July 25th, 2019
The Law Commission of Ontario is an independent law reform agency with a mandate to promote law reform, advance access to justice, and stimulate public debate. About two years ago, the Law Commission began a process of consultation with stakeholders across Ontario’s justice system to review class actions practice in the province and throughout Canada. The process culminated in the recently released report entitled “Class Actions: Objectives, Experiences and Reforms.”
In writing this report, the Law Commission’s stated objective was to analyze whether class actions practice in Ontario is meeting its three main objectives: access to justice, judicial economy, and behaviour modification.
The report makes 47 recommendations for updating the Class Proceedings Act, grouped into ten different categories. The report recognizes that many of its recommendations will be controversial, but also emphasizes that the Law Commission has attempted to keep the interest of the public as its main focus. Although such recommendations will likely take many years to be seriously considered by the legislature, and not all (if any) will be adopted, the report places a spotlight on some of the main issues faced in Canadian class actions.
Below, we summarize some key recommendations that will be of particular interest to those involved in class actions in Canada.
One-year deadline to schedule certification motions: Currently, the Class Proceedings Act requires certification motions to be brought within 90 days of the pleadings being closed. The 90-day deadline is usually ignored because certification motions can rarely be properly prepared within that timeframe. The Law Commission therefore recommends that there should be a firm one-year deadline within which the certification motion schedule must be set, and the plaintiffs’ motion record filed.
No change to the test for certification: The Law Commission considers whether to recommend: (1) adopting a preliminary merits test, to be decided at certification; and (2) amending the “some basis in fact” evidentiary burden that plaintiffs must meet at certification to a “balance of probabilities.” The Law Commission rejects both of these options because they “would introduce procedural and practical concerns that would subvert the objectives of access to justice and judicial economy.” The Law Commission concludes “the certification regime in Ontario does not warrant major reforms to the statutory or evidential tests.”
No costs for certification and ancillary motions: The report identifies increasing costs as posing a problem to access to justice. The existing costs rule in Ontario provides for two-way costs in class actions regardless of the stage of proceeding. The Law Commission recommends that this rule be changed so that there are no costs for the certification motion and any ancillary proceedings, and two-way costs after certification. This would be the inverse of what currently exists in British Columbia, Manitoba, and Newfoundland and Labrador, where costs may be ordered for proceedings before certification, but not for the certification motion or post-certification.
All appeals from certification motions to go directly to the Court of Appeal: Given the importance of certification to both plaintiffs and defendants, the decision on certification is often appealed. Currently, plaintiffs can appeal as of right to Divisional Court, and defendants must obtain leave to appeal to Divisional Court. Parties then often seek leave to appeal from Divisional Court to the Court of Appeal. Eliminating the interim step of going to Divisional Court would reduce the time and expense to reach a final determination on certification, according to the Law Commission. The Law Commission therefore recommends that certification motions be appealable directly to the Court of Appeal, by any party without leave.
Requirements for settlement approval: Settlement is a key moment in class proceedings, and courts have recognized the need to give settlements careful scrutiny before they are approved. The Law Commission recommends that the Class Proceedings Act be amended to establish new provisions governing settlement approval. These provisions would specify the requirement that proposed settlements be “fair, reasonable, and in the best interests of the class.” The Law Commission also recommends that the Class Proceedings Act be amended to specify the required evidentiary standards for parties seeking settlement approval, including affidavit evidence addressing the settlement approval criteria, the risks of litigation, the range of possible recoveries, and the method of valuating the settlement.
Full and frank disclosure at settlement approval hearings: Although it is the court’s role to ensure settlements are fair, reasonable, and in the best interests of the class, it can be difficult for the court to gather all of the relevant information to make that determination at settlement approval hearings. The Law Commission recommends that the Class Proceedings Act be amended to specify the requirement that counsel make full and frank disclosure to the court regarding the settlement.
Administration and Management of Actions
Simplified carriage determinations that cannot be appealed: Motions to determine which law firm should have carriage of a class proceeding can add time and expense to prosecuting a class action, especially if appealed. To address these issues, the Law Commission recommends that any carriage motions be brought within 60 days of the issuance of the first action and that carriage orders cannot be appealed. The Law Commission recommends that the test for carriage include consideration of: (1) each firm’s theory of the case; (2) the chances for success at certification and on the merits; (3) expertise and experience of counsel in class actions or the substantive area of law; and (4) funding and cost arrangements, including the resources of counsel.
Mandatory consideration of multijurisdictional aspect of action: Multijurisdictional class actions can raise complications in Canada’s federal system, where different courts across the country can have jurisdiction over actions based on the same facts. To manage this, the Law Commission recommends enacting provisions that permit judges, on their own motion, to consider the multijurisdictional aspects of a case. Further, the Law Commission recommends that the Class Proceedings Act require judges to consider competing class actions in other jurisdictions at certification.
Counsel fees based on results achieved and risk undertaken: The Law Commission considers the topic of counsel fees in class actions. It recommends that the Class Proceedings Act be amended to specify that in deciding class counsel’s compensation, courts should consider the results achieved and the risks undertaken.
Codification of procedure to approve third-party litigation funding: Third-party litigation funders offer an alternative to the Class Proceedings Fund in providing funding for disbursements and indemnities to the representative plaintiff for costs. Courts have required funding agreements to be approved before becoming effective, and the Law Commission suggests that such court oversight is important. The Law Commission recommends amending the Class Proceedings Act to codify the court approval of litigation funding agreements that is already occurring in practice.