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Class Actions e-COMMUNIQUÉ - August 2019

Published: 08/09/2019

By Wendy Berman, Kate Byers, Carly Cohen, Peter Henein, Stefanie Holland, Jason M. Holowachuk, Christopher Horkins, Marlon Hylton, Lara Jackson, Stephanie Kerzner, Robert Kligman, Jessica L. Lewis, Laurie Livingstone, Jeremy Martin, Eric Mayzel, Alexandra Murphy, W. Michael G. Osborne, John M. Picone, Tim Pinos, Brigeeta C. Richdale, Derek Ronde, Geoffrey B. Shaw, Kristin Taylor, Stephanie Voudouris

In This Issue

  1. The Law Commission of Ontario Releases Its Long-Awaited Report On Class Action Reform – Will This Lead To Change in Ontario?
  2. Ontario’s Crown Liability and Proceedings Act, 2019 and its Effects on Class Actions
  3. Ontario Superior Court of Justice Awards Defendants Millions in Costs Against a Sole Plaintiff in a Personal Injury Class Action
  4. Class Action Notes and Updates

The Law Commission of Ontario Releases Its Long-Awaited Report On Class Action Reform – Will This Lead To Change in Ontario?

By Jeremy Martin

In 1992, Ontario introduced the first class actions statute in common-law Canada. Now, 27 years later, after consultations with dozens of stakeholders across the province, the Law Commission of Ontario has reviewed the efficacy of the class actions regime in Ontario and released its final report: Class Actions: Objectives, Experiences and Reforms. The report is the first comprehensive, independent study of class actions in Ontario since the legislation was introduced, and it makes 47 recommendations for improvement.

In response to the Commission’s calls for feedback, Cassels Brock’s Derek Ronde and Jeremy Martin spearheaded an ad hoc committee of defence counsel representing numerous class action defence departments across Bay Street. They, along with Lara Jackson and Tim Pinos, also responded to the Commission independently on behalf of the Cassels Brock Class Actions Group. A copy of the ad hoc defence counsel submission can be found here. Jeremy Martin also held the pen for the Ontario Bar Association’s bipartisan Class Action executive as it made its submissions to the Commission.

The report was headed by professors Jasminka Kalajdzic (University of Windsor) and Catherine Piché (Université de Montréal), and sought to address a broad range of policy concerns in the class action sphere.

Law Commission Report’s Recommendations

Among many other things – including vital statistics that will be relied upon in class proceedings for years to come – the Report makes the following fundamental recommendations that reflect the most pressing concerns of both sides of the class proceedings bar (Note: an asterisk below indicates that the recommendation aligns with a submission of Cassels Brock to the LCO):

  • Increase the rarely-followed 90-day deadline for filing certification materials to one (1) year and dismiss claims that do not meet that deadline or adhere to an approved timeline
  • Case management should be improved and introduced earlier, within sixty (60) days of the claim being made*
  • A new Practice Direction should be adopted for class actions specifically, including detailed guidance on forms of notice to class members
  • The Class Proceedings Act, 1992, S.O. 1992, c. 6 (CPA) should be amended to include specific provisions for carriage motions (in which class counsel compete for the right to carriage of a class action), including a sixty (60) day window for interested counsel to file their motions, with service to the class, and no right of appeal*
  • The CPA should be amended to accommodate the multijurisdictional class action provisions promoted in other provinces and by the CBA Protocol for the Management of Multijurisdictional Class Actions*
  • There should be no preliminary merits test of an action prior to certification
  • The certification test should remain in place but the “preferable procedure” criterion should be applied more rigorously. Courts should give greater weight to alternative compensation procedures (including recalls)*
  • Courts should encourage early motions to strike or seek summary judgment where appropriate*
  • Class counsel should be required to provide independent evidence that a negotiated settlement is fair, on a “full and frank disclosure of all material facts” standard
  • The authority of the Court to appoint claims administrators and to make cy-près awards should be specifically recognized in the statutory language
  • Post-settlement “outcome reports” must be filed with the court and all parties
     
