Canada: Class Actions And Québec’s Draft Bill To Enact The New Code Of Civil Procedure

Last Updated: November 14 2011
Article by André Durocher

On September 29, 2011, the Québec Minister of Justice, Jean-Marc Fournier, tabled draft legislation to establish a new Code of Civil Procedure.

This article will examine the similarities and differences between the old and new rules governing class actions.

Au revoir "recours collectif", bonjour "action collective"

Articles 573 to 606 of the draft bill concern class actions. This procedural vehicle, which is referred to as a "recours collectif" ("collective recourse") in the French version of the existing legislation, is called "action collective" ("class action") in the draft bill.1

Broadened Definition of "Member"

From now on, legal persons established for a private interest, partnerships and associations can without restriction be members of a class, as has always been the case for natural persons: gone is the old limitation that to be members, legal persons established for a private interest, partnerships, and associations could have no more than 50 employees.

Let's compare the two texts:

Draft Bill

Current Code

573. A class action is a procedural means enabling one member of a class of persons ("representative plaintiff") to act as plaintiff, without a mandate, on behalf of all the members of the class.

In addition to natural persons, a legal person established for a private interest, a partnership or an association can be a member of a class. It can itself request status as representative plaintiff if the director, partner or member it designates is a member of the class on behalf of which it is seeking to institute a class action, and the designee's interest is related to the objects for which it was constituted.

999. In this Book, unless the context indicates a different meaning,

(a) "judgment" means a judgment of the court;

(b) "final judgment" means the judgment which decides the questions of law or fact dealt with collectively;

(c) "member" means a natural person, a legal person established for a private interest, a partnership or an association that is part of a group on behalf of which such a person, a partnership or an association brings or intends to bring a class action;

(d) "class action" means the procedure which enables one member to sue without a mandate on behalf of all the members.

A legal person established for a private interest, partnership or association may only be a member of a group if at all times during the 12-month period preceding the motion for authorization, not more than 50 persons bound to it by contract of employment were under its direction or control and if it is dealing at arm's length with the representative of the group.

Authorization Criteria

The criteria for determining whether a class action can be authorized remain essentially unchanged.

Here are the two texts:

Draft Bill

Current Code

577. The court authorizes the class action and appoints the class member it designates as representative plaintiff if it is of the opinion that:

(1) the claims of the members of the class raise identical, similar or related issues of law or fact;

(2) the facts alleged appear to justify the conclusions sought;

(3) the composition of the class makes it difficult or impracticable to apply the rules for mandates to sue on behalf of others or for joinder of demands; and

(4) the class member the court has decided to appoint as representative plaintiff is in a position to adequately represent the class members.

1003. The court authorizes the bringing of the class action and ascribes the status of representative to the member it designates if of opinion that:

(a) the recourses of the members raise identical, similar or related questions of law or fact;

(b) the facts alleged seem to justify the conclusions sought;

(c) the composition of the group makes the application of article 59 or 67 difficult or impracticable; and

(d) the member to whom the court intends to ascribe the status of representative is in a position to represent the members adequately.

Later on, we will look at the issue of the principle of proportionality and discuss whether this principle should be taken into account by judges who have to decide whether to grant a motion for authorization to institute a class action or not.

Later on, we will look at the issue of the principle of proportionality and discuss whether this principle should be taken into account by judges who have to decide whether to grant a motion for authorization to institute a class action or not.

Multi-Jurisdictional Class Actions

The draft bill takes into account pan-Canadian and international class actions, now called "multi-jurisdictional class actions". Article 576 provides that, "[if] the subject matter of the class action is the same as or similar to the subject matter of a multi-jurisdictional class action that includes class members in Québec, the demand for authorization and notice must be notified, if the court considers it necessary, to the representative plaintiff in the multi-jurisdictional class action."

The judge who authorizes the institution of a class action can create a subclass of members located outside Québec.

