Canada: Ontario Court Interprets Exclusion Clause, Denies Motion for Class Certification

On March 15, 2010, Justice Cullity of the Ontario Superior Court of Justice issued his decision in Dennis v. Ontario Lottery and Gaming Corporation.¹ Justice Cullity's decision declined to certify as a class proceeding an action brought on behalf of individuals who signed a "self-exclusion" form at an OLG gaming facility² between December 1, 1999 and February 10, 2005. The decision offers important guidance on the interpretation and applicability of "exclusion of liability" clauses, and on the requirement in class proceedings that there be a rational connection between the class definition and the proposed common issues.

Background

Since casino gambling was introduced in Ontario in 1994, the Province of Ontario has recognized, and adopted various measures to address, the social costs of gambling. Among those measures has been a "self-exclusion" program whereby gamblers consent to being denied entry to OLG gaming facilities. Self-exclusion is a service offered by many North American casinos. It is intended to be a self-help tool that lets patrons acknowledge and take positive steps to address problems that they may be experiencing associated with gambling.

The self-exclusion form at issue in the Dennis case stated that self-exclusion would direct OLG "to use their best efforts to deny you entry, as a service, to all of OLGC's gaming venues in the province of Ontario". The form then went on to disclaim and release any liability to OLG if the self-excluded individual continued to gamble:

Peter Dennis signed a self-exclusion form on May 23, 2004. He soon returned to gambling in breach of his self-exclusion, until ultimately retaining counsel, obtaining treatment and stopping gambling in September 2007. Soon thereafter he commenced this proceeding on behalf of all individuals who had signed the same self-exclusion form. His wife was named as a plaintiff on behalf of family members of self-excluded class members.

Section 5(1) of Ontario's Class Proceedings Act³ ("CPA") sets out a five-part test that a plaintiff must meet in order to obtain certification of an action as a class proceeding: there must be (1) a valid cause of action; (2) on behalf of an identifiable class; (3) raising common issues; (4) for which a class proceeding would be the preferable procedure; and (5) the named plaintiff(s) and counsel must adequately represent the class. The test is a procedural one that asks whether the action should be converted to a class proceeding, or should remain an individual action. There is no decision on the merits of the underlying action.

Cause of Action Analysis

The first requirement for certification under the CPA is that the statement of claim must disclose a cause of action. For purposes of this analysis, the facts pleaded in the statement of claim are assumed to be true. No evidence is admissible. The test presents a low threshold which gives little or no insight into the merits of the underlying action.

Justice Cullity concluded that Dennis's Statement of Claim disclosed causes of action in contract, tort, occupier's liability and waiver of tort. The principal debate on this issue concerned the tort analysis, as the other causes of action are relatively easy to establish at the pleadings stage.

No Canadian court has ever found a duty of care to problem gamblers or self-excluded gamblers. However, as Justice Cullity recognized, "the novelty of a cause of action will not, by itself, lead to its rejection".⁴ Moreover, the English Court of Appeal has in one case recognized a duty of care to implement the terms of an existing self-exclusion policy,

though that case ultimately dismissed the plaintiff's claim because the betting shop's negligence did not cause the plaintiff's losses.⁵

Justice Cullity ultimately concluded that a duty of care could be found on two bases. First, he held that the pleadings disclosed an analogy to an existing line of cases where "governmental authorities who had undertaken a policy of road maintenance had been held to a duty of care to execute the maintenance in a non-negligent manner".⁶

In the alternative, Justice Cullity concluded that the Statement of Claim could also meet the test to establish a novel duty of care even if it was not analogous to a previously recognized category. The self-exclusion form and OLG's public representations could establish a relationship of proximity between OLG and self-excluded gamblers. Justice Cullity also noted that, according to the Statement of Claim, a casino was an inherently dangerous environment that could have adversely affected vulnerable individuals. Finally, he found that, at the pleadings stage, there was not enough evidence to determine that the selfexclusion program represented a government policy immune from liability in tort.

Justice Cullity's finding that a cause of action had been pleaded made his discussion of the exclusion of liability clauses in the self-exclusion form particularly significant. Justice Cullity interpreted the exclusion clauses as "excluding any legal responsibility that might otherwise arise" if the gambler breached his or her self-exclusion.⁷

Where an exclusion clause applies, according to a recent decision of the Supreme Court of Canada, a plaintiff can only avoid its effect if it would be unconscionable or contrary to public policy to do so.⁸ Justice Cullity noted that OLG was not "attempting to obtain any benefit for itself"⁹ by offering self-exclusion, and that according to the Statement of Claim itself, Mr. Dennis "sought to circumvent and frustrate its performance".¹⁰

In these circumstances, Justice Cullity concluded that there was "nothing unconscionable in OLGC stipulating that it would undertake to exercise its best efforts so as to assist the plaintiff and class members but only on the condition that in no circumstances would it be liable for any gambling losses incurred by them in the event that, for any reason, selfexclusion failed to achieve its intended effect".¹¹ The lone possible exception suggested by Justice Cullity would be if a plaintiff could prove that OLG had acted in bad faith and the self-exclusion program "was mere window-dressing".¹²

Given that Justice Cullity could not look beyond the Statement of Claim, he was unable to make a ruling on the issues of unconscionability or public policy for the purposes of determining whether the exclusion clauses precluded the plaintiff's causes of action. However, his analysis demonstrates the difficult path that self-excluded individuals will face where an exclusion clause applies to a claim, in light of the Supreme Court of Canada's Tercon decision.

