Author: Ward K. Branch
Branch MacMaster Barristers & Solicitors[1]
E-mail: wbranch@branmac.com
It has been four years since B.C.'s Class Proceedings Act (the "Act") came into effect. As such, it is an opportune time to assess whether the legislation has had the desired effect of increasing access to justice, modifying behaviour of defendants, and managing scarce judicial resources.
This paper will review the areas where class actions have been brought, the results of these actions, and certain procedural and tactical questions that have arisen.
One person may commence a proposed class proceeding.[2] However, court approval must be obtained before the proceeding obtains formal class action status. There are five statutory requirements:
Once certified, the statute creates a number of benefits for class members:
The author is aware of seventy-three class actions that have been filed in B.C. since introduction of the Act.
Many of these actions have never been advanced. By definition, most class actions are large complex cases which require substantial commitment and resources on the part of plaintiffs and their counsel. In several cases, plaintiffs appear to have assumed too much responsibility.
That said, twenty actions have reached the class certification stage. Of these, class certification was granted in fourteen cases and rejected in six. It should be noted however that the defendant did not contest certification in six of the fourteen cases. Settlements or partial settlements have been reached in eight of the fourteen certified cases.
To the government's possible surprise and dismay, it has been the primary target of their own legislation. Twenty-one actions have included governments, government agencies, or crown corporations as defendants.
Government and associated entities have had mixed success avoiding proposed class actions. Government-related defendants have avoided class certification in four of the nine cases they have contested. The successful defences to certification advanced by the government have included:
The government was unable to avoid certification in the following cases: Campbell v. Flexwatt Corp.[7] (radiant ceiling heating panels), Howard v. B.C.[8] (challenge to constitutionality of probate fee structure), Nanaimo Immigrant Settlement Society v. B.C.[9] (challenge to constitutionality of charity licence fee structure), Cooper v. Hobart [10] (attack on the Registrar of Mortgage Brokers flowing from the Eron Mortgage collapse) and Rumley v. B.C.[11], (sexual assaults at the Jericho School).
The last of these decisions should be a particular concern for governments, as the Court of Appeal adopted a very liberal approach in certifying the action. The claim alleged sexual assault claims over a 42 year period at a government run school for the deaf. The Court of Appeal held that the issue of the government's alleged systemic negligence could be conveniently tried within one proceeding.
The provincial and federal governments did not oppose class certification in Endean v. Canadian Red Cross Society [12], and have since used the structure afforded by a class proceeding to settle the claims against them.
Product manufacturers have been the next most popular prey. To the uninitiated, this would not seem surprising. Most would assume this to be an essential and proper area for class actions given the practical difficulties facing the single individual who wishes to challenge a large multinational manufacturer.
However, a review of the American experience illustrates a decidedly hostile approach to products liability class actions, particularly in recent years. U.S. courts have become very concerned that such actions have the potential to bog down in the many individual issues that can arise such as causation, learned intermediary defences, choice of law, limitation periods, and damages.
B.C. courts have disregarded these concerns, noting that the test for certification is more liberal in B.C. than in the United States. All products liability class actions to come before the court have been certified[13] save one.[14]
The first company targeted with a class action in British Columbia was the Insurance Corporation of British Columbia. The corporation's policy of closely scrutinizing claims in which there was minimal impact between the two vehicles was challenged immediately after the Act came into effect.[15] Certification was successfully opposed on the basis that even within a class action the court would have to consider each individual accident in any event in order to determine whether or not no-fault benefits were payable. As such, there was insufficient justification for imposition of the class action procedure.
The Court of Appeal's analysis suggests that class actions against insurance companies are most likely to be approved where the action seeks the interpretation of a standard form insurance provision, rather than where there is a challenge to a claims adjustment process. The former is capable of common uniform resolution, while the latter is more sensitive to the vagaries of the individual claimant.