Article 579 provides that "the court cannot refuse to authorize a class action on the sole ground that the class members are party to a multi-jurisdictional class action already underway outside Québec." On the other hand, the same provision also states that "if the court is convinced that another court is in a better position to decide the issues raised and that the rights and interests of the class members resident in Québec are being properly taken into account, it can suspend the examination of the demand for authorization, the time limit for filing the originating demand or the conduct of the class action until a judgment is rendered by that other court or a transaction is made or a settlement is reached."

Paragraph three of the same article provides that "[if] a multi-jurisdictional class action has been instituted outside Québec, the court, in order to protect the interests of the class members resident in Québec, can disallow the discontinuance of a demand for authorization, or authorize another plaintiff or representative plaintiff to institute a class action involving the same subject matter and the same group if it is convinced that the class members' interest would thus be better served."

Under "Judgment and Execution Measures", article 596 provides that:

If a demand for the homologation of a transaction or the recognition of a judgment in a foreign class action is presented to the court, the court makes sure that the rules of the Civil Code that apply to the recognition and enforcement of foreign decisions have been complied with and that the notices given in Québec in connection with the class action were sufficient.

The court must also make sure that the terms governing how Québec residents are to exercise their rights meet the requirements imposed in class actions brought before a Québec court, that Québec residents can exercise their rights in Québec in accordance with the rules applicable in Québec and that, in the case of an aggregate award, the remittance of any undistributed part of the award to a third person will be decided by a Québec court insofar as the Québec residents' share of the award is concerned.

Asymmetrical Appeal Rule Remains in Place

It was hoped that the rule limiting the right of appeal to cases where plaintiffs lose at the Superior Court would be abolished.

Unfortunately, the asymmetrical appeal rule still stands, and the new article 580 remains substantially similar to article 1010 of the current code.

Here are those texts side by side:

Draft Bill

Current Code

580. A judgment authorizing a class action cannot be appealed. A judgment denying authorization can be appealed as of right by the person who filed the demand for authorization or, with leave of the Court of Appeal, by a member of the class on whose behalf the demand for authorization was filed.

The appeal is heard and decided by preference.

1010. The judgment dismissing the motion is subject to appeal pleno jure by the applicant or, by leave of a judge of the Court of Appeal, by a member of the group on behalf of which the motion had been presented. The appeal is heard and decided by preference.

The judgment granting the motion and authorizing the exercise of the recourse is without appeal.

This unjust rule is indefensible, and essentially undermines one of the pillars of the legal system – the right to appeal.

In our legal system, the Court of Appeal's role is to correct errors made by trial or motion judges.

By preventing the appeal of Superior Court decisions authorizing a class action, the code effectively prevents errors made by Superior Court justices from being corrected. Claiming that authorization is merely a preparatory step or an administrative decision is unacceptable; the authorization decision is much more – it defines the class and the main questions of fact and law to be adjudicated collectively. A Superior Court judge can err in principle even at this stage, and it is crucial to allow these errors to be corrected.

Moreover, this sort of lopsided system exists only in Quebec. The right to appeal a decision certifying a proceeding as a class action is available in the rest of Canada and in the United States.

In Ontario, where the right to appeal a decision certifying an action as a class action exists, the Court of Appeal extends a certain deference to the trial judge's opinion unless it believes that there are errors in principle in the reasons for his or her decision. See Andersen v. Wilson,2 and Cassano v. The Toronto-Dominion Bank.3

If we want the province of Québec to be a place where important (and pan-Canadian) class actions can be heard by the province's courts, it would be useful to harmonize the procedural and appeal rules with those of the other Canadian provinces, especially when the Québec rules cannot be justified as equitable or as complying with the fundamental principles of justice.

In a similar vein, if we want Québec class action decisions to be recognized abroad, we should ensure that the Québec rules of civil procedure meet the minimum standards of fair play and the principle of equality of arms and the rights of the defence.