     o Those reports and class action statistics should be organized centrally by the Ministry of the Attorney General and other interested parties
     
     o These reports should include information about the defendant’s behaviour modification in response to the class action
  • The CPA should be amended to allow the Court to ensure that class counsel fees are fair and reasonable, including the right to adjust or hold back counsel fees in the event of an unfair or unreasonable outcome*
  • Ontario should become a “no-costs” regime in respect of certification and related motions, but the normal costs rules would apply for all other procedural steps, including jurisdictional motions, summary judgment and de-certification motions, and trial
  • The CPA should be amended to authorize third-party funding of class actions under strict court controls and duties of disclosure
  • The Class Proceedings Fund should be permitted to partially fund legal fees in appropriate circumstances
  • The role of amicus curiae should generally be increased when the proceedings appear to become non-adversarial, such as in settlement approval hearings
  • All appeals from a certification motion should go directly to the Court of Appeal, rather than to the Divisional Court in certain circumstances*

In sum, the Report largely endorsed and sought to codify the status quo in most contentious areas – most notably certification – but adopted some bipartisan recommendations and sought to remedy some of the worst abuses and inefficiencies complained of at both sides of the class actions bar. Some of its more contentious recommendations, however – such as the one-year dismissal period, the recommendation of a “no-costs“ rule for all certification-related motions (which tend to be brought by plaintiffs) while maintaining a costs regime for post-certification motions (which tend to be brought by defendants), and the authority for the court to interfere in class counsel’s retainer agreement by adjusting their compensation – may prove to be more controversial in the long term.

We will continue to update our clients as we receive further information from our participation with the Commission and the Ministry of the Attorney General, as well as in stakeholder and other advocacy groups involved in this broader project of legislative reform.

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Ontario’s Crown Liability and Proceedings Act, 2019 and its Effects on Class Actions

By Stephanie Kerzner

On May 29, 2019, the Lieutenant Governor of Ontario granted Royal Assent to a bill repealing and replacing the Proceedings Against the Crown Act, a 56-year-old piece of legislation that defines the circumstances under which the Ontario government can be sued. The replacement legislation, the Crown Liability and Proceedings Act, 2019 (the "Act") was included as Schedule 17 of Ontario’s omnibus Bill 100, the Protecting What Matters Most Act (Budget Measures) The Act operates retroactively against existing actions, fundamentally limits the circumstances under which the Government of Ontario can be found liable in a private action and introduces significant procedural hurdles to actions against it. These changes will have important implications on current and future class actions involving the Province as a party.

The Act came into force on July 1, 2019. The key legislative changes are as follows:

1. Extinguishment of Causes of Action Respecting Certain Government Functions (Section 11)

Currently, regulatory negligence class actions in Ontario may be brought against the government by a plaintiff class seeking compensation for loss, injury or damages arising from careless conduct by provincial officials, agents and servants as long as the conduct concerns the implementation or operational level of a policy decision, and not the core policy decision itself. That status is derived from long-settled common law in the UK and Canada.

Section 11 of the Act, however, extinguishes causes of action against the Crown or any officer, employee or agent of the Crown respecting negligence in relation to acts of a legislative nature, specified regulatory decisions, and decisions respecting policy matters.

Subsection 11(5)(c) in particular shields the Crown from actions concerning “the manner in which a program, project or other initiative is carried out.” The section significantly expands the scope of government immunity to circumstances beyond policy decisions to the carrying out of policy, immunizing itself from claims for negligence or failure to take reasonable care in making and carrying out operational decisions. In other words, negligence in exercising government power is now largely beyond scrutiny.

Further, subsections 11(5)(e) and (f) provide that in addition to the immunity for regulatory decisions and policy matters, the scope of that immunity is subject to unlimited expansion through regulation.

2. Full Disclosure Leave Requirement in Proceedings for Torts of Misfeasance or Bad Faith (Section 17)

Section 17 of the Act introduces a completely new provision which will require a plaintiff class to obtain leave of the Court in all proceedings against the Crown for claims based on torts of misfeasance or bad faith. Subsection 17(2)(b) will further fix the plaintiff class with the obligation to serve and file an affidavit of documents at the outset of the action in addition to an affidavit on the merits. The threshold for bringing a misfeasance or bad faith claim is raised even higher by subsection 17(7), which precludes any award of costs on a successful motion for leave.