A number of class actions have been filed against Canadian life insurers who sold so-called "vanishing premium" policies. The allegation in these actions is that the insurers did not adequately disclose that a decrease in interest and dividend rates could result in a change in the year in which the policy would begin "paying for itself", allowing the individual to stop paying insurance premiums out of their own pocket. None of these actions have been the subject of a contested certification hearing. However, two insurers negotiated settlements which have been approved by the courts.[16]
Actions flowing from failed investments or unexpected drops in share value are amongst the most common class actions in the United States. A similar wave of litigation is just beginning in Canada. Class actions have been commenced by Bre-X, Delgratia Mining, Boliden, and BCRIC shareholders. As at the date of writing, no certification decisions had been issued in these cases. As noted above, an action was certified against the Registrar of Mortgage Brokers flowing from the collapse of the Eron Mortgage Corporation.
The Ontario experience suggests that investment cases will be certified if they are based on a prospectus, takeover circular, or other standard form document, or where conspiracy or fraud is alleged. However, if the cause of action is based on negligent misrepresentations that may vary amongst investors, the case is unlikely to be certified.[17]
The first four categories comprise the vast majority of class actions that have been commenced since passage of the Act. However, there is an assortment of other cases, including actions challenging the quality of education at private colleges[18], interest rate calculation disputes[19], the right to bump passengers from flights[20], and utility rate overcharges.[21]
B.C. Courts have developed a liberal stance towards class certification, particularly at the appellate level.
The requirement that the claim disclose a cause of action has been interpreted as equivalent to the Rule 19(24) standard.[22] Therefore, it must be plain and obvious that the claim cannot succeed on the basis of the pleadings before certification will be rejected on this basis.
The requirement that the class include two or more persons is easily met. The only legal test applied is to require that the definition be sufficiently clear such that class members have the ability from the outset to determine whether they fall in or out of the class.
The proposed representative plaintiff need not be particularly sophisticated or knowledgeable about the litigation. They need only have a common interest with other members of the class and have an intention to prosecute the claim vigorously.[23]
In Harrington v. Dow Corning [24], the court approved a representative plaintiff whose own cause of action was against only one of the group of manufacturer defendants.
The common issue test will be met if there exists an issue or issues for which resolution will advance the interests of the class by "moving the litigation forward".[25] Common issues that have been approved include whether: 1) a product is fit for its purpose[26], 2) a manufacturer was negligent in the manufacturing process[27], 3) a regulation is constitutional[28], and 4) whether the defendant's conduct merits an award of punitive damages[29].
The assessment of the preferability of the procedure is clearly the key element of the certification test. Those cases that have not been certified to date have generally faltered at this stage.
In assessing preferability the court will consider certain mandatory statutory factors including: whether common issues predominate over individual issues, whether class members have commenced or have an interest in commencing their own actions, available alternatives, and the manageability of the proposed class proceeding.[30]
The presence of a substantial number of individual issues affects the ability of the class proceeding to achieve its ends. If substantial individual trials will be required within the class proceeding, judicial economy may not be improved.[31] Furthermore, any increase in access to justice may be marginal, given that class members will need to prosecute individual trials in any event. Finally, the defendant's behaviour is unlikely to be modified to any greater extent than would occur were individual actions allowed to proceed.
The preferability of a class proceeding must be assessed against its proposed alternatives. In particular cases, courts have accepted that individual actions[32], administrative remedies[33], or voluntary claims processes[34] were preferable to the proposed class proceeding.
It may be difficult to interpret what presence or absence of ongoing individual actions means for class certification. If there are a substantial number of individual actions, this may be evidence of the need for judicial management through a class action. If there are no individual actions, this may be reflective of a need to facilitate access to justice through a class proceeding.
Management issues must be squarely considered. Once certified, the court is agreeing to manage the case from the first day of the common issues trial through to the last day of the last class member's individual trial or claims process. The court must be comfortable that the structure of the proposed litigation is such that the case is capable of reaching its end point, rather than becoming a "monster of complexity", bogged down in an endless procedural morass.
The Act states that unless ordered otherwise, the judge who hears the certification hearing will case manage the class action through to trial.
The practice that has developed is for a case management judge to be appointed at the outset of the litigation, even prior to the certification hearing. In the normal course, plaintiff's counsel will write to the court requesting appointment of the judge.