A second criticism can be levelled on this subject: what happens if the majority of the conclusions sought by the plaintiff are rejected but the class action is authorized nonetheless?

Can plaintiffs who did not win all of the points of their case appeal and seek the conclusions that were dismissed at the trial of first instance?

The answer is no, as seen in Regroupement des citoyens contre la pollution v. Alex Couture.4

When the Act to Reform the Code of Civil Procedure5 was passed, an evaluation of the application of the new rules was planned.6 A report was prepared in 2009.7

The evaluation report responds as follows to the suggestion made by several members of the Bar that decisions allowing a motion for authorization to institute a class action be allowed to be appealed, with leave:

[TRANSLATION]

The rule introduced by the reform therefore remains preferable as, on one hand, the motion for authorization already constitutes the initial filtration mechanism for class actions and, on the other hand, a court decision authorizing a class action in no way limits the defendant in how it can argue the merits of its case.8

Interestingly, the committee uses the same reasoning but refrains from pushing the analysis any further. We can only hope that lawmakers will be more attentive to the concerns of the stakeholders.

The lawmakers' objective of encouraging swift proceedings is understandable, but comes at too high a cost. A solution to this compromise would be to allow the appeal of judgements authorizing a class action, with leave from a judge of the Court of Appeal which would both speed up the process and serve justice.

Notices

There are few differences between the draft bill and the current code in terms of notices.

Here are both texts side by side:

Draft Bill

Current Code

581. When a class action is authorized, a notice is published or notified to the class members

(1) describing the class and any subclass;

(2) setting out the principal common issues to be dealt with and the conclusions sought;

(3) stating the representative plaintiff's name, contact information for the representative plaintiff's lawyer and the district in which the class action is to proceed;

(4) stating that class members have the right to intervene in the class action;

(5) stating that class members have the right to opt out of the class action and specifying the procedure and time limit for doing so;

(6) stating that no class member other than the representative plaintiff or an intervenor can be required to pay legal costs arising from class action; and

(7) providing any additional information the court considers appropriate, including the address of the website for the central registry of class actions.

1006. The notice to the members indicates:

(a) the description of the group;

(b) the principal questions to be dealt with collectively and the related conclusions sought;

(c) the right of a member to intervene in the class action;

(d) the district in which the class action is to be brought;

(e) the right of a member to request his exclusion from the group, the formalities to be followed and the time limit for requesting his exclusion;

(f) the fact that a member who is not a representative or an intervener cannot be called upon to pay the costs of the class action; and

(g) any other information the court deems it useful to include in the notice.

The new article 583 provides that "[a]t any stage of a class action, the court can order a notice to be published or notified to the class members if it considers it necessary for the preservation of their rights." Notices must be given in terms that are "clear and concise."9

Conduct of Class Action

The draft bill does not substantially differ from the current code as regards instituting a class action.

Here are the texts:

Draft Bill

Current Code

585. The originating demand in a class action must be filed with the court not later than three months after the class action is authorized, under pain of the authorization being declared lapsed.

If a demand for a declaration of lapse is filed, the representative plaintiff, or another class member asking to be substituted as representative plaintiff, can prevent the authorization from being declared lapsed by filing an originating demand with the court.

1011. The representative brings his demand in accordance with the ordinary rules. If he does not do so within three months of the authorization, the court may declare it perempted upon motion by any interested party served on the representative and accompanied with a notice of at least 30 days of its presentation. The notice must also be published at least 15 days before the date of presentation of the motion, in the same manner as the notice of the judgment granting the motion to authorize the bringing of the class action, unless the court orders another mode of publication.

So long as the motion is not decided, the representative or another member requesting to be substituted for him may still avoid the declaration of peremption of the authorization by bringing his demand; in such case, the court grants the motion, but for the costs only.

Unexplainably, article 586 does not allow defendants to request that proceedings be split, though plaintiffs may do so.

There may be some advantage to splitting a legal action, dealing with liability first before assessing damages. But why should only plaintiffs be entitled to present such a request to the courts?

