



COURT OF APPEAL FOR ONTARIO

CITATION: Lavender v. Miller Bernstein LLP, 2018 ONCA 955

DATE: 20181128

DOCKET: C64207

Epstein, van Rensburg and Brown JJ.A.

BETWEEN

Barry Lavender

Plaintiff (Respondent)

and

Miller Bernstein LLP

Defendant (Appellant)

Robert Staley and Nathan Shaheen, for the appellant

Daniel Bach, Serge Kalloghlian and Paul Bates, for the
    respondent

Shantona Chaudhury and Cristina Senese, for the Law
    Foundation of Ontario

Appeal heard: March 5, 2018

On appeal from the judgment of Justice Edward P.
    Belobaba of the Superior Court of Justice, dated July 12, 2017, with reasons
    reported at 2017 ONSC 3958, and reasons on costs reported at 2017 ONSC 4739.

COSTS ENDORSEMENT

[1]

The appellant was successful in its appeal of a
    summary judgment in a class proceeding. This court reversed the decision of the
    motion judge. Although the appellant had been negligent in its audit of the
    Form 9 reports that Buckingham Securities was required to file with the Ontario
    Securities Commission (the OSC), confirming its segregation of assets and
    minimum capital, there was no duty of care owed by the auditor to Buckinghams investor
    clients. This court concluded that the motion judge erred, in particular, in
    his proximity analysis.

[2]

The appellant seeks partial indemnity costs of
    the summary judgment motion in the sum of $1,009,063.32 and of the appeal in
    the sum of $159,463.29.

[3]

The respondent and the Law Foundation of Ontario
    (LFO) submit that the appellant should be awarded costs of the summary
    judgment motion in the sum of $400,000 and costs of the appeal in the sum of
    $50,000. They do not take issue with the appellants entitlement to costs of
    both the summary judgment motion and appeal. Nor do they dispute that the
    amount of costs sought reflects the actual time and expense incurred by the
    appellant in defending the proceedings and pursuing the appeal.

[4]

Indeed, the respondent and LFO acknowledge that
    the amounts they ask this court to award the appellant for the summary judgment
    motion and appeal are considerably less than what the respondent was awarded following
    its success in the summary judgment motion at first instance, and what the
    respondent proposed as its own costs, if successful on the appeal, at the close
    of argument in this court:

·

At first instance the respondent class was
    awarded $775,000, which reflected a 25% reduction from partial indemnity costs assessed
    at $1,067, 900 because the respondent had been successful on liability, but had
    failed to prove damages, and was given the opportunity to file further evidence
    on this issue; and

·

The respondents costs outline submitted to this
    court indicated that, if successful, it would be seeking partial indemnity costs
    of the appeal in the sum of $176,691.49.

[5]

We invited written submissions on costs, after
    the respondent advised that the class had received funding from the Class
    Proceedings Fund. LFO had a right to be heard on costs, according to r. 12.04
    of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194.

[6]

The respondent and LFO make three arguments in
    support of their position on costs. First, they contend that this is an
    appropriate case for the court to exercise its discretion to impose a reduced
    level of costs under s. 31(1) of the
Class Proceedings Act, 1992
, S.O. 1992, c. 6
.
They submit
    that the case raised a novel point of law and involved matters of public
    interest. Second, the respondent and LFO argue that the appellants costs of
    the summary judgment motion should be reduced under r. 57.01(1)(g) of the
Rules
    of Civil Procedure
because of its conduct in refusing to admit facts that
    were either uncontroversial or had been admitted in the prior OSC proceedings.
    Third, they submit that the costs claimed by the appellant are
    disproportionate.

[7]

We do not give effect to these arguments.

[8]

This was not a case that engages the courts
    discretion under s. 31(1) of the
Class Proceedings Act.
The claims
    made by the respondent in this action do not raise any novel question of law or
    matter of public interest.

[9]

The respondents claim falls within a relatively
    common category of claims asserting auditors negligence and involved the
    application of settled law. While the Supreme Courts decision in
Deloitte
    & Touche v. Livent Inc. (Receiver of)
, 2017 SCC 63, [2017] 2 S.C.R.
    855, added clarity to the application of the
Anns/Cooper
test

for
    assessing whether a duty of care is owed, the issue in this case was the
    application of that test to a particular set of facts. Nor did the case have some
    specific, special significance for, or interest to, the community at large
    beyond the members of the proposed class:
Pearson v. Inco Ltd.
(2006), 79 O.R. (3d) 427 (C.A.), at para. 9;
Williams v. Mutual Life
    Assurance Co. of Canada
(2001),
27 C.C.L.I. (3d) 256
, at para. 24. The respondents claim depended on an evaluation of
    whether a duty of care was owed by the auditor to a group of client investors
    in the context of a particular statutory scheme, which no longer exists. Even
    if, as the respondent argues, auditors perform an important role in ensuring
    proper disclosure by companies within the capital markets, this does not
    transform every case involving auditors negligence into one that engages the
    public interest.

[10]

We turn to the contention that the appellants
    costs should be reduced by reason of its delay in admitting certain facts. The
    respondent and LFO say that the appellant refused, in response to a 2013
    request to admit, to admit facts that had previously been admitted in its settlements
    with regulatory agencies, that many such facts were later admitted in Mr.
    Kornblums cross-examination in 2017, and that in the interim, the respondent
    was put to the unnecessary expense of retaining experts to review Buckinghams
    records and to opine on the appellants compliance with auditing standards.

[11]

At first instance, the respondent relied on this
    argument to seek costs on a level exceeding partial indemnity, which were
    refused by the motion judge who concluded that elevated partial indemnity
    costs were not available and that there was no reprehensible conduct on the
    part of the appellant that would justify an award of substantial indemnity
    costs. We note that the same evidence is relied on here to argue for the
    application of r. 57.01(1)(g).

[12]

There is simply no basis on this record to
    reduce the appellants costs for this reason. While the respondent and LFO
    assert that additional costs were incurred when the respondent had to prove
    facts that ought to have been admitted, the chart provided to the court below,
    and included in the submissions to this court, simply shows that numerous facts
    that were
already
admitted by the appellant in regulatory proceedings were
    ultimately admitted by the appellant on cross-examination. Nothing is provided
    to support the contention that additional expense was incurred in order to
    prove facts that ought to have been admitted. Indeed, the respondent and LFO
    argue only for a general reduction in costs, without pointing to any specific
    amount of costs that they say could have been avoided if the admissions had
    been made at an earlier stage. In any event, the record before us shows that
    the respondent also refused to admit many facts that were set out in the
    appellants request to admit.

[13]

Finally, the quantum of costs is reasonable
    and proportionate. There were two fact witnesses and seven expert witnesses.
    All were cross-examined. As the motion judge noted, the issues were complex and
    important, the record voluminous, and the parties provided lengthy written
    submissions. In this court, the parties, after delivering their factums,
    provided additional submissions to address the Supreme Courts decision in
Livent.
And, as already noted, the costs
    sought by the appellant are significantly less than
the
    respondents own costs at first instance and what the class was seeking if
    successful in the appeal.

[14]

For these reasons, the appellant is entitled to
    its costs on a partial indemnity basis of the summary judgment motion fixed at
    $1,009,063.32, and of the appeal fixed at $159,463.29, both amounts inclusive
    of disbursements and HST.

Gloria
    Epstein J.A.

K.
    van Rensburg J.A.

David
    Brown J.A.