A pre-certification hearing will then be held at which the court will discuss scheduling and other certification issues including:
This time frame from initial case management conference through to certification has usually been in the range of 4-6 months, although there is substantial variation. The class certification hearing will normally take 2-5 days. Presumably both these time frames will be reduced as the basic principles are developed.
One issue that has caused some difficulty is the fact that the Act does not toll limitation periods for the class until such time as the action is certified. As such, class counsel retained by a number of class members have been forced to file protective writs in advance of the certification hearing in cases where expiry of the limitation period may be an issue.
Although the Act does not specifically contemplate cross-examination on the affidavits, the practice has been for both sides to have such an opportunity. This ensures that the court has all material facts relevant to certification, which is the object of the production of such affidavits.
There is some controversy about the scope of discovery prior to the class certification hearing. All parties to the litigation have an obligation to produce an affidavit that includes all facts material to certification. However, are the parties entitled to any further discovery prior to class certification? In Endean v. Canadian Red Cross [36] and Matthews v. Servier Canada Inc.[37], the court suggested that if there were to be any discovery prior to certification, it should be limited to issues relevant to certification. However, in Cooper v. Hobart [38], the court ordered broad document discovery on the merits prior to certification. As such, the proper approach remains unsettled.
No class action has reached trial in the four years since the Act was passed. That is not to say that the mechanism has not achieved its intended results. As of the date of writing, the court has approved settlements or partial settlements in eight cases.[39]
Whether these settlements represent the consummation of the Act's intended purposes or simple procedural coercion depends on your point of view. However, there is no doubt that class members in these cases have received benefits that could not have been achieved through any other structure.
The slow pace of the B.C. actions can be partially explained by the full appeal rights available to both parties in relation to the initial certification decision. In Ontario, defendants must seek leave in order to appeal a certification order. In Quebec, defendants are barred from appealing a certification order. In B.C., virtually every contested certification motion has been appealed.
Class actions can be a powerful tool for class members. There will be no initial outlay required for counsel fees since the cases are normally taken on a contingency fee basis and the disbursements financed by counsel. Class members are immune from an adverse costs award in relation to the common issues. The class faces the defendant with the full scope of its liability in one proceeding, thereby magnifying the prospects for settlement. If successful, the remuneration for class counsel can be quite substantial.
Notwithstanding these benefits, plaintiffs' counsel must carefully assess the merits of any potential class action given the substantial resources that will have to be devoted to the prosecution of the claim. Some of the questions that must be considered are:
The first tactical issue for a defendant is whether or not to oppose certification. As can be seen from B.C.'s short history, several defendants have perceived an advantage from agreeing to certification. However, most of these agreements occurred in the context of a settlement or proposed settlement.
Where a defendant wishes to settle, either for broader economic or political reasons, or because of a perceived weakness in their position, the class action can be a very useful vehicle. The defendant obtains final res judicata effect against all class members who do not opt out (and opt outs are usually few in number). Because the proposed settlement must obtain the stamp of approval both from class counsel and the court, it is less likely to face objections from class members or the general public.
At the other end of the spectrum, where a defendant is absolutely confident of success, a class action has the same theoretical benefit. A defendant, if successful, is unlikely to face any further litigation as the positive judgment binds all those who have not opted out. However as the history to date illustrates, few defendants have this degree of confidence in their position. In the normal course, if a defendant does not plan to settle the case they will oppose certification.
If a decision is made to oppose certification, other tactical considerations arise.
First, the defendant should always to take advantage of the opportunity to cross-examine the representative plaintiff on their affidavit. The focus of such an examination should be to highlight those aspects of the claim that are inherently individual. For example, in a misrepresentation case, the defendant should attempt to draw out as many oral representations as possible, and de-emphasise the importance of any written representations produced in widely distributed material. The representative plaintiff who is not conversant with the elements of the statutory test for certification will often be more than willing to offer an array of evidence that assists their case on the merits, without realizing that the evidence is peculiar to their factual situation.
