Fischer et al. v. IG Investment Management Ltd. et al., (2013) 452 N.R. 80 (SCC)

• Judge: McLachlin, C.J.C., LeBel, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner, JJ.
• Court: Supreme Court (Canada)
• Case Date: April 18, 2013
• Jurisdiction: Canada (Federal)
• Citations: (2013), 452 N.R. 80 (SCC);2013 SCC 69

Fischer v. IG Inv. Mgt. Ltd. (2013), 452 N.R. 80 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2013] N.R. TBEd. DE.004

AIC Limited (appellant) v. Dennis Fischer, Sheila Snyder, Lawrence Dykun, Ray Shugar and Wayne Dzeoba (respondents)

CI Mutual Funds Inc. (appellant) v. Dennis Fischer, Sheila Snyder, Lawrence Dykun, Ray Shugar and Wayne Dzeoba (respondents)

(34738; 2013 SCC 69; 2013 CSC 69)

Indexed As: Fischer et al. v. IG Investment Management Ltd. et al.

Supreme Court of Canada

McLachlin, C.J.C., LeBel, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner, JJ.

December 12, 2013.

Summary:

The Ontario Securities Commission took enforcement proceedings against five mutual fund managers for failing to act in the public interest in relation to "market timing" activity in their funds. All the defendants entered into settlement agreements with the Commission pursuant to which they paid $205.6 million in compensation directly to their investors. All of the settlements specified that they were without prejudice to the rights of any person to bring civil or other proceedings against the mutual fund managers respecting the same subject matter. The settlements were approved by the Commission as being in the public interest. Plaintiffs commenced an action against the mutual fund managers and moved to have the action certified as a class action. Three of the five managers entered into settlement agreements with the plaintiffs. According to the method of calculation preferred by the plaintiffs' expert, the claim against the remaining managers, over and above the settlements with the Commission, was $333.8 million.

The Ontario Superior Court, in a decision reported at [2010] O.T.C. Uned. 296, dismissed the motion where the plaintiffs had not established that a class proceeding was the preferable procedure. In making the determination, the court found that there was an identifiable class and, subject to two qualifications, accepted the definition of that class as proposed in the plaintiffs' "Option A". The plaintiffs appealed the motion's dismissal. They also asserted that the motion judge erred in determining the common issues and that the two qualifications to their definition of the class constituted errors in principle that should be set aside.

The Ontario Divisional Court, in a decision reported at 276 O.A.C. 84, compared the level of recovery in the proceedings before the Commission with the quantum of damages claimed in the class action and concluded that the proceedings before the Commission could not be the preferred procedure as substantial recovery could still be achieved by way of the class action. The court allowed the appeal and issued a certification order on the condition that the motion judge approve a revised litigation plan. The class definition was to include the definition of the market timers which were excluded and there was not to be a specific prohibition against future amendments to exclude others from the class. The common issues were to be as directed by the motion judge. The managers obtained leave to appeal and appealed.

The Ontario Court of Appeal, in a decision reported at 287 O.A.C. 148, upheld the Divisional Court's decisions, but for substantially different reasons. The court's analysis focused on comparing the class members' procedural rights in class proceedings with the regulatory nature and limited participatory rights of investors in the proceedings before the Commissions. The managers obtained leave to appeal (see 438 N.R. 390) and appealed.

