Class Proceedings, Gains-based Claims, and Deterrence

AuthorJohn J. Chapman & Patti Shedden
John J. Chapman and Patti Shedden1
The common law knows individuals only … It tries questions of the
highest social import as mere private controversies between John Doe
and Richard Roe. And this compels a narrow and one-sided view …2
Class proceeding legislation creates no new cause of action. It is solely
Class proceeding legislation is solely procedural and does not supple-
ment or derogate from the substantive rights of the parties.4
The proposition that class proceeding legislation does not alter the sub-
stantive law has been so frequently repeated5 in the case law that it might
1 John J. Chapman and Patti Shedden, Miller Thomson LLP. A draft of this
article was presented as part of a Law Society of Upper Canada continuing legal
education seminar, “Remedies and Damages,” on 6 March 2007. This article
was finalized before the release of the Ontario Court of Appeal’s decision in
Markson v. MBNA Canada Bank, [2007] O.J. No. 1684 (C.A.), and does not
incorporate its comments on aggregate assessment damages. Many of the issues
discussed in this paper are far from settled in the law. This article should thus
be viewed with more than the normal caution.
2 Roscoe Pound, “Do We Need a Philosophy of Law?” (1905) 5 Colum. L. Rev.
339 at 346, quoted in “Developments in the Law: Class Actions” (1976) 89
Harv. L. Rev. 1318 at 1353 [“Developments in the Law”].
3 Bendall v. McGhan Medical Corp (1993), 14 O.R. (3d) 734 at 739 (Gen. Div.).
4 Ontario New Home Warranty v. Chevron (1999), 46 O.R. (3d) 130 at para. 50
5 The Supreme Court has recently also said this in Bisaillon v. Concordia
University, 2006 SCC 19 at para. 17 [Bisaillon]. See also, to the same effect,
Millgate Financial Corp. v. B.F. Realty Holdings Ltd., [1998] O.J. No. 4537;
Anderson v. Wilson, [1997] O.J. No. 548 (Gen. Div.), var’d (1998), 37 O.R. (3d)
235 (Div. Ct.) [Anderson]; Abdool v. Anaheim Management, [1993] O.J. No. 1820
(Gen. Div.); Price v. Panasonic Canada, [2002] O.J. No. 2362 (S.C.J.); Chadha
now be thought by some to be cast in stone. There is little doubt that on
one level the statement is entirely correct: a simple reading of the Ontario
Class Proceedings Act, 19926 will quickly convince any lawyer that it does
not purport to change the substantive law in any particular area. Statutory
interpretation, however, has its limits. Indeed, from time to time it can
be positively misleading if it is not tempered by some considerations of
how the court process actually works. In the authors’ view it is wrong to
suggest that the advent of class proceedings will not powerfully impact
on the development of many areas of our substantive law.
There are a number of factors that lead to this. First, prior to class
proceeding legislation there were entire areas of our substantive law that
could never be explored by our courts because cases could not practically
be brought.7 This is no longer the case. Blank areas in our law will be
filled in as previously undiscussed legal issues come forward for decision.
Second, in class proceedings there will be unexpected impacts of legal
doctrines developed elsewhere in our private law of obligations. We may
need to re-examine the foundation and boundaries of those doctrines to
judge their worth in a new setting. As a form of public litigation, class
proceedings sometimes raise considerations over and above those that
emerge in traditional litigation. A balancing of concerns amongst differ-
ent segments of society may be involved. One who is optimistic about our
court system might say that courts in class proceedings “are more likely
to see both the significance of the claims of a plaintiff and the conse-
quences of imposing liability on a defendant, and thus are more likely to
arrive at a substantively just conclusion.”8 Our substantive law has always
developed in response to perceived societal needs. As society changes,
v. Bayer, [2001] O.J. No. 1844 (Div. Ct.), aff’d (2003), 63 O.R. (3d) 22 (C.A.)
