The class action and public authority liability: "preferability" re-examined.

• Author: Jones, Craig

INTRODUCTION

When are class actions against the government "preferable"? Perhaps more to the point, when is a class action that might be appropriate against a private firm not an effective way of resolving a claim where the government acts as the defendant?

This question is of more than academic interest. Since the advent of the class action in Canada, governments have become a preferred--if not the preferred--target. (1) This is not terribly surprising, as government acts or omissions by their nature, frequently affect large numbers of people. Governments are also static targets: while the provincial and federal governments have the power to sweep away claims against them through legislative flat, it is a right rarely exercised. (2) In addition, governments do not go bankrupt, hide their money offshore, or engage in the myriad of other judgment-proofing strategies available to private concerns. They tend to litigate fairly and economically; and they usually follow court directions, declarations, and orders. They are sensitive to public opinion and easily embarrassed by revelations made through the litigation process. Most important of all, they can access practically unlimited wealth through taxation. Governments are, in short, perfect defendants.

In order for a class action to be certified, the court must determine that an aggregation of claims is the "preferable procedure". This in turn usually requires an examination of whether the class action will further the three objectives of class actions: access to justice, judicial economy, and behaviour modification. (3)

This paper assumes that a claim against the government will satisfy the first two criteria (which are plaintiff- and court-focused) in much the same way as would an equivalent claim against a private entity. That is to say, class actions against the government serve compensation and system efficiency goals regardless of the identity of the defendant.

What is of immediate interest, however, is whether behaviour modification--i.e. deterrence--will be the same in both contexts. If so, then there is no need for a court to take into account the identity of a government defendant in assessing certification. However, if there are differences, then it would follow that in some cases a class action which might be "preferable" when the defendant is a private company would not be "preferable" when the defendant is the government.

That is in fact a conclusion that we urge. In this paper, we suggest that the deterrence effects on government in almost any tort action based on past misbehaviour are so uncertain as to be virtually moot, and that at any rate the theoretical basis for deterrence applied to market participants has little or no application to most government activity. This observation might be irrelevant with respect to an individual action, as governments have, for whatever reason, bound themselves to the same rules as ordinary litigants. Only class actions require that the court consider deterrence effects before permitting a claim to proceed. When the courts do so, we believe they will conclude that class actions against the government are often ineffective at behaviour modification. In such circumstances, class proceedings will only be "preferable" to the extent that the benefits they afford with respect to access to justice or judicial economy outweigh the costs of the action.

So are these two criteria, the promotion of judicial economy and access to justice, sufficient to justify aggregate actions? It seems self-evident that judicial economy in government claims, as in claims against private entities, is really only furthered when the claims are significant enough to be individually viable. (4) Access to justice is primarily a question of access to compensation, and should generally be weighed as such. Sometimes class actions are a good way to compensate claimants; often they are not. The one remaining issue is whether the non-compensatory aspects of access to justice are of sufficient importance to justify the public investment in the proceeding. (5) But again, these considerations weigh differently when the government is the defendant, and the public thereby the insurer.

On this last point--access to justice--we point out an important countervailing consideration also unique to claims against the government. That is, there may be a particular advantage in the restraint of ongoing wrongful governmental activity that will weigh in favour of certification, even despite the muted deterrence effects and even in the absence of strong compensation-based justification. Where government activity would go unrestrained without legal intervention, and where that intervention would not occur absent the scale economy (and perhaps--in some jurisdictions anyway--the costs rules advantages) of the class action, this might weigh in favour of certification where the government is a defendant.

These observations do not lead to a series of easy conclusions. However, they do speak to the necessity of viewing class actions in a considerably different light in most cases where the government is the defendant.

UNDERSTANDING THE REGULATORY ROLE OF CLASS ACTIONS

1. Overview of the Deterrence-Centred Premises of this Paper

   There are four premises underlying the first main theme of this paper, which is that courts ought to assess deterrence effects differently (and carefully) when considering the certification of class actions against the government.

   The first premise is that deterrence, or "behaviour modification", has always been considered an important objective of class actions and one to be weighed when determining whether a class action is the "preferable procedure" at the time of certification. The second is the expectation that tort law effects deterrence through the internalization of the costs of harm in defendants. The third premise is a recognition that class actions work by more efficiently internalizing the cost of harm. Our view of this is consistent with a strong "public law model" or "regulatory approach" to class actions, but is not dependent on such a model. Finally, at this stage, we propose the fourth premise that the government possesses unique characteristics that make traditional models of internalization-based tort deterrence inapt.

2. Discussion

   (A) Behaviour Modification is an Element of the Preferability Analysis

   Although specific provisions vary somewhat among provincial class action statutes, one of the common criteria which must be satisfied in order to certify a class action in Canada is that the class action be the "preferable procedure" for resolution of the common issues. (6)

   Some class action statutes, those in Ontario, Manitoba and Saskatchewan, do not provide specific guidance in assessing the preferability of class actions. In the leading case of Hollick v. Metropolitan Toronto, the Supreme Court of Canada found that in the absence of legislative guidance, "the preferability inquiry should be conducted through the lens of the three principal advantages of class actions--judicial economy, access to justice, and behaviour modification." (7)

   The first purpose, judicial economy, refers to the efficient handling of potentially complex cases of mass wrongs. The second objective is to provide improved access to the courts for those whose actions might not be asserted without the economy of scale afforded by class actions. The third objective of class action litigation is to modify the behaviour (or deter) actual or potential wrongdoers who might otherwise be tempted to ignore their public obligations. (8) "Behaviour modification" in this context thus has both specific and general deterrence ambitions. The criteria were not invented by the Supreme Court in Hollick; they have their Canadian origin in the Ontario Law Reform Commission report of 1982, which originally posited class proceedings legislation in that Province and remains the seminal work on class proceedings in the Canadian context. (9)

   In those jurisdictions that have not enacted class proceedings legislation, the Maritime provinces and the Territories (known as "Dutton jurisdictions" (10)), the same objectives will be considered by the Court when deciding whether to certify a representative action under the Rules of Court. (11)

   In contrast to the statutes in Ontario, Manitoba and Saskatchewan, and to the approach taken in Dutton jurisdictions, the British Columbia, Newfoundland, Alberta and Federal Court legislation provides a list of factors that must be considered, along with any other relevant factors, when considering the "preferability" of the class action. (12) These specific factors are:

   (a) whether questions of fact or law common to the members of the class predominate over any questions affecting only individual members;

   (b) whether a significant number of the members of the class have a valid interest in individually controlling the prosecution of separate actions;

   (c) whether the class proceedings would involve claims that are or have been the subject of any other proceedings;

   (d) whether other means of resolving the claims are less practical or less efficient; and

   (e) whether the administration of the class proceedings would create greater difficulties than those likely to be experienced if relief were sought by other means.

   In these provinces where class proceedings Acts set out specific provisions to guide the preferability assessment, it remains open to the courts to also make reference to the three objectives of class actions identified by the Supreme Court of Canada (i.e. judicial economy, access to justice, and behaviour modification) in addition to the criteria set out in the respective statutes. The three criteria have been repeatedly referenced as underlying the Acts of all Provinces, and, as noted, the "common law class action" designed in Dutton. (13) In British Columbia, at least, it appears that the Supreme Court has considered the three...