In AIC Limited v. Fisher, 2013 SCC 69, the Supreme Court of Canada ruled on what makes a class action a preferable procedure under s.5(1)(d) of the Class Proceedings Act, 1992. The Supreme Court’s decision on this point came after varied decisions and reasoning by each of the courts below and provides necessary guidance on this certification criterion. Assuming that the rest of the statutory criteria are met, whether a class action is preferable necessitates comparing class proceedings with other possible procedural options through the triad of the goals of class proceedings: access to justice, behaviour modification and judicial economy. The facts and context of this case ultimately resulted in the Supreme Court’s analysis focusing on access to justice.
This case arose as a group of mutual fund managers were investigated by the Ontario Securities Commission (“OSC”) for “market timing”. The two mutual fund managers who were the appellants at the Supreme Court had entered into a settlement agreement with the OSC under which they paid their investors $108.1 million. These same investors were part of a class action against them for the same conduct. The OSC agreement anticipated and did not preclude such civil proceedings. The class action claimed for damages suffered in addition to the settlement amounts already received.
Justice Perell denied certification at first instance (2010 ONSC 296 (CanLII)). He found that a class proceeding was not the preferable procedure because the OSC proceedings and settlement agreement had already achieved the goals of class proceedings. The Divisional Court focused on the substantive access to justice aspect of preferable procedure and found that there was some basis in fact to believe that the investors were entitled to more than they had received as a result of the OSC proceedings. It allowed the appeal and certified the class action (2011 ONSC 292 (CanLII)). The Court of Appeal disagreed with the Divisional Court’s reasoning but agreed with the end result. The Court of Appeal focused on the procedural access to justice aspects of preferable procedure and emphasised whether investors had been able to participate and the fact that the OSC’s powers were remedial (2012 ONCA 47 (CanLII)).
The only issue before the Supreme Court was whether the class proceeding was preferable to the OSC proceeding in providing access to justice for the investors, i.e. whether certification should be denied because access to justice had been adequately achieved through the OSC proceedings.
The Court reasoned that it must look to both the procedural and the substantive components of access to justice. These are inextricable. The procedural aspect requires plaintiffs to have access to a fair process to resolve their claims. The substantive aspect asks whether claimants will receive a just and effective remedy for their claims, if established. A class action will serve the goal of access to justice if there are: 1) access to justice barriers that a class action could address; and, 2) these barriers remain even when alternative avenues of redress are considered.
Justice Cromwell, writing for a unanimous court, set out five questions to assist with the access to justice preferability analysis and noted that these are not to be asked in isolation or in any particular order but are to inform the overall comparative analysis on the facts of each case.
What Are the Barriers to Access to Justice? While not an exhaustive list, procedural and substantive barriers that a class action can address and which the motion court should consider may be economic (most common), but may also be physical, psychological, emotional, social, linguistic, or be based on ignorance of the injury, ignorance of the availability of substantive legal rights, fear of reprisals by the defendant, alienation from the legal system or the absence of an alternative procedure of meaningful redress.
What is the Potential of the Class Proceedings to Address Those Barriers? For example, with respect to one of economic barriers, a class action can distribute the litigation costs to make pursuing the claim affordable, and thereby provide a procedural means to achieve a substantive end of a remedy for a larger number and broader variety of claimants.
What Are the Alternatives to Class Proceedings? The Court must identify these alternatives. These may include other court procedures, non-court proceedings, or combinations of both such as non-litigation redress combined with individual actions.
To What Extent Do the Alternatives Address the Relevant Barriers? Or to put it another way, what is the potential for an alternative to provide effective redress for the substance of the plaintiffs’ claims in a manner that affords suitable procedural rights.
How Do the Two Proceedings Compare? The emphasis here is on the comparative ability of alternative proceedings to overcome the identified barriers that a class action would address. The Court must consider the results or limits on recovery of alternative procedures, where such evidence is available at the time of the certification motion.
In applying the above in AIC, the Court found that there were two potential barriers to access to justice. The first was economic, i.e. there were many investors who would not otherwise be able to advance claims, and the second was that there was potentially no access to a process aimed at protecting the rights of these many individuals or a “fair” process. A class action would address both of these. There were no viable alternative litigation processes. The only alternative proceeding advanced was the OSC proceeding.
Unusually, the alternative proceeding was complete. The evidence on the motion showed some basis in fact for the position that compensation through the OSC was less than the investors’ estimated losses, that this was not a case where the plaintiffs were trying to gain a windfall, and that substantive access to justice concerns remained. With respect to the procedural aspect, the OSC’s primary jurisdiction in this case was regulatory. Investors had little to no opportunity to participate in the OSC proceedings and were not advised how their losses were assessed by the OSC. As a result, the Court found that the class proceeding was the preferable procedure and certification was upheld. The appeal was dismissed with costs.