Canada: Ontario Court Applies New Preferable Procedure Analysis For First Time

On October 31, 2023, the Ontario Superior Court of Justice released the first decision ¹ on a certification motion to interpret the new preferable procedure analysis. This new analysis, as part of the test for class certification, stems from the 2020 amendments to the Class Proceedings Act, 1992 (CPA). Under the new provision, s. 5(1.1) of theCPA, a class proceeding will be the preferable procedure for the resolution of the common issues only if, at a minimum, it is superior to all reasonable alternatives to a class action and the questions of fact or law common to the class members predominate over any questions affecting only individual class members.

The decision establishes that the new emphasis on superiority and predominance under the preferable procedure analysis of s. 5(1)(d) creates a heightened threshold for class certification.

The new test for preferability

Subsection 5(1.1) was added to the CPA in 2020, part of major legislative changes to the CPA aimed at making class proceedings more fair, transparent and efficient for parties in Ontario. The amendments mark the first major overhaul to the Act since its enactment in 1992, reflecting some of the recommendations made by the Law Commission of Ontario in the July 2019 report, "Class Actions: Objectives, Experiences and Reforms."

Under the language of the provision, a class proceeding is the preferable procedure for the resolution of common issues only if, at a minimum:

(a) it is superior to all reasonably available means of determining the entitlement of the class members to relief or addressing the impugned conduct of the defendant, including, as applicable, a quasi-judicial or administrative proceeding, the case management of individual claims in a civil proceeding, or any remedial scheme or program outside of a proceeding; and

(b) the questions of fact or law common to the class members predominate over any questions affecting only individual class members. ²

The express requirement for predominance of common issues and superiority compared to other reasonable alternatives effectively raises the bar for the preferability requirement for certification. While predominance and superiority were arguably already factors in the preferability analysis of the original statute, the new, "only if, at a minimum" language signals that the proposed class proceeding must be "superlative" to all alternative procedures or processes in order to satisfy the preferable procedure requirement. ³

As part of the five-part criteria for certification under section 5 of the CPA, preferability of procedure is evaluated by a two-step test: first, whether a class proceeding would be a fair, efficient and manageable procedure; and second, whether a class proceeding is preferable to any alternative method of resolving the class members' claims. ⁴

The test is applied in a purposive and generous manner, comparing the advantages and disadvantages of the proposed class action through the lens of the three principal goals of class actions; namely:

(1) to promote the efficient use of judicial resources; (2) to encourage behaviour modification; and (3) to provide access to justice for litigants. ⁵ While the factual circumstances of each action will call for varying importance between these goals, access to justice is never considered to be a neutral factor, as it is the primary purpose of class proceedings and the prime lens for the preferable procedure analysis. ⁶

The case

In Banman v. Ontario, the Court certified a proposed class action against the Government of Ontario (the Government), with certain qualifications and exceptions, involving a proposed class comprised of 429 class members. The action involves the treatment program for patients detained in the forensic psychiatric unit at St. Thomas Psychiatric Hospital from 1976 through 1992, who allege that the Government is liable for breach of fiduciary duty, negligence, vicarious liability and breach of non-delegable duty and various breaches of theCanadian Charter of Rights and Freedoms. ⁷

A more rigorous analysis

The Court held that the amendments to the CPA require a more "rigorous" analysis of the following factors, which are to be considered by comparing the advantages and disadvantages of the alternatives to the proposed class action through the lens of judicial economy, behaviour management and access to justice:

(a) whether the design of the class action is manageable as a class action;

(b) whether there are reasonable alternatives;

(c) whether the common issues predominate over the individual issues; and

(d) whether the proposed class action is superior (better) to the alternatives. ⁸

The plaintiffs submitted that all criteria for certification were satisfied, including the recent amendments to the preferable procedure criterion. On the other hand, the Government submitted that the proposed action failed to satisfy the preferability requirement because: (1) the individual issues predominate over the common issues; and (2) a class proceeding was not the preferable procedure to deal with the conflicts resulting from the 429 class members' "idiosyncratic" claims, including those with respect to assault and sexual assault allegations. ⁹The Court rejected these arguments. Following a determination of the first three criteria for certification, the Court went on to find that the claim resulted in a systemic institutional abuse or malfeasance class action with a common issues trial, to be followed by individual issues trials, in order to determine causation and damages. The Court determined that this was manageable. ¹⁰

