Ontario Leads the Class Action Reform Movement
For some time, a common view shared by both the defence bar and the courts has been that certain aspects of Canadian class action regimes have been ripe for reform. This is particularly evident in two key areas: (i) improving the speed at which class actions have tended to proceed through certification; and (ii) implementing a test for class certification that is fair to both plaintiffs and defendants by operating as a genuine screening mechanism to weed out actions that do not facilitate access to justice and judicial economy.
The Ontario legislature has taken the lead implementing significant reforms in these areas with amendments to its Class Proceedings Act, 1992 (“CPA”), which came into force October 1, 2020. The Ontario amendments arose from recommendations by the Law Commission of Ontario (“LCO”) in its Class Actions Objectives, Experiences and Reforms Final Report, which called for sweeping changes to the CPA (“LCO Report”).
As highlighted in the LCO Report, delay has been a longstanding issue with Ontario class proceedings, which adversely impacts class members and defendants alike. Delay also gives rise to judicial economy issues that have become even more pressing in the wake of the Covid-19 pandemic that has exacerbated court backlogs. Accordingly, one of the government’s primary stated objectives for reforming the CPA was to resolve cases faster so people receive compensation sooner, and businesses experience fewer financial and reputational risks.[1]
To facilitate this goal, the legislature enacted the mandatory dismissal for delay provision in s. 29.1 of the CPA. Section 29.1 requires the Court to dismiss a proposed class proceeding for delay unless the plaintiff has filed their motion record for certification or, alternatively, a timetable has been established by the court or the parties for service of the motion record for certification or for completion of one or more other steps required to advance the proceeding.
Compliance with s. 29.1 is not overly onerous, nor is the provision punitive in its operation. Since limitation periods are suspended upon the commencement of a proposed class proceeding, most actions dismissed for delay under s. 29.1 will be capable of being refiled with a different representative plaintiff.
However, the amendment does shift the calculus for plaintiffs’ counsel, who, in the past, were able to take on as many cases as they could find, without being required to advance actions at any reasonable pace. All the while, the spectre of massive liability often hung over defendants for years on end. Prior to the CPA amendments, a number of court decisions have noted the issue of the “glacial pace” at which Ontario class proceedings tended to proceed.
On January 14, 2022, the first Ontario court decision considering s. 29.1 was released in Bourque v. Insight Productions Ltd. et. al. The decision confirms that, where the representative plaintiff has failed to comply with s. 29.1, the action must be dismissed and the Court retains no residual discretion to order otherwise. As stated by Justice Belobaba in Bourque:
If s. 29.1 of the amended CPA is to achieve its intended purpose — to help advance class action proceedings that otherwise tend to move at glacial speed — then it’s to everyone’s advantage (both putative class members and defendants) that the mandatory dismissal provision be interpreted and applied as written
In light of Bourque, plaintiffs have been put on notice that they will no longer be able to unreasonably delay proceeding to certification.
Going forward, s. 29.1 should greatly assist in combatting the long-standing issue of dormant class proceedings and moving cases toward a faster resolution. This is especially true in conjunction with the new CPA s. 4.1 amendment which confers defendants a presumptive right to have summary judgment motions heard prior to certification, a reversal of the previous standard which presumed certification would precede summary judgment.
The legislative amendment that arguably will have the greatest impact on Ontario’s class actions regime is the application of a heightened standard for the preferable procedure prong of the test for certification. As the LCO states in its Final Report, “Certification is a defining moment in the life of a class action.” This is because, due to the often existential damages claims facing class action defendants, the vast majority of class actions are settled once the action is certified. Given the importance of the certification stage, the LCO emphasized the need for a certification test that was fair to the interests of all parties. Prior to the CPA amendments, the certification process provably favoured plaintiffs, with an estimated 73% of contested class actions filed in Ontario since 1993 having been certified.
Under the new predominance and superiority standard, which largely mirrors that of the U.S. Federal Rules of Procedure, the plaintiff must satisfy the court that (a) the common issues predominate over individual ones, and (b) a class action would be a superior means of advancing those claims over any available alternative. Prior to the amendment, to satisfy preferable procedure plaintiffs only needed to establish that a class action was the preferable procedure for the fair and efficient resolution of the common issues.
