Canada: Preferable Procedure Revisited: Supreme Court Of Canada Examines Preferable Procedure For First Time Since Hollick

Last Updated: December 31 2013
Article by Scott Kugler, Erin Farrell and Josh Hanet

In dismissing an appeal from the decision of the Ontario Court of Appeal in AIC v. Fischer on December 12, 2013, the Supreme Court of Canada revisited the preferable procedure aspect of the certification test for class proceedings. The decision focused on access to justice, and states that courts must consider both the costs and the benefits of a class action as compared to an alternative procedure in deciding which is preferable. This requires the court to consider whether a class action or an alternative process would be best suited to offer (i) a fair process to resolve the plaintiffs' claims, and (ii) access to a just and effective remedy if the claims are successful.

Case History

The action was commenced by investors who claimed to have suffered losses as a result of "market timing" activities that allegedly occurred in certain mutual funds. The defendants were the mutual fund managers who were alleged to have allowed market timing to occur.

The Ontario Securities Commission commenced regulatory proceedings against the defendant mutual fund managers ten years ago. The regulatory proceedings were settled and the mutual fund managers paid millions of dollars in restitution to affected investors, including the plaintiffs.

The plaintiffs led evidence at the certification motion that the amounts received pursuant to the regulatory settlements did not fully compensate them for their losses and they argued that they should be entitled to pursue further recovery through the courts. The defendants took the position that the plaintiffs had been adequately compensated through the regulatory process and did not require a class action to obtain access to justice.

Preferable Procedure Analysis

The Supreme Court's analysis focused on section 5(1)(d) of the Ontario Class Proceedings Act, which requires the court to determine whether a class proceeding is the preferable procedure for the resolution of the common issues.

The Court confirmed that the preferable procedure analysis requires the court to compare the class action against other methods of resolving the claim and that this analysis must be considered through the lens of the three principal goals of class actions: behavior modification, judicial economy and access to justice. The Supreme Court noted, however, that the focus should remain on preferability as the plaintiff does not need to prove that the class action will actually achieve all three of the goals of class actions.

Access to justice was held to have two interconnected dimensions: (i) process, which is concerned with whether plaintiffs "have access to a fair process to resolve their claims"; and (ii) substance, which is concerned with whether plaintiffs "will receive a just and effective remedy for their claims if established".   

As the Supreme Court noted in Hollick v. Toronto (City) 2001 SCC 68 and reiterated in this case, a class action will serve the goal of access to justice if: "(1) there are access to justice concerns that a class action could address; and (2) these concerns remain even when alternative avenues of redress are considered."  A five-question framework for analysis of these issues was created by the Supreme Court:

1. What are the barriers to access to justice?

There are various barriers to access to justice, the most common of which is economic. However, the Supreme Court recognized that there are also psychological and social barriers to access to justice including ignorance of the availability of substantive legal rights, ignorance of the fact that damages have occurred, limited language skills, age, frail emotional or physical state, fear of reprisal by the defendant, or alienation from the legal system as a result of negative experiences with it.

2. What is the potential of the class proceeding to address the barriers?

This part of the analysis considers the relative ability of the class action, as compared to any other alternative mechanism, to address the barriers to access to justice that are present in the case at issue. While a class action will provide access to the courts for plaintiffs, the Supreme Court was careful to note that this only guaranteed a fair process, but not necessarily substantive results, which is an important dimension of access to justice.

3. What are the alternatives to the class proceedings?

Unlike the US class action process, the process in Canada allows the court to consider procedures both within the court system (e.g. individual actions, joinder, test cases, consolidation) and outside the court system.

4. To what extent do the alternatives address the relevant barriers to access to justice?

Once the alternatives to a class action have been identified, they must be assessed to determine the extent to which they address the barriers to access to justice that exist in the case. The Supreme Court noted that while the court process is not necessarily the "gold standard for fair and effective dispute resolution", alternatives must provide suitable procedural rights.

5. How do the proceedings compare?

This is the stage of the analysis where the court must determine whether the class action is the "preferable procedure to address the specific procedural and substantive access to justice concerns" in the case. This should also involve, to the extent possible, a consideration of both the costs and the benefits of the class action as compared to the alternative procedure.

Evidentiary Standard

The Supreme Court held that the five questions set out above "must be addressed within the confines of the certification process; the court cannot engage in a detailed assessment of the merits or likely outcome of the class action or any alternatives to it". It also confirmed that the applicable evidentiary standard is "some basis in fact" and that the court will not be required to resolve conflicting facts and evidence as the certification stage.  

While the Supreme Court did not define what "some basis in fact" means, it did cite the decision of the Ontario Court of Appeal in McCracken v. Canadian National Railway Co., 2012 ONCA 445 that "the use of the word "some" conveys the meaning that the evidentiary record need not be exhaustive, and certainly not a record upon which the merits will be argued".

The Supreme Court also took the opportunity to emphasize that the evidentiary burden on the plaintiffs should not lead to a "more fulsome assessment of contested facts going to the merits of the case".  The Supreme Court cited with approval from Cloud v. Canada (Attorney General) 73 OR (3d) 401 (C.A.) in which the Ontario Court of Appeal held that the some basis in fact standard "does not entail any assessment of the merits at the certification stage".

Burden of Proof

The plaintiff has the burden of proof to demonstrate that a class action satisfies the preferable procedure criterion for certification. The plaintiff must prove that a class action is preferable to all other litigation alternatives. However, the defendant has the evidentiary burden of proof with respect to non-litigation alternatives.

Outcome

The Supreme Court held that a class action made it economically possible for the plaintiffs to advance very small claims and that there was no realistic litigation alternative. The regulatory proceedings had provided a substantive remedy for the plaintiffs but it could not be concluded within the framework of a certification motion whether investors had been properly compensated by the regulatory settlement. This was due, in part, to the fact that the methodology used to calculate the amounts payable in the regulatory proceedings was confidential and there had been no investor participation in the regulatory settlement process. Consequently, in upholding the decision of the Ontario Court of Appeal the Supreme Court held that access to justice would be best served by a class action.  

Conclusion

This decision sets out a very detailed framework for the analysis of access to justice issues within the preferable procedure analysis. It also reinforces the "some basis in fact" evidentiary standard. Most importantly, while this decision does not necessarily preclude successful opposition to certification based on settled regulatory proceedings, given the typically confidential nature of settlement negotiations in regulatory proceedings and the lack of investor participation, it is unlikely that regulatory settlements will stand in the way of certification unless it is clear that the settlement payment in the regulatory proceeding properly compensated investors.

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 Mondaq.com.

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

Authors
Events from this Firm
7 Nov 2019, Seminar, Birmingham, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

14 Nov 2019, Seminar, London, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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