The Law Commission of Ontario’s final report on class proceedings in the province of Ontario

The Law Commission of Ontario has issued its final report “Class Actions: Objectives, Experiences and Reforms” (report) on class proceedings in the province of Ontario. The first evidence-based assessment of the Ontario Class Proceedings Act (CPA) since its inception in 1993, the LCO report makes 47 recommendations, described as “principled, practical, and forward-looking” to “best achieve the objectives of class actions” to some of the most pressing procedural problems associated with class proceedings.

What you need to know

• The report prioritizes issues with a systemic impact on parties, practice, and outcomes, recommending changes at every stage of a class proceeding, which are for the most part incremental. High-level summaries of some key recommendations from the report follow.
• Costs regime and appeal routes. Significant changes are recommended to the governing costs regime and appeal routes.
• Timing considerations in class actions. The recommendations establish clear and enforceable rules and benchmarks early in the class action litigation process to effectively manage delay within reasonable time limits.
• Managing multijurisdictional class actions. The report recommends new provisions to help organize multijurisdictional class actions more effectively and to promote harmonization between provinces.
• Encouraging summary judgment. The LCO proposes parties make more liberal use of summary judgment, particularly before certification, to streamline the claims to be determined at a common issues trial.
• More rigor in settlement approvals and distributions. The report recommends improved practice direction, accountability and transparency for settlement approvals and distributions.
• Counsel fees and costs for certification and ancillary motions. The report recommends greater judicial scrutiny of counsel fees and recommends introduction of a modified no-costs regime for both certification and “ancillary motions”.
• Abolishing Divisional Court appeals. The report recommends a right to each party to appeal certification orders directly to the Court of Appeal.
• Mandatory “outcome” reports. Outcome reports are being adopted as the LCO seeks to create greater transparency concerning class action results.

Class proceedings in Ontario

The report prioritizes issues with a systemic impact on parties, practice, and outcomes, recommending changes at every stage of a class proceeding, which are for the most part incremental. However, the report also proposes significant changes to the governing costs regime and appeal routes.

The LCO has not sought consensus and acknowledges that many of its recommendations will be “controversial”. However, it does not propose to take Ontario’s regime beyond the mainstream of class proceedings in the rest of Canada. In fact, the two significant recommendations noted above, a no-costs certification regime and a direct right of appeal to the Court of Appeal from a certification decision, are justified, in part, as being consistent with practice in other provinces.

Only time will tell whether the recommendations will be implemented. Some can be implemented by practice direction, but others would require legislative amendment to the CPA. As of this writing, the provincial government has said nothing about the report or a desire to implement any of the recommendations, although the government has previously signaled its interest in class action reform.

Background

More than 1,500 class actions have been initiated in Ontario since the introduction of the CPA in 1993. In recent years, the number has increased to an average of more than 100 class proceedings per year. Historically, roughly 73% of contested certification motions have been granted, whether in whole or in part. This percentage is on par with Québec, but higher than some other jurisdictions like Saskatchewan. There is no obvious reason for the difference.

The report addresses three major questions:

• Are class actions in Ontario fulfilling their three objectives: access to justice, judicial economy and behavior modification?
• Does the CPA reflect contemporary class action issues and practice?
• Does the CPA reflect contemporary priorities in Ontario’s justice system?

As the LCO writes, their recommendations will result in trade-offs if implemented; parties will see benefits, but also new responsibilities.

Key recommendations

Although the LCO concluded that the existing statutory provisions and/or judicial interpretations of those provisions are sound and should not be changed, the report’s recommendations touch on all aspects of class actions in the province of Ontario.

Reduce delay

Concerns about delay were universal among stakeholders. “Virtually everyone” consulted said that delay was a problem, noting in particular the problem of “so-called dormant actions”. The LCO recognizes that the CPA’s 90-day deadline for bringing certification motions “has been consistently (and reasonably) ignored” and recommends establishing clear and enforceable rules and benchmarks early in the class action litigation process to effectively manage delay within reasonable time limits.

