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Defendant in BC Denied Costs of “Class Proceeding” After Defeating Certification

Subject to a few exceptions, s. 37 of British Columbia’s Class Proceedings Act prevents courts from awarding costs “to any party to an application for certification…to any party to a class proceeding or to any party to an appeal arising from a class proceeding at any stage of the application, proceeding or appeal”. That usually benefits representative plaintiffs and class counsel by limiting the risk of a costs award against them and is a significant difference between class proceedings in BC and Ontario.

The scope of s. 37—and the exceptions to it—are a recurring issue. BC’s Class Proceedings Act defines a “class proceeding” to be a proceeding “that is certified as a class proceeding”. In other words, a proposed class proceeding becomes a “class proceeding” under the act only after certification.

For example, s. 12 of the Class Proceedings Act, allows a court “make any order it considers appropriate respecting the conduct of a class proceeding”. Earlier this year, BC’s Court of Appeal held that a court has no jurisdiction under s. 12 until a class action is certified; s. 12 cannot be the basis for pre-certification sequencing orders.

That suggests that s. 37 does not prevent costs awards for pre-certification steps like pleadings, particularly where an action is not certified. However, BC’s courts have not always reached this conclusion. The issue arose recently in 0116064 B.C. Ltd. v Alio Gold Inc., 2021 BCSC 2186. As we explained in a previous post, Alio Gold was a proposed securities class action. The court dismissed the certification application and struck out the claim. Alio Gold then sought costs (i) for all the steps before the certification application on the basis that s. 37 did not apply and (ii) for the certification application under an exception to s. 37.

The court refused pre-certification costs. Relying on a 2002 appellate decision, the court held that the use of “class proceeding” in s. 37 did not limit the provision to certified class proceedings. Instead, s. 37 prevents costs awards whether or not a proceeding is certified and becomes a “class proceeding”. The court distinguished cases where costs were awarded after a proposed class action was struck out before the certification application was heard. The apparent inconsistency between the interpretation of “class proceeding” in ss. 12 and 37 was not addressed.

However, the court awarded Alio Gold half of its costs of the certification application. Section 37 allows the court to award costs if “there has been vexatious, frivolous or abusive conduct” by a party or if “improper or unnecessary application or other step has been made or taken for the purpose of delay or increasing costs or for any other improper purpose”.

The court held that the plaintiff’s insider trading allegations advanced with the certification application met several of those criteria. The plaintiff knew or should have known that its insider trading allegations were fundamentally flawed because of judgments leading up to the certification application. Indeed, the court had previously awarded costs against the plaintiff under s. 37 following a successful application to strike claims against individual defendants.

The case demonstrates some of the issues that can arise if a successful defendant seeks costs after successfully opposing certification.



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