On October 1, 2020, recent amendments to Ontario’s Class Proceedings Act, 1992 (CPA), come into force. The amendments were made as part of the Smarter and Stronger Justice Act, 2020, which received Royal Assent in July 2020. These changes apply only to any class proceeding commenced on or after October 1, 2020. That said, in Karasik v Yahoo! Inc., 2020 ONSC 5103, Justice Perell recently applied the amendments to a current class action under the court’s plenary jurisdiction to manage class actions.
1. Introduction of a Stricter Certification Test
The most substantive change to the CPA is the introduction of superiority and predominance requirements to the test for certification. The existing CPA requires that a class proceeding be the preferable procedure to resolve the common issues. The amended CPA now requires:
- that the proposed class proceeding be a superior means of determining the rights or entitlement of the class members, as compared with, among others, any quasi-judicial or administrative proceedings (s. 5(1.1)(a)); and
- that questions of fact or law common to the class members predominate over the individual issues (s. 5(1.1)(b)).
2. Procedural Amendments Designed to Achieve Faster Resolution of Cases
Several changes to the CPA should increase procedural efficiency and streamline class actions in Ontario:
- Streamlined appeals: Both parties now have a right to appeal from a certification order to the Court of Appeal for Ontario (s. 30(1)). The plaintiff cannot materially amend their notice of certification motion, pleadings, or notice of application on appeal (s. 30(2)).
- Early dismissal motions: The court must hear dispositive motions before the certification motion or simultaneously with the certification motion, unless the court orders otherwise (s. 4.1).
- Dismissal of dormant actions: The court must dismiss a proposed class action for delay if, within one year from issuing a claim, the plaintiff has not filed a final and complete motion record for certification, the parties have not agreed upon a timetable, the court has not ordered that the action not be dismissed or imposed a timetable, or any other steps required by the regulations have not taken place (s. 29.1(1)).
- Limitation periods for contribution and indemnity claims: The limitation period for a defendant’s claims for contribution and indemnity from third parties is suspended upon commencement of a putative class proceeding (s. 28(3)).
3. Increased Disclosure for Settlement Approvals and Third-Party Funding
Under the amended CPA, courts must not approve a settlement unless it determines that the settlement is fair, reasonable, and in the best interests of the class or subclass members:
- Evidence to be filed on settlement: A party seeking approval of a settlement must disclose information about the settlement, including why the settlement is fair and reasonable, risks/possible recovery if litigation continues, the number of class members, and expected recovery arising from the settlement (s. 27.1(7)).
After settlement, the administrator must file a comprehensive report on the performance of the settlement (s. 27(16)). The court may hold back class counsel’s fees until it is “satisfied with the distribution of the monetary award or settlement funds” (s. 32(6)).
- Third-party funding: A plaintiff who makes an agreement to receive third-party funding must receive court approval of the agreement (s. 33.1(2)). The court will only approve a third-party funding agreement if it is fair and reasonable, does not diminish the rights of the representative plaintiff to instruct counsel and control the litigation, and the funder can satisfy adverse costs awards (s. 33.1(9)).
Once approved, and to the extent of the indemnity provided under the funding agreement, defendants will be able to recover any costs awarded against the plaintiff directly from the funder (s. 33.1(11)) and to obtain security for costs from the funder if certain conditions are met (s. 33.1(12)).
4. Management for Carriage Motions and Multi-Jurisdictional Cases
In line with legislation in B.C., Alberta, and Saskatchewan, the CPA is amended to consider multi-jurisdictional class proceedings commenced in Ontario or elsewhere in Canada:
- Registration: Plaintiffs must register class proceedings in accordance with regulations under the CPA (s. 2(1.1)) and serve an Ontario notice of certification on counsel advancing parallel proceedings in other provinces (s. 2(4)).
- Overlapping class proceeding in Ontario (i.e., carriage): Carriage motions between competing class actions in Ontario need to be filed within 60 days after the first proceeding is commenced (s. 13.1(3)). The court will determine which proceeding best advances the claims of the class members in an efficient and cost-effective manner, heeding each representative plaintiff’s theory of its case, the relative likelihood of success in each proceeding, the expertise/experience of each solicitor, and the funding of each proceeding (s. 13.1(4)). No appeals from carriage decisions will be allowed (s. 13.1(5)).
- Overlapping class proceedings in Canada: At certification, the court will have to consider whether there is a class action pending in another province involving the same subject matter and, if so, to determine whether it would be preferable for some or all of the claims in the Ontario action to be resolved in the other proceeding (s. 5(6)). Parties will also have the right to bring a stay motion prior to certification where there is an overlapping class action in another province (s. 5(8)).
- In making its determination, the court will be guided by certain objectives (s. 5(7)(a)) and tasked with considering all relevant factors, including the alleged basis of liability in each proceeding, the stage each proceeding has reached, the location of class members, representative plaintiffs, witnesses, and evidence, and the ease of enforceability in each applicable jurisdiction (s. 5(7)(b)).
5. Additional Obligations for Class Counsel
Changes are made to sections 17 to 19 respecting notice under the CPA. The court must make such orders as are necessary to ensure that the notice given is the best notice practicable in the circumstances. Notices must be written in English and in French (s. 20(2)), and in a plain language manner (s. 20(1)). The plaintiff must pay for the costs of providing notice of certification at first, unless they have consent from the defendant at an earlier time. The plaintiffs may seek to recover those costs from defendants if ultimately successful in the class proceeding (s. 22(1.1)).
6. Two New Regulations and Other Regulatory Amendments
Finally, regulations and regulatory amendments have been made to support the amendments to the CPA:
- A new “General” regulation under the CPA, O Reg 497/20, which includes details about the registration of proceedings and the National Class Action Database as well as technical rules related to starting a proposed class proceeding that includes a claim under section 138.3 of the Securities Act (i.e., liability for secondary market disclosure).
- A new “Subrogated Claims” regulation under the CPA, O Reg 498/20, which contains details for implementing section 27.3 of the CPA.
- Consequential amendments to the “Class Proceedings” regulation under the Law Society Act, O Reg 771/92.
- Minor amendments to Rule 12 of the Rules of Civil Procedure.