Canada: Nipping The Class Action In The Bud: Saskatchewan Court Dismisses Claim Pre-Certification

On October 30, 2015, the Saskatchewan Court of Queen's Bench released a decision that has significant implications for the conduct of class proceedings, and the remedies available under Canadian consumer protection legislation.

The Case

Sandoff et al. v. Loblaw Companies Ltd. et al.,1 was a proposed class action, in which the plaintiffs alleged that the defendant had marketed certain soft drink products in a misleading manner. The products were labelled as "low sodium". The plaintiffs conceded that this label was objectively accurate and the uncontested evidence was that the products contained less than one seventh of the sodium that Health Canada permits in products labelled as "low sodium".2 The plaintiffs argued, however, that the label was nonetheless misleading, because allegedly there were other products in the marketplace that contained comparable sodium levels, but that were not labelled as "low sodium".

Keene J. found, as a fact, that, "There [was] no evidence that the plaintiffs were misled about the sodium content of the drink they purchased, nor did they rely upon the low sodium label when making the purchase and I find they did not suffer any damages."3

His Honour went on to find that:

Surely truthfully and accurately labelling your product (even though your competitor chooses not to) does not mean you are misleading anyone ... I find that there was nothing misleading about the packaging complained of;

Consumers could have checked the nutritional labels in any event to read the sodium levels and used their own common sense to make informed decisions; and

There is no evidence that either plaintiffs (or for that matter any member of the proposed class) suffered any damages as a result of purchasing the PC Low Sodium Beverages. The plaintiffs bought what they expected or could reasonably expect) to receive: a low sodium beverage at essentially the same price as other soft drinks.4

Keene J. accordingly granted the defendants' summary judgment application, and dismissed the case.

Implications for Pre-Certification Summary Judgment

One of the most important aspects of the decision in Sandoff was the Court's willingness to dispose of the case summarily, prior to certification. This is an encouraging development for defendants faced with class actions.

Not infrequently, plaintiffs have a greater chance of success in attempting to have a case certified, than they do of succeeding on the merits of that case. The bar for certification is relatively low. While certification is considered a procedural step, it carries consequences that are more significant than those attached to most other procedural motions. Certification frequently attracts publicity. A legally unsophisticated public often fails to appreciate the fact that certification is not a determination of the merits of the case, and assumes that, "where there is smoke, there is fire." Moreover, the obligation to give notice to class members can be onerous from both a financial and a public relations perspective. For this reason, it is often in a defendant's interests to address the merits of a case prior to certification. Plaintiffs tend to insist that certification should be the first step in any class proceeding, essentially for the same reasons that make defendants resist that approach. Plaintiffs (or their counsel) often assume that, if a case is certified, settlement discussions will be the inevitable next step, even if the merits of the case are questionable.

Against this backdrop of competing incentives, there have been ongoing battles between plaintiffs and defendants about the order in which various steps should occur in a class proceeding. Sandoff is the latest decision in which a Court has had to consider whether a summary judgment application should be heard prior to certification. These decisions are always discretionary.

In Sandoff, it was not until almost a year after the defendants had served their application for summary judgment that plaintiffs' counsel delivered certification materials.5 Nonetheless, the plaintiffs took the position that certification should be decided prior to summary judgment. At a case conference, Keene J. determined that the two applications should be argued together.

After the hearing, Keene J. decided that this was an appropriate case in which to decide the summary judgment application prior to certification. Having granted the defendants' application for summary judgment, Keene J. concluded that:

Since I have granted the defendants' summary judgment application, I do not need to decide the plaintiffs' application for certification. To complete this matter, because the plaintiffs' claim is dismissed, I must therefore dismiss the application for certification as well and so order.

Significantly, the plaintiffs had accepted that the case was suitable for summary disposition, but had argued that judgment should be granted in their favour. Justice Keene rejected that position, finding that, "the plaintiffs' submission that they should receive summary judgment in favour of their claim is clearly without merit. There is no evidence to support this."6

In determining whether to grant summary judgment prior to certification, Keene J. found that there was "considerable authority for this Court to hear a summary judgment application prior to the certification application."7 Keene J. cited authorities from Saskatchewan, British Columbia and Alberta in support of this conclusion. Similar case law exists in other Canadian jurisdictions.

On the materials before him, Keene J. concluded that, he had "found the facts and applied the relevant legal principles" and could "fairly resolve the dispute." Keene J. accordingly found that, "Proceeding to trial is not necessary and would not be proportionate, timely or cost effective."8

Pre-certification summary judgment has strategic implications. The most important of these is that, as Keene J. noted, if summary judgment is granted prior to certification, only the named plaintiffs will be bound by the result. In other words, other than the possible expiry of limitation periods, there will be no legal impediment to prevent new representative plaintiffs from commencing a claim against the same defendants with respect to the same matter.9 For this reason, pre-certification summary judgment applications are best suited to cases where none of the proposed class members would have a tenable claim. If the defendants have a defence only against the named plaintiffs, there is a substantial risk that a successful summary judgment application will only delay the inevitable, because class counsel will identify a new, more suitable, representative plaintiff to take their place and make a second attempt at certification.

In appropriate cases, however, Sandoff provides support for defendants who want to deal with the merits of a questionable claim, without having to incur the expense and inconvenience associated with certification.

Remedies Under Consumer Protection Legislation

The Sandoff decision is also notable for being a further chapter in the ongoing development of the law governing available remedies under consumer protection legislation. In particular, there has been an ongoing debate about the extent to which the statutes in various provinces require the plaintiffs to prove damages in order to be entitled to a remedy. This debate is extremely important in the class actions context, because the need to prove individual damages can be fatal to certification. At a minimum, it can significantly reduce the likelihood that a class proceeding will ultimately require a defendant to pay out significant sums of money.

Since the plaintiffs in Sandoff sought to represent a national class, they relied upon consumer protection legislation from various different provinces. Keene J. found that all of the statutes that the plaintiffs relied upon required them to prove that the supplier of goods had made a representation that was untrue, deceptive or misleading, and that the plaintiffs had failed to establish these requirements in this case. Moreover, Keene J. held that the statutes in British Columbia, Alberta, Saskatchewan and Newfoundland and Labrador would have required the plaintiffs to prove that they suffered damages as a result of the violation of those acts. He specifically rejected the plaintiffs' argument that British Columbia's Business Practices and Consumer Protection Act,10 did not require plaintiffs to prove reliance on a misleading representation in order to obtain a remedy. Keene J. instead accepted the defendants' position that a remedy would only be available under that statute if the plaintiffs could establish either: (i) the existence of a constructive trust over an identifiable sum of money; or (ii) that the plaintiffs had personally suffered loss or damages. The plaintiffs in Sandoff had done neither.11

Coupled with the willingness to grant pre-certification summary judgment, Keene J.'s confirmation of the requirements for a remedy under various consumer protection legislation statutes provides valuable support to defendants seeking to nip class actions in the bud.

Note: Markus F. Kremer was co-counsel to the defendants in this case.

Footnotes

1. 2015 SKQB 345 ["Sandoff "].

2. Ibid ., para. 14.

3. Ibid ., para. 22.

4. Ibid. , at para. 41.

5. Ibid. , paras. 4 and 6.

6. Ibid ., para. 28.

7. Ibid ., para. 29.

8. Ibid. , para. 55.

9. Ibid ., para. 29.

10. SBC 2004, c. 2.

11. Sandoff, supra ., at paras. 51 to 52.

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