Constitutional Consideration Concerning National Class Actions

• Author: S. Gordon McKee and Jeff Galway
• Profession: Partners in the litigation department of the Toronto office of Blake, Cassels & Graydon, LLP
• Pages: 27-65

Constitutional Considerations

Concerning National

Class Actions

S.

Gordon McKee

and

Jeff

Galway*

A.

INTRODUCTION

One of the

most important developments

in

civil litigation

in

Canada

over

the

past

five

years

has

been

the

growth

in

class action litigation.

While

only three provinces

(Quebec,

Ontario,

and

British Columbia)

have

passed

class action legislation

to

date,1

superior court judges

in

these

provinces, particularly

Ontario,

have demonstrated

a

marked

willingness

to

certify

"national"

classes.2

Orders

of

this type raise inter-

esting

constitutional

questions

as to the

limits

on a

provincial superior

Partners

in the

litigation department

of the

Toronto

office

of

Blake,

Cassels

&

Graydon,

LLP.

1

Art.

999-1030

C.C.P.;

ClassProceedings

Act,

1992,

S.0.1992,

c. 6;

Class

Proceedings

Act,

S.B.C.

1995,

c. 21;

class proceedings legislation

is

currently

under consideration

in

Manitoba

and

Saskatchewan,

and

rule amendments

to

permit class

proceedings

in the

Federal Court

of

Canada have been

proposed:

see

Federal Court

of

Canada Rules Committee, Class Proceedings

in the

Federal

Court

of

Canada, (Ottawa: Federal Court

of

Canada,

2000).

2

Reference

to a

"national" class

in

this paper will

be to a

class

action that

includes

at

least

one

party

who is not

resident

in the

province

and has not

vol-

untarily

agreed

to

appear.

In an

opt-out regime, this

will

include

plaintiff

classes

where

one or

more members reside outside

the

forum

province.

In

both

an

opt-in

and

opt-out regime,

it

will include class actions against non-

resident defendants.

27

*

28

S.

Gordon

McKee

and

Jeff

Galway

court's ability

to

certify

a

class action that

includes,

and

binds,

individ-

uals

or

corporations resident outside

of

that province.

The

following example

highlights

the

complexity

of

this issue.

Assume

that

a new

medical procedure

is

developed

in the

United States

for

the

treatment

of

heart disease. Given that this procedure

is not yet

available

in

Ontario,

the

Ontario Health Insurance Plan

(hereinafter

OHIP)

enters into

an

agreement with

a

particular clinic

in the

Buffalo

area

to

administer

the new

procedure

to

Ontario residents. While other

provinces

refuse

to

fund

the

procedure, Canadian residents

from

across

the

country travel

to the

clinic,

at

their

own

expense,

to

obtain treat-

ment. Unfortunately,

it is

subsequently discovered that

the

procedure

causes severe side

effects.

A

class action

is

later started

in

Ontario

against

the

clinic

by an

Ontario resident

on

behalf

of

himself

and on

behalf

of all

Canadians

who

obtained treatment

at the

clinic.

In

the

above example,

can the

U.S. clinic, which carries

on no

busi-

ness

in

Ontario

and

otherwise

has no

presence

in the

province,

object

to

Canadian residents outside

of

Ontario being members

of the

Ontario

plaintiffs'

class, given that their claims individually have

no

connection

to

Ontario? Does

the

mere

fact

that there

may be

common factual

and

legal

issues

give

the

Ontario court jurisdiction

to

certify

a

national class?

For

Canadian

residents

outside

of

Ontario

who do not opt out of the

class, whether through choice, lethargy,

or

ignorance,

can

they

enforce

a

favourable

Ontario

judgment

against

the

U.S. clinic

in

jurisdictions out-

side

of

Ontario? What

if the

U.S. clinic successfully defeats

the

Ontario

class

action? Does that judgment preclude

a

non-Ontario resident,

who

was a

member

of the

class,

from

proceeding with

an

action

in his

home

province?

Finally, what happens

if

similar class actions

are

commenced

in

British Columbia and/or Quebec with duplication

of

class members?

These questions

are not

answered

in

class action statutes

of

Quebec,

Ontario,

or

British Columbia

nor

have they

yet

been definitively

answered

by

Canadian appellate courts. This paper addresses

two

ques-

tions:

First,

what

are the

constitutional limits

on the

composition

of a

plaintiffs'

class under provincial legislation? Second, what ability does

Parliament

have

to

pass

uniform

class action legislation making

the

class

action process available

to all

Canadians

to

address wrongs with

a

pan-Canadian

impact?3

3

This

paper does

not

address

whether

Parliament

or the

Federal

Court

of

Canada

Rules

Committee

can

create

class

proceedings

for

actions

that

other-

wise

fall

within

the

jurisdiction

of the

Federal

Court.

However,

the

analysis

in

this

paper

may be

applicable

to

determine

the

power

of the

Federal

Court

under

any

such

legislation

to

certify

"world-wide"

(i.e.,

extra-Canadian)

classes.

Constitutional

Considerations

Concerning

National

Class

Actions

29

With

respect

to the

first

question,

the

Supreme Court

of

Canada

in

Morguard

Investments

Ltd.

v. De

Savoye4

expanded

the

traditional limits

on the

adjudicatory/judicial

jurisdiction

of

provincial courts

to

actions

that have

a

"real

and

substantial connection" with

the

forum

province,

while confirming that courts with

an

insufficient

connection

to the

par-

ties

or the

subject matter

of the

action will have

no

jurisdiction.

In

reviewing

the

recent case

law

where national class actions have been

certified,

the

authors

of

this

paper assert

the

view that

the

superior court

judges

who

have certified national classes have

not

been rigorous

enough

in

their application

of

Morguard

principles

in

terms

of

their will-

ingness

to

assert jurisdiction over non-resident parties. Based

on

Morguard,

the

authors

are of the

view that

a

provincial court cannot,

under provincial class action legislation,

certify

national classes

unless

the

claims

of

each member

of the

plaintiffs'

class have

a

"real

and

sub-

stantial

connection"

to the

forum

province, based

not on

matters

of

con-

venience

but on the

connections

to the

events

and

parties

at the

time

each cause

of

action

arose.5

With

respect

to the

second issue concerning

Parliament's

jurisdic-

tion

to

pass national class action legislation, some support

for

this posi-

tion can be found in Morguard6 as well as the later Supreme Court of

Canada decision

in

Hunt

v. T&N

Pic.7

For

reasons developed below,

however,

the

authors

are of the

view that neither

the

peace, order,

and

good government power

nor the

trade

and

commerce power

in

section

91(2)

of the

Constitution

Act,

1867

provides

a

supportable constitutional

basis

for

such legislation.

4

[1990]

3

S.C.R.

1077 [hereinafter

Morguard].

5

The

impact

of

this conclusion

on

certification

is

that jurisdiction will

be,

as we

submit

it

always

has

been,

an

individual issue. Unless uncontroverted evi-

dence

can be

adduced

at the

certification

motion

(often

based

on the

plead-

ings) that

the

forum

court

has

jurisdiction over

the

claims

of

each class

member

based

on

traditional rules

(i.e.,

attornment

to

each claim)

or the

claims

of

each

class

member

have

a

real

and

substantial connection

to the

forum

province,

the

certification

order should

limit

the

class

to

persons with

such

claims

and

leave determination

of who

falls

within

the

class

to be

decid-

ed

after

resolution

of the

common issues.

6

Ibid.

7

[1993]

4

S.C.R.

289

[he

rinafter

Hunt}.