In this presentation, FMC's Michael Schafler looks at the past year in Class Actions in Ontario. With an examination of Class Action trends as well as Class Actions related to employment, securities, franchisee actions as well as government actions.
2. Certification Test (Class Proceedings Act, 1992)
s. 5(1) The court shall certify a class proceeding on a motion… if,
(a) the pleadings or the notice of application discloses a cause of action;
(b) there is an identifiable class of two or more persons that would be
represented by the representative plaintiff or defendant;
(c) the claims or defences of the class members raise common issues;
(d) a class proceeding would be the preferable procedure for the resolution
of the common issues; and
(e) there is a representative plaintiff or defendant who,
(i) would fairly and adequately represent the interests of the class,
(ii) has produced a plan for the proceeding that sets out a workable
method of advancing the proceeding on behalf of the class and of
notifying class members of the proceeding, and
(iii) does not have, on the common issues for the class, an interest in
conflict with the interests of other class members.
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3. Class Certification Motions
40
09-10
35
30 11-12
09-10
25 10-11
10-11
20 11-12
15
09-10
11-12
10
5 10-11
0
Contested Certification motions Certifications Granted Certification Denied
*All data relates to the period August 1, 2011 – August 1, 2012
**Does not include appeals
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4. Types of Motions
30
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20
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14
15
9
10
5
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*All data relates to the period August 1, 2011 – August 1, 2012
** Summary dismissal data includes appeals as well
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5. Summary Dismissals: New Trends
• Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA
765
– “Full appreciation test”
• 8 out of 14 summary dismissal motions were not granted
(including 4 reversals on appeal)
– Lack of evidence, did not meet the full appreciation test
– Trend is to order full trial
• Allen v. Aspen Group Resources Corporation, 2012 ONSC 3498
– Duty of care is a complex, nuanced and important issue which requires
a full record. Full appreciation of evidence cannot be obtained without
a trial
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*All data relates to the period August 1, 2011 – July 31, 2012
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Class Actions Trends
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7. Employment
Fresco v. Canadian Imperial Bank of Commerce, 2010 ONSC 1036
• Alleged failure to pay overtime pay
• Certification denied (Div. Ct.); no common issues
• Court of Appeal reversed the decision and granted the Certification Order
Fulawka v. Bank of Nova Scotia, 2010 ONSC 2645
• Alleged failure to pay overtime pay
• Certification granted (Div. Ct.); refusal to pay overtime resulted from policy, not individual decisions
• Court of Appeal upheld the decision of the lower court decision
McCracken v. Canadian National Railway Company, 2010 ONSC 4520
• Alleged unlawful classification of employees as managers, depriving them of overtime and vacation
pay
• Certification granted by the lower court
• Court of Appeal reversed the decision and Certification was denied
– Why? The employees in question were classified as “management”. The correctness of this
classification raises fundamentally individual issues: “There is no basis in fact to support a finding that
the essential misclassification determination could be made without resorting to the evidence of
individual class members”
Brown v. Canadian Imperial Bank of Commerce, 2012 ONSC 2377
• Alleged misclassification of employees to avoid payment of overtime
• Certification denied; lack of commonality among the class members (appears to have been endorsed
in para. 92 of McCracken)
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8. Securities Cases of Note
Abdula v. Canadian Solar Inc., 2012 ONCA 211
• Canadian Solar Inc. (“CSI”) is a Canadian company; principal place of business is China and its
shares are listed only on the U.S. stock exchange, NASDAQ
• Issue: Is CSI a “responsible issuer” as defined under the Securities Act (Ontario)
• Statutory cause of action for secondary market misrepresentations can be raised against
foreign‐listed issuers that maintain a “real and substantial connection” with Ontario because:
– executive offices, annual general meetings, private placements, documents published in
Ontario, documents filed with the Ontario Securities Commission
Baffinland Iron Mines Corp., Re 2011 ONSC 2761
• Takeover bids made by ArcelorMittal S.A. and Nunavut Iron Ore Acquisition Inc.
