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It’s the plaintiff’s lawsuit, so why should counsel pay costs?

Trials & Tribulations
|Written By Margaret L. Waddell
It’s the plaintiff’s lawsuit, so why should counsel pay costs?

Hopefully, the decision from the Ontario Court of Appeal in Attis v. Ontario has firmly brought to an end the proposition that defence counsel can bring a collateral attack against class counsel by arguing that they should be held liable for the costs of a failed motion for certification. Except in situations where there are compelling facts supporting a finding of egregious conduct warranting a signal of disapprobation from the court, or where there is clear evidence that the plaintiff did not authorize the proceeding, at all, class counsel should not personally be subject to an adverse cost award.

Attis represents a classic case of high-stakes litigation, where the defendant took an aggressive position on costs, once it learned the plaintiffs were impecunious, and could not pay the costs that had been awarded against them. The Crown had not sought costs against class counsel at the time the motion and appeals from it were argued. The claim against class counsel was first raised after the plaintiff, Attis, brought a civil action against her lawyers alleging negligence for their alleged failure to properly advise her about the potential cost consequences arising from the litigation. No indemnity agreement had been made between Attis and her lawyers. Only then did the Crown seek to reopen the costs awards to argue that class counsel should be held personally liable for the costs awards made against the plaintiff.

Relying upon the fact that the negligence action had been commenced against class counsel, the Crown argued that there must have been a lack of authority to commence the class action, since the plaintiff did not give “informed consent.” Superior Court judge Maurice Cullity agreed, despite the fact the litigation had been ongoing for many years, the plaintiff had been an active participant in the litigation, and was well aware of the fact that the costs awards had been made.

On appeal, the Court of Appeal confirmed that there was no doubt the action had been commenced with the plaintiff’s authority; hence Rule 15.02(4) — proceeding commenced without authority — was not relevant. The defendant has no right or entitlement to enquire into the advice a lawyer provides to his or her client, and it is not the defendant who is aggrieved and entitled to take action if the advice is inadequate or negligent.

In response to the further argument that class counsel breached their warranty of authority, the Court of Appeal noted that the remedy for this tort would be the amount the plaintiff would have gained had the authority existed. Here, the plaintiffs were impecunious, so the defendants would still be unable to collect on their cost awards. The defendants were trying to put themselves into a better position than they would have been in if there had been fully informed authority to commence the proceeding. This would be an improper result.

From Attis, we can conclude that a defendant is not to have recourse to class counsel to collect any adverse cost awards, just because the plaintiff can’t pay. Nor does an outstanding costs award give the defendant the right to probe into the relationship between class counsel and their clients, and complain if they don’t like what they find. This surely is the correct result. A defendant to a class proceeding should not be able to turn their sights on class counsel for payment of their costs, simply because the certification motion fails.  Presumably this decision will diffuse whatever leverage defence counsel thought they might be able to apply from the costs award against class counsel in the singular case of Poulin v. Ford Motor Co. of Canada Ltd.

In 2007, Justice Douglas MacKenzie made a troubling costs ruling in Poulin. Maurice Poulin commenced a proposed class action against Ford and others based upon an alleged faulty and dangerous door lock mechanism. Certification was denied. Among the reasons for denying certification, the motions judge expressed substantial reservations regarding Poulin’s ability to instruct counsel, given his general lack of knowledge of the goings-on in the proceeding. Costs were awarded in favour of the defendants. The defendants sought and received a costs award directly against both class counsel and their American “co-counsel.”

In reaching his decision on costs (as well as on certification), MacKenzie emphasized the fact that class counsel had not provided an indemnity on costs to the plaintiff. He said, “The fact remains that at the time of instituting the action and mounting the Certification Motion, Mr. Poulin was without an indemnity undertaking and it was accordingly, open for [class counsel] to obtain extremely large fees arising from a successful outcome without any concomitant risk of adverse cost consequences.”

Based upon the Court of Appeal’s decision in Attis, I expect that it will be unlikely that such an argument is raised again, or that it will gain any traction if suggested by a defendant. This particular missile should be removed from defence counsel’s arsenal when arguing about costs — the relationship between counsel and client and the existence or lack of an indemnity is an issue between the lawyer and the client, and it is not a relevant consideration in respect of assessing liability for costs. Nor for that matter is the fact that class counsel might be paid for its work if the case is successful — but I’ve discussed that previously.

The bottom line is that whether an indemnity exists or not, it is not a relevant fact in deciding if costs should be awarded against class counsel. Before such an extreme ruling should be made, there must be facts that clearly demonstrate egregious conduct in prosecuting the proceeding, or a genuine lack of authority to commence any proceeding. Those situations are extremely rare, and I certainly hope that we have now seen the end of demands for costs payable by class counsel absent such aberrant facts.

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