Second, the defendant should put forward a detailed affidavit that makes the complexity and individuality of the claim real for the court. The court will see through any attempt to throw up straw men. The defendants' evidence must show that the individual issues are real. For example, in a products liability case where the defendant wishes to establish that intermediaries such as installers, may have damaged the product, the defendant should present any studies or complaint investigation data that supports this conclusion. Further, while the fact that there are potentially multiple lawyers of liability leans against certification, it will be important to establish that 1) the case against the other potential parties lies at the heart of the problem, 2) the case against these parties cannot be addressed until the individual trial stage, and 3) the evidentiary and legal overlap between the proposed common issues trial and the individual trials cannot be adequately managed.[41]
Third, at the certification hearing itself, the defendant must never let the court forget that it is not simply the common issues that will be tried. The court is responsible for resolving each class member's claim and all the associated legal issues. When faced with a more holistic approach to each class member's claim, the court is more likely to recognize that the proposed common issues are only the "end of the beginning" rather than the "beginning of the end" of the litigation.
There are three issues on the horizon that will have an enormous effect on the future of class action litigation in B.C.
Year 2000 issues would appear to be a perfect fit with class actions. There will often be one core issue (when should the company have modified their software or hardware to account for the Year 2000?) and large groups of people will be affected by the error in the same way. Litigation has already commenced in the United States against manufacturers for failing to take the proper steps or make the proper disclosures. For a more complete review of this issue, see the author's paper prepared with Richard Berrow entitled "Class Action and Products Liability Exposure for Year 2000 Problems".[42]
The Canadian Securities Commissions are considering legislative changes which will facilitate bringing class actions by purchasers in the secondary securities market. In essence, the proposed legislative changes will import the American concept of "fraud on the market", where all purchasers in the secondary market are deemed to rely on all information (or misinformation) in the marketplace put out by the issuer. The draft legislation being considered would make the following changes to the existing framework:
Deemed reliance removes one key individual issue which has been a stumbling block for class actions based on traditional negligent misrepresentation. However the damage caps may limit the incentive to bring such actions. Nonetheless, as a whole, the changes will improve the environment for securities class actions.[43]
Consumer problems often extend beyond B.C.'s borders. How has this issue been managed?
Under B.C.'s legislation, the court may approve a subclass consisting of non-residents. While B.C. residents must opt out in order to avoid the res judicata effect of the proceedings, the position of members of a non-resident subclass is reversed. Non-residents must specifically opt into the B.C. action in order to obtain the benefit of the litigation.[44] Further, there must be a representative plaintiff appointed to represent the interests of the non-resident subclass.[45]
On the other hand, Ontario's legislation has no specific provisions relating to non-residents. However, Ontario courts have now approved national classes in several lower court decisions, the most prominent and comprehensive decision having being issued in Carom v. Bre-X Minerals Ltd.[46] National classes have been certified on an opt-out basis, meaning that any person in Canada who did not wish to participate in or be bound by the results of the Ontario litigation has to specifically advise the designated office in the Ontario order at the outset. Any B.C. resident who failed to opt-out of the Ontario action would be bound by the positive or negative judgment in the Ontario litigation, unless a B.C. court refused to respect the Ontario certification order.
The Ontario Court of Appeal has not yet considered the appropriateness of national opt-out classes. Nor have courts outside Ontario considered whether to such actions are binding on residents of their respective provinces. Given the constitutional uncertainty surrounding national opt-out classes, Ontario, B.C., and Quebec counsel have generally cooperated to commence litigation in all three provinces with class action legislation.
When and if greater certainty develops surrounding the Ontario practice, it may no longer be necessary to commence separate litigation in B.C. to maximize the coverage of the litigation. The Ontario approach makes it more attractive to begin litigation in Ontario alone, given the broad coverage and leverage created by a national opt out class.[47]
If the Ontario approach is upheld, class proceedings in B.C. may be limited to matters of purely local interest. The implication of upholding the Ontario approach will be that B.C.'s specific and additional non-resident rules and protections are constitutionally unnecessary. B.C. may then wish to consider removing its specific non-resident rules to promote national consistency. A class member in B.C. should be able to certify a class proceeding that creates the same level of access to justice as a class member in Ontario.
