Canada: "Controversial" Changes To Ontario Class Actions Law Recommended By Commission

After two years of review, the Law Commission of Ontario ("LCO") has recommended wide-ranging changes to Ontario's class actions regime. In its report released on July 17, 2019, the LCO acknowledged that some of its recommendations would be "controversial".

The LCO prioritized issues with a systemic impact on class action litigants, practice and outcomes. Its report recommends changes to nearly all steps of class actions, from commencement of the cases, to certification, settlements, and counsel fees – including having a "no costs" regime for certification motions, encouraging dispositive early motions (such as motions to strike), and requiring defendants to report on resulting changes to their corporate practices. Key recommendations are described below.

Background: The Class Actions Project  

The LCO's class action project was the first comprehensive, independent review of the Ontario Class Proceedings Act ("CPA") since its introduction almost 30 years ago. Over this period, Ontario class actions have grown significantly in volume, complexity, and impact. The LCO estimates that approximately 1,500 class actions were initiated in Ontario between 1993 and February 2018, most frequently including Securities Act, Competition Act, and product liability matters.

Key recommendations

In making recommendations, the LCO's stated goal was not to achieve consensus, but to identify "principled, practical, and forward-looking recommendations." 

Deterring undue delay

Delay was cited by "virtually everyone" consulted by the LCO as a significant issue. The LCO recommends amending the CPA to establish a one year deadline for the plaintiff to schedule the certification motion and file its certification motion. The LCO also recommends introducing an automatic dismissal and costs provision for cases that are not advanced by plaintiffs in a timely or appropriate manner.

Certification

The LCO's report estimates that 73% of contested certification motions in Ontario are eventually granted, in whole or in part. Ontario's certification rate was roughly equivalent to that of Quebec but higher than other Canadian jurisdictions. The LCO stated that while the "certification rate in Ontario appears high," there is "no simple or accepted statistical benchmark of what constitutes an appropriate certification rate".  Some might say that the high certification rate is a sign that the system is granting access to justice.

The report concludes that the existing certification test set out in the CPA is generally sufficient and does not warrant major reform. Instead, the LCO recommends encouraging courts to interpret the existing elements the test (particularly that a class proceeding be the "preferable procedure") more rigorously.

Noting that "summary judgment motions are underutilized in class actions," the report also recommends  that courts support pre-certification motions to dispose of the action or to narrow the issues for certification.  If adopted, this could be a significant change, as courts have historically been cautious about pre-certification motions to avoid delay.

Settlement approval

Identifying a significant need to improve the settlement approval process, the LCO recommends the CPA be amended to require courts to consider whether the proposed settlement is "fair, reasonable, and in the best interest of the class."  This test is often imposed by case law, but is not included in the CPA.

Perhaps more significantly, the LCO recommends setting higher evidentiary standards for parties seeking settlement approval - including requiring evidence regarding the risks of litigation, the range of possible recoveries, and the method of valuation of the settlement.  To date, evidence on settlements is rarely so detailed or rigorous in Ontario.

Settlement distribution and fee approval

While the LCO considered the issue of plaintiff firm fees compared to compensation obtained by class members, it did not make specific recommendations that would directly tackle the perceived issue.

The report noted that a frequent criticism is that "plaintiff counsel appear to earn millions in counsel fees while individual class members receive comparatively little compensation for their damages." The LCO notes that this view is too simple, but recommends amending the CPA to specify that counsel fees must be fair and reasonable. Again, this test is often imposed by case law, but is not included in the CPA. When considering whether a proposed fee is fair and reasonable, the LCO recommends that courts consider the results achieved for the class and the degree of responsibility and risk assumed by class counsel.

The LCO recommends adding provisions to the CPA to require detailed final outcome reports at the end of the distribution period.

Reports on behavior modification

The LCO recommends requiring mandatory class action outcome reports which include information about behavior modification outcomes (i.e., changes in corporate or government practices or behavior that may be attributable to a class action).

Costs

At present, Ontario generally maintains the same two-way 'loser pays' costs rule in class actions as it does in other civil litigation – with a provision permitted lower costs to plaintiffs where a case was brought in the public interest or raises a novel issue. The LCO recommends adopting a modified no-costs system under which there would be no cost awards for certification motions, ancillary motions, and appeals from certification. All other proceedings would have two-way costs applied including motions to strike, jurisdiction disputes, summary judgment motions, motions to de-certify, and trials.

Appeals  

Currently, Ontario is unique among Canadian jurisdictions in having an intermediate appeal level from certification decisions, and asymmetrical certification appeal rights between plaintiffs and defendants. The LCO recommends amending the CPA to provide both parties with a direct right of appeal to the highest level of Ontario appellate court (the Ontario Court of Appeal).

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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