Canada: Ontario Court Of Appeal Emphasizes Access To Justice Over Concerns Regarding Individual Issues

The Ontario Court of Appeal in Fantl v. Transamerica Life Canada dismissed an appeal of a Divisional Court ruling, confirming the certification of an investor class action for negligent misrepresentation.

The ruling required the Court of Appeal to grapple with certifying a class with complex individual issues, and in light of Supreme Court of Canada's decision in AIC Limited v. Fischer, which refocused the preferability analysis towards addressing barriers to access to justice.

Background

The respondent commenced a class action against the appellant for negligent misrepresentation, alleging misrepresentations in a disclosure document that was provided to investors in the respondent's fund, pursuant to the Insurance Act. The negligent misrepresentation claim arose from "best efforts" statements made in the disclosure documents, which the respondent argued were untrue. Of the 53 insurance contracts at issue in the claim, five contained express "best efforts" clauses, while the remaining 48 did not.

At the certification stage, Justice Perell certified the respondent's claim for the 5 insurance contracts that contained express "best efforts" statements. However, he refused to certify the negligent misrepresentation claim for the other 48 contracts which did not have such express clauses. He found that only two or possibly three of the elements of negligent misrepresentation could be issues common to the class, and so issues of reliance and damages – which he regarded as "critical, difficult, and contentious" – would have to be determined at individual trials. Justice Perell found that a class action was not the preferable procedure, concluding that the common issues would be "overwhelmed or subsumed" by the individual issues.

The Ontario Divisional Court overturned the decision not to certify the negligent misrepresentation claim, reasoning that Justice Perell did not have the benefit of the Supreme Court's decision in Fischer, which provided a refocused preferability analysis for determining certification. The Divisional Court certified the negligent misrepresentation claim, finding that: (i) a class action was a fair, efficient, and manageable means of advancing the claim; and (ii) given the value of the plaintiff's claim, there was no viable and reasonable alternative to advancing the claim.

Court of Appeal Decision

On appeal, the Ontario Court of Appeal found that the Supreme Court's decision in Fischer, which was released subsequent to Justice Perell's certification decision, reduced the deference owed to the certification judge and permitted the Divisional Court to conduct its own analysis. The decision in Fischer requires the court to consider barriers to access to justice, a class action's potential to address those barriers, and the alternatives to a class action, including whether they address those barriers.

The Court of Appeal then distinguished the case in issue from Kinross, a securities class action for secondary market misrepresentation and common law misrepresentation which would have required numerous investor-specific inquiries regarding issues of reliance, causation, and damage. The Court of Appeal noted that the case in issue, in contrast, involved a "single common written representation", which every class member acknowledged receiving and which removed the need for some of the individual inquiries. Moreover, the court noted that much of the "necessary heavy lifting" for the negligent misrepresentation common issues would be shared with the already-certified breach of contract common issues, which advance judicial economy and serve to avoid a multiplicity of proceedings.

The Court of Appeal specifically noted Justice Cromwell's observation in Fischer that "the most common barrier to access to justice is an economic one. That is the case here." The court proceeded to conclude that given that the high cost of expert evidence needed to establish negligent misrepresentation would be out of proportion to the amount claimed, it was not economically viable to litigate the respondent's claim as a stand-alone proceeding. The court ruled that while a joinder would also not address this barrier, that a class proceeding had the potential to address it by distributing such costs over a wide number of class members.

Further, the court determined that, if the common issues were resolved in favour of the class, then a class proceeding could potentially provide a framework to resolve the individual issues. If a judge has tried the common issues, the court reasoned, then they will be well-suited to develop a procedure to resolve the individual issues, which a judge is given the authority to do under sections 12 and 25 of the Class Proceedings Act. However, no indication or guidance was provided as to how such a procedure to resolve the individual issues could actually work in practice, and it remains to be seen whether any such procedure will in fact be workable.

The court concluded its analysis with a particularly strong emphasis on access to justice concerns:

[44] Although class actions have been with us in Ontario for almost 25 years, there have, at most recent report, been less than 20 common issues trials... Few of these have resulted in individual issues trials. If class actions are to deliver on their promise of access to justice it is perhaps time to test some of the assumptions made about the "manageability" of the individual issues stage of a class action. This appears to be an ideal case in which to do so.

Whether this will be such an ideal case, or will in fact prove to be unmanageable in practice, remains to be seen.

Conclusion

The Court of Appeal's decision in Fantl v. Transamerica Life Canada may be a harbinger that, at least in Ontario, certification may be granted even where there are difficult individual issues that pose manageability concerns, provided that a class proceeding can help advance the common issues and overcome barriers to access to justice.

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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