Ontario Superior Court adds class counsel to costs award in decertified class action

Background

The action was initially certified as a class proceeding in 2021 but was decertified in 2023 after virtually all proposed class members opted out of the proceeding. Following decertification, the Court awarded the defendants $100,000 in costs.

Nearly three years later, the costs award remained unpaid. The defendants brought a motion seeking to have class counsel added to the costs order, arguing that the original order had been made on the understanding that class counsel would bear responsibility for any adverse costs exposure faced by the representative plaintiff. Legal counsel for the law firm representing the class argued that the Court could not vary the cost order on the basis that it was functus.

The decision

Justice Morgan concluded that the Court was not functus and retained jurisdiction to revisit the costs order under Rule 59.06 of the Rules of Civil Procedure because material facts had come to light after the original order was issued. Specifically, the Court found that the assumption underlying the original costs ruling—that class counsel would stand behind any adverse costs award against the representative plaintiff—appeared not to reflect the reality that subsequently emerged.

The Court reviewed established jurisprudence recognizing that representative plaintiffs in class proceedings are generally protected from personal exposure to significant adverse costs and that indemnification arrangements from class counsel have become a common and expected feature of Ontario class actions.

Justice Morgan also emphasized the Court’s supervisory role in class proceedings and held that both its inherent jurisdiction and its broad case-management powers under the Class Proceedings Act, 1992, supported varying the order where necessary to achieve a fair and equitable result.

Key findings

The Court found that:

• The original costs order was made on the premise that class counsel would assume responsibility for adverse costs awarded against the representative plaintiff.
• The defendants should not be required to undertake extensive enforcement measures against the representative plaintiff where standard class action practice contemplates protection from such personal exposure.
• It would be unfair to require the representative plaintiff to personally bear the costs consequences of litigation pursued on behalf of a class, or to engage in further litigation against his own counsel to obtain the benefit of any indemnity arrangement.
• The circumstances justified varying the order to include class counsel as a party responsible for payment of the costs award.

Result

The Court varied its earlier costs order and added Monkhouse Law Professional Corporation, as class counsel, as a party responsible for payment of the defendants’ $100,000 costs award. The issue of costs of the motion itself was deferred pending written submissions.

Why this decision matters

This decision reinforces the Ontario courts’ expectation that representative plaintiffs in class proceedings will be protected from significant adverse costs exposure and highlights the Court’s willingness to exercise its supervisory authority where the conduct of a class proceeding departs from established class action practice. The ruling also confirms that, in appropriate circumstances, a court may revisit and vary an existing costs order when new facts emerge that undermine assumptions underlying the original decision.

Notably, this development may further encourage plaintiffs to bring class actions in jurisdictions such as British Columbia, where the no-costs regime offers greater protection from adverse costs exposure. As a result, this decision is expected to reinforce the ongoing shift of class actions to British Columbia and may further accelerate the migration of these proceedings from Ontario.

DLA Piper acted as counsel to the defendants in this matter. The authors, Richelle Pollard and Stephen Gleave, were lead lawyers for the defendants.