[Chadha]; Serhan Estate v. Johnson & Johnson (2004), 72 O.R. (3d) 296 (S.C.J.),
aff’d [2006] O.J. No. 2421 (Div. Ct.), leave to appeal dismissed to both the
Court of Appeal (16 October 2006) and the Supreme Court of Canada, [2006]
S.C.C.A. No. 494 [Serhan]; Reid v. Ford Motor Co., [2006] B.C.J. No. 993 (S.C.).
6 Class Proceedings Act, 1992, S.O. 1992, c. 6 [Ontario Class Proceedings Act]. The
Acts in the other common law provinces are broadly similar to the Ontario Act,
for the purposes of this article, although there will be some technical differ-
7 The provision creating civil liability for prospectus misrepresentation was put
into the Ontario Securities Act, R.S.O. 1990, c. S.5, in 1978. There were no
civil cases considering the proper application of the relevant sections of the
Securities Act until Danier Leather, [2004] O.J. No. 1916 (S.C.J.). A number of
significant legal questions emerged as a result of the trial. These questions will
not finally be answered until the Supreme Court of Canada delivers its reasons.
8 “Developments in the Law,” above note 2 at 1353.
VOL UME 4, No 1, JUlY 2007 49
and as the types of claims before our civil courts change, the law adapts
to new challenges and realities. Just as courts have in the past altered the
substantive law in the context of individual disputes to correct perceived
injustices, there is no reason to expect that they will not do so when
faced with mass wrongs which they believe call for a remedy. A court, if
left with a choice of throwing up its hands in despair or protecting the
public,9 may opt to change the law in a way that protects the public.
The courts have unanimously held that one of the goals of class
proceeding legislation is behaviour modification.10 The goal of behav-
iour modification is a wide one — it is directed both specifically at the
defendant who is before the court and more generally at other similarly
situated actors in society.11 Behaviour modification is a substantive value.
What is more, it is “a significant departure from the traditional view in
which the more or less exclusive purpose of a civil proceeding is to afford
injured parties a means to compensation.”12 To be sure, by compelling the
wrongdoer to pay for the damages it has caused, a deterrent effect is also
indirectly created. However, in most areas of civil obligations this is an
ancillary benefit rather than the purpose of the law.13 There are, of course,
9 Barrick Gold Corp. v. Lopehandia (2004), 71 O.R. (3d) 416 (C.A.).
10 Western Canadian Shopping Centres v. Dutton, [2001] 2 S.C.R. 534 at paras. 27–
29: “Without class actions, those who cause widespread but individually mini-
mal harm might not take into account the full costs of their conduct because
for any one plaintiff the expense of bringing the suit would far exceed the
likely recovery. Cost sharing decreases the expense of pursuing legal recourse
and accordingly deters potential defendants who might otherwise assume
that minor wrongs would not result in litigation.” The Ontario Law Reform
Commission in its Report on Class Actions (Toronto: Ministry of the Attorney
General, 1982) [OLRC Report] had expressed similar sentiments.
11 Pearson v. Inco, [2005] O. J. No. 4918 at paras. 85–91 (C.A.), leave to appeal to
S.C.C. refused, [2006] S.C.C.A. No. 1 [Pearson].
12 Hon. Robert J. Sharpe, “Commercial Law Damages: Market Efficiency or
Regulation of Behaviour?” in Law Society of Upper Canada Special Lectures
2005: The Modern Law of Damages (Toronto: Irwin Law, 2006) at 348.
13 In the tort context, see Allen M. Linden & Bruce Feldthusen, Canadian Tort
Law, 8th ed. (Markham, ON: LexisNexis Butterworths, 2006) at 6–13 for a dis-
cussion of compensation and deterrence. In contract, see S. Waddams “Breach
of Contract and the Concept of Wrongdoing” (2000) 12 Sup. Ct. L. Rev. (2d)
1 at 7–13. In British Columbia v. Canadian Forest Products Ltd., [2004] 2 S.C.R.
74 at para. 59 [Canadian Forest] the Court stated: “in assessing compensatory
damages for environmental loss, the Court ought not to be engaged merely in
punishment of the wrongdoer (which is the domain of regulatory offences)
or imputing losses based on little more than a generalized desire to mete out
rough justice to a tortfeasor.”

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