The acceptance of aggregate assessment of damages pursuant to s. 24(1) of the Class Proceedings Act (CPA) as a common issue is now more firmly entrenched as a result of the Court of Appeal for Ontario's recent decision certifying a class action in Cassano v. The Toronto-Dominion Bank.
Brought on behalf of all credit-card holders who had been charged fees in respect of foreign currency transactions on their credit cards, the claim alleges that the TD Bank had failed to disclose two of the fees - a "conversion fee" and an "issuer fee" - in breach of the Banking Agreements with the cardholders. The Bank argued that the terms of the Banking Agreements provided them with a broad discretion to determine exchange rates to be applied. At the certification motion, Justice Cullity had refused certification because he held that the proposed proceeding did not meet the "preferable procedure" requirement for class actions (nor could the common issue as to damages be certified).
Justice Cullity concluded that the plaintiffs were seeking only compensatory damages (damages intended to put the plaintiffs in the position they would have been in, but for the breach) as opposed to restitutionary damages (or damages meant to disgorge the breaching party of profits, available only where compensatory damages would be inadequate). Because the compensatory damages determination would require a "but for the breach" analysis, Justice Cullity agreed with the defendants that an assessment of what each cardholder would have done had they been informed of the charges would be required. He concluded that what the cardholders were deprived of was the value of the choice each of them could have made to reconsider the use of their credit cards in light of the fees, had they known about them and been concerned about the costs involved.
As a result, Justice Cullity held that certification would only be appropriate if compensatory damages could be determined on a class wide basis, and in his view they could not (nor could they be aggregated pursuant to section 24(1) of the Class Proceedings Act) because the determination of the extent of each class member's loss would require proof on an individual basis of how each member of the class would use his or her credit card had they known of the fees that applied to foreign currency transactions.
The Divisional Court upheld Justice Cullity's decision and refused to certify the proceeding. In particular, the Divisional Court agreed with Justice Cullity's conclusion that the damages assessment flowing from the alleged breaches of contract would require an individual analysis of what each class member would have done had there been disclosure.
The Court of Appeal for Ontario, in a ruling authored by Chief Justice Winkler, overturned the previous decisions and certified the action. Justice Winkler disagreed with the Bank's position that there were insufficient common issues as to damages and, by extension, that a class proceeding would not be a preferable procedure. He identified as a preliminary problem the fact that Justice Cullity's conclusion with respect to the assessment of damages rested on the application of a line of contract-law cases, which provide that where a contract has alternate modes of performance, the breaching party is entitled to assume that the non breaching party would have chosen the mode most beneficial to the breaching party. In this case, the Court of Appeal concluded there were really no alternate modes of performing the contract.
Chief Justice Winkler proceeded to consider the recent Court of Appeal decision in Markson v. MBNA Bank (discussed in our August 15, 2007 Class Action Update), in which the Court accepted that section 24(1) of the CPA could be used to determine damages as a common issue and circumvent any complaint of individual assessments. Section 24(1) sets out certain criteria that must be met before a judge can "determine the aggregate or a part of the defendant's liability to class members and give judgment accordingly." One of the criteria is that "the aggregate or a part of the defendant's liability to some or all class members can reasonably be determined without proof by individual class members." Justice Winkler relied on the proposition from Markson v. MBNA Bank that so long as there is a "reasonable likelihood" that this condition would be satisfied, the Court could add damages as a common issue. He dismissed out of hand the defendant's argument that the cost of producing the information required to prove any damages would be prohibitively expensive, noting that the Court could resort to Section 23 to permit statistical sampling to determine average damages, in place of a case-by-case assessment.
Justice Winkler also concluded that even if damages had to be assessed on an individual basis, a class proceeding would nevertheless be the preferable procedure, since access to justice and judicial economy would still be advanced, and since a finding that there was a breach of contract would significantly advance the claims of all class members. Justice Winkler went on to note that the CPA is a "powerful procedural mechanism" in litigation and that the fact that damages cannot be aggregated should not be fatal to certification, since the CPA contemplates the assessment of individual damages where appropriate.
While Cassano may be distinguished from other cases where aggregate assessments of damages are sought, because of the nature of the contract in that case and the fact that the fees paid by each cardholder should be readily determinable by the Bank, the fact remains that the continued application of s. 24(1) of the CPA as a means to facilitate certification is a troubling (continued) development. The "high water" mark for defendants of the Court of Appeal's decision in Chada v. Bayer in respect of the interpretation of s. 24(1) - where the Court of Appeal limited the application of that section at the certification stage - appears almost unreachable, unless and until the Supreme Court of Canada weighs in on the issue.
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