Predominance of common issues

The Court next considered whether there were reasonable alternatives to a class action and found there was some basis in fact for the following types of proceedings: (a) up to 429 individual issues trials; (b) a single joinder action of up to 429 co-plaintiffs; and (c) several joinder actions in which the up to 429 patients are grouped into categories of claims. In this regard, the Government advocated for a co-plaintiff joinder approach taken in a case with a similar factual matrix, Barker v. Barker, wherein 28 co-plaintiffs were awarded CA$10 million for instances of abuse and harm suffered throughout a psychiatric treatment program. ¹¹

The Court's analysis of the three above-mentioned goals of class actions found that behaviour modification was a neutral factor—the Hospital had ceased its allegedly harmful practices by 1992 and much behaviour modification had already been achieved following theem>Barker v. Barker decision and other cases. ¹²Judicial economy was also found to be a largely neutral factor, given that a class action and all reasonable alternatives, still involved the prospect of adjudicating 429 individual claims.

The preponderant lens was held to be access to justice. The plaintiffs argued, in part, that access to justice could only be achieved through the procedural vehicle of a class proceeding, given that the class members are highly marginalized individuals—many of whom are elderly, suffer from serious mental illnesses and disorders, are ignorant of their substantive legal rights and are alienated from the legal system due to historic interactions with the criminal justice system. ¹³

The Court found that each of the alternatives to a class action that it had identified involved individual damages trials. The Court made clear that there is nothing more preferable to a class action where the common issues trial resolves all or a part of the claims of the proposed class members, particularly where a damages award is made. ¹⁴ While this scenario did not exist here, the Court nonetheless concluded that the common issues predominated over the individual issues, as the common issues trial would benefit "many" of the class members. This was the case even if some class members opted out to pursue individual claims, because a class action was the only "viable" means to obtain access to justice. ¹⁵This was not the case, however, for class members with sexual assault claims, where the questions of fact and law were not found to predominate over the questions affecting their individual claims. ¹⁶

Superiority to all reasonable alternatives

Turning to the question of whether a class action was the superior alternative, the Court considered the experience of class counsel in the joinder action in Barkergainst the Government, which the Court accepted was "economically inefficient." ¹⁷The Court ultimately concluded that a class action was superior to the alternatives for the following reasons:

My analysis of the access to justice branch of the preferable procedure analysis is that a class proceeding in the immediate case is the preferable procedure and superior because: (a) a class action automatically assembles the class members who may benefit by a common issues trial and then they will have an opportunity to opt into individual issues trials if they have economically viable claims; (b) a class action secures the class members with legal representation that they might not otherwise obtain; (c) class counsel may be unwilling to take on the risks of a joinder action and so a class action is the only viable route to access to justice for those with economically viable claims; (d) a class action achieves economies of scale for the whole group, and allows those with economically viable individual claims to pursue them later depending on the outcome of the common issues trial; and (e) a class action is the most favourable procedure for the defendant (in this case the Government of Ontario) because a class action ending in individual issues trials accommodates all of the claims of the class members (the patients) that wish to pursue them and if the class action settles, it will benefit the defendant (the Government) by discharging it from liability for all of the class members (the patients), even those that would not have proceeded to individual issues trials. ¹⁸

Implications

Subsection 5(1.1) creates a more stringent analysis for preferability under the CPA. What remains to be seen, as noted in Banman, is how much stricter the new test will be in practice with variable facts and circumstances. The decision in Banman represents a more rigorous methodology for analyzing the most appropriate vehicle for advancing potential class claims and establishes a greater barrier to certification than that which existed prior to the amendments to the CPA.

Footnotes

1. Banman v. Ontario, 2023 ONSC 6187 ["Banman"].

2. Class Proceedings Act, 1992, S.O. 1992, c 6, s. 5(1.1). ["CPA"].

3. Banmanat para. 317.

4. Banman, at para. 315.

5. Banman, at para. 179.

6. Banman, at para. 333.

7.Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11.

8. Banman, at para. 320.

9. Banman, at paras. 7-9.

10. Banmanat paras. 325-325.

11. Banman, at paras. 8 and 12.

12. Banman, at para. 329.

13. Banman, at para. 348.

14. Banman,at para. 334.

15. Banman, at para. 341.

16. Banman, at para. 342.

[17. Banman, at para. 352.

18. Banman, at para. 357.

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