



COURT OF APPEAL FOR ONTARIO

CITATION:
McCracken v. Canadian National Railway
    Company,
2012 ONCA 797

DATE: 20121120


DOCKET: C52635

Winkler C.J.O., Laskin and Cronk JJ.A.

BETWEEN

Michael Ian McCracken

Plaintiff (Appellant/

Respondent by
    Cross-Appeal)

and

Canadian National Railway Company

Defendant (Respondent/

Appellant by
    Cross-Appeal)

Louis Sokolov, Peter L. Roy, Steven Barrett, David F.
    OConnor and Sean M. Grayson, for the appellant/respondent by cross-appeal

Guy J. Pratte, Morton G. Mitchnick, Sylvie Rodrigue,
    Jeremy J. Devereux and Michael Kotrly, for the respondent/appellant by
    cross-appeal

Scott Hutchinson, Aaron
    Dantowitz and Benjamin Kates, for the Law Foundation of Ontario

Heard:   February 28 and 29, 2012

On appeal from the order of Justice Paul M. Perell of the
    Superior Court of Justice, dated August 17, 2010, with reasons reported at 2010
    ONSC 4520, 3 C.P.C. (7th) 81, and on appeal from the costs order of Justice
    Paul M. Perell, dated November 2, 2010, with reasons reported at 2010 ONSC
    6026, 100 C.P.C. (6th) 334.

COSTS ENDORSEMENT

Winkler C.J.O.:

[1]

This courts judgment in
McCracken v. Canadian National Railway
    Company
,
2012 ONCA 445,
    was released concurrently with two other appeals in a trilogy of class actions
    against federally-regulated employers claiming unpaid overtime pay:
Fulawka
    v. Bank of Nova Scotia,
2012 ONCA 443, and
Fresco v. Canadian Imperial
    Bank of Commerce
, 2012 ONCA 444. In
McCracken
, this court
    overturned the motion judges order certifying the proposed action. The parties
    are to return before the motion judge to make oral submissions on the costs of
    the certification motion.

[2]

The court has now had the opportunity to review submissions on the costs
    of the appeal of the successful appellant, Canadian National Railway Company, as
    well as the joint submissions of the proposed representative plaintiff, Michael
    McCracken, and the Law Foundation of Ontario. The Class Proceedings Committee of
    the Law Foundation approved the proposed class action for funding support from
    its Class Proceedings Fund.

[3]

CN seeks partial indemnity costs of the appeal in the amount of
    $300,000, including disbursements in the amount of $13,293.49 and taxes. CNs counsel
    indicate that this amount represents approximately one-third of the actual costs
    incurred ($931,464) and reflects a discount from the maximum allowable on a
    partial indemnity scale ($487,799).

[4]

The plaintiff and the Law Foundation submit that no costs should be awarded
    for the appeal, but if they are, the award should not exceed $50,000.

[5]

The plaintiff and the Foundation complain that as much as $229,074 of
    the actual fees appearing in CNs costs outline ($127,050 on partial indemnity)
    and an unspecified portion of the claimed disbursements, arise from work done
    in connection with the Divisional Court proceedings. These proceedings were
    resolved on consent and on a no-costs basis and are not properly claimed as
    costs of the proceedings in this court. As noted above, however, CN reduced the
    amount of its alleged actual costs on a partial indemnity basis by
    approximately $180,000, which neutralizes the concern raised by the plaintiff
    and the Foundation.

[6]

I would not accept the position of the plaintiff and the Law Foundation that
    no costs should be awarded to CN for the appeal in this court. The outcome of
    the appeal, its complexity, the principle of indemnity and the reasonable
    expectations of the plaintiff all militate in favour of a significant partial
    indemnity costs award.

[7]

This was a two-day hearing and each side raised a host of issues by way
    of appeal and cross-appeal. It should come as no surprise to the plaintiff or
    the Law Foundation  given the $300 million claimed in the action and the almost
    $750,000 in costs that the plaintiff was awarded on the certification motion  that
    the appeal would be hard-fought and would be argued by experienced counsel on
    behalf of CN.

[8]

However, in furtherance of the goals of the
Class Proceedings Act,
    1992
, S.O. 1992, c. 6,
the
    court will also consider whether any of the factors set out in s. 31(1) of that
    Act  a test case, a novel point of law, a matter of public interest 
apply
: see
Ruffolo v. Sun Life
    Assurance Co.
(2009), 95 O.R. (3d) 709 (C.A.). I agree with the position of
    the plaintiff and the Law Foundation that this appeal involved novel points of
    law. Indeed, in its factum filed in support of the request for leave to appeal
    the certification order to the Divisional Court, CN took the position that the
    proposed action engages serious, novel legal issues. It raises important
    questions regarding how misclassification can be heard collectively, if at
    all.

[9]

I also agree with the plaintiff and the Foundation that the proposed
    action was animated by public interest concerns insofar as this class
    proceeding was intended to afford an efficient means to obtain collective redress
    for employees of a federally-regulated company. The public interest issue is
    whether or not a misclassification case can properly be made the subject matter
    of a class proceeding. This public interest purpose is consistent with the fundamental
    objective of the
CPA
of providing enhanced access to justice:
Pearson
    v. Inco Ltd.
(2006), 79 O.R. (3d) 427, at para. 13.

[10]

I
    reject CNs argument that access to justice considerations are not involved
    because the Class Proceedings Fund will indemnify the representative plaintiff
    for any costs award. The Fund was created to facilitate access to justice. If
    the Fund were required to absorb steep cost awards imposed on litigants even
    though the proposed action displays the factors in s. 31(1) of the
CPA
,

this
would have an undesirable chilling effect on class
    proceedings.

[11]

On
    the other hand, it must be recognized that class actions come at a cost to
    defendants. Indemnifying parties  such as class counsel or the Law Foundation
     must assess the risks of an unsuccessful litigation strategy and balance them
    against the possible rewards: see
Singer v. Schering-Plough Canada Inc.
,
    2010 ONSC 1737, 87 C.P.C. (6th) 345, at para. 20. The risk of adverse cost
    awards must factor into the decision to fund and indemnify a proceeding. The
CPA
was never intended to insulate representative plaintiffs from the possible
    costs consequences of unsuccessful litigation:
David Polowin Real Estate
    Ltd. v. Dominion of Canada General Insurance Co.
(2008), 93 O.R. (3d) 257
    (C.A.), at para. 29.

[12]

Considering
    that the appeal raised novel legal issues and that the proposed class action
    engaged the access to justice rationale animating the
CPA
, I would fix
    costs at a significantly lower amount than is being claimed by CN. However, I
    would not give effect to the plaintiff and the Foundations submission that an
    order of no costs  or, in the alternative, an award of not more than $50,000 
    would be fair and reasonable in this case. Given the complexity of the appeal,
    the amount at stake in the litigation, and CNs complete success on appeal, in
    my view, costs of the appeal should be fixed on a partial indemnity scale at $60,000,
    inclusive of disbursements and taxes.

W.K. Winkler
    CJO

I agree John Laskin J.A.

I agree E.A. Cronk J.A.


