Indexed as:
Authorson (Litigation guardian of) v. Canada (Attorney
General)
PROCEEDING UNDER the Class Proceeding Act, 1992
Between
Joseph Patrick Authorson, by his Litigation Guardian, Lenore
Majoros, plaintiffs, and
The Attorney General of Canada, defendant
[2001] O.J. No. 2924
[2000] O.T.C. 719
106 A.C.W.S. (3d) 988
Court File No. 99-GD-45963
Ontario Superior Court of Justice
Brockenshire J.
June 29, 2001.
(39 paras.)
Crown -- Actions by and against Crown in right of Canada -- Practice -- Class or representative actions, for damages -- Costs -- Solicitor and client costs -- Entitlement to solicitor and client costs -- Measure of solicitor and client costs -- Disbursements -- Expenses for media consultants.
Application by the class action plaintiffs for an assessment of their solicitor and client costs. The plaintiffs were incapacitated war veterans who sought interest on their pension benefits from the defendant Federal Government. On summary judgment, the Government was found liable for the payments. This was complex litigation with many novel procedural and substantive issues. It involved a national class with claims that went back 70 years. There were thousands of veterans' accounts. The action involved a substantial amount of documentation. The potential amount of the claim was $3 billion. The quantum of damages would have to be dealt with separately. During the course of plaintiffs' counsel preparation, a potential further class was discovered. The existence of this class would necessitate further legal proceedings. The plaintiffs claimed solicitor and client costs of $805,000. The Government argued that the plaintiffs were only entitled to costs of $367,000, as it was inappropriate for the plaintiffs to use three senior counsel to do the preparation and research work. It argued that such work should have been done by students and juniors. The Crown also objected to disbursements for media consultants and press releases.
HELD: Application allowed. This was an appropriate case for solicitor and client costs. The Government's conduct was reprehensible. The plaintiffs acted properly when they employed senior counsel for the preparatory and research work. The bill would have been much higher if they did not do this work. Counsel would have questioned the results and this would have generated more work. The proceedings were not protracted. There was no duplication in the work of the three senior lawyers. Most of the media expenditures were disallowed. It was not clear that these expenditures advanced the plaintiffs' case. The court allowed the plaintiffs' solicitor and client costs at $668,000.
Statutes, Regulations and Rules Cited:
Bill of Rights, ss. 1, 2.
Department of Veterans Affairs Act, s. 5.1(4).
Dependents Relief Act.
Counsel:
Raymond Colautti and David Greenaway, for the plaintiffs.
William Knights and Vickie McCaffrey, for the defendant.
1 BROCKENSHIRE J.:-- In this Class Action, claiming interest on pension benefits held by the Federal Government for incapacitated veterans, following a successful motion for summary judgment re liability therefore, counsel sought costs. Counsel appeared before me on January 10th of this year and after reviewing a draft bill and considerable written material including a number of cases, I delivered an oral decision the same day. In that decision I dealt with the question of whether the cost should be on a solicitor/client or party and party basis and whether they should be fixed or sent to an assessment officer for assessment. I concluded, based on case law in both Ontario and British Columbia, that the Government's actions towards the veterans could be classified as, "reprehensible" and further concluded that, like Barry v. Chief and Council of the Garden River Band of Ojibways, 33 O.R. (3d) 782, in our Court of Appeal, this was a situation where the Government as trustee had to be sued in order to bring a response, and in that situation solicitor/client costs should be paid.
2 I reviewed the case law before me, including Murano v. Bank of Montreal, 41 O.R. (3d) 222, in our Court of Appeal, and concluded that I was in a position to do procedural and substantive justice in fixing the costs, and that in the peculiar circumstances of this case it was better that they be dealt with by myself than by an assessment officer. I then directed, as the amount involved was very large, and as Crown counsel had intimated that it wished to further examine the details, that the matter be put over for further submissions in writing, with no particular time limit.
3 Over the last several months further submissions from both sides have come in and I have now had an opportunity of considering all of them.
