Award of No Costs a Cautionary Tale For Defendants of Class Actions

In the recent decision of Elder Advocates of Alberta Society v Alberta Health Services, 2021 ABCA 67, the Alberta Court of Appeal put to bed a class action that spent over 15 years in various levels of court, in confirming that the Plaintiffs did not have to pay any costs to the Province of Alberta and Alberta Health Services (collectively, the “Defendants”), even though the Defendants were entirely successful in their defense.

Background

In 2003 the daily charge for a semi-private room in a nursing home or auxiliary hospital in Alberta increased. Subsequently, the Elder Advocates of Alberta Society together with an individual (the “Plaintiffs”) filed a proposed class action against the Defendants on behalf of long-term care facility residents. The Plaintiffs’ law firm agreed to indemnify the Plaintiffs for any award of costs against them.

The certification process spanned 2008 to 2011, and included two Court of Appeal decisions and one decision by the Supreme Court of Canada.[1] Following certification, in 2018 the class action was ultimately dismissed on the merits.[2] In 2019, the Plaintiffs unsuccessfully appealed,[3] and were denied leave to appeal to the Supreme Court of Canada.[4]

Needless to say, the costs for both Plaintiffs and Defendants ran quite high. The Defendants sought approximately $2.3 and $2.9 million, respectively, in costs (although unclear from the decision, it is likely that the Defendants’ actual legal costs were much higher).

In 2020, the Alberta Court of Queen’s Bench declined to award costs to the Defendants, despite their complete success.

Key Principles

The Court of Appeal noted that Alberta’s approach to costs in class action proceedings is different from many other provinces. Some provinces have adopted a “no costs regime” where costs are not awarded to either party in class actions but for a special order of the court, and other Provinces have funds that exist to help representative plaintiffs pay for the costs of commencing an action and pay any costs awarded against them. But this is not the case in Alberta.

In Alberta, legislation directs the court to determine costs as provided by the Rules of Court. There is no fund to assist representative plaintiffs with costs. Thus, an unsuccessful plaintiff will usually be required to pay costs in accordance with the general rule that costs follow the event. This has been characterized by the Court of Appeal as a “policy choice” of the Alberta Legislature.[5]

Nevertheless, where the defendant is successful, a representative plaintiff may ask the court to exercise its discretion and decline to award costs. There are four factors to be considered when determining whether to decline to award costs in a class proceeding:

  • whether the issue involves a matter of broad public interest;
  • whether it raises a novel point of law;
  • whether it was a test case; and
  • whether a costs order would impede access to justice in the context of class actions.[6]

Importantly however, Rule 10.32 provides the court with the discretion to take into account any other factors it considers appropriate. This may include factors set out in Rule 10.33 (which includes the relative success of the parties), but this is entirely in the discretion of the court.

The Appeal Decision

The Alberta Court of Appeal upheld the trial judge’s decision. In particular, the Court noted:

  • the issues raised in the class action were of public importance and they extended past the interests of the Plaintiffs;
  • the class action had the potential to impact much more than just the members of the class action and influence future decisions by the Defendants;
  • the case raised a novel point of law;
  • orders for costs claimed by the Defendants would clearly have a chilling effect on future class actions; and
  • access to justice was particularly important in this case given the disadvantages faced by the members of the class.

One might think that indemnification from experienced legal counsel, who agreed to take on the risk in exchange for the potential award (e.g. upwards of 30% of a successful judgment), would weigh in favour of granting costs. However this is not necessarily the case. Instead, the Court of Appeal endorsed the trial judge’s finding that the Plaintiffs, and not their counsel, were the driving force behind the litigation, and this weighed in favour of declining costs. Thus it appears that a defendant would need to establish that plaintiff’s counsel was the driving force behind the litigation in order for an indemnification agreement to weigh in favour of awarding costs.

Despite dismissing the appeal and upholding the decision to award no costs, the Court of Appeal did note that several factors considered by the trial judge were in error, including:

  • The Defendants’ conduct: the Court of Appeal found that the Defendants’ conduct during the litigation was entirely appropriate.
  • The Plaintiff was not seeking costs, even though the Plaintiffs had incurred significant costs: the Court of Appeal noted that had the Plaintiffs been successful, they would have sought solicitor-client costs, and that the fact that the unsuccessful party is not seeking costs is not a relevant factor in determining whether costs should be awarded against that unsuccessful party.
  • The Defendants were better able to bear the costs, and that to award costs would inappropriately penalize the Plaintiffs and their counsel: The Court of Appeal found that this was not a reason to decline costs, as this is inconsistent with the class actions costs regime in Alberta and that a costs award is not designed to punish but rather partially indemnify the successful party.

Ultimately, the Court of Appeal concluded that these errors did not materially affect the overall decision, and thus the decision of “no costs” was allowed to stand.

Conclusion

The decision of the Alberta Court of Queen’s Bench and subsequently the Alberta Court of Appeal in this case should serve a reminder to class action defendants that the courts do have the discretion to award no costs. Regardless of how blameless a defendant is, and even if the defendant is vindicated and completely successful at trial, the courts can and will deny the defendant costs.  This reiterates the importance for defendants of class actions to have practical and strategic counsel on their side from the outset.

 

[1]Elder Advocates of Alberta Society v Alberta, 2008 ABQB 490 [QB Certification #1]; Elder Advocates of Alberta   Society v Alberta, 2009 ABCA 403, [CA Certification #1]; Alberta v Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 SCR 26 [SCC Certification]; Elder Advocates Society v Alberta, 2011 ABQB 801 [QB Certification #2]; Elder Advocates Society v Alberta, 2012 ABCA 355, [CA Certification #2].

[2] Elder Advocates of Alberta Society v Alberta, 2018 ABQB 37.

[3] Elder Advocates of Alberta Society v Alberta, 2019 ABCA 342.

[4] Elder Advocates of Alberta Society v Alberta, 2020 CanLII 25158.

[5] Elder Advocates Society at para. 18, citing Ayrton v PRL Financial (Alta) Ltd., 2006 ABCA 88 at paras 30-31.

[6] Pauli v ACE INA Insurance Co, 2004 ABCA 253, and the factors from that case have been enshrined in Rule 10.32.

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