On April 6th, 2011, the Québec Court of Appeal (the "Court") dismissed the appeal of Trudel & Johnston GP and al. v Nortel Networks Corporation and al. and affirmed the decision of the Superior Court rendered by Judge Michèle Monast of the Superior Court on May 28, 2009.
Justice Monast had substantially reduced the amount of legal fees sought by the Appellants Trudel & Johnston following the settlement of the Nortel II class action. Class Counsel appealed this decision on the following grounds: the trial judge erred in applying the rules of law specific to the approval of legal fees in the context of class actions; the judge also erred in excluding the affidavit of Me Trudel with respect to the hours worked by the Appellants in this matter; and the judge did not exercise her judicial discretion in a reasonable manner.
Following the announcement of a Settlement Agreement in principle in February 2006, the Appellants agreed to limit their fee application to 0.45% of the Nortel II gross settlement fund, which was then equivalent to about US$5 million. Fees in the amount of CDN$1.25 million were ultimately awarded by Judge Monast.
On appeal, the Court first examined the applicable legal factors germane to fee applications in the class action context. It noted that the Appellants essentially argued that the trial judge placed too much importance on certain factors while minimizing others. The Appellants therefore attacked the balancing exercise conducted by the trial judge, but did not question the legal principles upon which she based her conclusions. The Court stated that it was rarely appropriate for an appellate court to substitute its discretion for that of the trial judge regarding such balancing exercise and that nothing in the judge's reasons justified any intervention in this matter.
The Court also confirmed that the trial judge had to evaluate the fees awarded based on the hours actually worked, and not the hours that could have theoretically been worked. It emphasized the catalytic role of earlier class actions filed in other jurisdictions. It was quite clear that the work already accomplished in these other jurisdictions had to be taken into account by the judge to determine whether it alleviated the burden and risks borne by the Appellants. The goal is to avoid counterproductive and unnecessary duplication of work. Furthermore, the Court dismissed the Appellants' argument that Judge Monast had failed to consider the results achieved by the Settlement of the class action.
The Appellants also argued that the trial judge erred when excluding the sworn affidavit of class counsel, Me Trudel, in the absence of contradictory evidence. The Court affirmed that the trial judge was in a privileged position to appreciate the work that was required of class counsel at every stage of the proceedings. The Court concluded that, notwithstanding the absence of contradictory evidence, the affidavit of Me Trudel was not convincing enough on its own, given its retrospective and approximate nature. Moreover, class counsel's time charge estimates did not specify the number of hours worked at each stage of the proceedings.
Finally, the Court reiterated that Judge Monast was conferred and benefited from a wide discretion in such matters. It added that the Appellants had failed to establish any error, let alone any palpable and overriding mistake in the exercise of this discretion. Several factors motivated this conclusion: the inherent weakness of the evidence relating to the hours worked; the shorter period of time during which the risks were borne; the shorter waiting period before the payment of fees and, finally, the momentum resulting from the already filed Nortel I class action. Judge Monast's decision not to compute the fee award as a multiple of estimated recorded time was deemed immaterial.
The Respondents, Ontario Teachers' Pension Plan Board and Department of the Treasury of the State of New Jersey and Its Division of Investment, were successfully represented by Me Laurent Nahmiash of the Montréal office of Fraser Milner Casgrain.
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