4 In the course of this exchange of further submissions, there has been some movement in the position of the two sides. The original bill of costs claimed $810,272.50 in fees plus $90,573.60 in disbursements less $42,575 in costs ordered to-date, leaving a net claim of $858,271.10. Counsel later acknowledged that the dockets included work in relation to not only claims of veterans, but proposed claims of estates of veterans, an issue which is yet to be addressed. Plaintiff's counsel went through the dockets and was prepared to revise the claim by removing all of the items they said related to the "estates" issues, resulting in a reduction of the proposed bill by $53,484 to $804,787.10. Crown counsel takes the position that further items should be removed, bringing the disbursements to $86,123.60 and the fees to $554,383.73. Then, based on the reasoning in Jazairi v. Ontario Human Rights Commission [2001] O.J. No. 758 in our Court of Appeal, Crown counsel submitted that the fees portion should be cut in half, resulting in what they put forth as a fair amount of $277,199.10 for fees, plus $86,123.60 for disbursements.
5 This is complex litigation. Not only is it a Class Action with a national class, with claims going back some 70 years; during the course of plaintiff counsels' preparation work a potential whole further class (the "estates") was discovered, which will probably lead in due course to separate proceedings within the action, based in part on different statutory provisions. Further, during the course of the action, the action was in effect bifurcated, with a successful motion for summary judgment being brought on the liability only, with quantum of damages yet to be dealt with. I doubt if all of these complexities were fully foreseen at the beginning, creating obvious problems in segregating time spent to one particular heading, to the exclusion of others.
6 I am prepared to accept that once the estates matter was raised, plaintiffs' counsel carried out a careful review of their dockets, and in deducting fees of $53,484, had done as well as is possible in segregating out costs relating to that issue for consideration on another day. Indeed, defendant's counsel, in their supplementary submissions at pg. 23, seems to accept that proposition.
7 A more difficult issue is the question of time spent re the quantum of damages. Defence counsel claim at Paragraph 66 and 67 of their supplementary submissions that there is included in the proposed bill re liability, $49,800 in solicitors costs and $4,450 in disbursements relating to the damages issue. Details of these allegations are contained at Tab 6 of the supplementary submissions. This contains three pages of excerpts of the dockets of the three counsel acting for the plaintiffs. Some of these would clearly deal with damages - for instance the first one is an hour spent "prepare spread sheet damage calculation". Others are far from clear e.g. - "Attend Weldon Library to Research Government Records". Plaintiff's counsel in their response to the supplementary submissions of the defence indicate they could not determine the basis for the defendant's assertion the $49,800 in billable time related to the damages issue, but at Paragraph 25 of that document acknowledge that some of counsel's time was directed to that issue in connection with the motion for summary judgment.
8 I have gone back over the docket items extracted at Tab 6, and have gone through, in a cursory way, all of the docket items appended to the plaintiff's materials. I see some items that would clearly relate primarily to damages and I see other items, even among those in Tab 6, which to me would seem clearly to relate primarily to liability. It is I think fair to say that a number if not all of the items at Tab 6, and other items in the dockets that caught my eye, could fairly be said to relate somewhat to the quantum of damages and somewhat to the question of liability.
9 A part of the problem is that the quantum of damages, what is to be included in it, and how it would be calculated, is not just an issue to be dealt with on an assessment of damages. In this case, it was very much a problem in case management from the commencement of the action through the hearing on liability.
10 There were thousands of veterans accounts, scattered across the country, some of which showed substantial amounts building up over a long period of time to the credit of a veteran, and many others showing very small amounts going into an account and then being paid out within a few days or weeks. A large problem therefore was the difficulty of the Government in gathering together the massive amount of information, and extracting from it what might assist the Court as to the Government's position. Connected with this were all the problems of production to the defence.
11 It was essential in case managing this action and making time allocations to have some basic background information of the size and complexity of the claim. I am sure even the initial very rough estimates, that there was something between one billion and three billion at issue, have taken some time, research, and thought to develop.
12 The question of quantum was indirectly an issue on the argument on liability, in that a good part of the liability argument was that the Auditor General had raised the issue of there being huge amounts of money being held in a trust arrangement without interest being credited, which information had been circulated within the Ministry of Defence and other ministries. The Government allegedly did little or nothing for years, and then purported to outlaw claims for interest in the past, while at last starting to pay interest for the future.
13 Further the plaintiffs' investigation into the accounts revealed that in fact the Government had paid interest on accounts for years a long time ago, and then for some reason stopped. Further the Government started paying interest on the accounts of veterans in one hospital in Quebec, while not treating the accounts of other veterans in the same way. These matters were strenuously, and in my view properly, put before the court on the argument on liability.