When introducing the Class Proceedings Act in 1995, then Attorney-General Colin Gabelmann stated:
Our legislation will allow individuals to apply to the court to bring a civil action as a group and to seek redress for injury or damages caused by the same or similar circumstances. This is an important breakthrough for British Columbia....
The people of British Columbia have asked for class legislation, and this bill opens up a new justice option for them. It creates more fairness in the system, and it balances the rights of defendants with the rights of injured British Columbians to seek their remedy through a more accessible justice system.[48]
Has the Act lived up to these expectations? Although results have been mixed, that is to be expected as lawyers test the boundaries of the legislation and courts establish the basic parameters. Even with these inescapable growing pains, the question must be answered in the affirmative. Many groups have been able to advance claims that would not otherwise have been brought. A number of these groups have reached settlements with defendants who failed to respond to individual complaints in the absence of a class action. Defendants are now well aware of the threat posed by the legislation, and will hopefully modify their conduct accordingly.
As such, it can be said that to date this new procedural framework has achieved the desired substantive results.
[2] Under section 3 of the Act, a defendant may also seek class action status if it is facing two or more actions of the same type. However, this provision has never been invoked.
[3] (1997) 15 C.P.C. (4th) 329 (B.C.S.C.)
[4] (1996), 22 B.C.L.R. (3d) 49 (S.C.), aff'd (1997), 38 B.C.L.R. (3d) 377 (C.A.)
[5] (March 31, 1999) Vancouver C984120 (S.C.)
[6] (February 27, 1997), Vancouver A962818 (S.C.)
[7] (1996), 25 B.C.L.R. (3d) 328 (S.C.); further proceedings (1996) 3 C.P.C. (4th) 208 (B.C.S.C.), aff'd (1997), 98 B.C.A.C. 22
[8] (March 15, 1999), Vancouver A982836 (S.C.)
[9] (December 8, 1999), Victoria 873/98 (B.C.S.C.)
[10] [1999] B.C.J. No. 690 (S.C.), further reasons [1999] B.C.J. No. 1360 (S.C.) (under appeal)
[11] [1999] B.C.J. No. 2634 (C.A.)
[12] [1997] B.C.J. No. 295 (S.C.) (application for documents), (1997), 148 D.L.R. (4th) 158 (B.C.S.C) (certification decision), appeal on spoliation as cause of action allowed (1998), 157 D.L.R. (4th) 465 (C.A.), leave to amend statement of claim refused [1998] B.C.J. No. 1542, settlement approved [1999] B.C.J. No. 2180 (S.C.)
[13] Harrington v. Dow Corning (1996), 22 B.C.L.R. (3d) 97 (S.C.), supplementary reasons (February 14, 1997), Vancouver Registry C954330, Chace v. Crane Canada (1997), 101 B.C.A.C. 32, Campbell v. Flexwatt Corp, supra note 7; Endean v. Canadian Red Cross Society, supra note 12, Killough v. Canadian Red Cross (November 24, 1998) C976108 (S.C.); Mitchell v. Canadian Red Cross Society (May 17, 1999) A981187 (S.C.); Sawatzky v. Societe Chirurigacle Instrumentarium Inc. (September 6, 1996) Vancouver C954740 (S.C.) (document discovery), [1999] B.C.J. No. 1814 (settlement approval)
[14] Bittner v. Louisiana Pacific Corp. (1997), 43 B.C.L.R. (3d) 324 (S.C.)
[15] Tiemstra v. I.C.B.C., supra note 4.
[16] Romanchuk v. Sun Life Assurance Co., (November 28, 1997), Vancouver Registry C964248 (S.C.); Haney Iron Works Ltd. v. Manufacturers Life Insurance Co., (19980, 169 D.L.R. (4th) 565 (B.C.S.C.)
[17] Branch, Class Actions In Canada (Vancouver: Western Legal, 1996) at paras.5.490-5.850; Carom v. Bre-X Minerals Ltd., 44 O.R. (3d) 173 (S.C.)
[18] McKay v. CDI Career Development Institutes Ltd., (1999), 30 C.P.C. (4th) 101 (B.C.S.C.)
