The Final Skirmish In The Trillium Class Action: Class Counsel's Charge With Respect To Fees And Disbursements Trumps GM's Prior Perfected Security Interest

One of the few Ontario class actions to proceed through trial to judgment and subsequent appeals, the Trillium Motor World Ltd. ("Trillium") v. General Motors of Canada Company ("GM") and Cassels Brock & Blackwell LLP ("CBB") case concerning the wind-down of GM dealerships during the 2009 financial crisis has spanned nearly a decade. The final skirmish in this case involved a priority dispute between class counsel and GM in which GM sought to claim approximately $3 million in costs awards that CBB had been ordered to pay to Trillium (the representative plaintiff) at trial and on CBB's unsuccessful appeal ("Costs Award'). In this decision, the trial judge, Justice McEwen, found that class counsel's interest in the Costs Award had priority over GM's interest as secured creditor of Trillium and directed that the Costs Award be applied to class counsel's fees and disbursements as per the court's prior approval of class counsel's retainer agreement.

Background

In a motion originally returnable in July 2018, class counsel sought court approval of their retainer agreement and payment of their fees and disbursements under section 32(2) of the Class Proceedings Act, 1992[1] ("CPA"). The retainer agreement provided for the assignment to class counsel (as part of class counsel's contingent fee) of costs awards made in favour of Trillium in the action, subject to the approval of the court. Section 32(3) of the CPA states that amounts owing under an enforceable agreement (i.e. an agreement respecting fees and disbursements between class counsel and the representative plaintiff that is approved by the court under section 32(2) of the CPA) "...are a first charge on any settlement funds or monetary award."

Prior to the return of class counsel's fee and retainer approval motion, GM brought an application for orders: (i) adjudging Trillium bankrupt; (ii) that the Costs Award be deemed the property of Trillium; and (iii) declaring that GM as secured creditor of Trillium had a first-ranking security interest over the Costs Award, and specifically ranked in priority to class counsel. Having succeeded in defending the case at trial and on appeal, GM had received substantial costs awards of its own and, as such, was an unsecured creditor of Trillium. GM was not, however, a secured creditor of Trillium until it took steps to acquire, at or around the same time it brought its application in July 2018, a $2.7 million secured debt that the Business Development Bank of Canada ("BDC") held with respect to Trillium...