On July 18, 2010, the Ontario Superior Court released reasons in Blair v. Toronto Community Housing Corporation, 2011 ONSC 4395. Justice Perell certified the action as a class proceeding. He did so over the arguments of the defendants who had implemented an alternative compensation plan that they submitted was preferable to a class proceeding. Justice Perell disagreed but his comments on alternative compensation plans are instructive for defendants facing class proceedings considering ways to reduce their potential liability.
The facts giving rise to Ms. Blair's action were headline news in Toronto in the Fall of 2010. On September 24, 2010, a six-alarm fire occurred in the apartment building at 200 Wellesley Street East in Toronto. Five million gallons of water were needed to extinguish the blaze. All of the residents, the vast majority of whom are low-income, were evacuated. Fortunately, there were no serious injuries. However, there was significant property damage.
Toronto Community Housing Corporation (TCHC), the nation's largest social housing provider owned the building. Greenwin Property Management Incorporated managed the building.
Shortly after the fire, TCHC announced a comprehensive compensation plan. Pursuant to the plan, residents could recover money for personal injuries, emotional upset, loss of comfort, spoiled food, contents damage, cleaning costs, moving expenses, out of pocket expenses and loss of income expenses. Residents would meet with the plan's administrator to determine the amount of compensation they were entitled to given their individual circumstances. Before payment, residents had to obtain independent legal advice (TCHC covered the cost of such advice), release their claims against TCHC, and assign their claims against Greenwin to TCHC. If residents did so, they received money within five business days. By the time of the certification hearing, over 50 percent of residents had accepted compensation from the plan and released their claims against TCHC.
Alongside the rollout of the compensation plan, Ms. Blair issued her claim seeking to certify a class proceeding on behalf of all residents of 200 Wellesley. Her claim seeks damages from TCHC and Greenwin of more than $25 million for negligence and breach of contract, among other things. Ms. Blair ultimately narrowed the proposed class to only those residents who had not signed releases pursuant to TCHC's compensation plan.
At certification, TCHC and Greenwin did not seriously dispute many of the elements of the certification analysis. But they opposed certification on the basis that a class action was not the preferable procedure for resolving the claims of residents. They argued that TCHC's compensation plan was the preferable procedure and that residents who thought the plan undercompensated them for their unique circumstances could proceed before the Landlord and Tenant Board, the Small Claims Court or the Superior Court of Justice, as appropriate. The defendants asserted that certifying this action as a class proceeding despite a comprehensive compensation plan would have a chilling effect and discourage defendants from taking steps to compensate class members voluntarily as quickly as possible.
Justice Perell held that, in certain circumstances, alternative compensation schemes implemented by defendants may be preferable to class proceedings. He cited several cases in which Canadian courts (including the Supreme Court of Canada in Hollick v. Toronto (City),  3 SCR 158) denied certification on the basis that a class action was not the preferable procedure given the existence of an alternate compensation scheme.
However, Justice Perell determined that in the circumstances of this case, TCHC's compensation plan was not the preferable procedure for those residents who had not released their claims against TCHC.
It is noteworthy that despite reaching this decision, Justice Perell commended many of the features of the compensation plan. Justice Perell found the following factors weighed in favour of preferring TCHC's compensation plan over a class proceeding:
- TCHC is, for practical purposes, a public authority and had less incentive to secure "cheap releases",
- The residents received legal advice following which there was a high take-up rate, which suggested that the amount offered under the plan was fair,
- The plan closely resembled administrative schemes in settled class actions,
- The plan closely resembled the administrative scheme proposed in Ms. Blair's litigation plan, and
- It is a social good when a defendant promptly takes steps to remediate injuries suffered.
Despite all of these factors which suggested TCHC's compensation plan was preferable to a class proceeding, two key facts in the particular circumstances of this case swayed Justice Perell to conclude that a class proceeding was the preferable procedure. First, Ms. Blair was not only the representative plaintiff but a critical witness for every class member with a claim against TCHC and Greenwin. Ms. Blair lived across the hall from where the fire began and testified that she informed Greenwin about the potential fire hazard and heard the fire marshall's office informing Greenwin likewise. Thus, her testimony would be critical to any individual proceeding residents wish to bring against TCHC (whether before the Landlord and Tenant Board or the courts). Having a common issues trial with Ms. Blair's testimony being given only once would save the judicial system enormous resources. Second, Justice Perell noted that residents are low-income and cannot fund litigation individually. A class action is, practically speaking, the only available action they have because class counsel and the representative plaintiff bear the up-front litigation costs and risks.
Finally, Justice Perell addressed the defendants' argument that certifying this action would eliminate incentives for defendants to voluntarily implement compensation plans and promptly remediate injuries suffered. Justice Perell acknowledged he was most troubled by this issue because he recognized that undervaluing voluntary compensation schemes could send the wrong message "that a defendant should not bother promptly offering compensation since there will be no avoiding a class action". But he concluded that reducing the class size, as TCHC has done in this case, should remain sufficient incentive for defendants to implement compensation plans in the future.
It is noteworthy, as well, that the plaintiff's decision to move to certify a class only of residents who had not participated in the TCHC compensation plan was critical. In other words, the certified class definition respecting the releases already obtained as well as those that continue to be obtained. That is, the compensation program will continue to be offered despite the certification order.
Businesses seeking advice when facing a situation which may give rise to a class action will want to consider the factors considered by Justice Perell and their impact on a compensation plan. It is clear that effective compensation plans can sometimes be preferable to class actions and in other cases can effectively reduce the size of the certified class. Both results are positive for defendants who wish to promptly remediate injuries suffered from mass harm, without admitting liability. However, it is clear that such plans need to offer reasonable compensation, delivered through fair processes and affected individuals should receive independent legal advice before releasing their claims.