Ontario Superior Court Of Justice Clarifies When Individual Claims Can Be Maintained Alongside A Pending Class Action

A recent ruling of the Ontario Superior Court of Justice provides clarification about when an individual action should be allowed to continue, despite the presence of pending class actions that address the same issues. Although the Class Proceedings Act (CPA) allows defendants to apply to stay an individual action where there are pending class actions addressing the same issues, plaintiffs should be allowed to bring an individual action when their claims are substantial and they would be prejudiced by the delays that typically accompany a class action.

In Workman Optometry v Aviva Insurance 2021 ONSC 3843, several insurance companies brought a motion to stay several individual proceedings brought against them by small businesses. The plaintiffs had been denied coverage for "business interruption" claims, which they filed in response to losses caused by the COVID-19 pandemic. Two class actions against the defendants were awaiting certification relating to the denials of coverage for business interruption. The defendants brought a motion under section 13 of the CPA  to stay the individual actions pending the certification of the class actions. While many of the criteria for such a stay were met, the motion was dismissed because the stay would have caused prejudice and injustice to the plaintiffs.

Under section 13 of the CPA, an individual action may be temporarily stayed pending certification of a class action if four prerequisites are met:

1. There is substantial overlap of issues in the two proceedings;
2. The two cases share the same factual background;
3. Issuing a temporary stay will prevent unnecessary and costly duplication of judicial and legal resources;
4. The temporary stay will not result in an injustice to the party resisting the stay.

The first three prerequisites were met in this case. However, the motion to stay was rejected because it did not meet the fourth prerequisite. The individual plaintiffs demonstrated that they would suffer prejudice and injustice if their individual actions were stayed in favour of the pending class action.

The individual plaintiffs were well-informed litigants who set out compelling reasons to favour their individual claims over the proposed class action. Their claims were substantial, and they wanted to retain their own counsel and make their own decisions about the prosecution and settlement of the action. Timeliness was also important—the money from the claims would be most useful right away, while the businesses were struggling to recover from the impacts of the pandemic. Staying the individual actions in favour of the proposed class action would strip the plaintiffs of their ability to direct their own counsel through the litigation process, and the delays would compromise the usefulness of any payment they would eventually receive from the insurance companies.

By contrast, there was no prejudice to the defendant insurance companies. At the time of the decision, there was a possibility that the parties may agree to a consent certification, which would render a stay moot. The defendant insurers were also able to bring a motion to determine a question of law that would resolve all the individual actions without further litigation, specifically the question of whether standardized "physical loss or damage" provisions covered business losses cause by COVID.

Justice Belobaba distinguished this situation from a previous case, Carter v LifeLabs 2020 ONSC 7340, where individual actions were stayed pending certification of a class action. In that case, there was no evidence that staying the individual claims would cause injustice or prejudice to the individual plaintiffs.

This decision shows that it may make sense to maintain an individual action despite the presence of a pending class action on the same issues. That is especially true in cases where well-informed litigants are seeking significant claims, and they can show the importance of instructing their own counsel to resolve the matter more quickly than is typically possible in a class action.

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