Canada: Abuse Of Process: Carbon Copy Class Actions Stayed By Courts Coast To Coast

Over the past year the Nova Scotia, Alberta, and Manitoba Courts of Appeal have each found the same action within their respective jurisdictions, brought by the same law firm on behalf of the same plaintiff class is an abuse of process.¹ Unlike in ordinary litigation, where it is prima facie vexatious and oppressive for a plaintiff to sue concurrently in two courts on the same matter, overlapping and parallel class actions commenced in different jurisdictions are not, necessarily, abusive or vexatious. ² A real issue arises however, when class counsel bring the same action in multiple jurisdictions as part of an overall litigation strategy to toll limitation periods, retain carriage of the matter, or achieve procedural advantages based on jurisdiction. In this case, class counsel filed across the country for all of the above reasons and as a "form of insurance for the possibility of an unsuccessful result" in the province in which the action was pursued. ³ In these circumstances, three appellate courts held that the case was an abuse of process and should be unconditionally stayed.

Leave to appeal to the Supreme Court of Canada has been sought from the Nova Scotia Court of Appeal, although the deadline for the respondents' materials was based on the timing of the Alberta Court of Appeal and Manitoba Court of Appeal decisions. The Supreme Court of Canada is faced with a unique situation: not only is same issue being considered by courts across Canada, but, in fact, the exact same case. It remains to be seen whether bringing carbon copy class actions across Canada as part of a litigation strategy and without the intention to pursue the action (except in one province), will likewise be condemned by the Supreme Court of Canada.

The SAF Actions

In 2004, national class actions were filed by the same class counsel in every province, except PEI, alleging that wireless service providers improperly charged and collected "system access fees" ("SAF") from customers. Class counsel then only pursued certification in Saskatchewan ⁴ while it "parked" the actions in the other provinces. SAF class actions in British Columbia, Alberta, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia and Newfoundland were left at the pleadings stage for the better part of a decade.

Within the last couple of years, the defendants have brought applications to have the SAF actions dismissed or stayed as an abuse of process across the country. Various courts have commented that the SAF actions were "essentially carbon copies" ⁵, "virtually identical" ⁶ and "similar in the extreme". ⁷ Courts in British Columbia, ⁸ Manitoba, ⁹ Nova Scotia, ¹⁰ Saskatchewan, ¹¹ and Alberta, including appeal courts, have now grappled with the propriety of this litigation strategy.

SAF Litigation in Saskatchewan

In order to understand the most recent decisions, it is necessary to consider the SAF litigation in Saskatchewan and particularly the Frey/Chatfield action. It is this background which the Alberta Court of Appeal held "clearly exemplifies why the Turner action amounts to an abuse of process". ¹²

The certification application for Frey/Chatfield was initially heard and denied in 2006. ¹³ However, the Court granted leave to reapply for certification. The Court also held that, of the seven causes of actions advanced, only one was supported by the facts and properly grounded in the law: unjust enrichment. ¹⁴

A national class was subsequently certified for the unjust enrichment claim, which permitted non-residents to opt-in to the class. ¹⁵ What steps non-residents of a province must take in order to be included in a class action takes two forms in Canada: "opt-in" and "opt-out". Opt-out regimes presumptively include class members who are non-residents, unless they take positive steps to be excluded. Opt-in regimes provide the opposite: non-residents must take positive steps to be included.

This procedural difference between opt-in and opt-out regimes became a focal point for the Frey/Chatfield action because in 2008, the Saskatchewan Class Actions Act was amended from opt-in to opt-out. All class actions legislation has among its goals, access to justice. Where class actions legislation provides that non-residents are presumptively included, there is an argument that better access to justice may be provided to the class. 16

In the Frey/Chatfield action, class counsel then brought an application to convert the nationally certified opt-in class action to an opt-out action. The Saskatchewan Court of Queen's Bench held that the amendments to the Class Actions Act were not retroactive and dismissed the application. An appeal was brought out of time and the application to extend the time was denied by the Saskatchewan Court of Appeal. ¹⁷

In 2009, class counsel filed a second SAF class action in Saskatchewan, the Collins action. The Collins action alleged the same facts, causes of action, claim in damages and disgorgement, named the same defendants, and provided the same class definition and class period as the Frey/Chatfield action. The change, slight as it was, was that non-residents would have to opt-out of the class, rather than opt-in. The Court conditionally stayed the Collins action as an abuse of process. It was "nothing more than an attempt to redo what had already been done in the Frey action, presumably in the hope of somewhat different results." ¹⁸ A subsequent motion to lift the stay was refused. 19

