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Bulletin

A Possible Blueprint for Class Action Law Reform in Ontario

Fasken
Reading Time 7 minute read
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Litigation and Dispute Resolution Bulletin

On July 17, 2019, the Law Commission of Ontario (“LCO”) released its long-awaited report, Class Actions: Objectives, Experiences and Reforms. The report is the final report published pursuant to LCO’s review of the Class Proceedings Act, 1992 (“CPA”)—the first assessment of Ontario’s 27 years of class actions experience since the CPA was enacted.

The LCO project was conducted over a 24-month period in consultation with interested stakeholders including plaintiffs and defence law firms (including representatives of Fasken), Canadian and US-based lawyer organizations, judges, class members, NGO representatives, government policy makers, court administrators, academics and claims administrators, among others. LCO’s stated focus was to analyze the class action experience and results from the perspective of the CPA’s three objectives: access to justice, judicial economy and behaviour modification.

LCO’s first consultation paper, which was released in March 2018, identified a number of consultation questions designed to generate commentary necessary to examine the impacts of the CPA to date, and propose recommendations for reform. Potential areas for reform identified in the consultation paper included costs rules, delay, certification, settlement and fee approval and leave to appeal (all of the consultation questions appear in Appendix C of the final report).

The final report is organized around three major questions:

i) Are class actions in Ontario fulfilling their three objectives: access to justice, judicial economy and behavior modification?

ii) Does the CPA reflect contemporary class action issues and practice?

iii) Does the CPA reflect contemporary priorities in Ontario’s justice system?

The report, which is divided into twelve chapters, culminates with a list of 47 recommendations (set out in Appendix A of the Report) for reform of the CPA and related policies.

Key Takeaways:

Empirical Study:

As part of the project, LCO states that it developed an empirical profile of class actions in Ontario by tracking the number and type of class actions initiated between 1993 and February 2018. Consistent with Fasken’s perception and experience as counsel for many defendants in a wide range of class actions, the data show an increase in class actions in recent years. Though these actions span a wide range of legal issues, the most frequently instituted cases involve claims related to the Securities Act (16%), the Competition Act (15%) and product liability (15%). Although its data are not comprehensive, LCO estimates that 73% of contested certification motions are eventually granted, either in whole or in part. 

LCO’s efforts also revealed certain challenges in establishing a complete empirical foundation. The report advocates for increased data collection, evidence-based policy making, transparency and “open data”, and recommends amendments to the CPA to effect these objectives.

Carriage:

The report takes aim at the “inefficient” and “unpredictable” system for determining carriage issues between competing duplicate class actions in Ontario, and recommends that the CPA be amended to include provisions that would allow better management and focus of carriage hearings. Specifically, LCO recommends simplifying the criteria for deciding between competing firms, and adding provisions to (1) require that carriage motions be brought promptly after the commencement of the first action, (2) ensure that carriage orders are final and (3) prohibit the costs of carriage motions from being recouped from class members.

Multijurisdictional actions:

The report recommends new provisions to more effectively manage multijurisdictional class actions. These include statutory amendments to create greater harmony between the class actions regimes of Alberta, British Columbia, Saskatchewan and Ontario, encouraging cooperation amongst ministers of justice at all levels to develop national rules for recognizing provincial certification decisions and multijurisdictional classes, and encouraging courts to develop consistent training methods.

Certification Proceedings:

LCO declined to adopt the submissions made by a number of defence-oriented groups urging LCO to  recommend the injection of some semblance of a merits assessment into the certification motion and an elevation of the evidentiary “some basis in fact” threshold on certification motions. However, with some recognition of the defence view that access to justice should be a two-way street, LCO made some recommendations designed to make the certification process more robust, including (1) encouraging courts to apply CPA s. 5(1)(d) (“preferable procedure”) of the certification test more rigorously, and adopting a “more generous approach to alternative remedies”, (2) using pre-certification summary judgment motions or motions to strike claims more frequently, with a view to potentially narrowing the issues before the hearing of the certification motion, (3) simplifying the appeal process, and levelling the appeal playing field by granting both parties an appeal as of right to the Court of Appeal from certification motion decisions, and (4) developing a Practice Direction in consultation with appropriate stakeholders that incorporates best practices for certification motions.

