Canada: When There's A Choice Of Procedure, Which Is "Preferable"?

Last Updated: February 13 2012
Article by Adrienne Boudreau

In Fischer v IG Investment Management Ltd,1 the Ontario Court of Appeal provides important guidance to class action defendants and their counsel on the impact of an existing alternate dispute resolution procedure when deciding whether to certify a proposed class action. This decision will be of particular interest to persons involved in regulated industries with their own dispute resolution procedures, such as investors in regulated capital markets.

Fischer was a proposed class proceeding brought by investors against certain mutual fund managers. The plaintiffs alleged that the defendant fund managers permitted certain market conduct – "market timing" – to occur in certain mutual funds. Unlike other traded securities, mutual funds are valued only one time per day. This comparatively infrequent valuation means that, for short periods of time, the posted value of a fund may be artificially low. "Market timers" take advantage of this circumstance by buying undervalued funds and then quickly selling once the funds' value increases.

The plaintiffs in Fischer claimed that the fund managers breached their duties to investors by failing to take appropriate steps to stop market timing in affected funds. Although market timing is not illegal, the plaintiffs alleged that by failing to address this conduct the fund managers did not act in the best interest of the fund or in the best interests of investors, caused an annual loss to the value of the funds and increased certain transaction costs.

Prior to the certification motion, the Ontario Securities Commission ("OSC") had investigated the same market timing activity that formed the basis of the Fischer claim and subsequently initiated enforcement proceedings. The OSC reached settlements with the defendant fund managers and held hearings pursuant to section 127 of the Ontario Securities Act2 to determine if the settlements were in the public interest. The OSC provided notice of the hearings to the public, but did not directly notify individual investors. Although the hearings were initially open to the public, they were ultimately held in camera at the request of the fund managers. At the conclusion of the hearings, the settlements were approved.

Following the OSC settlement approvals, the plaintiffs brought a motion to certify their action as a class proceeding. To certify an action as a class proceeding the court must find the following: the claim discloses a cause of action, there is an identifiable class, there are issues common to the class, a class action would be the preferable procedure for the resolution of the common issues and there is a representative plaintiff who would fairly represent the interests of the class.

The only contested issue at certification was whether a class proceeding under the CPA was the "preferable procedure" for the resolution of the issues common to the class. In conducting the preferable procedure inquiry it is well established that a court should consider:

  • whether a class proceeding is a fair, efficient and manageable method for advancing the plaintiffs' claims; and,
  • whether a class proceeding is preferable to any other reasonably available means of resolving the class members' claims.

The preferable procedure inquiry must be conducted with the three goals of the Class Proceedings Act in mind: judicial economy, access to justice and behavior modification.

At the certification hearing, the plaintiffs argued that a class proceeding was the most appropriate procedure to resolve the common issues. As support for their position, the plaintiffs led expert evidence that the OSC settlements did not fully compensate investors for their losses (the settlements represented only 1/7 of the actual loss to CI investors and 1/3 of the total harm to AIC investors). In opposition, the defendants argued the concluded OSC proceedings were the most appropriate procedure to resolve the claims of the class.

The motions judge declined to certify the class proceeding on the basis that the preferable procedure requirement was not met. He found that the OSC proceedings, and the settlements reached in those proceedings, fulfilled the objectives of the CPA so as to make the OSC proceedings "preferable" to a class proceeding under the CPA. In coming to this finding, the motions judge considered the criteria the court applies when determining whether to approve a settlement in a class proceeding, and applied those criteria to the OSC awards. The Court found that as long as the purpose of the alternative proceedings was to obtain compensation for harm, the court should not delve into an inquiry of whether the plaintiffs have been fully compensated or not.

The plaintiffs appealed.

On appeal, the Divisional Court overruled the motions judge and certified the action as a class proceeding. In coming to this decision, the Divisional Court focused primarily on the amount of the recovery obtained through the OSC proceedings. The Court found that the OSC proceedings could not be the "preferable procedure" because the investors' action was for significant monetary damages beyond the amount recovered in the OSC proceedings.

The defendant fund managers appealed.

The Ontario Court of Appeal found that the Divisional Court came to the right result but for the wrong reasons and that both courts below erred in their consideration of the substantive outcome of the OSC enforcement proceedings.

According to the Court of Appeal, the correct approach to a preferable procedure inquiry is to analyze the nature of the alternative procedural mechanism at issue and then compare it to the procedure offered under the CPA. The purpose is to determine which procedure is the preferable procedure for resolving the common issues. The substantive result obtained by another procedure is not relevant. In conducting a preferable procedure inquiry, the judge may consider the following characteristics of the alterative proceeding: the impartiality and independence of the forum; the scope and nature of the alternative forum's jurisdiction and remedial powers; the procedural safeguards that apply in the alternative proceeding; and the accessibility of the alterative proceeding.

In comparing the OSC proceedings with the procedure available under the CPA, the Court of Appeal found the OSC proceedings did not adequately address the CPA goal of providing access to justice with respect to the claims of investors because:

  • the jurisdiction of the OSC under section 127 of the Securities Act is regulatory and not meant to serve as a compensatory or remedial provision with respect to harm done to individual investors; as such, the OSC lacks appropriate powers to fully address class members' claims; and,
  • the investors' participatory and informational access to the OSC proceedings was insufficient.

In so finding, the Court determined that a class proceeding would be the preferable procedure for resolving the investors' claims and dismissed the defendants' appeal.

The Court of Appeal's decision is consistent with the law in this area. It is very well established that certification is procedural only and does not involve a consideration of the substantive merits of the case. It is therefore not appropriate to consider such matters as the substantive result of concluded, alternate proceedings. Instead, the proper focus of the inquiry is on the nature of the alternate process and whether that process furthers the goals of the CPA.


1 2012 ONCA 47.

2 RSO 1990, c S.5.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2012 McMillan LLP

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions