Canada: Class Actions In Canada: What To Expect In 2024

As the end of 2023 approaches, Torys looks ahead to how this year's decisions may shape the landscape of Canadian class actions in 2024 and beyond.

More rigour at certification

Higher bar for meeting preferability criteria confirmed in Ontario

In 2023, the Ontario court provided its first, long-awaited substantive consideration of Ontario's amended preferable procedure threshold on a contested motion for certification. As we previously reported, section 5(1.1) of the Class Proceedings Act, 1992 (the Ontario Act) was amended in 2020 to add the requirements of predominance and superiority to the preferable procedure criterion of the certification test.

While Ontario courts had only made passing references to the new preferability threshold in 2022¹, as anticipated, this year saw the court's first interpretation of the new threshold in the decision of Banman v Ontario². In Banman, the court confirmed a more rigorous analytical methodology was required under the new preferable procedure test, which involves determining, through the lens of judicial economy, behaviour modification and access to justice, whether the common issues predominate over the individual issues and whether the proposed class action is superior to (better than) the reasonable alternatives.

In the unique circumstances of Banman, which was an institutional abuse and misfeasance action, the court found the higher bar for preferability was met. In 2024, we expect to see the courts interpret the new preferable procedure approach in other factual contexts and as other alternatives to class actions are considered.

More meaningful scrutiny at certification

In 2020, we previously theorized that the Supreme Court's decision in Atlantic Lottery v Babstock³—in which the Court unanimously held that waiver of tort was not a cause of action and the majority denied certification on that basis—could open the door for courts to scrutinize the legal and evidentiary basis of claims at an early stage. This year, we have seen that prediction start to be realized, as more courts have denied certification after applying more meaningful scrutiny to claims at the certification stage under the cause of action criterion in common law jurisdictions and the equivalent criterion for authorization in Québec, which requires the facts alleged to justify the conclusions sought.

For example, in Lewis v Uber Canada Inc.⁴, the Ontario court recently denied certification of a proposed class action about goods and services tax (GST) paid on discounted food orders. The court first considered the nature of the claims raised and properly characterized the claim as one for tax recovery, before going on to find that it was plain and obvious that the claim was barred by the operation of the Excise Tax Act and failed scrutiny under section 5(1)(a) of the Ontario Act. Even more recently, the Ontario court in Gebien v Apotex⁵, a proposed class action against the manufacturers and distributors of opioids, found it was plain and obvious that no reasonable causes of action were raised against a group of distributor defendants pursuant to section 5(1)(a) due to a lack of material facts pleaded connecting the distributor defendants to the plaintiff's allegations. The court also found the plaintiff had no legally viable common design claim that would ground joint and several liability of the defendants, but ultimately held the plaintiff could advance a claim as against 14 groups of manufacturer defendants with a representative plaintiff joined for each of these groups, asserting certain statutory and negligence claims, which would satisfy the cause of action criterion (if properly pleaded).

Appellate courts have also upheld decisions where motion judges have denied certification after scrutinizing plaintiffs' claims. In Jensen v Samsung Electronics Co. Ltd.⁶, the Federal Court of Appeal denied the appellants' claim that the motion judge inappropriately applied the "plain and obvious" test and instead undertook a full-blown merits analysis. Instead, the FCA "wholeheartedly" agreed with the motion judge's approach to certification motions, which involves a "rigorous review of a plaintiff's certification motion and to scrutinize with care the allegations, the material facts and the evidence put forward by a plaintiff"⁷. A similar conclusion was reached by the Québec Court of Appeal in Hazan v Micron Technology Inc.⁸, where the QCCA confirmed that the motion judge's examination of the allegations in light of the evidence was not a merits-based analysis, but rather an appropriate exercise of his discretion to decide that the allegations were not supported by a factual underpinning, and there was no evidence to form an arguable case.

