithstanding the general no costs rule contained in Rule
299.41(1) [the predecessor to Rule 334.39(1)]”: Always Travel, at para.
9. In the case of the defendants, Hugessen J. wrote: “I do not think that the
criteria laid down in Rule 299.41(1) (above) which are a prerequisite to my
making an order for costs have been met”: Always Travel, at para. 11.
[25]
The difference between these two cases is that in Pearson,
it was held that the “no costs” rule did not apply until the action was
certified as a class proceeding, while in Always Travel, the “no costs”
rule (including the exceptions to the rule) was applied prior to certification
of the action.
[26]
Some
guidance as to the intention of the Rules Committee with respect to the
“no-costs” rule may be found in the working papers prepared prior to the
amendments to the class action Rules. The Federal Court of Canada Rules
Committee issued Class Proceedings in the Federal Court of Canada: A
Discussion Paper (Ottawa: June 9, 2000), in which the
issue of cost barriers to representative plaintiffs was raised. The authors of
the Discussion Paper frame the issue at page 97 as follows:
Cost
barriers would exist if representative plaintiffs were fully exposed to a two
way (“losers pay winners”) costs regime. This regime would be a barrier in
light of the fact that most plaintiffs would be exposed to a substantial
downside in terms of costs even as they would have comparatively little to gain
if the class action were successful.
[27]
The Discussion Paper concludes at page 104 that a “no costs”
provision is “an important measure in removing the barriers to class proceedings…”
and records the decision of the Rules Committee as follows:
Decision
#37A
The rule
will contain a provision that, subject to exceptions that are stated, there
shall be no costs awarded in class proceedings…
[28]
The
Rules Amending the Federal Court Rules, 1998 (No.1): Regulatory
Impact Analysis Statement, Canada Gazette, Part I: December 8, 2001, Vol.
135, No. 49, at 1 which accompanied the publication of the proposed Rule
changes, also dealt with the issue of costs:
The discussion paper
[quoted above] indicated that there would be a “no costs” provision. Costs
would not be awarded up to the determination of the common questions subject to
exceptions, including “exceptional circumstances that make it unjust to deprive
the successful party of costs.” …
The suggested Rule
299.4 incorporates this “no costs” (up to the disposition of common questions
subject to exceptions) provision. This “no costs” provision is also
incorporated in the British Columbia Class Proceedings Act, section 37, The
Class Actions Act of Saskatchewan, section 40, and the Uniform Class
Proceedings Act, section 37 (alternative)…
[29]
These
comments suggest that the intention of the proponents of the “no costs” rule
was that no costs would be awarded prior to the determination of the common
questions.
[30]
The fact that a class
proceeding begins its life as a statement of claim to which the normal rule as
to costs applies created a challenge for the legislative draftsman. The
question is, at what point after the issuance of the statement of claim should
the “no costs” rule begin to apply? It must apply early enough in the process
to give substantial protection to the representative plaintiffs but not so
early as to shelter plaintiffs whose actions never proceed to certification.
[31]
With this background
in mind, I reproduce again, for ease of reference, the terms of Rule 334.39(1):
|
334.39
(1) Subject to subsection (2), no costs may be awarded against any party to a
motion for certification of a proceeding as a class proceeding, to a class
proceeding or to an appeal arising from a class proceeding, unless
(a) the
conduct of the party unnecessarily lengthened the duration of the proceeding;
(b)
any step in the proceeding by the party was improper, vexatious or
unnecessary or was taken through negligence, mistake or excessive caution; or
(c) exceptional
circumstances make it unjust to deprive the successful party of costs.
|
334.39 (1) Sous réserve du paragraphe (2), les dépens ne sont
adjugés contre une partie à une requête en vue de faire autoriser l’instance
comme recours collectif, à un recours collectif ou à un appel découlant d’un
recours collectif, que dans les cas suivants :
a) sa
conduite a eu pour effet de prolonger inutilement la durée de l’instance;
b) une
mesure prise par elle au cours de l’instance était inappropriée, vexatoire ou
inutile ou a été effectuée de manière négligente, par erreur ou avec trop de
circonspection;
c) des
circonstances exceptionnelles font en sorte qu’il serait injuste d’en priver
la partie qui a eu gain de cause.
|
[32]
A careful reading of
Rule 334.39(1) reveals at least two possible interpretations. The first is that
no costs can be awarded with respect to a motion for certification, a class
proceeding or an appeal from a class proceeding. According to this interpretation,
immunity from costs attaches to the proceedings designated in the Rule. The
Motions Judge gave effect to this interpretation when she refused to award
costs with respect the certification motion itself, but awarded them with
respect to other steps, specifically the motion to strike the statement of
claim for failing to disclose a cause of action.