Lack of Issues Common to the Proposed Class

The remainder of the elements of the test for class certification do require an evidentiary foundation. Unlike the cause of action analysis above, in analyzing proposed common issues, "evidence is required and the pleading will not be determinative on the basis of an assumption that its allegations of fact will be proven at trial".¹³ The plaintiffs could not meet this evidentiary burden.

Justice Cullity's decision to deny certification ultimately turned on the absence of "a rational connection between the class definition and the proposed common issues". The fundamental problem with the case was that "the claims advanced on behalf of the class members are predicated, and dependent, on their vulnerability". However, Justice Cullity concluded that not all self-excluded gamblers are vulnerable. The resulting overinclusiveness of the class definition "cannot be resolved by the use of statistical evidence",¹⁴ and would therefore require an inquiry into each class member's individual circumstances that would swamp any common issues.

This fundamental problem drove the three central findings in Justice Cullity's reasons. First, he noted that the proposed class members could not establish that they were all vulnerable simply by pleading that all class members were problem gamblers and unable to control their behaviour. The evidence offered by the plaintiff in the Dennis case did not establish that all self-excluded gamblers were necessarily vulnerable, and so individual evidence would be necessary.

Second, Mr. Dennis could not rely on statistical evidence to overcome the heterogeneity of the proposed class. While statistical evidence is frequently, and successfully, relied on by plaintiffs in proposed class proceedings to estimate damages, Justice Cullity recognized the limits of such evidence. Specifically, he held that statistical evidence "is not, in my opinion, admissible for the purpose of determining commonality of the five proposed common issues on which OLGC's liability depends. To ascribe commonality to such issues on the basis of such evidence would be to assert that OLGC's liability, or elements affecting its liability – other than proof of damages or the amount of a monetary award – can be determined on the basis of statistical probability."¹⁵

Finally, Justice Cullity considered the Court of Appeal's recent decisions¹⁶ holding that "only a finding of 'potential liability' is required before an aggregate assessment of damages can be made".¹⁷ These decisions did not, however, "alter the necessity to show that other elements of liability that are framed as common issues – such as the existence of a duty of care or a breach of duty – must have commonality".¹⁸ In this case, crucial elements of the plaintiff's claims like the existence of a duty of care, breach of that duty and causation of any damages would all need to be determined on an individual basis.

Given the absence of any significant common issues, Justice Cullity concluded that a class proceeding was not the preferable procedure for resolving the claims of proposed class members. Notwithstanding the plaintiff's characterization of the claims as "systemic", they were inherently individual in nature.

Moreover, none of the three goals of class proceedings would be served by certifying this proceeding. First, given the preponderance of individual issues, there would be no gains in judicial economy. Second, the amounts at stake are large enough that individual actions could be viable, and access to justice was therefore not an issue. Finally, OLG is already subject to persistent scrutiny and has taken significant steps to improve its self-exclusion and responsible gaming programs, rendering behaviour modification relatively unnecessary.¹⁹

Conclusion

Class proceedings have been an important addition to the procedural arsenal of plaintiffs since their introduction in Ontario in 1992. However, without appropriate limits, they can undermine the very goals of judicial economy that they were intended to promote. Justice Cullity's decision in Dennis recognizes and reinforces the boundaries of these limits. The decision should be of assistance to plaintiffs' counsel in contemplating future claims, and to defence counsel in defending those actions that step over the limits.

Footnotes

1. 2010 ONSC 1332.

2. This includes slots-at-racetrack facilities like the Woodbine Slots, community casinos like Casino Brantford, and the resort casinos in Rama, Windsor and Niagara Falls. OLG operates the slots facilities and community casinos, while the resort casinos are operated on OLG's behalf by private commercial operators.

3. S.O. 1992, c. C.6.

4. Dennis, supra note 1 at para. 82.

5. Calvert v. William Hill, [2008] E.W.H.C. 454, aff'd [2008] E.W.C.A. Civ. 1427.

6. Dennis, supra note 1 at para. 132.

7. Ibid. at para. 96.

8. Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4 at paras. 122-123.

9. Dennis, supra note 1 at para. 103.

10. Ibid. at para. 104.

11. Ibid. at para. 105.

12. Ibid. at para. 106.

13. Ibid. at para. 194.

14. Ibid. at para. 189.

15. Ibid. at para. 211.

16. Markson v. MBNA Canada Bank, 2007 ONCA 334; Cassano v. Toronto-Dominion Bank, 2007 ONCA 781.

17. Dennis, supra note 1 at para. 217.

18. Ibid. at para. 218.

19. Ibid., supra note 1 at paras. 237-240.

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