Case information

Civil Procedure – Class Actions – Costs – Court granting a motion for security for costs brought by a proposed representative respondent in a pending motion for certification as a class action – Whether, contrary to the prima facie no costs regime established for class proceedings, the appellate court erred in ordering security for costs pursuant to Rule 416(1)(a) and (b), on the basis that “exceptional circumstances” may be found to exist under Rule 334.39(1) – Federal Courts Rules, SOR/98-106.

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The applicants commenced a proposed class proceeding claiming declaratory, injunctive and other relief against the proposed representative respondent and others who have allegedly infringed their copyright by engaging in illegal file sharing over the Internet. Prior to the filing of the motion for certification, the respondent brought a motion for an Order requiring the applicants to pay security for costs. The applicants defended the motion on the basis that it goes against the general rule against awarding costs in the context of class proceedings, set out in Rule 334.39(1). The chambers judge held that Rule 334.39(1) was not yet engaged, given that no notice of motion for certification had been filed. He awarded security for costs in the amount of $75,000, and a lump sum amount of $750 to the respondent for his costs on the motion. The Federal Court of Appeal dismissed the appeal. While disagreeing with the lower court reasoning, it upheld the order on the basis of Rule 416(1)(a) and (b). Given that the case involves a proposed reverse class proceeding brought by foreign corporations with no significant assets in Canada, there is potential for a court to find the exceptional circumstances contemplated in Rule 334.39(1)(c) so as to permit an order for costs on the motion for certification. A determination under Rule 334.39(1)(c) is not a condition precedent to an exercise of judicial discretion under Rule 416. A cross-appeal on the costs awarded to the respondent was allowed and remitted to the lower court.