In a failed class proceeding, Judge Edward M. Morgan of the Ontario Superior Court varied a cost order under r. 59.06 of the Rules of Civil Procedure to add class counsel as a party responsible for paying the defendants’ costs.
Morgan certified an employment-related class action on Aug. 11, 2021, then decertified it on May 31, 2023. The class members opted out of the action en masse on the basis that it was “not in their interest” and did “not do them justice.”
On July 6, 2023, Morgan awarded the defendants in Navaratnarajah v. FSB Group Ltd., 2026 ONSC 3314, costs of $100,000. Morgan found that class counsel’s approach to the action involved delay and futile procedures that added to the costs.
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At that time, Morgan directed the cost order only against the representative plaintiff on the assumption that class counsel would be responsible for covering the representative plaintiff’s costs.
“Some arrangement whereby the representative Plaintiff is relieved of any potential costs burden – either by counsel or by a third party funder under an approved funding agreement – is not only standard procedure in class action litigation, but has become accepted as a necessary ingredient without which, or without some further explanation, the representative Plaintiff will not pass one of the important criteria for certification,” Morgan wrote for the Ontario Superior Court of Justice.
In the present proceeding, Morgan noted that class counsel had not yet paid the defendants’ costs and apparently had not discussed the matter with the client.
The defendants moved to:
- Obtain a declaration that class counsel owed and should pay the costs awarded to the defendants
- Vary the cost order to make class counsel, instead of the representative plaintiff himself, directly responsible for paying the costs
Under r. 57.07 of the Rules of Civil Procedure, RRO 1990, Reg 194, the defendants’ counsel sought to invoke the court’s authority to fashion a cost order aimed at counsel in the event of additional costs because of “undue delay, negligence or other default.”
Class counsel added to cost order
Morgan varied the cost order upon finding that he was not functus officio or without jurisdiction to determine the defendants’ motion. Morgan said he did not expect that:
- There would be a question of whether there was a cost coverage agreement in class counsel’s retainer
- The question of class counsel’s abiding by such an arrangement, if any, would depend on a process that included the defendants engaging in full creditors’ rights proceedings against the representative plaintiff and the representative plaintiff potentially pursuing further litigation against class counsel
“Therein lies the surprise change from the premise of the costs ruling and the facts as known at the time,” Morgan said. “The costs Order, directed only against the representative Plaintiff on the assumption that that would engage Class Counsel’s responsibilities, was based on a record whose erroneous state of facts was not and could not have been known.”
Morgan found r. 57.07 inapplicable and unnecessary because the surprising lack of a costs coverage clause in the retainer agreement, not the undue delay itself, prompted the motion to vary. Instead, given the unique situation, Morgan cited:
- the court’s inherent power to issue an order directed to a non-party, such as class counsel, if it was just and equitable to do so
- the court’s management authority under s. 12 of Ontario’s Class Proceedings Act, 1992, to make an order regarding the conduct of a proceeding to ensure its fair and expeditious determination
Morgan found that the proceeding might take longer and be unfair to everyone involved if he did not grant a variation of the costs order. Morgan added that it would be inequitable and unjust to:
- Force the defendants to choose between giving up their costs or pursuing onerous enforcement proceedings against a plaintiff who might be unable to pay and who ordinarily would not need to pay
- Compel the representative plaintiff to incur the personal expense of personally paying the costs incurred on behalf of the class or litigating the matter further with class counsel
Morgan permitted the parties to provide written submissions regarding the motion costs.