[19] Johnston v. Royal Bank of Canada, (June 26, 1998) Vancouver Registry C972962 (S.C.) (certification order); (February 3, 1999) (settlement approval)
[20] Koo v. Canadian Airlines, Vancouver Registry C985655
[21] Windbiel v. BC Tel, Vancouver Registry C985218; Stall v. Rogers Cable, Vancouver Registry C993615; The Owners, Strata Plan LMS 1816 v. British Columbia Hydro and Power Authority, Vancouver Registry A992029
[22] Endean v. Canadian Red Cross, supra note 12 (C.A.)
[23] Endean v. Canadian Red Cross, supra note 12 (S.C.) (certification decision)
[24] Supra note 13
[25] Campbell v. Flexwatt Corp., supra note 7 (C.A.)
[26] Harrington v. Dow Corning, supra note 13
[27] Chace v. Crane Canada, supra note 13, Endean v. Canadian Red Cross, supra note 12
[28] Howard v. B.C., supra note 8
[29] Chace v. Crane Canada, supra note 13; Lumley v. B.C., supra note 11. Note that in Lumley, the Court of Appeal suggested that while the entitlement to punitive damages could be determined at the first stage, the amount of punitive damages must await the final determination of compensatory damages.
[30] Act, s.4(2)
[31] Tiemstra v. I.C.B.C., supra note 4
[32] Sutherland v. A.G. Canada, supra note 3; McKay v. CDI Career Development Institutes Ltd., supra note 18; Tiemstra v. I.C.B.C., supra note 4
[33] Auton v. B.C., supra note 5
[34] Bittner v. Louisiana Pacific Corp., supra note 14
[35] Several actions have been dismissed prior to certification, including Edmonds v. Actton Super-Save Gas Stations (June 20, 1996), Vancouver Registry C954921 (B.C.S.C.); Azevedo v. The Legal Services Society (March 12, 1998), Vancouver Registry CA023217 (B.C.C.A.)
[36] (February 6, 1997), Vancouver Registry C965349 (S.C.)
[37] (January 27, 1998), Vancouver Registry C9731778 (S.C.)
[38] Order issued (November 18, 1998), Vancouver C984069 (S.C.).
[39] Chace v. Crane Canada, supra note 13; Romanchuk v. Sun Life, supra note 16; Harrington v. Dow Corning, supra note 13, Haney Iron Works v. Manufacturers Life, supra note 16; Ernewin v. Bausch & Lomb, (October 24, 1994), Vancouver Registry C965586 (S.C.).; Endean v. Canadian Red Cross Society, supra note 12; Sawatzky v. Societe Chirurigacle Instrumentarium Inc. supra, note 13; Johnston v. Royal Bank, supra note 19.
[40] See Bittner v. Louisiana Pacific Corp, supra note 14
[41] Contrast the findings in Endean v. Canadian Red Cross Society, supra note 12 with Bittner v. Louisiana Pacific Corp., supra note 14. In Endean, the court found that the presence of third parties did not interfere with the overall efficiency of a class proceeding against the named defendants. In Bittner, the court found certification was not appropriate given that the third parties' activities were at the heart of the claims, and the evidentiary overlap so serious.
[42] The Year 2000: Litigation Issues (Vancouver: CLE, 1999)
[43] For a more detailed discussion of class actions in the investment arena see Ward Branch, "Class Actions: The New Threat to Directors and Officers", Directors Under Siege (Toronto: CBAO, 1999)
[44] Act, s.16(2)
[45] Act, s.6(2); Endean v. Canadian Red Cross, supra note 12; Harrington v. Dow Corning Corp., supra note 13.
[46] Nantais v. Telectronics Proprietary Ltd., (1995), 25 O.R. (3d) 331 (Gen.Div.), leave to appeal dismissed (1995), 25 O.R. (3d) 347 (Div.Ct); Carom v. Bre-X Minerals Ltd. (February 11, 1999), 97-GD-39574 (Gen.Div.) (national class)
[47] The only limitation to this point is the issue of costs. B.C. has a no-costs rule while Ontario's legislation allows costs to be awarded for and against the representative plaintiff.
[48] Hansard, June 6, 1995