14 A good part of the plaintiff's preparation, and eventual argument on liability was based on the examination of many, many Government documents. These documents largely related to finances, financial management, management policies and policy applications. Very little of it dealt directly with the legal issues raised on the liability argument, but they did provide a factual background on which the legal liability issues could be argued. I assume many of those documents also contained financial information that might well be referred to on the argument on quantum.
15 Plaintiff's counsel has not given a detailed response to Crown counsel's suggestion that there is $49,800 in billable time in the account, that relates to the damages issue. Because of the above mentioned problems, and undoubtedly others, it may be that no detailed response could be made.
16 I am prepared to accept that Crown counsel have in fact located many docket entries which prima facie have at least something to do with damages. However, I also note that the figure of $49,800 that they complain of is relatively small when related to the total quantum of costs claimed, and that the proper place to get into all of the details of the supportable claims for work done re damages would be on an assessment of costs re the damages issue, and not on this assessment. I am therefore prepared to take a rough and ready approach on this assessment and on the basis of the $49,800 alleged by the defence, I simply deduct the amount of $25,000 from the current claim for fees, on the basis that that amount would relate to the damages issue, so that then, if the plaintiffs are successful on the damage assessment, and if the same docket items appear again on an assessment of costs on that issue, it could be noted that an allowance of $24,800 had already been made on account of those items.
17 The defence disputes the consultant fee of Dr. Charette of $4,450 on the ground that it relates entirely to the damages issue. I accept this submission. Dr. Charest had done some calculations indicating the possible range of damage assessments which calculations were presented to the court during the liability hearing, presumably as the best evidence available. However, in my view, this would primarily be background information during the liability hearing. This sort of material would be directly relevant during the assessment of damages, and in my view the presentation of the expert's account for calculations of this type should be deferred to that time. I disallow the disbursement of $4,450 for the Charette consulting fee.
18 The Crown objects to a claim for 190 hours of senior counsel's time at $300 an hour or $57,000 for media and press releases, public relations consultations etc. Counsel segregated the time spent on this in their dockets into Schedule 6 at Tab E of their Response to the Defendant's Written Arguments. On my count, there is included in that Schedule some 12 hours spent in meetings with Lenore Majoros, the litigation guardian for the named plaintiff, and in meetings or telephone conversations with other Class Members or their representatives. In my view, time spent advising, updating, and receiving instructions from clients is allowable if reasonable on a solicitor/client account, and I view the 12 hours as reasonable. The remaining 178 hours, and the claimed disbursement of $53,029.77 to Pragmacom International Inc., - public relations and media consultants, is another matter. The detail of the solicitor's time spent indicates that what was involved were press interviews, meetings in Ottawa with politicians and veterans groups and assisting in the public relations campaign being orchestrated by Pragmacom.
19 Pragmacom in its proposal to plaintiff's counsel, defined its services as helping them to maximize the positioning of their message with the Canadian Government in order to maximize their ability to receive a favourable settlement; and to advise them on the use of appropriate public affairs and public relation/media tools during the course of the claim process.
20 It is counsel's submission, in response to the defence objection, that there
"... is a serious public policy dimension to this case. The Government is a political institution, which responds to the public policy and public opinion. Only public opinion may ultimately persuade the Government to resolve this case through settlement. It is necessary for the plaintiff to raise the profile of this case in the Court of public opinion', which can only be done through the news media in order to get the message out and create the political will to resolve the case."
21 It may be that these claims, in this bill of costs for services in relation to class litigation, raises a new and novel issue. Plaintiff's counsel was able to put before me only one precedent in our courts. Re Seitz, decided November 6, 1974, by Lerner J., reported in 53 D.L.R. (3d) 223, was an appeal from a decision of a taxing officer, the point being time spent in disbursements incurred by counsel in persuading the Government to amend the Dependants Relief Act, and in particular to make a specific amendment which permitted the applicant's claim to go forward. Lerner J. noted at Pg. 229 that without the attendance's etc., of the solicitor unquestionably the widow would not only have made no recovery, but would have had no basis for launching an application. He allowed the item.
22 In my view that was a particular example of the general principle that the applicant must show that the services were of value to the client in advancing the client's position in the litigation. It may be in the end that the lobbying and public relations efforts of plaintiff's counsel and the firm they hired will demonstrably bear fruit. However, at this point, I have no indication of that. Certainly the partial summary judgment motion on liability and the various steps and motions leading up thereto proceeded in the normal manner of litigation of this type. The only indication of any effect of the public relations efforts was the interest of the media in the proceedings. There was no indication of "giving in" by Government or Government's counsel.
23 Plaintiffs' counsel raised in argument that the media efforts constituted a method of giving notice to Class Members, and that in fact the media interest resulted in increased phone calls and hits on the web site established by plaintiffs' counsel. Defence counsel responded that this was not notice as authorized in the certification order, which provided for formal notices to be widely circulated, at the cost of the defendant. Further, all the costs in relation to the web site were specifically reserved until the final determination of the common issues. I accept those Crown submissions.
24 I am therefore disallowing the disbursements and the claim for legal fees except for 12 hours worth, or $3,600 above referred to in relation to the media etc., heading in this bill of costs, without prejudice to the right of the plaintiff's to bring these items forward again at some later time.
25 There are a number of other objections raised by the defence to the plaintiffs' bill of costs. I believe I can deal with these fairly briefly in the following paragraphs.
26 Considerable objection was raised over inconsistencies between the dockets of Messrs. Colautti and Greenaway and the docket of Mr. Sengbush. In my view most, if not all of these apparent inconsistencies have been explained or dealt with in the exchanges of submissions. Any that remain will be handled in the inevitable rounding off which occurs in the fixing of fees.
27 The defence complains that Mr. Sengbush was a witness (that is, his affidavit was used to bring before the Courts documents he had found in his research). At the same time claims were made for counsel fees by Mr. Sengbush on the motions at which his affidavit would be used. I do not accept this argument. The evil that is to be avoided is the risk of counsel finding his/her own veracity is put in issue. There was never any hint or suggestion of any question as to the truthfulness and accuracy of Mr. Sengbush. His affidavit material simply stated the results of his research and appended the material, mainly Government documents that he found. This was a straightforward way of doing it, and incidentally saved the expense of having to instruct somebody else as to what this was all about so that some other person could swear the affidavit. I decline to make any deduction on that account.
28 The defence complains of the many hours spent in preparation and states that this was grossly excessive and unreasonable. Crown counsel points to a total of 204.3 hours claimed for pleadings, 355.6 hours claimed in relation to the certification motion, and preparation for trial (which I take to be preparation for the summary judgment motion on liability) of 856.5 hours.
29 However, Crown counsel at Paragraph 93 of its written argument, in speaking of its own cross motion for judgment, points out that the legal issues were novel and subject to uncertainty, ss. 5.1(4) of the Department of Veterans Affairs Act had not been litigated and the plaintiff's reliance on s. 1 and 2 of the Bill of Rights, in light of the passage of the Charter, to ground their clients property claim was novel.
30 It is a gross simplification to say that plaintiff's counsel had to plead and prove that the Federal Crown was in a fiduciary position in relation to a Class of incapacitated veterans, that it had failed to invest funds held for them, it was obliged to do so, and that the statutory bar which it created in the legislation would not, under the Bill of Rights stand to prevent the claims of the veterans, despite the Callie decision to the contrary in the Federal Court. As above indicated, the amounts involved could be massive and the documentation certainly was massive. The Crown indicates in its materials, for instance, that it had produced over 34,600 pages of information. I am sure plaintiffs' counsel, particularly Mr. Sengbush, turned up thousands of pages of Government documents. All of these had to be examined, and more importantly extracts had to be taken from them where relevant, to build the case. I do not find the preparation time to have been excessive or unreasonable.
31 The defence also argues that plaintiff's "over lawyered" the case. They say that the use of three senior counsel to do nearly all of the preparation and research work was inappropriate and that this work instead should have been done by students and juniors. No complaint is made of the rate claimed of $300 an hour on a solicitor/client basis, the complaint being that instead of senior counsel, juniors who were used at a rate of $125 an hour or students who were used at $60 an hour should have been employed.
32 My own conclusion is that this was a very complex and very important case. It was launched as a Class Action on behalf of a national class, which in itself is still relatively new and novel and which presented a number of procedural difficulties. The documents and legal research was not aimed at finding black and white answers, but rather materials which when taken together would support inferences in both equity and constitutional law. I am sure if this was delegated to students and juniors the result would be more questions than answers, with countless hours spent in consultation amongst the junior people and memos one to the other. Members of our bench have seen, I am afraid, far too many examples of horrendous bills for the education of students and juniors in points of law that they should have known about before undertaking the task at hand. I conclude that in this case, the senior lawyers involved were right in working up the case themselves. While the bill for the preparation seems high, I am sure if it had been farmed out, and then had to be pulled back together again by senior counsel, the bill would have been much higher. The bottom line, as expressed by plaintiff's counsel in their submissions is that the three senior lawyers succeeded in moving this very complicated matter from the commencement of action to a successful argument on judgment for liability in 19 months.
