Determining how to meet or defeat the test for “preferable procedure” on a certification motion has been an enigmatic problem. Until the Supreme Court of Canada last month clearly articulated that access to justice involves a two-part analysis in Fischer v. AIC Ltd., there was no consistent measure by which this part of the preferability test would be analyzed.
Until Fischer was released, preferability was generally considered to be a largely discretionary assessment undertaken by the certification judge — typically on a limited evidentiary record. However, we can now expect future plaintiffs’ certification records will contain a more robust exploration of preferability in situations where an alternative dispute resolution forum is available, to ensure the record contains some evidence a class proceeding is preferable both procedurally and substantively.
Fischer involves claims against two mutual fund managers who were prosecuted by the Ontario Securities Commission for failure to protect their funds from market timing trading that damaged the funds. Both fund managers entered into settlements that included terms requiring the defendants to make multi-million dollar payments to their investors.
The settlement agreements recognized, and did not preclude, the possibility of civil action being brought against the defendants by the customers who benefitted from the settlements. A class action alleging negligence and breach of fiduciary duty was brought, and the certification motion was argued after the OSC settlements had been concluded.
At first instance, certification was denied solely on the basis a class action was not the preferable procedure. In all other respects, the court found the action met the certification test. However, the motions judge concluded the OSC proceedings were a sufficient alternative procedure that had met the purposes of a class proceeding by providing some restitution to the class through the settlement.
The Divisional Court and the Court of Appeal both disagreed, although each gave different reasons for granting certification. The Divisional Court focussed on the incomplete substantive relief received by the class while the Court of Appeal identified the procedural distinctions between the two proceedings as key.
In its analysis of the preferability test, the SCC first confirmed the undisputed tenet that in assessing preferability, the court is to compare all the competing possible methods of resolving the class members’ claims (both inside and outside the courtroom) “through the lens of the goals of behaviour modification, judicial economy and access to justice, bearing in mind, of course, that the ultimate question is whether the statutory requirement of preferability has been established.”
Here, the parties agreed behaviour modification had been achieved through the OSC proceedings, and the motions judge found a class action would serve the goal of judicial economy, so the only remaining question was whether the class had received sufficient access to justice through the OSC proceedings.
The question framed by the SCC was “whether, from an access to justice perspective, certification should be denied on account of results already obtained in a non-litigation proceeding before the OSC.”
Access to justice, the top court concluded, has two interconnected dimensions — procedure and substance — both of which must be present.
“One focuses on process and is concerned with whether the claimants have access to a fair process to resolve their claims. The other focuses on substance — the results to be obtained — and is concerned with whether the claimants will receive a just and effective remedy for their claims if established. They are interconnected because in many cases defects of process will raise doubts as to the substantive outcome and defects of substance may point to concerns with the process.”
Accordingly, the correct test to apply in deciding if a class action will meet the goal of access to justice is to determine:
1. Are there access to justice concerns that a class action will address?; and
2. Do those concerns remain, even when alternative avenues of redress are taken into consideration?
Fischer then sets out a series of questions the court may take into consideration in its analysis:
1. What are the barriers to access to justice in the case under consideration? Barriers may be procedural or substantive, or both. They include economics, psychological and social barriers, and, in some cases, the lack of other means of redress.
2. What is the potential of a class action to address these barriers?
This question is to be asked with reference to the alternative procedures in a comparative analysis, and must take into account both procedure and substance. The SCC reminds us “even though a class action is a procedural tool, achieving substantive results is one of its underlying goals.”
3. What are the alternatives to a class proceeding?
As the SCC held in Hollick v. Toronto, the preferability analysis requires the court to look at all reasonably available methods of resolving the class’ claims to determine to what extent those alternatives break down barriers to access to justice.
4. To what extent do the alternatives address the relevant barriers?
Here, the issue is whether the alternatives can provide effective redress for the substantive claims employing suitable procedures.
5. How do the alternative proceedings compare?
Here, the court weighs the alternatives to determine preferable procedure for achieving procedural and substantive access to justice.
In undertaking this analysis, however, the SCC reiterated its direction from the Pro-Sys trilogy that the evidence on a certification motion is not meant to delve into the merits, and the “some basis in fact” threshold is very low.
Accordingly, the court is not meant to conduct a comparative analysis of the quantum of recovery that may be achieved by either process (particularly since the recovery in the class action cannot be determined at certification), although results and limits on recovery may be relevant depending on the facts.
It is to be expected in future cases where the defence identifies, establishes, or proposes alternative methods for resolving the claims asserted by the class, the plaintiff will have a higher evidentiary burden than it has typically adduced in the past.
It will not suffice for the representative plaintiff to attest to the obvious — that individual proceedings are too costly or will overburden the court system. Some evidence the alternative procedure raises barriers to substantive or procedural justice will be necessary. However, it is unlikely the court will go so far as to require the plaintiff to include expert evidence regarding the psycho-social barriers to litigation or other dispute resolution methodologies. To impose such a burden on the class would itself create a barrier to access to justice.