The report recommends amending the CPA to impose a one-year deadline for plaintiffs to schedule certification motions and to file certification materials. The report also recommends introducing an “administrative dismissal” and costs penalty where cases are not advanced with sufficient expediency.

The report recommends enhanced case management through amendments to the CPA and supports the development of a practice direction to “improve the efficiency and timeliness of certification motions”. Proposed CPA amendments include requiring an initial case management conference within 60 days and allowing the court to make orders on its own initiative respecting the conduct of the proceeding, rather than solely at the request of the parties. Proposed “best practices” for a practice direction include narrowing the issues through case management and adopting “a restrictive approach to the quantity of evidence filed at certification”.

Carriage

The LCO describes the system for determining carriage of a class action as “inefficient and unpredictable” and says that “carriage fights cause delay, increase costs, and create uncertainty” for competing firms, plaintiff firms and defendants. The process of determining which firm will move forward to represent plaintiffs on a class action “consumes substantial private and public resources”. The LCO agrees with the Court of Appeal that “competing actions […] provide little or no benefit to the members of the class” and says that carriage motions are to be discouraged. The report rejects the “first-to-file” approach in Quebec and recommends amendments to the CPA to establish a dedicated process and timetable for determining carriage. The goal is to empower case management judges to better manage and focus carriage hearings to ensure high-quality representation for class members, along with greater judicial economy, and more predictability and finality in carriage decisions.

Multijurisdictional actions

The LCO recommends improvements to handling multijurisdictional class actions, noting that in the absence of a coordinating forum like the U.S. Judicial Panel on Multidistrict Litigation, these types of actions “raise extraordinary challenges for Ontario’s justice system”. In particular, “these actions create barriers to access to justice, generate inefficiencies, increase costs and add considerable delays in class action proceedings”.

Responding to concerns that the CPA lacks sufficient guidance, the report recommends new provisions to help “organize multijurisdictional class actions more effectively and to promote harmonization between provinces”. The LCO endorses the recent adoption of the Canadian Bar Association’s protocol on multijurisdictional actions as a practice direction in Ontario which facilitates multijurisdictional judicial communication and participation, and urges Ontario to amend the CPA to harmonize practice with Alberta, British Columbia, and Saskatchewan to clarify issues relating to multijurisdictional opt-out mechanisms, forum preferability and case management orders. The report also encourages Ministers of Justice from across Canada to work together to develop a national protocol for recognizing provincial certification decisions and multijurisdictional classes.

Certification

The LCO concludes that the test for certification is generally satisfactory with no need for significant revision. The report expressly rejects calls for the adoption of a “preliminary merits test” on the basis that: it would be procedurally unfair to require plaintiffs to prove their case “without the procedural protections and advantages proffered at discovery or trial”; it would “frustrate the goal of judicial efficiency” by further front-end loading the certification process; and would put Ontario out of step with other Canadian jurisdictions, encouraging forum-shopping and further complicate the management of multijurisdictional actions. For similar reasons, the report expressly rejects calls to raise the evidentiary standard on certification on the basis that it would “likely strain the procedural nature of the motion”.

Nevertheless, the report recommends that courts interpret the certification requirements – particularly with respect to preferable procedure – with greater rigour, noting that “robust recall programs or regulatory action can weigh heavily against the utility of a class action”. What this means in practice, exactly, is unclear; in the past, arguments in support of procedures that are more preferable to a class proceeding have generally not found favour in Ontario courts.

Summary procedure

The LCO concludes that summary judgement, which the report describes as “underutilized”, offers both substantive and procedural advantages over certification “to discuss the merits of a class action”. Substantively, the LCO notes that the summary judgment threshold of a “genuine issue requiring trial” is a more suitable framework for weighing evidence and efficiently filtering out weak claims. Procedurally, the LCO observes that a summary judgment motion offers greater flexibility as it may be sought prior to, at, or following certification.

