Ontario Court Rules About Class Action Costs and Quantifies Damages

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Author: Robert Jones, Law Works P.C.
Editor: Ben Hanuka, Law Works P.C.

In Trillium Motor World Ltd. v. Cassels Brock & Blackwell LLP, an October 10, 2018, decision of the Ontario Superior Court, the court held that the defendant Cassels Brock & Blackwell LLP (the “law firm”) was liable to pay the costs of administering the proceeds of the judgment to the class members, and that it was not appropriate to reconsider substantive issues in the litigation at the point of quantifying damages. (Our blog articles about earlier phases of this proceeding may be found here and here.)

Key facts

During the 2009 financial crisis, General Motors of Canada Inc. (“GM”) signed a bailout agreement with the Government of Canada. As a condition of the funding, GM was required to terminate some of its franchisee dealerships.

GM offered 240 of its dealers Wind-Down Agreements (“WDAs”). In exchange for payment, the franchisees were required to sign a release in favour of GM which covered claims under the Wishart Act. The WDAs had a tight deadline for acceptance and required the franchisees to obtain a certificate of independent legal advice.

A total of 202 GM dealers signed the WDAs. Of these 202 dealers, 181 opted-in to a class action lawsuit against GM. Trillium Motor World Ltd. (“Trillium”) was the representative plaintiff. They alleged that GM breached the duty of good faith by imposing such a strict deadline for acceptance of the WDAs.

Trillium also sued the law firm, alleging that it breached fiduciary duties owed to the class members by acting in a conflict of interest and was negligent in providing to them the certificates of independent legal advice.

The trial judge dismissed Trillium’s class action against GM, finding that GM acted in a fair and commercially reasonable manner and that the releases in the WDAs were legally valid because they satisfied the Tutor Time exception. The trial judge granted Trillium judgment against the law firm. The Ontario Court of Appeal upheld these results.

This decision is about the quantification of damages against the law firm and the costs of administering the judgment.

The law firm was liable for the costs of administering the proceeds of the judgment

The court held that the law firm was liable to reimburse Trillium for its costs in administering and distributing the proceeds of the judgment to the class members. It followed Kerr v. Danier Leather in reaching this result, which analogized the administration fees in doling out judgment proceeds to disbursements. The source of its jurisdiction was subsection s.26(9) of Ontario’s Class Proceedings Act.

The court rejected the law firm’s arguments that these costs were not pleaded by Trillium and that the law firm could be exposed to an open-ended liability. It found that Trillium’s request for any “other relief that the court deems appropriate” extended to the administration costs and decided to remain seized of the matter to ensure that the costs were reasonable.

The court refused to vary its approach to quantifying damages

The court refused to vary its approach to the quantification of damages. The formula for the quantification of damages was based on an assessed value for the loss of chance, discounted by the number of opt-outs from the class, multiplied by the number of dealers that the law firm had been retained by.

Applying this formula, the court concluded that the law firm was liable to its dealer clients for damages in the amount of $28,745,304.

The court held that it had already considered Trillium’s arguments about the bargaining power of the dealers that formed the class and the distribution of the proceeds from the WDAs. The court did not allow Trillium to relitigate these issues.

It also declined to make an adjustment for the GM dealers that later signed the WDAs. At the material time, when the law firm was in a position to negotiate on behalf of the dealers, only 202 GM dealers signed the WDAs. The court noted that the adjustment that the law firm argued for would be modest in any event.

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