[33]
A second
interpretation of Rule 334.39(1) focuses on the words “a party to” so that
costs are not to be awarded against a person who is a party to any of the
designated proceedings. For example, once a party to a proposed class
proceeding becomes a party to a certification motion, that is, once the
certification motion is served and filed, that person is immune from costs with
respect to any and all steps taken before and during the certification
process. If the certification motion is successful, the party is then
sheltered from the costs of the class proceeding by the reference in the Rule
to “any party…to a class proceeding…”. In the present case, this interpretation
would preclude an order for costs for any steps taken after May 28, 2007, the
date the appellants served and filed their motion for certification.
[34]
Presumably, an order
for costs made against a party to a proposed class proceeding prior to that
person becoming a party to a certification motion would not be affected by Rule
334.39(1) but that is not a question which arises on these facts. It is
therefore not one which we have to answer.
[35]
Both of these
interpretations are, of course, subject to the three exceptions set out at
paragraphs 334.39(1) (a), (b) and (c) of the Rule.
[36]
The
jurisprudence of the courts of Saskatchewan and British Columbia tends to the view that immunity from
costs is a function of the proceeding. The “no costs” rule is found at s. 37
of British Columbia’s Class Proceedings Act, R.S.B.C.
1996, c. 50:
37 (1) Subject to
this section, neither the Supreme Court nor the Court of Appeal may award costs to any
party to an application for certification under section 2 (2) or 3, to any
party to a class proceeding or to any party to an appeal arising from a class
proceeding at any stage of the application, proceeding or appeal.
(2) A court
referred to in subsection (1) may only award costs to a party in respect of an
application for certification or in respect of all or any part of a class
proceeding or an appeal from a class proceeding
(a) at any time that the court
considers that there has been vexatious, frivolous or abusive conduct on the
part of any party,
(b) at any time that the court
considers that an improper or unnecessary application or other step has been
made or taken for the purpose of delay or increasing costs or for any other improper
purpose, or
(c) at any time that the court
considers that there are exceptional circumstances that make it unjust to
deprive the successful party of costs.
(3) A court that
orders costs
under subsection (2) may order that those costs be assessed in any manner that
the court considers appropriate.
[37]
Subject to
some differences which are immaterial, the Saskatchewan legislation is essentially identical:
see The Class Actions Act, S.S. 2001, c. C-12.01, s. 40.
[38]
In Edmonds, cited above, at para. 4, the
British Columbia Supreme Court held that the “no costs” rule “only applies and becomes operative once the court embarks upon an
application for certification...”. The Court went on to say the following, at
paragraph 8 of its reasons:
In my view
it is important to recognize that an intended class proceeding, until it is
certified, is an ordinary action governed by the Rules of Court. Even after
certification the Rules of Court apply to the extent that they are not
inconsistent with the Act. While the Class
Proceedings Act does provide that no costs are
recoverable from the plaintiff in respect of a certified action or in respect
of a certification hearing, the statute contains no such provision in respect
of actions prior to the certification hearing stage. In the case at bar there
is nothing which would justify a departure from the usual rule that costs follow
the event. The defendants will have their costs on Scale 3.
[39]
The
Edmonds case is of interest
because of the way in which the British Columbia Supreme Court dealt with the
issue of the starting point for the application of the “no costs” rule. It
chose to apply the “no costs” rule as of the commencement of the hearing of the
certification motion. This has the effect of sheltering parties from the costs
of the certification motion itself, but excludes preliminary matters that may
be intimately related to the certification motion. The adverse consequences of
this choice can be seen in Killough v. Canadian Red Cross Society,
[1998] B.C.J. No. 3019, in which the British Columbia Supreme Court awarded
costs with respect to an unsuccessful motion to adjourn the hearing of the
certification motion. Unfortunately, arbitrariness of this kind will
necessarily arise if the starting point for the application of a “no costs”
rule is anything other than the issuance of the statement of claim itself.