In 2024, we may see courts continue to take a harder look at claims before certifying as a class action, particularly when scrutinizing the causes of actions advanced and the evidentiary basis to support the allegations raised. In particular, the decision in Gebien  provides helpful guidance on claims advanced against distributors in the opioid context, with the court stating that "there are policy reasons why distributors should not be asked or expected to police the illegal trade in pharmaceuticals"⁹. We also anticipate further guidance from the appellate courts on this topic in 2024. For example, the appeal of the Ontario court's decision to deny certification in Frayce v BMO Investor Line Inc. et al.¹⁰ on the basis that the plaintiffs did not satisfy the requirement to demonstrate "some evidence of illegality" in respect of the allegations is scheduled to be heard in December 2023, with a decision expected in 2024.

Challenges for claims against foreign defendants

In 2023, we have also seen the courts clarify the analysis for whether a court has jurisdiction over a proposed class proceeding against foreign defendants under different statutory schemes. In B.C., the Court of Appeal recently confirmed in Hershey Company v Leaf¹¹ that a minimum threshold of "jurisdictional facts" are necessary to establish an arguable case that the B.C. courts have territorial competence over a proceeding pursuant to the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003 (CJPTA). The court found that the pleadings and affidavit evidence tendered by the plaintiff did not establish an arguable case that the proceeding concerned a tort committed in B.C. pursuant to section 10(g) of the CJPTA, as the plaintiff's materials did not comply with the requirements for a pleaded misrepresentation claim (which was the cause of action pleaded). Citing Hershey, the Ontario court in Gebien  similarly found it lacked jurisdiction over a Québec company, Pro Doc, which resold opioid products in Québec pharmacies. The Ontario court found the facts in Gebien analogous to those in Hershey, as there were no representations made or received in Ontario attributable to Pro Doc and the connection between Pro Doc, the matter, the parties and Ontario was not a real and substantial one. The court also procedurally and substantively distinguished the decision in British Columbia v Apotex¹², which was relied on by the plaintiff as a factually similar case which held that Pro Doc was substantially connected to the province of B.C. as an alleged tortfeasor in the conspiracy or common design case advanced by the provincial government. The Ontario court distinguished Apotex  on the basis that unlike in that case, there was no connection between Pro Doc and Ontario based on the claim advanced, as there was no viable cause of action against the distributor group of defendants, which included Pro Doc.

In contrast, the Québec court in Bourgeois v Electronics Arts Inc.¹³ found that it had jurisdiction over the foreign defendants pursuant to article 3148 of the Civil Code of Quebec, which requires establishing, on a prima facie basis, that the foreign defendant had an establishment in Québec and the dispute related to their activities in Québec. The court confirmed the determination of whether a defendant has an establishment in the province of Québec is a question of fact. While the concept of "establishment" is not defined in the CCQ, an essential aspect, particularly in circumstances in which a foreign parent company domiciled outside of Québec will be subject to the jurisdiction of the Québec courts by virtue of its subsidiaries in Québec, is whether the subsidiary is an integral part of the parent organization or is under its immediate control and engaged in its business. A subsidiary (even one wholly-owned by a parent company) will not, by that fact alone, fall within the definition of establishment as long as it is maintained as a separate and distinct entity.

In Bourgeois, the court found that both the respondents' subsidiaries had operations in Québec which were an integral part of the U.S. parent organization, forming a joint enterprise. Accordingly, the foreign parent companies had an establishment in Québec by virtue of their subsidiaries and the Québec court had jurisdiction. The court's decision was appealed to the Québec Court of Appeal, where the foreign defendants argued that the lower court incorrectly broadened the criteria of "establishment" under article 3148. The outcome of the appeal is expected in 2024.

We will likely continue to see further analysis by the courts on the minimum factual threshold required for claims against foreign defendants and how that threshold varies under the different provincial class action legislative schemes. In particular, if the Québec Court of Appeal upholds the court's decision in Bourgeois, we may see an increase in claims against foreign companies with subsidiaries operating in Québec in light of the court's findings.