The precise manner in which the new predominance and superiority standard will be interpreted and applied is still not certain as there has yet to be a certification decision applying the new test. However, the new test clearly elevates the standard plaintiffs must establish and represents clear direction from the legislature that judges hearing certification motions must apply greater scrutiny to whether a proposed class action is truly the preferable procedure for resolution of the common issues. Whereas in the past, class actions could be certified even where individual issues considerably outweighed common issues, it is unlikely that such cases can be certified under the new predominance standard.
The Impact of the Ontario Reforms on Other Provincial Class Action Regimes
In response to the Ontario CPA amendments, it is likely that plaintiffs will strategically select alternative forums where such options are available. This already appears to be happening as more class actions were filed in B.C. in the last year than ever before. Compared to Ontario, B.C. presents less risks for plaintiffs commencing class proceedings, in large part due to the fact that there are no adverse costs, nor is there a predominance requirement in their certification test. B.C. is also an attractive option because, since 2018, it has permitted the certification of national classes that include extra-provincial residents on an opt-out basis. Other forums may similarly see an increase in class action filings in response to the Ontario amendments – for example, more competition class actions could be filed in the Federal Court as the certification test under the Federal Court Rules is largely identical to Ontario’s pre-amendment certification test.
Class action reform in Canada is still in its infancy and it remains to be seen whether the other provinces will follow Ontario’s lead in this area.
Recently, the Quebec bar has placed greater emphasis on initiatives to improve judicial economy in their courts. This has culminated with Quebec’s Minister of Justice launching, in June 2021, a public consultation in respect of proposed reforms to the Quebec class action regime. Like in Ontario with the LCO’s Final Report, the proposed Quebec reforms arise from a research report from the Class Actions Lab of the Université de Montréal. One of the avenues proposed to speed up the pace of Quebec class actions is integrating the class action authorization stage (similar to a certification motion in common law provinces) into the proceedings on the merits. This new hybrid mechanism, which would commence with the filing of a class action claim (rather than an application for authorization), would allow defendants to bring preliminary motions to dismiss that would be decided by the court along with authorization, following which the proceedings would commence on the merits.
Another avenue for the contemplated reform is changing the authorization criteria by eliminating the colour of right test, which requires the Petitioner to demonstrate an arguable cause of action, and is the most frequently used by defendants to attack the proposed class action. Under the proposed reform, when faced with a meritless claim, defendants would instead be allowed to present preliminary exceptions to dismiss. The introduction of a summary judgment procedure, which is not provided for under the Quebec rules of civil procedure, is also being contemplated.
As things currently stand in the post-CPA amendments landscape, there is significant variance in provincial class actions procedure, as the other common law provinces have yet to announce possible reforms similar to Ontario’s. As Ontario-based plaintiffs’ counsel seek to commence more class proceedings in alternative forums, the issues that precipitated changes in Ontario may become more apparent and pressing in jurisdictions now seeing an uptick in class actions filings. If so, more provinces may well move toward similar reform.
This is a time of flux in the Canadian class action landscape. It is still too early to predict whether other provinces will take Ontario’s lead, with the result being a turn toward great homogeneity and coordination between provinces in respect of class action procedure. Conversely, it is possible that there will continue to be significant variance in class action procedure from province to province. As business and in turn class actions become more nationalized in scope, there is a strong basis for greater coordination, which remains difficult in light of the current landscape. Undoubtedly, the class actions bar will be watching closely to see if other provincial legislatures prioritize similar reforms. If not, it is likely that the proportion of Ontario class action filings continues to decrease and strategic forum shopping remains a major theme going forward.
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Neil Rabinovitch is a partner in the Litigation and Dispute Resolution group of Dentons’ Toronto office and is Co-head of Dentons’ Canada’s class action practice group. His practice focuses on class action defence and commercial litigation. Neil has litigated in all levels of courts across Canada.
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A.J. Freedman is an associate in the Litigation and Dispute Resolution group of Dentons’ Toronto office. He has experience with a broad range of litigation matters, including class actions, general corporate/commercial litigation, Aboriginal rights litigation, breach of contract disputes and defamation.
Prior to joining Dentons, A.J. worked as an associate at a Toronto-based class actions boutique firm.
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[1] https://news.ontario.ca/en/backgrounder/55020/better-more-affordable-justice-for-families-and-consumers