Dormant SAF Actions

Meanwhile, the SAF actions in other provinces lay dormant except where the defendants brought applications to dismiss or stay the underlying SAF actions:

• In British Columbia, the Drover action was stayed as an abuse of process in 2013. The rejected causes of action in the Frey/Chatfield certification were identical to the causes of action raised in the Drover action. An appeal was launched, not pursued, and ultimately dismissed. ²⁰
• In Alberta, the Pappas action was dismissed in 2013 for long delay.²¹ Class counsel then filed a second SAF action, the Turner action. A permanent stay was initially denied 22 but the decision was reversed, as discussed below.
• In Manitoba, the Hafichuk-Walkin action was unconditionally stayed by the Court of Queen's Bench in 2014. ²³ This decision was appealed, and the stay was upheld, as discussed below.
• In Nova Scotia, the Supreme Court initially declined to grant a stay. The Court of Appeal reversed that decision, held the Gillis action was an abuse of process and granted an unconditional stay. ²⁴ Leave has been sought to appeal this decision to the Supreme Court of Canada.

It is against this backdrop, including the exhaustion of appeals to the Saskatchewan Court of Appeal and Supreme Court of Canada in relation to the Frey/Chatfield action, that the Courts of Appeal in Alberta and Manitoba considered whether the SAF actions in their respective provinces were an abuse of the courts process.

Alberta Court of Appeal Decision in Turner

The Alberta Court of Appeal held that when the overall circumstances, including the previous Pappas Action in Alberta, and the "decisions of Courts in Saskatchewan, British Columbia, Nova Scotia and Manitoba are given the full faith and credit appropriate to our federal system" the Turner Action was an abuse. ²⁵ In particular, it was an attempt by class counsel to subvert or make an end-run on Saskatchewan decisions in two ways: first, to obtain a national "opt-out" class and second, as a collateral attack on the Saskatchewan Courts' certification of a sole cause of action, unjust enrichment. ²⁶

The Alberta Court of Appeal expressly agreed with the conclusion of Scanlan JA of the Nova Scotia Court of Appeal that class counsel was attempting to obtain the very relief refused by the Saskatchewan courts: ²⁷

This is an obvious case of [class counsel] repeatedly using lawsuits in different jurisdictions (as, in effect, the law firm promised to do) to get around the rulings in the Saskatchewan Courts. This is an abuse not just of the courts of Alberta but is also a trammeling of the reputation of class proceedings legislation, which serves important social goals. It also invites juridical dissonance in Canada.

Manitoba Court of Appeal Decision in Hafichuk-Walkin

The Manitoba Court of Appeal heard the appeal in Hafichuk-Walkin on March 9, 2015 and released its decision a year later. The Manitoba Court of Appeal acknowledged that the completion of proceedings in Nova Scotia and Alberta delayed the decision, and that decisions in Gillis and Turner were of assistance.²⁸ The Manitoba Court of Appeal reached the same conclusion as the other courts: the SAF action was an abuse of process in the circumstances.

The Manitoba Court of Appeal also clarified, with respect to the distinction between parallel and duplicative class actions, that: ²⁹

In our federation, parallel multi-jurisdictional class actions are permissible. However, multi-jurisdictional class actions are abusive when they are duplicative and no legitimate purpose would be served by allowing more than one class action to proceed on behalf of overlapping class members from one or more provinces.

The Court echoed the comments of the Nova Scotia and Alberta Courts of Appeal, that it is the context of each multi-jurisdictional class action which determines whether or not the degree of overlap between claims gives rise to an abuse of process. ³⁰ Context also includes a consideration of the diligence in prosecuting the action. In this case, the action in Manitoba was parked for a decade while the Frey/Chatfield action was advanced in Saskatchewan. ³¹

With respect to the opt-in/opt-out distinction, the Court emphasized that the critical consideration is not the alleged potential unfairness to non-resident members of the class in the Frey/Chatfield action, but rather whether there are reasonable safeguards to guarantee the principle of access to justice based on the common law and the provisions of Saskatchewan's Class Actions Act. Hafichuk-Walkin was an abuse of process given the capacity and willingness of the Saskatchewan courts to protect the interests of Manitoba residents by ensuring adequate and timely notice of the Chatfield/Frey action.³²

In an essentially carbon-copy finding to the Alberta and Nova Scotia Court of Appeal, the Manitoba Court of Appeal concluded:³³

[Class counsel] is maintaining the SAF class actions filed outside of Saskatchewan, despite the fact that Frey/Chatfield action is certified and going to trial, as nothing more than a form of insurance for the possibility of an unsuccessful result in that jurisdiction on the claim of unjust enrichment. That is inappropriate and amounts to an abuse of process.

