A recent decision denying certification of a proposed class
action includes some noteworthy comments regarding the preferable
procedure requirement. In Excalibur Special Opportunities LP v. Schwartz
Levitsky Feldman LLP, Perell J. found that joinder of
claims was preferable to a class action where there were no
significant economic, psychological or social barriers to
individual actions. In reaching that conclusion, Perell J. made
specific reference to the fact that the moving party did not
demonstrate a "genuine need" for the common issues to be
resolved on a class-wide basis, and implied that certification will
not be granted simply because certification would result in
"intense pressure" on the defendant to settle.
The proposed representative plaintiff was a Canadian investment
fund that purchased privately-placed shares of a Chinese hog
producer. The Private Placement Memorandum given to potential
investors included a clean audit report prepared by the defendant,
a Canadian accounting firm. When the company went bankrupt shortly
thereafter, the plaintiff sued the defendant for negligence and
negligent misrepresentation and sought to certify the action as a
class proceeding on behalf of all those who invested in the private
Perell J. refused certification, as the proposed class action
failed to meet the identifiable class and preferable procedure
requirements. This post focuses in particular on Perell J.'s
comments with respect to the preferable procedure analysis.
Preferable Procedure: Not an Automatic Pass
The question of
whether a class action is a preferable procedure is analysed
through the lens of the purposes of class proceeding: judicial
economy, behaviour modification and access to justice. In
Excalibur, Perell J. noted that, in considering the
preferable procedure criterion, the court should consider:
The type or genre of class action (e.g.
franchise, personal injury, economic loss, etc.), as plaintiffs in
different types of class actions will have different access to
Whether the type of remedy being sought is
declaratory, compensatory, or restitutionary, since access to
justice cannot be divorced from ensuring that the ultimate remedy
provides substantive justice where warranted; and
Proportionality in civil procedures and its
relationship to access to justice.
Considering all of these factors, Justice Perell found that the
alternative of a joinder of claims was preferable to the proposed
class action as it would provide effective redress for the
plaintiff and any other investors who could join the action as
co-plaintiffs while protecting their procedural rights. Perell J.
based this finding on several facts, including the following:
The proposed representative plaintiff had an almost $1 million
claim that would justify taking on the litigation risk – it
did not genuinely need a class action to obtain access to
The class members were all known and were all "accredited
investors" (had a net worth of at least $1 million or two
years of $200,000 plus income) so were not without resources to
There was enough money at stake to warrant a contingency fee
arrangement even without a class action.
A class action would achieve only modest judicial economy over
individual actions or the joinder of claims, especially since (i)
it required the additional formality and expense of a certification
motion, and (ii) individual issue trials would be required in any
There were no psychological or social barriers to bring
individual claims, such as might be present in an employment or
franchise class action where the class members may be intimidated
or reluctant to sue their boss or franchisor.
While a class action would be manageable, it would also be more
procedurally cumbersome and protracted than a regular action.
Behaviour modification was not needed beyond the behaviour
modification that comes from a regular tort action.
Excalibur contained some fairly pointed comments which
suggest that, at least in the particular circumstances of the case,
the Court required some meat, in the form of a demonstrated genuine
need, on the bones of an argument regarding preferable procedure.
The Court noted that all the representative plaintiff had done was
demonstrate that there was "a group of claimants with
manageable common issues". That was, in the Court's view,
not enough to satisfy the preferable procedure requirement
notwithstanding that it is an "easy to satisfy standard".
The Court's comments regarding the use of certification as a
way put pressure on defendants to settle were also noteworthy. It
will be interesting to see whether future cases will pick up on
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.
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In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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