June 14, 2011
For many years, company directors in Canada assumed class action lawsuits were an issue that only concerned their counterparts on U.S. boards. Anyone still thinking that today needs a refresher.
While the United States has had class action lawsuits since the 1930s, Canadian jurisdictions didn't start trying them until the 1990s – and the sector only really came into its own in the past decade, following further changes to the laws in different provinces. The statistics reflect it. According to NERA Economic Consulting, a firm that provides damages analysis and other litigation support, at the start of 2011 there were 28 securities class action cases being pursued in Canada – representing about $15.9 billion in outstanding claims. That's the most ever underway at any one time, NERA says. The number of such claims filed annually in Canada has fluctuated between seven and nine for the past few years.
The way some lawyers see it, these numbers are still low. Andrew Gray suspects there's still a relatively low number of actions here due to a lower risk-reward ratio than in the U.S. – as well as Canada's more litigiously conservative society. At the same, Cornell Wright: "Directors are increasingly sensitive to the risks of class action. My sense is that we as a firm have a lot more class action retainers on the go now than six or seven years ago."
A claim only becomes a class action once the court certifies it as such, and according to Andrew, courts "have made the test for certification much more amenable and easier for plaintiffs" as of late. "The trend in the courts, particularly in Ontario, has been towards facilitating these claims,” he says. “That has been true not only in the passage of class action legislation, but in their approach to consumer protection generally."
Read the full article here.