Will the Supreme Court of Canada Hear the Appeal?

Three appellate courts have concluded that duplicative, strategically managed class actions filed throughout Canada are an abuse of process. In 2009, the Supreme Court of Canada called on provincial legislatures to "pay more attention to the framework for national class actions and the problems they present. More effective methods for managing jurisdictional disputes should be established ... in the Canadian legal space".³⁴ Some of those problems have manifested in the SAF litigation including upending the goal of judicial economy and replacing it with judicial inefficiency.

As mentioned above, the leave to appeal application to the Supreme Court of Canada is pending. With the Manitoba Court of Appeal's decision in Hafichuk-Walkin, the 90-day clock for the respondents to file their materials has now started. We will update you on that leave decision in our regular SCC Monitor blog posts.

Footnotes

1 Hafichuk-Walkin v BCE Inc, 2016 MBCA 32 ("Hafichuk-Walkin"); Turner v Bell Mobility, 2016 ABCA 21 ("Turner"); BCE Inc v Gillis, 2015 NSCA 32 ("Gillis"). This action was briefly addressed in our earlier blog post entitled "10 Years, 9 Provinces, 1 Claim and 5 Different Results". Note that while the lower courts were previously divided on this case, the appeal courts have each reached the same decision.

2 See e.g., Turner, ibid at para 6.

3 Hafichuk-Walkin, supra note 1 at para 56.

4 For background on the Saskatchewan action, see Chatfield v Bell Mobility Inc, 2014 SKQB 82 at paras 3-15.

5 Hafichuk-Walkin v BCE Inc, 2014 MBQB 175 at para 4 ("Hafichuk-Walkin QB").

6 Gillis, supra note 1 at para 4.

7 Collins v BCE Inc, 2010 SKQB 74 at para 5.

8 Drover v BCE Inc, 2013 BCSC 1341; appeal statutorily dismissed 2015 BCCA 132 (one JA) ("Drover").

9 Hafichuk-Walkin QB, supra note 5 aff'd Hafichuk-Walkin, supra note 1.

10 Gillis, supra note 1.

11 Collins v BCE Inc, 2010 SKQB 74 at paras 1, 3-6, 11-17.

12 Turner, supra note 1 at para 9.

13 Frey v BCE Inc, 2006 SKQB 328.

14 Ibid at paras 1, 46, 81-98.

15 Frey v BCE Inc, 2007 SKQB 328.

16 See e.g., Hafichuk-Walkin, supra note 1 at para 12.

17 The Class Actions Amendment Act, 2007, SS, 2001, c 21.01; Frey v Bell Mobility Inc, 2009 SKQB 165 at paras 15-24; Frey v Bell Mobility Inc, 2013 SKCA 26 ("Frey").

18 Collins, supra note 11 at paras 1, 3-6, 11-17.

19 Ibid at paras 7-10.

20 Drover, supra note 8.

21 Pappas v BCE Inc, 2014 ABQB 122 ("Pappas").

22 Turner v Bell Mobility, 2015 ABQB 169 at paras 7-11.

23 Hafichuk-Walkin QB, supra note 5.

24 Gillis v BCE Inc, 2014 NSSC 279 rev'd 2015 NSCA 32.

25 Turner, supra note 1 at para 36 (note that the Manitoba Court of Appeal's decision in Hafichuk-Walkin was on reserve when the Alberta Court of Appeal released its decision in Turner).

26 Frey, supra note 17; Turner, supra note 1 at paras 37-39.

27 Ibid, Turner, at para 42.

28 Hafichuk-Walkin, supra note 1 at paras 13-18.

29 Ibid, at para 40 [underline in original; citations omitted].

30 Ibid, at para 41ff.

31 Ibid, at paras 44-47.

32 Ibid, at para 55.

33 Ibid at para 56 [citations omitted]

34 Canada Post Corp v Lépine, 2009 SCC 16 at para 57.

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