Settlement Approvals and Distribution:

This chapter discusses the problems inherent in a judge’s assessing a proposed settlement in an “adversarial void,” since defendants and plaintiffs share a common interest in having their negotiated deal approved. The report suggests reforms that would help judges review and evaluate settlements more effectively, including the introduction of an independent affidavit requirement for class counsel in respect of the settlement approval criteria (including a “full and frank” disclosure standard analogous to that imposed in ex parte proceedings), and discretion for the court to appoint amicus curiae on approval motions.

The report refers to a different kind of void at the settlement benefits distribution stage: an “informational void” in which courts lack access to empirical information or independent research that could be used to assess and compare a proposed settlement benefits distribution plan. The report recommends: improved notice requirements; mandatory and comprehensive final “outcome” reports; and new provisions governing claims administrators and expressly authorizing cy-près distributions.

Class Counsel Fee Approvals:

The report advocates for greater judicial scrutiny in approving fee arrangements to ensure that fee amounts address the need to compensate and incentivize class counsel, while avoiding over-compensation to the detriment of the class. LCO recommends four kinds of statutory amendments that would lower public cynicism about plaintiff counsel fees, and increase access to justice for class members: (1) clarifying that the risk assumed by class counsel and the results achieved should be the two principal considerations in determining whether fees are “fair and reasonable”; (2) authorizing the court to appoint amicus curiae on motions for class counsel fee approval; (3) giving the court express discretion to adjust counsel fees; and (4) authorizing the court to order that a “small percentage” of the fees be held back until the final report on the outcome of the settlement distribution process--ie, the participation rate among class members and aggregate amount distributed.

Costs:

LCO recommends amending the CPA to abolish the loser-pays costs rule for certification and ancillary motions; instead, such motions would be governed by a no costs rule, while the usual two-way loser pays costs rule would govern all other phases of the action, including motions to strike and for summary judgment.

Third Party Funding:

LCO recommends amending the CPA to expressly permit third party funding of class actions, but subject to prescribed conditions, and amending the Law Society Act to give the Class Proceedings Fund greater authority to determine appropriate funding arrangements in individual cases.

Behaviour Modification:

LCO claims that its empirical research ultimately shows that class actions provide general incentives for increased compliance, although on a case-by-case basis the effects vary significantly. The report identified two key areas where LCO believes that a greater focus on achieving behaviour modification could improve judicial decision making, namely in the approval of settlements and class counsel fees. The report proposes that the mandatory outcome reports, referred to above, should include information about behaviour modification outcomes, such as changes in corporate or government practices and other behaviour that may be attributable to a class action.

Appeal Routes for Certification Decision:

LCO proposes amending s. 30 of the CPA to give both plaintiffs and defendants rights of appeal from certification orders directly to the Ontario Court of Appeal. LCO proposes that removing the asymmetry created by the requirement that a defendant must obtain leave of the court to appeal a decision granting certification, whereas a plaintiff has an automatic right to appeal a decision denying certification, and removing intermediate appeals to the Divisional Court, will dispense with unnecessary complexity and delay, and equalize timely access to appellate review.

What’s Next?

LCO will formally submit its report to the Government of Ontario. The current Government has expressed some interest in effecting class action reform, although to date it has not made any formal commitment to introducing legislation. If enacted into law, LCO’s recommendations would achieve some improvement in Ontario’s class action process from the perspective of defendants, although some of the problematic elements of the process would remain in place.

If you would like further information about LCO’s report or Fasken’s analysis of the class action sphere in Canada, please do not hesitate to contact the authors of this bulletin or other Fasken lawyers.

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