Canada: Supreme Court Of Canada To Rule On "Preferable Procedure" Inquiry In Class Actions

The Supreme Court of Canada (SCC) recently granted leave to appeal the Ontario Court of Appeal's decision in AIC Limited et al. v. Dennis Fischer et al.

The Fisher decisionconsiders the important question of whether a successful OSC proceeding, resulting in the payment of $205 million in compensation to affected investor mutual funds, prohibits individual investors from suing for damages in civil courts.

The Ontario Court of Appeal recently held that a class proceeding is the preferable procedure to the OSC enforcement proceedings because it can provide relief to individual investors. This, however, paves the way for parallel proceedings on the same set of facts. The "preferable procedure" inquiry is often a main fight on certification motions. The SCC will provide much-needed clarity on this analysis.


Five mutual fund managers were alleged to have permitted market timing in certain mutual funds. Market timing involves trading in mutual funds intended to take advantage of short-term discrepancies in pricing of mutual funds which may arise from time zone differences in the value of securities traded on foreign exchanges. This practice, while not illegal, was alleged to have allowed market timers to earn short-term gains at the expense of long-term investors.

Following an investigation into market timing, the OSC commenced enforcement proceedings against the five mutual fund managers who were alleged to have permitted market timing.

All five of the mutual fund managers entered into settlement agreements with the OSC totaling $205.6 million dollars to be paid to investors in the relevant mutual funds. The mutual fund managers admitted that market timing had occurred in the relevant mutual funds. The admissions were made on a without prejudice basis.

Hearings were held before the panel of the OSC to decide whether to approve the settlement agreements as being in the public interest pursuant to s.127 of the Securities Act. These hearings were held in camera and no notice of the hearings was sent to individual investors. The settlements were ultimately approved by the OSC.

Once the settlements were approved, the plaintiffs commenced class actions against the mutual fund managers concerning the same conduct addressed in the OSC proceedings. The key issue on the certification motion was whether the proposed class action met the preferable procedure criterion under s. 5(1)(d) of the Class Proceedings Act ("CPA").


The motion judge, Justice Paul Perell, denied certification on the ground that the OSC proceedings and the settlement agreements fulfilled the CPA's objectives of judicial economy, access to justice and behavior modification. In particular, Justice Perell held that the proposed class action failed to meet the second element of the Hollick inquiry because the class action would not be preferable to other reasonably available means of resolving the class members' claim. [The first element of Hollick is whether a class action constitutes a fair, efficient and management method for resolving the claims of the class members.] Rather, Justice Perell found that the OSC proceedings were the preferable procedure for resolving these claims.

The Divisional Court overturned Justice Perell's decision. Molloy J., writing for the Divisional Court, found that the OSC proceedings could not be the preferable procedure for recovering damages because the investors' action was for damages beyond the amount recovered through the OSC proceeding. Said otherwise, the Divisional Court did not accept that the investors had achieved the full or substantially full recovery that they are entitled to in a class action.

The Court of Appeal upheld the Divisional Court's decision to certify the class action but for different reasons.

The Court of Appeal was asked to consider two questions:

  1. Did the Divisional Court err in its application of the standard of review to the motion judge's decision?
  2. Did the divisional Court err in its preferable procedure analysis?

(1) Standard of Review

The Court of Appeal found that the Divisional Court properly applied the standard of review being a palpable and overriding error. The Court reminded the appellants that "[d]eference cannot shield errors in principle".

(2) Preferable Procedure Analysis

Chief Justice Winkler, writing for the Court, certified the class action on the grounds that the civil action met the CPA objectives of judicial economy, access to justice and behaviour modification whereas the OSC proceedings did not. His analysis focused on the differences between the OSC proceedings and the class action. In particular, he considered the nature and purpose of the proceedings and the lack of participatory rights in OSC proceedings as the main differences between the two proceedings.

Contrary to the Divisional Court's analysis, Justice Winkler commented that question was not whether the investors should be entitled to recover more than what was compensated through the OSC proceedings. The issue was a principled one and required the court "to compare the fundamental characteristics of the proposed alternative proceeding to determine which is the preferable means of fulfilling the judicial economy, access to justice and behavior modifications purposes of the CPA."

As to the nature and purpose of the alternative proceeding, Justice Winkler found that the jurisdiction of the OSC proceeding was inherently regulatory rather than compensatory. Section 127 of the Ontario Securities Act permits the OSC to make regulatory orders in the best interests of the public. It does not, however, empower the OSC to require a party to pay compensation or restitution or damages to affected individuals. [Under Section 128 of the Securities Act the court may make an order for restitution or punitive damages but the OSC did not bring the application under s. 128.] On the other hand, the purpose of the CPA is to obtain relief for individual investors.

As to the participatory rights of investors, Justice Winkler noted that the OSC hearings were held in camera without notice directed to or participation of affected investors. In contrast, the class proceedings procedure is "premised on facilitating transparency and participation on a class-wide basis". The affected investors did not participate in the negotiations leading to the OSC settlement agreements nor did they have an opportunity to weigh-in on the amount of compensation to be paid by the mutual fund managers. Moreover, there is no record of how the amount of compensation was calculated. Indeed, the OSC settlement agreements specifically contemplated the possibility of subsequent civil actions. Justice Winkler concluded that, contrary to the rights afforded to plaintiffs in a class action, the investors were not intended to be parties to the OSC proceedings.

Potential Significance

The SCC's decision will be an important judgment as it will allow the Supreme Court to clarify the meaning of the "preferable procedure" criterion, which is usually one of the major battlegrounds on certification, and which has not been considered by the SCC since Hollick v. Toronto (City) and Rumley v. British Columbia.

It will also provide clarity on whether a preferable procedure must be one that will occur in the future, or whether it can be one that has already occurred prior to certification, such that the class action is effectively barred by it.

Finally, the SCC may clarify the meaning of "access to justice" in the class action context. For example, will "access to justice" require a process in which class members are direct participants? Further guidance and clarity by the SCC's is eagerly anticipated.

Case Information

AIC Limited v. Dennis Fisher , 2012 CanLII 36235

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.