Canada: SCC Allows Certification Of Class Action Where OSC Settlement Already Completed

On December 12, 2013, the Supreme Court of Canada issued its decision in AIC Limited v. Fischer, in which it allowed certification of a proposed class action proceeding against a number of mutual fund managers despite the fact that a settlement agreement between the fund managers and the Ontario Securities Commission had already been reached.

The appellant mutual fund managers in this case entered into settlements with the OSC over allegations of market timing causing losses to long-term investors. The settlement agreements, under which the defendants collectively paid investors $205.6 million, did not preclude the possibility of civil proceedings. Thus, investors subsequently brought an action claiming breach of fiduciary duty and negligence. According to the plaintiffs, the actual losses suffered by investors could reach as high as $832 million.

The Class Proceedings Act

According to Ontario's Class Proceedings Act, the court will certify a class proceeding where,

  1. the pleadings or the notice of application discloses a cause of action;
  2. there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;
  3. the claims or defences of the class members raise common issues;
  4. a class proceeding would be the preferable procedure for the resolution of the common issues; and
  5. there is a representative plaintiff or defendant who,

    1. would fairly and adequately represent the interests of the class,
    2. has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and
    3. does not have, on the common issues for the class, an interest in conflict with the interests of other class members.

Lower court decisions

At first instance, the motion judge denied certification, finding that the OSC proceeding was the preferable procedure for addressing the investors' claims. The decision, however, was overturned on appeal, with the Divisional Court finding that since a significant amount of money was potentially still owed to the plaintiffs, it could not be said that the OSC process was preferable. Rather, the Court found that unless the plaintiffs achieved full or substantially full recovery, they were entitled to maintain an action.

Despite finding that the Divisional Court had erred in focusing on whether the OSC settlements provided investors with the monetary relief sought, the Court of Appeal agreed with the Divisional Court's ultimate decision and dismissed the appeal. According to the Ontario Court of Appeal, however, the Divisional Court should have focused on the procedural characteristics of the alternative proceedings in comparison to class proceedings. Such procedural characteristics of the alternative forum include its impartiality and independence, the scope and nature of its jurisdiction and remedial powers, the applicable procedural safeguards, and its accessibility. Ultimately, the Court of Appeal found that the OSC's proceedings did not provide comparable participation rights to affected investors and that the OSC's remedial authority was insufficient to fully address investors' claims.

SCC decision

Access to justice

On appeal, the Supreme Court's analysis was limited to whether a class action would be the preferable procedure to address the plaintiff's claims, as there was no dispute in respect of whether the proposed class action met the other requirements for certification. Further, while preferability is typically considered in light of the principal goals of class actions, being judicial economy, behaviour modification and access to justice, there was no dispute with respect to the first two goals. Thus, the Supreme Court's analysis focused on the narrow issue of access to justice.

In outlining its approach to preferability, the Supreme Court also noted that a class action does not have to actually achieve the above mentioned goals. Rather, the analysis is one of comparison, and is intended to determine whether other available means of resolving the claim are preferable. Further, while the Divisional Court focused on the substantive issue of quantum of damages, and the Court of Appeal focused on procedural considerations, the Supreme Court found that the access to justice analysis must include a consideration of both procedural and substantive elements.

Class action vs. OSC proceedings and settlement

While the Supreme Court found that class actions overcome barriers to litigation by "providing a procedural means to a substantive end", the alternative in this case would be more limited in its ability to do so. Specifically, the Supreme Court recognized two potential barriers to access in respect to the investors, namely an economic barrier arising from the nature of the action as a "small claims class action" consisting of claims not large enough to support viable individual actions, and the associated lack of access to a fair process.

While the proposed class action addressed both barriers, the OSC proceeding and settlement agreements were found to be insufficient. According to the Supreme Court, the OSC's proceeding suffered from procedural limitations due to its regulatory nature, the limited participation rights for investors and the limited information available in regards to how investor compensation was calculated. In regards to the substantive issue, while the limited scope of the factual inquiry on the certification motion means that courts are typically not able to compare potential recoveries, the Supreme Court found that the results of the alternative proceeding in this case could not be ignored. As such, the Supreme Court found that a cost-benefit analysis supported the view that class proceedings were preferable in order for investors to pursue their claims. That said, in cases where the results of the proposed class action and alternative proceedings are not known, "the comparative exercise with regard to the substantive access to justice barriers will in general be very limited."

Disposition

Ultimately, therefore, the Supreme Court found that the motion judge had erred in his approach to preferability, finding that it was the role of the judge to compare and evaluate, within the limited scope of the certification motion, the access to justice provided by the two proceedings, both in the substantive and procedural dimensions of the term as part of his overall assessment of whether the plaintiffs had established the preferability requirement on the appropriate evidentiary standard.

In applying the analysis it articulated, the Supreme Court found that the class proceedings were the preferable proceeding for pursuit of the investors' claims. As such, it dismissed the appeal and upheld certification.

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
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must 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