Let's now compare article 586 of the draft bill and article 1012 of the current code:

Draft Bill

Current Code

586. The defendant cannot urge a preliminary exception against the representative plaintiff unless it concerns a substantial number of the class members and pertains to a common issue to be dealt with in the class action. Nor can the defendant request a splitting of the proceeding or file a crossdemand.

1012. Except in the case where he claims to have a recourse in warranty, the defendant cannot urge a preliminary exception against the representative unless it is common to a substantial part of the members and bears on a question dealt with collectively.

The new article 587 essentially restates articles 1014 and 1016 of the current code.

Those texts read as follows:

Draft Bill

Current Code

587. The representative plaintiff must have the authorization of the court to amend a pleading, to discontinue the demand, to withdraw a pleading or to waive rights arising from a judgment. The court can impose any conditions it considers necessary to protect the rights of the class members.

An admission by the representative plaintiff binds the class members unless the court considers that the admission causes them prejudice.

1014. An admission by a representative binds the members unless the court considers that the admission causes them prejudice.

1016. The representative cannot amend a proceeding, or discontinue, in whole or in part, the action, a proceeding or a judgment, without the permission of the court and except on the conditions it deems necessary.

The member intervention rules essentially remain unchanged.

The texts read as follows:

Draft Bill

Current Code

588. A class member cannot intervene voluntarily for the plaintiffs except to assist the representative plaintiff or to support the representative plaintiff's demand or claims. The court authorizes an intervention if it is satisfied the intervention is helpful to the class. The court can limit an intervenor's right to file a pleading or participate in the trial.

1017. A member cannot intervene voluntarily in demand except to assist the representative, to aid his demand or to support his pretensions.

The court admits the intervention if of opinion that it is useful to the group.

1018. In the case of a conservatory intervention, the court may at any time limit the right of an intervener to produce a proceeding or to participate in the proof or hearing, if it is of opinion that the intervention is prejudicial to the conduct of the action or is contrary to the interests of the members.

The rules on examining the members are essentially the same.

Here are the texts:

Draft Bill

Current Code

589. A party cannot submit a class member other than the representative plaintiff or an intervenor to a pre-trial examination or to a medical examination, nor can a party examine a witness outside the presence of the court. The court can make exceptions to these rules if it considers that doing so would be helpful for its determination of the common issues of law or fact.

1019. A party cannot, before the final judgment, submit a member other than a representative or an intervener to an examination on discovery or a medical examination unless the court considers the examination on discovery or medical examination useful to the adjudication of the questions of law or fact dealt with collectively.

1020. A witness cannot be heard out of court without the permission of the court.

The rules for annulling an authorization to bring a class action are essentially the same.

Here are the texts:

Draft Bill

Current Code

590. The court can at any time, on a party's request, revise or annul the authorization judgment if it considers that conditions relating to the issues of law or fact or to the composition of the class are no longer satisfied.

If the court revises the authorization judgment, it can allow the representative plaintiff to amend the conclusions sought. If circumstances so require, the court can also, at any time, even on its own initiative, modify or divide the class.

If the court annuls the authorization judgment, the proceeding continues between the parties before the competent court pursuant to the rules of Book II.

1022. The court may, at any time, upon the application of a party, revise the judgment authorizing the bringing of the class action if it considers that the conditions set forth in paragraph a or c of article 1003 are no longer met.

The court may then amend the judgment authorizing the bringing of the class action or annul it, or allow the representative to amend the conclusions sought.

In addition, if the circumstances so require, the court may, at any time, and even ex officio, change or divide the group.

The rules for retaining the interest to act as representative are essentially the same.

Compare the texts:

Draft Bill

Current Code

591. The representative plaintiff is deemed to retain sufficient interest to act even if his or her personal claim is extinguished. The representative plaintiff cannot waive status as such without the authorization of the court. Such authorization cannot be given unless the court is able to appoint another class member as representative plaintiff.

