Determining a Fair Price for Carriage?: Applying a 'fee-driven' Factor and Reverse Auctions to Adjudicating Carriage Motions in Ontario

• Author: Timothy Law
• Pages: 187-224

187

Determining a Fair Price for Carriage?: Applying

a “Fee-Driven” Factor and Reverse Auctions to

Adjudicating Carriage Motions in Ontario

Timothy Law

: Since the introduction of the Class Proceedings Act, 1992, car-

riage motions have been assessed on the basis of an indeterminate and

multi-factor test that provides a wide degree of discretion for judges. This

has resulted in inconsistent outcomes that have not promoted the test’s

consistency with the three objectives of class actions. As noted in Chu v Par-

well Investments, however, one potential remedy is to place greater emphasis

on fee arrangements in the form of a determinative “reverse auction.”

This paper proposes that courts in Ontario should seek to formalize

the goals encompassed within a new “fee-driven” factor that emphasizes

the court’s use of a reverse auction.

Judicial oversight is one dif‌ferentiating factor between how reverse

auctions have been previously applied in the United States and how this

concept is being considered in Ontario. The paper proposes that Ontar-

ian courts should cultivate this culture of judicial oversight to ensure

that any future application of a reverse auction substantively contributes

towards all three objectives of class actions. This would allow the court

to passively structure the fee-driven factor towards providing economic

savings for the plaintif‌f class and incentivizing both class counsel and

third party funders to structure more equitable funding practices.

This fee-driven factor is intended to compliment the multi-factor test

and may be introduced via incremental progress in jurisprudence. Con-

sequently, the paper’s proposal provides pragmatic options that easily

integrate with the Law Commission of Ontario’s pre-existing recommen-

dations and recent amendments to the CPA introduced by the Smarter

and Stronger Justice Act.

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189

DETERMINING A FAIR PRICE FOR

CARRIAGE?: APPLYING A “FEE-DRIVEN”

FACTOR AND REVERSE AUCTIONS TO

ADJUDICATING CARRIAGE MOTIONS IN

ONTARIO

Timothy Law*

A. INTRODUCTION

Since the initial introduction of the Ontario Class Proceedings Act, 1992,1

class actions have been an evolving area of law, largely with the purpose

of maximizing the three primary objectives of access to justice, behaviour

modif‌ication, and judicial economy. While certain aspects of class actions

have seen dramatic reforms and improvements, the assessment of car-

riage motions continues to be an area where little progress has been made.

Despite the introduction of recent legislative amendments to the CPA

under the Smarter and Stronger Justice Act, 2020,2 which seek to reform

this area of class actions, carriage motions continue to be assessed on the

basis of an indeterminate multi-factor test that provides a wide degree of

discretion to judges. This results in inconsistent and unpredictable out-

comes for class counsel. As noted by Belobaba J in Chu v Parwell Invest-

ments, however, one potential remedy is to place greater emphasis on fee

arrangements by implementing determinative reverse auctions.3 As fee

1 SO 1992, c 6 [CPA].

2 Bill 161, Smarter and Stronger Justice Act, 2020, 42d Parl, 1st Sess, Ontario, 2020, cl 16

(assented to 8 July 2020), SO 2020, c 11.

3 Chu v Parwell Investments Inc, 2019 ONSC 700 at para 24 [Chu]. Note that the term

“reverse auction” as used in Chu and in this paper is distinct from prior jurisprudential

conceptualizations and rhetoric of a problematic reverse auction. As noted in the

2005 case Currie v McDonald’s Restaurants of Canada Ltd, 2005 CanLII 3360 at para 26

(Ont CA) [Currie], the problematic conceptualization of a reverse auction may be

described as a circumstance whereby a “sophisticated defendant may persuade

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