3. Extinguishment of Causes of Action is Retroactive (Sections 11, 30 and 31)

Several provisions of the Act provide that new provisions will apply not only to new proceedings, but to proceedings that have already been commenced. In other words, the Act applies retroactively, such that elements of any existing class action implicating the Ontario Crown may be extinguished.

This Act, which involves litigation against the Ontario Crown generally, will have a significant impact on class actions, as there are several common bases for class proceedings that involve the Crown either as a party or regulator.  Not only will it become difficult to bring such claims in the first instance, but existing actions will be complicated as the “landscape” of ongoing actions – Pierringer agreements, common interest privilege agreements, etc. – may shift due to the Crown’s new, independent basis upon which to escape the proceeding. At a minimum, it will likely be more expensive and complex to bring negligence claims against the government, or to name it as a third party in defending a class proceeding, and Crown counsel will have new tools to seek the dismissal of existing claims on the basis of this new legislation.

If you have an existing class action involving the Government of Ontario in any capacity as a party, please consider reaching out to your counsel for advice as to how this new development may change the status of your proceeding.

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Ontario Superior Court of Justice Awards Defendants Millions in Costs Against a Sole Plaintiff in a Personal Injury Class Action

By Alexandra Murphy

Introduction

In what Justice Edwards called the “gold standard” for how expensive it is to litigate in the 21st century – and in this case, to litigate a class action –  the Ontario Superior Court of Justice recently fixed costs against a single plaintiff in the amount of $2.56 million. This decision is reflective of a recent trend of Ontario courts recognizing the cost to defendants of vigorously defending the merits of class proceedings and other actions and ensuring that successful defences are reflected in adequate costs awards.

The class action in Davies v. The Corporation of the Municipality of Clarington settled in 2006 without prejudice to the ability of two class members to continue with the case, with the class action narrowed to their own individual claims. This costs award arose out of the 106-day trial of one of those two opt-out plaintiffs, Christopher Zuber, who chose to litigate the action rather than be part of the class settlement.

Background

The underlying class action commenced following a VIA Rail train derailment in 1999. The issue of liability was determined through the course of a 10-week trial, and the parties entered into court-approved minutes of settlement in 2006. At the time of execution, it was understood that Mr. Zuber’s claim had not been settled and would go forward separately following the settlement.

In his claim, Mr. Zuber sought damages in the amount of $60 million for loss of income. The court noted that this amount “far exceeded anything that this court has ever heard of being awarded in a personal injury action in this country”.1 Mr. Zuber originally offered to settle his claim for $35 million, which he subsequently reduced to $26,200,000, plus costs, before trial.

Over the course of the litigation, the defendants made three settlement offers. The final offer to settle from the defendants was $500,000.

Ultimately, Mr. Zuber missed the mark of that final offer to settle at trial, obtaining judgment only for $50,000, plus prejudgment interest, for a total recovery of approximately $146,000.2 Although the plaintiff was only granted $50,000 on a $60 million claim, Mr. Zuber argued that he was the successful party and should be entitled to his costs of approximately $7 million. By contrast, the defendants claimed that they were entitled to their costs of $3 million, starting from their first settlement offer, which was made in November 2009.

Costs Considerations

In granting the significant $2.5 million costs award to the defendants, the Court considered, and ultimately rejected, a number of Mr. Zuber’s arguments that he should be awarded costs, or alternatively, that costs should not be awarded to the defendants.

