Federal Court costs awards rare in class actions

5 minute read
23 November 2021


The Federal Court of Appeal ("FCA") recently considered the question of the legal costs to be awarded to the Plaintiff upon settlement of a class action. In Wenham v. AGC 2021 FCA 208, despite arguments by class counsel for an approach to costs more generous to the plaintiffs in class actions, in their decision, they held to the general approach in the Federal Court of treating a costs award as an exceptional remedy.  The Class Action in this case was brought on behalf of individuals whose claims for support from Canada's Thalidomide Survivors Contribution Program ("TSCP") had been rejected.  In addition to the Class Action, the Defendant, the Attorney General of Canada ("AGC") was also involved in a political and policy based process to try to resolve the issues of the scope of support to be offered by TSCP.

Following successful certification of the matter the parties arrived at a settlement and sought its approval. The settlement was approved but based on a settlement agreement which neither provided for nor precluded costs.  In the application before the Federal Court ("FC") to approve the settlement of the class action, the Plaintiff applied for but was refused its costs.  To arrive at their decision upholding the lower Court's refusal to award costs, the FCA considered Rule 334.39 of its Rules.  Rule 334.39 generally restricts the awarding of costs in a class action regardless of the success of either party.  There are three grounds that can support an award of costs but all, in the view of the FC, with the intention of disciplining inappropriate conduct in the context of the litigation.

The FCA rejected the Plaintiff's argument that costs should be awarded in part because the purpose of Rule 334.39 is to incentivize class proceedings and instead held that the purpose of Rule 334.39 is to create the absence of a disincentive.  It is intended to remove a barrier to class proceedings, not to incentivize them.  The FCA also expressly rejected the Plaintiff's argument that the general restriction of an award of costs defined by Rule 334.39 should only apply to restrict cost awards against class action plaintiffs.  In the underlying decision, the FC had held on this point that:

The presumption in favour of no costs is strong and essential for the proper operation of the class proceedings regime. Although the no costs rule is generally designed to assist plaintiffs' access to justice, the policy choice that the rule applies to both parties is clearly deliberate.

The focus of the FC's rejection of the Plaintiff's claim for costs in the original application was, in part, based on its refusal to find that the conduct of AGC in the related external policy process could support a costs award against them under Rule 334.39.   The FC described the ground that would satisfy Rule 334.39 very narrowly as: "where a defendant seeks to delay, frustrate or even prevent the plaintiff's day in court."  The FCA agreed with and followed the approach.  The FCA held that while matters outside the litigation could be considered in a decision to award costs in a class action, that consideration was restricted to matters outside the litigation that were intended to frustrate the litigation in some way.  The Defendant's participation in the external public policy process, whether it caused delay or not, was not intended to impact the class action litigation.

The FCA also made some other comments about the meaning of "exceptional circumstances" in Rule 334.39.  The Court noted that while it was not intending to define the term, it was something "remarkable, extraordinary" and if "not rare, then very far from common."  The FCA went on to note:

Perhaps it would be described as requiring something that could cause an objective observer, familiar with the no costs rule and its rationale, and with all facts and circumstances of the particular case, to be astonished at the injustice of the successful party not being awarded costs.

The Court has spoken and it is now clear that even in class actions, costs awards in the Federal Court will be the exception, not the rule, and will not be granted more liberally to plaintiffs than defendants.

Should you have any questions about this article or any other commercial litigation matter, you can contact the author or a member of our Commercial Litigation Group.

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