Until Fischer was released, preferability was generally considered to be a largely discretionary assessment undertaken by the certification judge — typically on a limited evidentiary record. However, we can now expect future plaintiffs’ certification records will contain a more robust exploration of preferability in situations where an alternative dispute resolution forum is available, to ensure the record contains some evidence a class proceeding is preferable both procedurally and substantively.
Fischer involves claims against two mutual fund managers who were prosecuted by the Ontario Securities Commission for failure to protect their funds from market timing trading that damaged the funds. Both fund managers entered into settlements that included terms requiring the defendants to make multi-million dollar payments to their investors.
The settlement agreements recognized, and did not preclude, the possibility of civil action being brought against the defendants by the customers who benefitted from the settlements. A class action alleging negligence and breach of fiduciary duty was brought, and the certification motion was argued after the OSC settlements had been concluded.
At first instance, certification was denied solely on the basis a class action was not the preferable procedure. In all other respects, the court found the action met the certification test. However, the motions judge concluded the OSC proceedings were a sufficient alternative procedure that had met the purposes of a class proceeding by providing some restitution to the class through the settlement.
The Divisional Court and the Court of Appeal both disagreed, although each gave different reasons for granting certification. The Divisional Court focussed on the incomplete substantive relief received by the class while the Court of Appeal identified the procedural distinctions between the two proceedings as key.
In its analysis of the preferability test, the SCC first confirmed the undisputed tenet that in assessing preferability, the court is to compare all the competing possible methods of resolving the class members’ claims (both inside and outside the courtroom) “through the lens of the goals of behaviour modification, judicial economy and access to justice, bearing in mind, of course, that the ultimate question is whether the statutory requirement of preferability has been established.”
Here, the parties agreed behaviour modification had been achieved through the OSC proceedings, and the motions judge found a class action would serve the goal of judicial economy, so the only remaining question was whether the class had received sufficient access to justice through the OSC proceedings.
The question framed by the SCC was “whether, from an access to justice perspective, certification should be denied on account of results already obtained in a non-litigation proceeding before the OSC.”
Access to justice, the top court concluded, has two interconnected dimensions — procedure and substance — both of which must be present.
“One focuses on process and is concerned with whether the claimants have access to a fair process to resolve their claims. The other focuses on substance — the results to be obtained — and is concerned with whether the claimants will receive a just and effective remedy for their claims if established. They are interconnected because in many cases defects of process will raise doubts as to the substantive outcome and defects of substance may point to concerns with the process.”
Accordingly, the correct test to apply in deciding if a class action will meet the goal of access to justice is to determine:
1. Are there access to justice concerns that a class action will address?; and
2. Do those concerns remain, even when alternative avenues of redress are taken into consideration?
Fischer then sets out a series of questions the court may take into consideration in its analysis:
1. What are the barriers to access to justice in the case under consideration? Barriers may be procedural or substantive, or both. They include economics, psychological and social barriers, and, in some cases, the lack of other means of redress.
2. What is the potential of a class action to address these barriers?
This question is to be asked with reference to the alternative procedures in a comparative analysis, and must take into account both procedure and substance. The SCC reminds us “even though a class action is a procedural tool, achieving substantive results is one of its underlying goals.”
3. What are the alternatives to a class proceeding?
As the SCC held in Hollick v. Toronto, the preferability analysis requires the court to look at all reasonably available methods of resolving the class’ claims to determine to what extent those alternatives break down barriers to access to justice.
4. To what extent do the alternatives address the relevant barriers?
Here, the issue is whether the alternatives can provide effective redress for the substantive claims employing suitable procedures.
5. How do the alternative proceedings compare?
Here, the court weighs the alternatives to determine preferable procedure for achieving procedural and substantive access to justice.
In undertaking this analysis, however, the SCC reiterated its direction from the Pro-Sys trilogy that the evidence on a certification motion is not meant to delve into the merits, and the “some basis in fact” threshold is very low.
Accordingly, the court is not meant to conduct a comparative analysis of the quantum of recovery that may be achieved by either process (particularly since the recovery in the class action cannot be determined at certification), although results and limits on recovery may be relevant depending on the facts.
It is to be expected in future cases where the defence identifies, establishes, or proposes alternative methods for resolving the claims asserted by the class, the plaintiff will have a higher evidentiary burden than it has typically adduced in the past.
It will not suffice for the representative plaintiff to attest to the obvious — that individual proceedings are too costly or will overburden the court system. Some evidence the alternative procedure raises barriers to substantive or procedural justice will be necessary. However, it is unlikely the court will go so far as to require the plaintiff to include expert evidence regarding the psycho-social barriers to litigation or other dispute resolution methodologies. To impose such a burden on the class would itself create a barrier to access to justice.