Introduction
In 1992 the Ontario C.P.A. was passed. The Act was designed to provide a
procedure for the fair and efficient resolution of common claims which
otherwise would not be economically worthwhile for individual litigants to
pursue. Class proceedings may arise in the outcome of major accidents, mass
breaches of contract between employer and employees, and mass tort claims. The
experience to date in Ontario is still limited but indicates that judges are
taking a cautious and pragmatic approach to allowing cases to proceed as class
actions.
When your client becomes a class member in a class action he or she will be
notified by way of a Notice published under the C.P.A. The notice, whether
published in a newspaper or mailed directly to your client, will likely outline
the following information:
i. The lawsuit.
ii. The participants (class members) in the lawsuit.
iii. Your client's right to remain in the lawsuit or opt out.
iv. The financial consequences of remaining in the lawsuit.
v. How to make a claim in the lawsuit.
Occasions will arise when clients will seek advice from their legal counsel as
to remaining in the lawsuit or opting out and the consequences of remaining a
class member.
Background to the Ontario Legislation
In designing the procedure set out in the C.P.A. the Attorney General's
Advisory Committee on Class Action Reform was faced with two choices: either an
opt-in model or an opt out model. In the former, a representative plaintiff
would commence an action and notify class members of their opportunity to elect
to participate in the lawsuit. In the later model, it would be assumed that the
representative plaintiff spoke for class members, unless they exercised the
option of excluding themselves from the lawsuit.
In the outcome of their deliberations, the Advisory Committee adopted the
opt-out model because of the potential to maximize the participation of
individual class members. There was a concern that if any active steps had to
be taken by potential litigants, less than the maximum number of claims might
come forward due to apathy, especially in the case of small claims. There was
also value in the model due to the fact that the defendant in a class
proceeding was assured they faced all potential litigants in one lawsuit: it
also identified potential claimants who opted out and could be dealt with
separately by the defendant.
The opt-out model also follows the recommendations of the Ontario Law Reform
Commission who felt that an "opt-in" model (i.e. one that requires class
members to take positive steps in order to be included in the action) ran
counter to the goals of enhancing access to justice:
the operation of the same social and psychological factors that discourage
persons from bringing their own civil actions will prevent them from taking
other forms of affirmative action, particularly following certification, when
the liability of the defendant is not settled and recovery appears to be in the
distant future.
The Legislation
Relevant provisions in the C.P.A. for counsel to focus on when giving advice to
a client on opting out are the following:
Section 9 of the C.P.A. states that a member may opt out of the proceeding in
the manner and within the time specified in the certification order.
Section 27(2) of the
CPA
states:
A judgment on common issues of a class or subclass does not bind,
(a) a person who has opted out of the class proceeding; or
(b) a party to the class proceeding in any subsequent proceeding between the
party and a person mentioned in clause (a).
Section 27(3) of the
CPA
states:
The judgment on common issues binds every class member who has not opted out
but only to the extent that the judgment determines common issues that:
(a) are set out in the certification order.
(b) relate to claims or defenses described in the certification order, and
(c) relate to relief sought by or from the class or subclass as stated in
certification order.
Pursuant to section 27(3), a judgment in the class action will bind the client,
if they have not opted out, but only in respect to the common issues set out in
the certification order.
If your client does not take steps to opt out, he or she is bound by the
judgement. However, the application of the principle of
res judicata
is more limited under the Act than in its traditional form.
The principles of the doctrine of
res judicata
were set out in
Henderson v. Henderson
which establishes the requirement that parties to the litigation must bring
forward their entire case, and will not (except under special circumstances) be
permitted to open the same subject of litigation between the parties in respect
of a matter which might have been brought forward previously, but was not.
Negligence, inadvertence, or even accidental omittence are not an excuse as
parties are expected to exercise reasonable diligence. The application of
res judicata
is broad enough to include not only the facts and issues actually decided, but
those which should have been before the court.
Keeping this in mind, it is clear that section 27(3) sets out an important
limitation to the doctrine of
res judicata
: it is intended to avoid the effect of the "rule against splitting" which bars
a plaintiff from bringing forward subsequent claims arising from the same
breach e.g. a claim for property damage, with a subsequent claim for personal
injury arising out of the same set of facts.
If your client opts out, they are free to initiate their own actions, including
starting their own separate class action. Note that section 27(2)(b) is aimed
at stopping those who have opted out
from taking advantage of a favorable judgement by raising issue estoppel in a
subsequent proceeding against a class action defendant.
In so far as the common issues are concerned, it will be very difficult for
class members who have not opted out to avoid the
res judicata
effect of a judgement, although there have been challenges in the United
States based on improper notice.
Conversely, independent actions by class members have been allowed to proceed
in Ontario where they did not involve the common issues. This gives class
action members some latitude, as demonstrated in the case of
Allan et al v. CIBC Trust Corporation et al
(1998) and
Barry et al v. CIBC Trust Corporation et al.
("The Allan Case").