[40]
The British Columbia Court of Appeal referred to Edmonds
without adverse comment in Secure Networx Corp. v. KPMG LLP, 2003 BCCA
227, [2003] B.C.J. No. 903, and in Samos Investments Inc. v. Pattison,
2002 BCCA 442, [2002] B.C.J. No. 1771. In Consumers’ Assn., cited
above, the British Columbia Court of Appeal held that s. 37 of the Class
Proceedings Act did protect parties from costs “but not prior to the
certification application”: Consumers’ Assn., at para. 12.
[41]
The
Saskatchewan Court of Queen’s Bench came to a similar conclusion in McKinnon
v. Martin (Rural Municipality No. 122), 2011 SKQB 313, [2011] S.J. No. 572,
at para. 6, where Mills J. wrote:
In my
opinion, applications prior to certification are subject to the normal
jurisprudence and Rule 545 respecting the award of costs.
[42]
In coming to this conclusion, Mills J. referred to a
decision of the Saskatchewan Court of Appeal in which that Court suggested that
the Saskatchewan “no costs” rule does not apply to applications made prior to
the certification application: see Englund v. Pfizer Canada Inc., 2007
SKCA 62, 284 D.L.R. (4th) 94, at para. 57.
[43]
I
began this analysis by pointing out that Rule 334.39(1) could be construed in
at least two ways. As I read the jurisprudence of the courts of Saskatchewan and
British
Columbia,
they have chosen to attach immunity from costs to the proceeding itself. In
the case of the application for certification, this leaves representative
plaintiffs exposed to costs for steps taken prior to the certification motion,
although such steps may be intimately connected with that proceeding: see for
example, Killough, cited above.
[44]
In
my view, this approach gives too narrow a scope to the “no costs” rule. If one
accepts that the intention of the proponents of the “no costs” rule was to
limit the role of costs as a disincentive to class action plaintiffs, then one
should construe the rule so that it does so.
[45]
I
believe that the construction of Rule 334.39(1) that gives fullest effect to
the intention of the Rules Committee is to have the “no costs” rule apply as
soon as the parties to the action are made parties to the certification
motion. While this still leaves room for the possibility of an award of costs
in relation to a step undertaken after the issuance of the statement of claim
but prior to the service and filing of the certification motion, the scope for
costs orders is reduced to a minimum, having regard to the wording of Rule
334.39(1) itself. If one assumes that the bringing of the motion for
certification will follow the issuance of the statement of claim without delay,
the risk to representative plaintiffs would appear to be minimal.
[46]
To
the extent that an expansive interpretation of the “no costs” rule has the
potential to shelter a party’s improper or abusive behaviour, it is important
to remember that paragraphs (a), (b) and (c) of Rule
334.39(1) give the Court the option of imposing costs where the conduct of a
party justifies such an award.
[47]
As
a result, I would find that the appellants were immune from costs, subject to
paragraphs 334.39(1) (a), (b) and (c), as of May 28, 2007,
which is the date the certification motion was filed. Since all of the matters
that could have given rise to an award of costs occurred after that date (save
for one motion), the Motions Judge erred in law in awarding costs as she did.
However, the Motions Judge did not address the question of whether the
appellants’ conduct fell within one of the exceptions to the “no costs” rule.
She did refer to the application of paragraphs 334.39(1) (a), (b)
and (c) but only to the extent of saying that they did not provide a
basis for awarding costs where Rule 334.39(1) itself did not apply
CONCLUSION
[48]
I would
therefore allow the appeal, set aside the Order of the Federal Court and return
the matter to the Motions Judge for a decision as to whether, in light of
paragraphs 334.39(1) (a), (b) or (c), an
award of costs should be made.
J.A.
“ I
agree
John
M. Evans”
“ I
agree
Carolyn
Layden-Stevenson”
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