Stricter approaches to dismissal for delay

We have also seen the courts continue to dismiss proposed class actions for delay under both the Ontario Act's section 29.1 and, in other jurisdictions, under the rules of court. As we previously reported, the extent of the court's discretion under section 29.1 has been a focus of significant judicial attention. In Tataryn v Diamond & Diamond Lawyers LLP¹⁴, the court acknowledged the debate in the case law as to whether or not there is any room for interpretation of what constitutes the steps toward certification enumerated in subsections 29.1 (a)-(d), but held that nevertheless, the language is mandatory and an action must be dismissed if it is clear that none of the identified steps are taken in time.

In Tataryn, the court also considered whether the defendant had waived its rights under section 29.1 by bringing pre-certification motions and waiting a substantial amount of time before bringing its motion to dismiss for delay. The court confirmed that section 29.1 cannot be waived, both because it is a statutory provision in which there is substantial public interest, and because it confers rights on defendants which are not notionally waived by the rights-holding party bringing successful motions.

Finally, the "phoenix order" granted in D'Haene v BMW Canada Inc¹⁵, where the action was dismissed but leave was granted to start a new action, was considered by the court in Tataryn. The court found that such an order would be directly contrary to the policy goal of section 29.1 and would not address the problem that the provision sought to prevent. The court also suggested that there are circumstances where resurrecting an identical case after a dismissal for delay could constitute an abuse of process, but did not make any determination on this issue.

Courts outside of Ontario also took similarly stricter approaches to slow-moving proposed class proceedings under their rules of court this year. In Saskatchewan, the defendants in Bovier v Crary Company¹⁶ brought a motion for an order dismissing the proposed class action under Rule 4-44 of The Queen's Bench Rules because of inordinate and inexcusable delay. The court found there to be an inordinate and inexcusable delay, and it was not in the interests of justice to allow the claim to proceed.

We expect to continue to see insights from the courts on the appropriate approach for dismissal for delay of proposed class proceedings, whether under specific statutory frameworks or the rules of court more generally.

Takeaways for business

We expect to see many key developments in the class actions landscape in 2024. Our key takeaways for businesses are:

• Courts have been applying more rigorous scrutiny to claims at the certification phase and the allegations and evidence adduced to support those claims. This trend is a positive development for defendants and should continue to be watched closely.
• Ontario's court has confirmed that the new preferable procedure test requires a more rigorous analytical approach and is a higher bar to meet. While that bar was met in the unique institutional abuse context, further interpretations of the new preferability threshold in other factual contexts and considering other alternatives will be important developments to the class action landscape in Ontario.
• Whether courts will find they have jurisdiction over foreign defendants will largely be based on the unique statutory scheme applicable in each jurisdiction, but nevertheless requires a minimum evidentiary basis to establish territorial competence. Businesses, particularly those in Canada with foreign parent organizations, should be cognizant of the differences across jurisdictions when considering class action litigation risk.
• Ontario courts in 2023 have signaled to a stricter approach to the statutory dismissal for delay provision in the Ontario Act and have provided other key clarifications with respect to waiver and resurrection through "phoenix orders". Other courts have also been employing their rules of court to dismiss class proceedings for delay. These decisions are helpful to defendants and signal that courts are more comfortable with taking stricter approaches to delay in class proceedings.

Footnotes

1. See Brewers Retail v. Campbell, 2022 ONSC 850.

2. 2023 ONSC 6187. Our earlier reporting can be found here.

3. 2020 SCC 19.

4. 2023 ONSC 6190.

5. 2023 ONSC 6792 [Gebien].

6. 2023 FCA 89. Our earlier reporting can be found here.

7. 2023 FCA 89 at para 49.

8. 2023 QCCA 132.

9. Gebien at para 410.

10. 2023 ONSC 16.

11. 2023 BCCA 264.

12. 2023 BCSC 662.

13. 2023 QCCS 1011.

14. 2023 ONSC 6165.

15. 2022 ONSC 5973.

16. 2023 SKKB 21.

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.