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 Richdale, Derek Ronde, Geoffrey B. Shaw, Kristin Taylor, Stephanie Voudouris
In This Issue
The Law Commission of Ontario Releases Its Long-Awaited Report On Class Action Reform – Will This Lead To Change in Ontario?
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):
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.
Ontario’s Crown Liability and Proceedings Act, 2019 and its Effects on Class Actions
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.
Ontario Superior Court of Justice Awards Defendants Millions in Costs Against a Sole Plaintiff in a Personal Injury Class Action
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.
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.
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.
Class Action Notes and Updates
The Cassels Brock Class Actions Group has had a busy few months. A few headlines from its recent work: