In Dufault v Toronto Dominion Bank,1 the defendant's pre-certification motion for summary judgment brought under section 4.1 of the Class Proceedings Act ("CPA") was dismissed. Of particular interest is Justice Belobaba's commentary regarding the appropriateness of granting reverse summary judgment in a proposed class action that has not yet been certified.
The proposed class action concerned allegations that the defendant bank did not fully and fairly disclose the possibility that clients could be charged two NSF service fees for a single transaction involving insufficient funds. Specifically, this could occur when third-party payee's such as PayPal resubmitted requests for payment where the initial transfer of funds was rejected by the user's bank and the user still had insufficient funds at the time of the resubmission.
The defendant brought a motion for summary judgment on the basis that the plaintiff could not establish any of their causes of action in contract, provincial consumer protection legislation, or unjust enrichment.
Section 4.1 of the CPA is commonly referred to as the sequencing provision. It provides that:
If, before the hearing of the motion for certification, a motion is made under the rules of court that may dispose of the proceeding in whole or in part, or narrow the issues to be determined or the evidence to be adduced in the proceeding, that motion shall be heard and disposed of before the motion for certification, unless the court orders that the two motions be heard together.
The parties and Justice Belobaba agreed that summary judgment was appropriate as the decision essentially involved an issue of contractual interpretation of a standard form contract, that being the defendant's NSF service fee clause:
If you do not have overdraft protection service and you issue a cheque or make a payment without sufficient funds in your account [TD may charge] $48.00 if TD does not approve the cheque or payment.
Justice Belobaba held that on the plain reading of this clause the possibility of the imposition of a second NSF on a single transaction was not fully and fairly disclosed.2 There was no need to resort to a consideration of the banking network rules referred to elsewhere in the bank's user agreement because those surrounding circumstances would not have been known by any reasonable banking customer at the time of the formation of the contract, that being when they opened their bank account.3 Justice Belobaba therefore dismissed the defendant's summary judgment motion.
Justice Belobaba ultimately found that the imposition of the second NSF fee was not adequately disclosed to customers by the NSF provision.4 Given this finding, Justice Belobaba, on his own initiative, considered whether this was an appropriate case for "reverse summary judgment" - whether the court on its own imitative should grant the plaintiff the breach of contract and related declarations about the second NSF fee that were pleaded but not advanced by way of a cross-motion for summary judgment.5 After the motion was argued, Justice Belobaba welcomed submissions from the parties on this issue. The defendant bank opposed reverse summary judgment, in opposition to the plaintiff's support. Ultimately, Justice Belobaba concluded, "But for the fact that the action before me is a proposed class action, I would probably have agreed with counsel for the plaintiff. On balance, however, I am not persuaded that in the context of a proposed class action where the broader findings made herein will in any event be before me when I hear the certification motion, that any practical purpose is served in granting a reverse summary judgment."6
The decision in Dufault demonstrates the potential for the use of s. 4.1 of the CPA to streamline class proceedings in Ontario. While Justice Belobaba appeared to have opened the door to the possibility of reverse summary judgment pre-certification, he nonetheless closed the door, noting that a finding that is made pre-certification would not be binding on a class that is certified at a later time. This is because at the time the finding was made there would only be a proposed class of individuals, as opposed to a certified class over which the court has jurisdiction to make findings and orders that are binding on all members of the class.
This ruling appears to preclude the possibility of reverse summary judgment on all section 4.1 motions, unless that motion is heard together with the certification motion. In any event, as Justice Belobaba's comments also make clear, it would remain open for a judge to make the same merits findings at the hearing of the certification motion.