• Alleged takeover bid documents presented to shareholders omitted or misstated information
• Certification motion scheduled for January 29‐ February 1, 2013
Labourers’ Pension Fund of Central and Eastern Canada v. Sino‐Forest Corporation,
2012 ONSC 1924
• Alleged public filing of Sino‐ Forest Corporation contained false and/or misleading statements
about its business and affairs
• Securities no longer traded on the TSX
• Hearing scheduled from November 21‐November 30, 2012
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9. Securities Class Action Statistics
Trends in Canadian Securities Class Actions: 2011 Update (NERA Economic
Consulting)
• 15 new Canadian securities class action: total claims ~ $8 billion
– 9 out of 15 claims were Bill 198 cases
– 7 claims under secondary market liability provisions of provincial securities
acts
– 2 against investment funds; 2 involving ponzi schemes; 1 takeover bid; 1 in the
primary market
– 12 claims commenced in Ontario; 2 claims commenced in Quebec; 1 claim
commenced in Alberta
• As of December 31, 2011, 45 active securities class actions, $24.5 billion in
outstanding claims (includes claims for punitive damages)
• 1997‐2011 – Canadian‐domiciled companies named as defendants in 74
filings in the U.S.; 21 also had parallel class actions in Canada
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10. Consumer Services Cases of Note
MacDonald v. Bank of Montreal, 2012 ONSC 759
• Bank allegedly overcharged and never disclosed foreign exchange fee charged on
registered bank accounts
• Alleged breach of duty, contract and unjust enrichment
• Certification granted; common issues approved
Wein v. Rogers Cable Communications, 2011 ONSC 7290
• Rogers misrepresented and overcharged customers for long distance calls
• Certification and settlement agreement approved
• Free call days for the certified class
Wright v. United Parcel Service Canada Ltd., 2011 ONSC 5044
• UPS alledgedly charged undisclosed brokerage service fee (639 paragraphs)
• Certification and summary judgment motions (by both parties) brought. Certification
granted. Summary judgment granted in part in favour of both the parties (breach of
Consumer Protection Act; no criminal interest charge)
• Leave to appeal from the certification motion granted to the Divisional Court on June
14, 2012; one of the common issues not defined properly
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12. Government
Seed v. Ontario, 2012 ONSC 4588
• Claim against Ross MacDonald provincial school for alleged physical,
emotional and sexual abuse against visually impaired children
• Certification granted
Loveless v. Ontario Lottery and Gaming Corporation, 2011
ONSC 4744
• Allegations against the Ontario Lottery and Gaming Corporation (“OLG”)
that it allegedly failed to protect Ontarians from fraud committed by the
retailers who are largely responsible for the sale and redemption of tickets
• Certification denied; no cause of action
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13. Procedure Update
Aftermath of Pennyfeather v. Timminco Limited, 2011 ONSC 4257
• Rule: “Motion for particulars granted BUT… following delivery of particulars, the
Defendants must deliver a Statement of Defence”
• On this issue 2 cases have cited Pennyfeather v. Timminco Limited and have stated
that, generally, a statement of defence should be filed before the certification
motion.
Axiom Plastics Inc. v. E.I. Dupont Canada Co., 2011 ONSC 4257 (July 26, 2011)
• Completion of pleadings before certification motion is “preferable”
Smith v. Sino‐Forest Corp, 2012 CarswellOnt 3480 (March 26, 2012)
• “I shall order that a statement of defence be delivered by any Defendant that
delivers an affidavit pursuant to s. 138.8 (2) of the Securities Act. I order that
any other Defendant may, if so advised, deliver a statement of defence. Further,
I order that if a Defendant delivers a statement of defence, then the delivery of
the statement of defence is not a fresh step and the Defendant is not precluded
from bringing a Rule 21 motion at the leave and certification motion or from
contesting that the Plaintiffs have shown a cause of action under s. 5 (1)(a) of
the Class Proceedings Act, 1992”
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14. Procedure Update
Coulson v. Citigroup Global Markets Canada Inc., 2012 ONCA
108
• In 1998, Mr. Menegon proposed a class action asserting a statutory cause
of action under s.130 of the Ontario Securities Act and a common law claim
for alleged misrepresentations in the prospectus.
