decision of the Ontario Court of Appeal in the Pet Valu
franchise class action should give defendants to class proceedings
optimism that courts will not allow plaintiffs to recast their
claims at late stages of the class proceedings. While the Pet Valu
decision highlights and provides important reasoning on franchise
law matters – perhaps most importantly on the scope of the
statutory duty of fair dealing under the Arthur Wishart
Act– this post focuses on the Court's comments on
the class action procedural points.
Read our Osler Update for our commentary on the substantive
franchise issues discussed in this case.
Plaintiffs Cannot Amend Pleadings Where to do so Prejudices the
Pet Valu's appeal arose in the context of a class action
brought against the franchisor by its franchisees. In January of
2011, Justice Strathy certified a narrow set of claims relating to
allegations that Pet Valu failed to pass on the benefits of certain
volume rebates to its franchisees.
Pet Valu moved for summary judgment before Justice Belobaba who
granted judgment in favour of Pet Valu in respect of five of the
common issues. However, over the course of arguing the summary
judgment motion the plaintiff attempted to shift the focus of its
claim from issues pertaining to volume rebates to issues of
purchasing power. Justice Belobaba therefore granted leave to the
plaintiffs to amend their pleadings to add a new common issue for
certification in relation to purchasing power and deferred his
decision in relation to the existing sixth common issue (the
seventh common issue related to damages and was contingent on
another common issue being certified).
Despite it being his suggestion, Justice Belobaba ultimately denied the plaintiff's motion to add a new
common issue on the grounds of prejudice to the defendants. In so
doing, at paragraph 32 of his reasons, Justice Belobaba cited the
Quizno's decision where Justice
Perell noted that "defendants, just as much as plaintiffs, are
entitled to access to justice" and courts "should also be
aware that the procedure of a class action is meant to level the
playing field, not tip the field in favour of plaintiffs." In
his decision, Justice Belobaba also read additional language into
the remaining sixth common issue, and then held for the Plaintiffs
on that issue pursuant to its new framing.
Pet Valu appealed Justice Belobaba's decision based on the
new wording of the sixth common issue and the plaintiffs
cross-appealed Justice Belobaba's denial of their motion to add
an eighth common issue. The Court of Appeal upheld Justice
Belobaba's denial of the motion to add an eighth common issue.
The Court of Appeal noted that Pet Valu encountered actual
prejudice because in the absence of the proposed additional common
issue, Pet Valu could have obtained complete summary judgment on
the common issues as well as well as a probable costs award that
would have ended the litigation. Justice Belobaba acknowledged this
at paragraph 31 of his reasons.
Critically, the Court of Appeal also commented on the role of
the case management judge in a class proceeding, emphasizing that
while the case management role is an important and challenging one
in guiding the proceeding, it does not permit a judge to
"descend into the arena and make a suggestion at the
conclusion of an otherwise dispositive summary judgment motion as
to how a plaintiff might improve its position."
The Motion Judge Erred in Amending a Common Issue to Conduct an
Inquiry not Justified by the Certified Common Issues
The Court of Appeal held that Justice Belobaba erred in reading
additional language into common issue six, noting that the addition
of language to a common issue was tantamount to adding a common
issue (relief which had been denied by the court). This means that
Justice Belobaba effectively gave judgment on an issue that was
never actually certified. Furthermore, the Court of Appeal noted
that modifying the common issues without notice to Pet Valu was not
only fundamentally unfair to them, but undermined the adversarial
process by depriving the court of the benefit of submissions on
This decision is significant because of the Court of
Appeal's affirmation that common issues cannot be added or
modified where to do so would prejudice the defendant. Further, the
Court of Appeal clarified the role of a case management judge in
defining the common issues in a class proceeding.
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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