Plaintiffs’ offers to settle certification motions in the Ontario Superior Court: Rule 49 is an “Ill Fit”

After a contested certification motion in the Ontario Superior Court of Justice, the losing party is typically required to pay the successful party’s costs on a “partial indemnity” basis. In a recent decision, Justice Perell considered whether a plaintiff can recover a portion of its costs on the higher “substantial indemnity” basis if the plaintiff makes an offer to settle the certification motion and then meets or beats the offer at the motion. Justice Perell confirmed that costs on a substantial indemnity basis should rarely be awarded on a certification motion, “even if […] the plaintiff makes an offer and the outcome of the certification motion is better than the offer.”

Background & the Court’s decision

In Harris v. Bayerische Motoren Werke Aktiengesellschaft, the plaintiff offered to settle the certification motion approximately one year before the hearing. The Court ultimately certified the action. The plaintiff then sought costs on a substantial indemnity basis from the date of the offer.

Justice Perell followed the “normal rules of costs that prescribe that the loser pays costs on a partial indemnity basis.” His Reasons explain:

• “[I]t is not a bad thing that a defendant takes up its right to oppose certification.” A defendant’s resistance can be productive, ultimately leading to a more manageable class action. This improves access to justice, judicial economy, and the efficient use of the parties’ resources.
• Unlike most interlocutory motions, a certification motion is mandatory. The plaintiff must brief and argue the certification motion – even if the defendants consent to certification – to satisfy the Court that the certification criteria are met.
• The policy rationale and technical requirements of Rule 49 are an “ill fit” for a certification motion.

Justice Perell concluded: “in the context of a contested certification motion, there is no need to pile on substantial indemnity costs for a defendant who is entitled to resist certification but who will pay significant costs on a partial indemnity basis, which costs could have been avoided if the defendant held fire for a determination on the substantive merits of the claim.”

Conclusion

The Harris ruling reinforces that costs decisions in class action litigation are often shaped by the specialized nature of class actions. Even if a plaintiff makes a settlement offer and the outcome of the certification motion is better than the offer (i.e. the Court certified more issues than the plaintiff proposed in its settlement offer), the Ontario Superior Court of Justice can exercise its discretion to constrain the costs award in a manner that accounts for the unique procedural context and policy objectives underlying the certification motion.