33 In Sherman v. Drabinsky (1996) 90 O.A.C. 139, Austin J.A. was involved in fixing costs in a complex and dragged out action. He noted at Paragraph 44 that the action had been going on for 13 1/2 years, with two senior counsel responsible for the file and about a dozen other people, most of them clerks and students. At paragraph 24, he comments that, "... unduly protracted litigation is inefficient and wasteful of time."
34 In paragraph 25, in speaking of the determination of fees, he says, the following:
"In my view, it comes down to a matter of judgment, not arithmetic. I concede that numbers of hours and hourly rates can be useful in the process, but they cannot be permitted to govern that process. To do so is to award inefficiency. In my view, the most important factor in determining fees is value to the client. This is directly so in the case of determining fees as between solicitor and his/her own client."
35 In this case the proceedings have certainly not been dragged out or protracted. There has not been a small army of juniors, students and clerks involved. There have been three senior counsel, but they divided up their work into three separate areas and I see little duplication. A lot of hours were spent by plaintiff's counsel, but as above indicated, there were good reasons for that and as plaintiff's counsel notes, no doubt even more hours were spent by the defence team. The value to any client seeking summary relief in moving ahead expeditiously is obvious. In this case, it was particularly important because a great many of the surviving veterans are elderly, and they have seen their claims organized and pressed forward to a judgment on liability in a court of first instance while they were still alive. I reject the defence argument that the plaintiff's "over lawyered" the case.
36 Crown counsel urges that I should apply the reasoning in Jazairi v. Ontario (Human Rights Commission) [2001] O.J. No. 758. This was a decision by Laskin J.A. on an appeal of an assessment of party and party costs on a motion for leave to appeal and a one-day appeal to the Court of Appeal. The Assessment Officer had awarded a counsel fee of $35,000. Laskin J.A., at Paragraph 9 summed up the situation as being that,
"... The Assessment Officer awarded a $35,000 counsel fee for a one day appeal on uncontested facts in which counsel argued a single, albeit, important question of law, which they had already argued once before in the Divisional Court."
Laskin J.A. concluded that the amount was unreasonable. He felt that the Assessment Officer, although he dealt in detail with the bill, did not stand back and critically questions whether what reasonably needed to be done to prepare and argue this appeal justified a $35,000 counsel fee. He concluded it did not and cut it in half.
37 I fail to see what all of that has to do with this case. This was certainly not the rehash of a fairly simple issue that had been argued once before. The proceedings to date, as above detailed, involved massive amounts of material, which while it clearly existed, had to be found, and then could be interpreted in different ways, as was demonstrated in the lengthy arguments before me. It involved creative procedural steps to accommodate the claim, and involved applying the legal principles from a great number of cases on different subjects to a situation to which they may never have been applied before; and the attacking of Federal legislation under the provisions of the Bill of Rights, which had been little used since the introduction of the Charter many years ago. Further, as plaintiffs' counsel observes the Jazairi case dealt with party and party costs, and not solicitor and client costs. I find that the comments contained in the Jazairi decision do not apply to this situation.
38 The bill of costs as presented claimed $810,272.50 for fees plus $90,573.60 for disbursements, totalling $900,846.10. Counsel then indicated there should be deducted from that $42,575 for costs previously ordered. During the course of submissions plaintiff's counsel agreed to reduce the bill by $53,484 re the estates issues. I have, in the foregoing reasons, deducted $25,000 re the damage issues from this bill without prejudice to presenting the items at a further date. I further deducted the $4,450 re the Charette damage calculations. Crown counsel did not object to any of the other disbursements, and I accept them. I also disallowed from this bill, without prejudice to the right to present the issue later, all but $3,600 of the $57,000 in fees re media matters, being a net amount of $53,400, and in the same way deducted from this bill the $53,029.77 disbursement to Pragmacom.
39 On my count the above deductions bring the total claim for fees and disbursements to $668,907.33. I round the total claim to the even amount of $668,000.00. I fix the total costs of the plaintiffs re this bill of costs at that amount.
BROCKENSHIRE J.
cp/d/qlsar/qldah