The Allan Case
The background facts to this case are as follows:
The plaintiffs had invested in mortgage syndications used to raise monies for a
development company, Maters. Morgan Trust, the defendant CIBC's predecessor,
acted as trustee and received and distributed the mortgage funds. At some time
it was discovered that the properties were mortgaged beyond their value and
that mortgage funds had been diverted by the principals of Maters for their
personal use. On application by Morgan Trust, a receiver and manager was
appointed to protect the interest of the investors.
One group of disgruntled investors brought a class action against CIBC Trust
(Morgan Trust's successor) based on the theory that Morgan Trust was negligent
in applying for the appointment of a receiver and breached their obligations,
which caused damage to the assets and investors of Maters. The class action was
certified, and only two investors chose to opt out. The motions judge dismissed
the class action on a summary judgment motion. The Court addressed and disposed
of the question of any liability on the part of CIBC Trust for having applied
for and obtained an order appointing the receiver.
Several plaintiffs who were class members in the class action subsequently
commenced actions against CIBC Trust and the solicitor and advanced an
alternate theory of negligence, alleging that CIBC Trust was in breach of its
duty as a trustee in not investigating and monitoring the mortgage
syndications, which were unsafe investment vehicles.
The defendants moved for an order staying or dismissing the actions on grounds
that
1. The doctrine of cause of action estoppel precluded the plaintiffs from
bringing these actions against CIBC Trust when a similar cause of action had
been determined in earlier proceedings i.e. the unsuccessful class action;
2. All the plaintiffs except two were members in a class action arising out of
the same matters which was successfully determined in favour of CIBC Trust;
3. The claims in the present actions were not disclosed during the
certification in the class action and would have materially affected the
outcome of that process; and
4. The present plaintiffs were "lying in the weeds" with their alternative
claim and had abused the process of the court.
In his analysis, the motions judge distinguished the cause of action in the
class action from the cause of action being brought in the plaintiffs'
lawsuits. The motions judge cited at length from the Ontario Law Reform
Commission report, accepting it as cogent evidence that under s. 27 of the
CPA
traditional principles of
res judicata
had been substantially modified in the context of class actions. The plaintiffs
were allowed to continue with their actions. He further held that there was no
abuse of process, although he did suggest that the matter of the plaintiffs'
choice of proceeding could be addressed by a costs order in the outcome of the
action.
National Class Actions
If counsel is consulted in regards to a class action of national scope, it is
important to note that the effect of a judgment on non-resident class members
may be less certain, due to possible jurisdictional problems. The Ontario
CPA
has no special provisions in respect of non resident plaintiffs, and a number
of national class actions have been certified on an opt-out basis. In contrast,
the
British Columbia Class Proceedings Act
singles out non-resident class members, requiring them to opt in to a class
action, so as to allow the court to assume jurisdiction over their claim.
The problem was alluded to in
Nantais v. Teletronics Proprietary (Canada) Ltd.
where the far reaching jurisdictional claim of the Ontario Legislature and
courts was discussed.
In that case there was a national class of approximately 1,100 members, 700 of
whom resided in Ontario. On the certification motion, the defendant argued that
by establishing a national class the Ontario legislature was imposing its
jurisdiction over non-residents. The Court recognized that the certification of
the class action on a national level had a potential for creating
jurisdictional problems. On the leave to appeal application the Court remarked:
Those outside the jurisdiction who are included in the class are free to opt
out in the same manner as those inside Ontario may do. Whether the result
reached in Ontario court in a class proceeding will bind members of the class
in other provinces who remained passive and simply did not opt out, remains to
be seen. The law of
res judicata
may have to adapt itself to the class proceeding concept.
The Ontario courts do not appear to be constrained by the jurisdictional
issues. The outcome of the position taken by the Court in
Nantais
appears to be that if a class proceeding is certified in Ontario concerning a
matter that has class members elsewhere in the country they are within a class
bound by any decision reached by the Ontario courts.
The possibility that other class proceedings could be certified in other
provinces in Canada relating to the same matter as an Ontario class proceeding
was also raised in
Nantais
. The Court believed that the flexibility of the class proceedings procedure
was sufficient to deal with any jurisdictional issues by redefining the class
i.e. excluding groups who commenced their own class proceedings in another
province.
Practical Considerations : The advantages and disadvantages of a class
proceeding
The benefits to a client of proceeding as a class member are apparent.
In some instances the class proceeding mechanism provides the only means of
judicial relief to the client, especially in the case of small claims in
complex actions which would be too expensive for individual litigants to
advance. There is "strength in numbers" for the plaintiffs as a litigation
posture. There are no risks in regard to legal fees, except for the
representative plaintiff and counsel. Other advantages include convenience of
jurisdiction and the suspension of limitation periods.
More importantly, and in view of the positive step that has to be taken to opt
out, it is important to assess any disadvantages which may require your client,
as a class member, to opt out.
The class action is cumbersome, and if your client has already started an
action there may be a longer wait to obtain individual relief. There is also a
question of whether an individual class member that has previously commenced a
lawsuit can recover their legal fees.
The choice of counsel may be important to your client if he or she has retained
a solicitor previously who is not appointed by the Court to act in the class
proceeding.
Different jurisdictions offer different procedures and remedies which may be
worthwhile reviewing in the context of the individual circumstances of your
client's case.
