Class Actions

As Canada’s class actions regime has evolved over the past 25 years or so, lawyers have been fond of pointing to the swinging pendulum of jurisprudence that shifts its ever-roving eye on the class action battleground.

It’s been almost a quarter-century since Ontario became the first common law province to adopt class action legislation, and almost 40 years since Québec laid the groundwork for the rest of the country. The pendulum is still shifting, but there’s a difference: it now hovers over a battleground that has started to take real shape, developing defined parameters within which the pendulum moves. So while it may be easy to say that the past year hasn’t been a good one for plaintiffs and that the pendulum has swung over to the defence side, it’s also a simplistic approach. The truth is that the jurisprudence is increasingly refining the parameters, with less need to define them. Ultimately, what seems to be shaping up is a healthy balance that augurs well for resolution of the issues that still need clarification.

On defendants’ side of the spectrum, courts have given real teeth to the leave provisions that govern the commencement of statutory secondary market misrepresentation proceedings, cast a giant shadow on the historic characterization of product liability cases as “quintessential” class actions, and set the stage for a Supreme Court of Canada ruling on whether the Competition Act and other statutes constitute a complete code that govern civil claims arising from breaches of their provisions. Otherwise, carriage battles continued in a murky jurisdictional landscape, courts got tougher on parallel class actions, judges seemed more inclined than ever to poke around into the merits of class actions at early stages, expert evidence and the attendant expense and delay continued to play major roles, and class counsel’s fees and settlement came under more intense scrutiny.

Plaintiffs’ lawyers, for their part, got a boost from the Ontario Court of Appeal’s ruling in Ramdath v. George Brown College of Applied Arts and Technology, which gave the concept of “aggregate damages” a definitive nod by confirming that individual damages need not be proven in certain cases.

Plaintiffs also found fertile new ground in complex financial cases, often involving market manipulation where no formal exchanges exist, such as the foreign exchange market.Privacy and cybersecurity breach proceedings are also flourishing, judges are coming down harder on abuse and delay by defendants, the SCC is poised to pronounce on national class actions, the administration of settlements is achieving new levels of maturity, and more and more cases are making their way to trial, proving that many class actions are in fact “manageable” and chipping away at defence arguments that certification should not be granted because of procedural hurdles.

Perhaps the greatest maturation is evident in securities class actions, where the elusive standard for granting leave to commence secondary market misrepresentations has long been playing head games with judges as well as lawyers on both sides of the fence.

The SCC released two landmark decisions in 2015: Theratechnologies Inc. v. 121851 Canada Inc., which dealt with the leave test in Québec’s Civil Code, and the trilogy around Canadian Imperial Bank of Commerce v. Green, which dealt with the corresponding provision of Ontario’s Securities Act. As it turns out, the language in the Québec Code is substantially the same as the language that populates the corresponding provisions in the common law provinces.

The appellate decisions that preceded these two cases set a very low standard for meeting the key requirement of the leave test that there be a reasonable possibility of success for the plaintiff. Put simply, plaintiffs had only to show that they had “some chance of success.” The environment was definitely plaintiff-friendly.

The SCC set a considerably higher standard, one that created a meaningful screening mechanism. The threshold, the court concluded, was more than a “speed bump”. Plaintiffs had to provide credible evidence that withstood reasoned consideration from the court to demonstrate that they had a reasonable or realistic chance of success.

Since, lower courts have put real teeth into the standard. Coffin v. Atlantic Power Corp., an Ontario decision that considered Theratechnologies before the SCC decided Green, set the stage by confirming that courts would scrutinize not only the pleadings, but the evidence, on a leave application. Otherwise, Rahimi v. SouthGobi Resources, also decided after Theratechnologies but before Green, established that defendants could use statutory defenses on leave applications to considerable effect. In Rahimi, Justice Edward Belobaba of the Ontario Superior Court refused leave for the plaintiff to proceed against individual corporate defendants. He reasoned that these defendants had established that there was no reasonable possibility that the plaintiffs could overcome the “reasonable investigation” defence at trial. What’s particularly compelling is that Belobaba went into the evidence presented on the leave motion at considerable length.

More recently, defendants have been further heartened by the decision of Justice Helen Rady, also of the Ontario Superior Court, in Bradley v. Eastern Platinum Ltd., released after the SCC’s ruling in Green. The decision makes it clear that the leave threshold is a meaningful merits test. According to the defence bar, that is exactly what it was always intended to be.

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