Perhaps as a way of streamlining the claims to be determined at a common issues trial, the LCO recommends that parties make more liberal use of summary judgment, particularly before certification.

Settlement Approval and Distribution

The LCO recommendations relating to settlement are designed to improve transparency and accountability. Although the report recommends amending the CPA to adopt formally the common law test for settlement approval, the more significant recommendations require amending the CPA to require parties to make full and frank disclosure of all material facts and to give the courts discretion to appoint an amicus curiae to help the court assess the settlement. With respect to distribution, the LCO recommends a dedicated practice direction with detailed requirements and best practices for proposed settlement distributions, along with amendments to the CPA to govern settlement distributions.

Fee approval

The report recommends greater judicial scrutiny of counsel fees. Like settlement approvals, fee arrangements “are presented to the court in an adversarial void”. Additional scrutiny is “essential” because there is “a zero sum-equation” between the payment of counsel fees and compensation to class members. “Over-compensation of lawyers has obvious access to justice implications in that it can result in under-compensation of class members. It also breeds cynicism about the civil justice system, and class actions in particular”.

The LCO recommends amending the CPA to incorporate the common law test that requires counsel fees to be “fair and reasonable” and subject to court approval. Additionally, the report recommends empowering the court to appoint an amicus curiae to help the court consider fee approvals.

Costs

One of the most significant proposals is the recommends introduction of a modified no-costs regime for both certification and “ancillary motions”. Although 73% of class proceedings have historically been certified in one form or another, the 27% that are not certified are said to present a real risk to plaintiffs who fear a large costs award, and would “readily trade [the possibility of funding ongoing litigation through past costs awards] for the elimination of risk associated with cost sharing”. The LCO’s concern is that the risk of adverse costs awards against plaintiffs has stifled access to justice and has made public interest litigants particularly reluctant to bring their case lest they lose and find themselves subjected to a large costs award. Although the LCO refers to meetings with “several organizations and clinics representing low-income and other vulnerable communities” to support its conclusions regarding the chilling effect of two-way costs awards on public interest litigation, it cites neither data to support these conclusions nor examples of proceedings that would have been brought but for the existing cost rule. It should be noted that a no costs regime would also eliminate one disincentive for defendants to resist certification, since defendants would no longer be liable for class counsel’s costs if certification is granted.

Although the LCO recommends no costs for certification, the traditional approach to costs would not be eliminated entirely, reserved instead for more substantive proceedings, whether common issues trials, jurisdiction motions, and summary judgment motions.

The LCO also recommends greater transparency relating to third-party funding arrangements and allowing the Class Proceedings Fund to partially fund ongoing legal fees in appropriate circumstances.

Appeals

Appeals involving class proceedings are a source of enormous confusion—and with it, time and expense. As the LCO notes, the appeal route from certification in Ontario is unique in Canada as only Ontario has an intermediate appeal court (Divisional Court) and asymmetrical appeal rights with plaintiffs having a right of appeal and defendants requiring leave.

The LCO recommends a significant but straight-forward modification of the current appeals process: the abolition of appeals to the Divisional Court, and a right to each party to appeal certification orders directly to the Court of Appeal.

Greater transparency

Finally, the report seeks to create greater transparency concerning class action results. There is currently little in the way of statistics on various aspects of class actions (i.e., certification, settlement, fees, etc.) The LCO proposes to rectify this problem by adopting mandatory “outcome” reports that would provide information about take-up rates, class member compensation, and costs (both legal and transactional) relating to settlement. Greater information about the administration of claims and cy près awards are said to serve the dual purpose of promoting behavior modification and increasing public confidence in the class proceedings regime.

Conclusion

After two years of broad consultation, the LCO has produced a comprehensive review of Ontario’s class action regime. Although several of the recommendations are significant, many are straightforward and uncontroversial, tinkering at the margins to make class actions practice in Ontario consistent with practice and procedure in other provinces.