• In 2001, the Court dismissed the action stating that there was no merit and
that the representative plaintiff had not purchased shares himself under the
prospectus. Appeals dismissed in 2003.
• Another plaintiff brought the same claim.
• Held that commencement of the Menegon action suspended all applicable
limitation periods under section 28 of the Class Proceedings Act.
• Limitation period applicable to the statutory claim began to run again after
the dismissal order in 2001 since, as a matter of fact, Menegon's appeal was
only in relation to the common law claim. Therefore, the statutory claim
was no longer being asserted for the purpose of section 28.
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15. Procedure Update
Sharma v. Timminco Limited, 2012 ONCA 107
• Claimant filed a proposed class action asserting a statutory claim of
secondary market liability for alleged misrepresentations made by the
defendant from March to November 2008.
• By the end of February 2011 the claimant still had not sought leave of the
court to commence his statutory claim.
• Court of Appeal held that
• Until leave to sue was granted under section 138.8, the secondary
market liability claim was not being "asserted" within the meaning of
section 28(1) of the Class Proceedings Act.
• The mere indication in the statement of claim that the claimant
intended to seek leave was not sufficient to suspend the limitation
period under section 28(1).
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17. Third Party Funding: Draws Mixed Reactions
Smith v. Sino‐Forest Corp., 2012 ONSC 1924
• Third party funding from a Dublin based Claims Funding International
(CFI) PLC approved by the Court
• CFI to receive up to 7 percent capped at $10 million of a judgment or
settlement
Fehr v. Sun Life Assurance Company of Canada, 2012 ONSC 2715
• Third party funding agreements now available to the defendants
• Debate: “The defendants don’t tell us what their war chest is, why
should the defendants know how much we have available to pursue our
case”‐ Won Kim, Kim Orr LLP, National Post, “Third Party Funding Draws
Mixed Reaction”, May 30, 2012
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18. Expert Witnesses ‐ Trends
Alfano v. Piersanti, 2012 ONCA 297
• Increased willingness to exclude expert testimony on basis of:
– (i) lack of independence; or
(ii) bias or partiality (the “advocate” paradigm).
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20. Expert Witnesses – Trends cont’d
Gould v. Western Coal Corporation, 2012 ONSC 5184
• Follows Piersanti (para. 92)
[94] Rosen’s willingness to engage in this type of advocacy,
exaggeration and over‐statement, and his failure to make a
balanced assessment of the evidence, drawing only the most
unfavourable conclusions, casts serious doubt on his
independence and objectivity and causes me to discount the
weight which might be given to his evidence.
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21. Expert Witnesses – Trends cont’d
[95] Rosen signed an acknowledgment of expert’s duty in
which he acknowledged a duty to provide fair, objective and
non‐partisan opinion that related only to matters that were
within his area of expertise. He also acknowledged that this
duty prevailed over any obligation he might owe to the party
that retained him. Rosen did not confine himself to matters
within his expertise. He engaged in impermissible fact‐finding
and speculation. The tone of his report was not fair, objective
and non‐partisan. These failings, together with shortcomings in
his logic, discussed below, give me no confidence that his
evidence can be relied upon, or could possibly be relied upon
at trial.
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22. Expert Witnesses – Trends cont’d
[198] Redmond’s evidence is completely consistent with
the foregoing and completely inconsistent with any deliberate
attempt to pull the wool over the eyes of the auditors. This is
another example of Rosen’s inclination to find a boogie man
under every bed. When light is actually shone on the subject, it
disappears.
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