Damages of $28 million awarded against firm

Vermette says the case is a reminder to the profession to keep an eye out for conflicts of interest.

“Justice McEwen found Cassels to be liable on three different grounds, but the Court of Appeal really just focused on the conflict of interest issue,” Vermette says.

“So, I think the legal profession should take this as a cautionary tale and just be careful with conflicts.”

Aside from the damages award, McEwen decided that it was fair for Cassels Brock to be ordered to pay administration costs, estimated to be capped at $100,000.

Cassels Brock said it was unable to comment on the case.

“In my view, it was certainly within the reasonable expectation of Cassels that the Administration Costs would be borne by them if they were unsuccessful in the litigation,” McEwen wrote.

The Oct. 10 decision, Trillium Motor World Ltd. v. Cassels Brock & Blackwell LLP, 2018 ONSC 5497, is the latest development in a long-running dispute surrounding Trillium Motor World Ltd. and General Motors of Canada Ltd. The fight involves the negotiation of “the largest government subsidy given to a corporation in Canadian history,” according to Sotos LLP.

The dispute dates back to the “heights of the financial crisis,” when “dangerously close to the edge of insolvency,” General Motors Canada nixed around 200 dealers, McEwen wrote in a 2015 decision, Trillium Motor World Ltd. V. General Motors of Canada Ltd. Cassels Brock was retained to represent Canadian dealers in a GM restructuring bankruptcy, where General Motors Canada was a wholly owned subsidiary of General Motors Corporation.  

In 2015, McEwen said that Cassels Brock breached contractual and fiduciary duties and was negligent by accepting the GM dealers’ retainer despite having already agreed to act for the federal government through Industry Canada.  

“Cassels knew about this conflict from the outset; yet, rather than declining to act for the GMCL dealers and referring the dealers to an unconflicted law firm, or even telling the dealers about the retainer with the Federal Government, Cassels continued to act for both the Federal Government and the dealer,” McEwen wrote in 2015.

“As a result of these breaches, the Class Members, who were offered compensation which represented a fraction of  the  value  of  their  dealerships,  lost the opportunity to negotiate with GMCL for increased wind-down payments.”

Trillium Motor World, which was a Scarborough, Ont. Pontiac, GMC and Buick dealer, was a representative plaintiff on behalf of class members that signed wind-down agreements, McEwen wrote in his 2015 decision.

In 2015, after a 41-day trial, McEwen awarded class members aggregate damages of $45 million, which Cassels Brock’s general counsel said the firm would appeal. In 2016, McEwen further clarified his decision, including specifying the damages be awarded to the members of the class that retained Cassels Brock in 2009.

Last year, the Court of Appeal decided the damages should be less than $45 million, allowing an appeal on the trial judge’s quantification of damages, Justice Eleanore Cronk wrote in the 2017 decision, with justices Katherine van Rensburg and Gladys Pardu concurring.

After reducing the starting point of the damages, the Court of Appeal returned the damages issue to the trial judge. The Court of Appeal decision said that the trial judge should account for a group deemed “Participation Form Dealers.”

“[Justice McEwen] answered the question on an arithmetical basis,” Statham says.

“Both the plaintiff and Cassels had a range of other submissions on ways of tackling that question that were not just straight-line arithmetic. . . . taking into account who some of the 141 dealers were and whether they had bargaining power and so forth. So, both sides, in coming up with alternative calculations, were positing something other than straight-line arithmetic.”

Margaret Waddell, founding partner of Waddell Phillips Barristers PC in Toronto, says the issue of aggregate damages is unique in the the class-action world, as the court has more flexibility than in traditional litigation.

“It may not be an exact number. It’s permissible in the class-action world to use statistical evidence to come up with a round number estimate of what the classes’ total damages were or a best estimate, based on the evidence available, of the general scope of the losses that the class had suffered,” she says.

“Then the trial judge can — once they’ve come up with the gross number — set out a plan for how the class will receive those damages.”

Waddell, who was not involved in the case, says that since many cases are settled rather than going to trial, this case is somewhat unusual by spelling out the administration costs: the expenses of getting the money out to the class members. She says McEwen’s decision is consistent with what usually happens when a case goes to trial in that it indicates that the party that must pay administration costs is the party that engaged in the wrongful conduct.

The case “is a good example of a case where the trial judge came up with the best estimate of what the loss was based on the information that was available,” she says.  

“It just shows the power and flexibility of the Class Proceedings Act to accommodate that kind of situation and get some justice for people that have been wronged,” says Waddell.

While one hurdle has been cleared, there are still many aspects of the case that are before the court or may be appealed, Vermette and Statham say.

“We’re still in the trenches,” Vermette says. Statham adds: “We are happy that we are getting closer to the end.”