Written By Emrys Davis, Mia Laity and Peter Douglas
Last year, we reported on the amendments to Ontario’s Class Proceedings Act, 1992 (CPA) that took effect on October 1, 2020. One of the most significant amendments to the CPA was the introduction of a higher standard for class certification in Ontario, requiring that a proposed class action be a superior way to determine the rights or entitlement to relief of class members, and that questions of fact or law common to the class members predominate over the individual issues. We predicted this would make Ontario a less attractive forum for class action plaintiffs.
While courts in Ontario have yet to interpret and apply the new standard, the effects of these stricter certification requirements may already be starting to appear. Data from the Canadian Bar Association’s Class Actions Database indicates that there were 53 class actions started in Ontario in 2020, while only 32 were started in 2021. We predict that this trend is likely to continue in 2022 given recent case law interpreting other CPA amendments. Taken together, these decisions suggest that Ontario is becoming more defendant-friendly compared to certain other provinces.
Courts Begin Applying Ontario’s CPA Amendments
In Dufault v Toronto Dominion Bank, the Ontario Superior Court of Justice provided the first interpretation of newly enacted section 4.1 of the CPA, determining that defendants have the right to bring a motion to dismiss or narrow the scope of a class action before certification has been decided. This departs from the historical rule in many Canadian class action jurisdictions that there is no presumptive right to bring pre-certification motions.
Another significant amendment was newly enacted section 29.1 of the CPA. That section states that a proposed class action will be automatically dismissed for delay unless the plaintiffs file a “final and complete” certification motion record within a year of starting the proceeding, or unless the parties have agreed on, or the court has established, a timetable for advancing the proceeding. In Bourque v Insight Productions, the Ontario Superior Court of Justice provided the first application of this section, finding that the Court has no discretion and must dismiss a class action when no condition in section 29.1 is met. This rule is unique to Ontario, and will force Ontario-based class actions to move at a faster pace than in other jurisdictions in Canada.
Going forward, we expect to see plaintiffs continue to start class claims in “plaintiff-friendly” jurisdictions when possible, rather than proceeding in Ontario where there is a tougher certification standard, an accelerated certification process, and a greater risk of determinative pre-certification motions by defendants.
Uneven Interpretations of “Some Basis in Fact”
The “some basis in fact” evidentiary standard imposed on plaintiffs at the certification stage is designed to ensure that certification is a meaningful screening mechanism, not a mere “speed bump.” Interpretations of that standard remained somewhat uneven across jurisdictions in 2021, with some courts taking a liberal approach to what qualifies and others undertaking a more rigorous and reasoned analysis of the evidence.
In McCorquodale v RBC Global Asset Management Inc, the British Columbia Supreme Court held that the plaintiffs’ expert analysis provided enough support for the existence of common issues, even though that analysis was based on general comparisons and heavily disputed assumptions. The Court found that the plaintiffs’ claim met the commonality requirement for certification, despite the defendants’ arguments that the plaintiffs had produced no evidence of a methodology to determine loss on a class-wide basis and there was no examination o individual decisions made by the defendants that could alter the scope of any damages suffered. The Court accepted that examining the defendants’ individual decisions would not have changed the overall impact of the impugned conduct.
In Spring v Goodyear Canada Inc, the Court of Appeal of Alberta overturned a lower court decision granting certification of a claim against Goodyear Tires relating to an alleged manufacturing defect causing tire failure due to tread separation. The key issue on appeal was whether there was commonality among class members—specifically, whether there was some basis in fact for a defect. The only direct evidence led by the representative plaintiff was the recall notice, which only applied to a subset of tires covered by the claim, and did not establish the cause of tread separation. No evidence was produced to show that tread separation was a common problem for all 51 types of Goodyear tires, or that Goodyear had been dishonest in setting the recall notice’s scope.
The Court of Appeal in Goodyear found that, since the representative plaintiff could not identify a “common” defect, the test for showing some basis in fact for commonality among class members was not met. It also found that the allegations of intentional misconduct by Goodyear should not be certified given the lack of evidence showing some basis in fact on this point.
Certification Denied in Landmark Competition Decision
In Jensen v Samsung Electronics Co Ltd, the Federal Court struck the plaintiffs’ claim at certification, at the same time deciding that the plaintiffs had not shown some basis in fact for the alleged illegal agreement among the defendants.
In a lengthy and well-reasoned decision, Justice Gascon highlighted the importance of proper pleadings in an alleged conspiracy case, and refused to allow the plaintiffs to avoid the rigours of pleadings standards by parroting the language of the Competition Act and relevant torts rather than pleading material facts. Justice Gascon added his voice to the judicial chorus endorsing the two-step test for proving some basis in fact for the common issues: the plaintiff must show some basis in fact that (i) the issue exists, and (ii) it is common among the class members. In Jensen, Justice Gascon concluded that the plaintiffs had shown no basis in fact for an agreement among the defendants and refused to certify their case.
Jensen may signal the next area of focus for courts and parties in competition class actions, particularly when plaintiffs pursue claims in circumstances of disputed liability. Up until now, disputes at the certification stage have largely focused on the complexities associated with proving damages on a common basis. Jensen suggests that courts may look more closely at the underlying premise of the plaintiffs’ case to confirm that some basis in fact exists for the common issues.
Other Articles In This Series
- An Update on COVID-19 Class Actions in Canada
- The Expansion and Contraction of Product Liability Causes of Action
- Navigating Multijurisdictional Class Actions
- The Need to Prove Compensable Losses in Privacy Class Actions
- Ontario and British Columbia Lead a Sequencing Culture Shift
Get the full Class Actions in Canada story
In our 2022 edition of Looking Forward, we review notable class action developments of the past year and consider what trends in the law might tell us about the year ahead.