If the representative plaintiff is no longer in a position to adequately represent the class members or if his or her personal claim is extinguished, another class member can ask the court to be substituted as representative plaintiff or propose some other class member for that purpose.

A substitute representative plaintiff continues the proceeding from the stage it has reached but, with the authorization of the court, can refuse to ratify acts already done if they have caused irreparable prejudice to the class members. A substitute representative plaintiff is not liable for legal costs and other expenses in relation to acts done prior to the substitution that he or she has not ratified, unless the court orders otherwise.

1023. The person wishing to waive his status of representative can only do so with the authorization of the court.

The courts accepts the waiver if it is able to ascribe the status of representative to another member.

1024. A member may, by motion, apply to the court to have himself or another member substituted for the representative.

The court may substitute the applicant or another member consenting thereto for the representative if it is of opinion that the latter is no longer in a position to represent the members adequately.

The substituted representative accepts the trial at the stage it has then reached; he may, with the authorization of the court, refuse to ratify the proceedings already had if they have caused an irreparable prejudice to the members. He cannot be bound to pay the costs and other expenses for proceedings prior to the substitution, unless the court orders otherwise.

Finally, the rules for approving transactions are essentially the same, although the exception for acquiescences that are unconditional in the whole of the demand has been repealed. Why, however, is unclear.

Here are the texts:

Draft Bill

Current Code

592. A transaction, acceptance of a tender, or an acquiescence is valid only if approved by the court. Such approval cannot be given unless notice has been given to the class members.

In the case of a transaction, the notice must state that the transaction will be submitted to the court for homologation on the date and at the place indicated. It must specify the nature of the transaction, the mode of execution chosen and the procedure to be followed by class members to prove their claim. The notice must also state that class members have the right to make submissions to the court as regards the proposed transaction and the distribution of any remaining balance. The judgment homologating the transaction determines, if necessary, the terms of its execution.

1025. Transaction, acceptance of a tender or acquiescence, except where it is unconditional in the whole of the demand, is valid only if approved by the court. This approval cannot be given unless a notice has been given to the members.

The notice must state

(a) that the transaction will be submitted to the court for approval, specifying the date and place of such proceeding;

(b) the nature of the transaction and the method of execution;

(c) the procedure to be followed by the members to prove their claims; and

(d) that the members have the right to present their arguments to the court as regards the transaction and the distribution of any balance remaining.

The judgment determines, is such is the case, the terms and conditions of application of articles 1029 to 1040.

Judgment and execution Measures

There are not that many differences between the draft bill and the current code where judgments and execution measures are concerned.

Here are the texts:

Draft Bill

Current Code

593. The judgment on a class action describes the class to which it applies, and is binding on all class members who have not opted out.

Once the judgment has become final, the court of first instance orders the publication of a notice stating the substance of the judgment and its notification to each known class member.

1027. Every final judgment describes the group and binds the member who has not requested his exclusion from the group.

Draft Bill

Current Code

594. If the judgment awards damages or a monetary reimbursement, it specifies whether members' claims are to be recovered as shares of an aggregate award or as individual claims.

1028. Every final judgment condemning to damages or to the reimbursement of an amount of money orders that the claims of the members be recovered collectively or be the object of individual claims.

However, the draft bill innovates by allowing the Superior Court to award the representative an indemnity. In that vein, see article 595:

595. The court can award the representative plaintiff an indemnity for expenses and disbursements and an amount to cover legal costs and his or her lawyer's fee. Both are payable out of the aggregate award or before payment of individual claims.

Note that this provision also deals with the fees charged by the representative plaintiff's lawyer.

The text seems to codify the existing case law on lawyers' fees.

The new article 596 deals specifically with the homologation of transactions or recognition of "foreign" judgments.

It would seem that the purpose of this provision is to take into account the Supreme Court of Canada's ruling in Canada Post Corp. v. Lépine.10

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