Consistent with what is generally understood about litigation financing disbursements, the Court rejected the contention that the plaintiff’s litigation loans and accrued interest thereupon could constitute recoverable disbursements. The litigation loans were not disclosed to the Court or the defendants until after all three of the defendants’ settlement offers were made. Notably, Mr. Zuber did not submit the loan agreements for approval by the Court, and despite his case being a class action, did not seek funding from the Class Proceedings Fund until the Court’s reasons for decision were released. The Court determined that since the defendants had no knowledge of the litigation loans, it would be a “gross unfairness” for the defendants to pay interest on Mr. Zuber’s undisclosed litigation loans.3

The Court also considered whether the significant interest accrued on Mr. Zuber’s litigation loans meant that Mr. Zuber was justified in his decision not to accept the defendants’ settlement offers, on the basis that to do so would have left him in “a deficit position”.4 The Court rejected this argument, finding that the real issue was whether the defendants’ offers represented sincere attempts to compromise, which he was satisfied they were.

The Court also rejected the argument that this action was in any way a “test case” simply because it involved foreign officials as witnesses.5

Key Takeaway Principles

The Superior Court’s decision in Davies v. The Corporation of the Municipality of Clarington makes clear that litigants are expected to make genuine settlement offers in order to limit unnecessary, costly, and lengthy litigation, and that an unreasonable party should expect to be at risk of a proportionate costs award. The Court explained that:

Litigants must be encouraged to settle their claims in an age when court time is precious, and which should be reserved for those litigants who have a real lis that requires adjudication. Civil trials are an important part of our judicial system. Courtrooms are there to adjudicate real disputes between parties who have made a real effort to resolve their dispute through an exchange of offers.6

Increasingly, where parties – including class action plaintiffs – fail to meet this obligation, they are beginning to find that the Court will be even-handed in assessing costs against them.

The decision in Davies is also reflective of a helpful trend for defendants: namely, that Ontario courts are willing to award significant adverse costs in the context of class actions. For example, in 2016, Cassels Brock was successful in obtaining a significant costs award on behalf of its client Pet Valu in respect of a failed franchisee class proceeding.

Another key point of interest in this case was the Court’s rejection of litigation funding and interest as a recoverable disbursement. In this particular case, the Class Proceedings Fund had rejected Mr. Zuber’s late application for costs indemnity and neither the parties nor the Court were advised of the higher-risk loans that had been taken out to support the action.  This decision has not entirely closed the door on the possibility that such loans and interest may be recoverable in reasonable circumstances and on due notice in the future.

____________________________

1 Davies v. The Corporation of the Municipality of Clarington (“Davies”), 2019 ONSC 2292, para 2.
2 Ibid, para. 9; Davies v. The Corporation of the Municipality of Clarington, 2018 ONSC 4370, para. 451.

3 Ibid, Davies, para. 86.
4 Ibid, Davies, para. 96.
5 Ibid, Davies, para. 90.
6 Ibid, Davies, para. 104.

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Class Action Notes and Updates

The Cassels Brock Class Actions Group has had a busy few months. A few headlines from its recent work:

  • Jeremy Martin was cited by the Newfoundland Court of Appeal in Atlantic Lottery Corporation v. Babstock, 2018 NLCA 71 at para. 142, for his expertise on ‘waiver of tort’: an ancient and complex cause of action pleaded almost exclusively in class actions. The Court adopted his “exhaustive historical examination” of the doctrine in coming to its decision to abandon waiver of tort as an independent cause of action and to replace it with an action for disgorgement of wrongful gains. The Supreme Court of Canada has granted leave to appeal the decision.
  • Lara Jackson was on the faculty of the Advocates’ Society’s “Class Actions Advocacy” program on June 11, 2019. That program is the only specialized class actions litigation training course in Canada.
  • Tim Pinos spoke at the International Association of Defence Counsel’s Annual Meeting in Asheville, NC on July 9, 2019, on recent developments in the use of class action waivers and arbitration agreements.
  • Wendy Berman spoke on the topic of class actions in the US and Canada at the Litigation Counsel of America’s 2019 Spring Conference and Celebration of Fellows in Santa Barbara, CA on May 1-3, 2019.
  • Jeremy Martin was acclaimed as Secretary of the Ontario Bar Association’s Class Action Section executive in June. In that role, he will serve as one of the four officers of the executive along with the Present, Past and Vice Chair.

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