The Supreme Court of Canada noted that there was no dispute that the proposed class action met all of the requirements for certification except for the disputed element of whether it was the preferable procedure. The court set out an analysis for determining the preferable procedure that considered, within the proper scope of the certification process, both substantive and procedural aspects. Based on that analysis the court dismissed the appeal.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Considerations (incl. when class action appropriate) - The Supreme Court of Canada stated that "Section 5(1)(d) of the [Ontario Class Proceedings Act (CPA)] requires the court to conclude that 'a class proceeding would be the preferable procedure for the resolution of the common issues'. ... Although this provision could be read as requiring a procedure that is capable of producing a formal resolution of the common issues, that reading was rejected by the Court in [Hollick v. Metropolitan Toronto (Municipality) et al. (2001 SCC)]. McLachlin C.J., writing for the Court, made clear that the preferability requirement is broad enough to take into account 'all reasonably available means of resolving the class members' claims' including avenues of redress other than court actions (para. 31). An alternative process need not necessarily decide the precise legal and/or factual questions raised by the common issues provided that it effectively resolves the class members' claims. This broad understanding of the preferability requirement is critical in cases like this one in which individual court actions are not a viable option." - See paragraph 19.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Considerations (incl. when class action appropriate) - The Supreme Court of Canada stated that "In order to determine whether a class proceeding would be the preferable procedure for the 'resolution of the common issues' [Ontario Class proceedings Act, s. 5(1)(d))], those common issues must be considered in the context of the action as a whole and 'must take into account the importance of the common issues in relation to the claims as a whole': [Hollick v. Metropolitan Toronto (Municipality) et al. (2001 SCC)] ... McLachlin C.J. in Hollick accepted the words of a commentator to the effect that in comparing possible alternatives with the proposed class proceeding, 'it is important to adopt a practical cost-benefit approach to this procedural issue, and to consider the impact of a class proceeding on class members, the defendants, and the court' ..." - See paragraph 21.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Considerations (incl. when class action appropriate) - The Supreme Court of Canada stated that "In [Hollick v. Metropolitan Toronto (Municipality) et al. (2001 SCC)], McLachlin C.J. indicated that the preferability inquiry had to be conducted through the lens of the three principal goals of class actions, namely judicial economy, behaviour modification and access to justice (para. 27). This should not be construed as creating a requirement to prove that the proposed class action will actually achieve those goals in a specific case. Thus, when undertaking the comparative analysis, courts must focus on the statutory requirement of preferability and not impose on the representative plaintiff the burden of proving that all of the beneficial effects of the class action procedure will in fact be realized. ... This is a comparative exercise. The court has to consider the extent to which the proposed class action may achieve the three goals of the [Ontario Class Proceedings Act (CPA)], but the ultimate question is whether other available means of resolving the claim are preferable, not if a class action would fully achieve those goals. This point is well expressed in one U.S. Federal Court of Appeals judgment and it applies equally to CPA proceedings: 'Our focus is not on the convenience or burden of a class action suit per se, but on the relative advantages of a class action suit over whatever other forms of litigation [and, I would add, dispute resolution] might be realistically available to the plaintiffs': [Klay v. Humana, Inc. (11th Cir. 2004)] ...". - See paragraphs 22 and 23.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Considerations (incl. when class action appropriate) - The Supreme Court of Canada stated that "There is no doubt that access to justice is an important goal of class proceedings. But what is access to justice in this context? It has two dimensions, which are interconnected. One focuses on process and is concerned with whether the claimants have access to a fair process to resolve their claims. The other focuses on substance - the results to be obtained - and is concerned with whether the claimants will receive a just and effective remedy for their claims if established. They are interconnected because in many cases defects of process will raise doubts as to the substantive outcome and defects of substance may point to concerns with the process. As the Honourable Frank Iacobucci put it, 'access to justice must contain both a procedural and a substantive component. I find it difficult to accept that providing injured parties with a process to pursue their claims can be divorced from ensuring that the ultimate remedy arising from the process provides substantive justice where warranted': [What Is Access to Justice in the Context of Class Actions?', in Accessing Justice: Appraising Class Actions Ten Years After Dutton, Hollick & Rumley (2011)] ... While it may be analytically convenient to look at process and substance considerations separately, this must not be done at the expense of an overall assessment of the access to justice implications of the proposed class action." - See paragraph 24.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Considerations (incl. when class action appropriate) - The Supreme Court of Canada stated that "The correct approach ... must include both substantive and procedural aspects in assessing whether a class action is the preferable procedure. The focus cannot be exclusively on process: a process may be fair but nonetheless not offer a real opportunity to recover compensation for all of the losses suffered. In other words, in some cases even if the process is fair, there will remain significant obstacles to recovery. In addition, an absence of a fair process may also heighten concerns about whether substantive justice has or will be done. Of course, as we shall see, consideration of these aspects must respect the limited scope of the certification process." - See paragraph 25.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Considerations (incl. when class action appropriate) - The Supreme Court of Canada stated that a class action would serve the goal of access to justice if (1) there were access to justice concerns that the class action could address; and (2) those concerns remained even when alternative avenues of redress were considered - The court set out the following series of questions to help determine whether both of those elements were present, noting that the questions were not to be considered in isolation or in specific order, but should inform the overall comparative analysis: (1) What were the barriers to access to justice? (2) What was the potential of the class proceedings to address those barriers? (3) What were the alternatives to class proceedings? (4) To what extent did the alternatives address the relevant barriers? (5) How did the two proceedings compare? - The court discussed each of the questions - See paragraphs 26 to 38.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - The Ontario Securities Commission (OSC) took enforcement proceedings against five mutual fund managers for failing to act in the public interest respecting "market timing" activity in their funds - The managers settled with the OSC and paid compensation directly to their investors without prejudice to the rights of any person to bring civil proceedings against the managers - Investors sued the managers and moved to have the action against two of them certified as a class action - A motions judge dismissed the motion where the investors had not established that a class proceeding was the preferable procedure (Ontario Class Proceedings Act, s. 5(1)(d)) - The Supreme Court of Canada affirmed that the motions judge erred in his analysis and judicial intervention was warranted - There were two potential barriers to access to justice - First, an economic barrier arose from the small claims nature of the claims - The individual claims were too small to support viable individual actions - Access to justice required access to a process that had the potential to provide in an economically feasible manner just compensation for the class members' individual economic claims should they be established - The second barrier was related to the first - The regulatory nature of, and the limited participation rights for investors in the OSC proceedings, coupled with the lack of information about how the OSC staff assessed investor compensation, supported the conclusion that significant procedural access to justice concerns remained which the proposed class action could address - Moreover, the focus and nature of the OSC process reinforced concerns about whether substantial access to justice was achieved - Giving the substantive outcome of the OSC proceedings the substantive weight it deserved reinforced the conclusion that the action should be certified - The investors had to establish "some basis in fact" to think that the class proceedings were preferable to the alternative - The motion judge was satisfied that there was some basis in fact for the assertion that the investors might not have been fully compensated as a result of the settlements - In the investors' expert's view, the investors had received either 31% or 14% of the compensation that they were entitled to - There was no reason to believe that potential additional recovery would be consumed by the costs of the proceedings - The investors had provided an appropriate basis to support the view that the class action would overcome access to justice barriers and that a cost-benefit analysis supported the conclusion that the class proceedings were the preferable proceeding - The deference owed to the motion judge did not protect the decision against review as the judge made errors in principle that were directly relevant to the conclusion reached - See paragraphs 50 to 65.

Practice - Topic 209.7

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Evidence and proof - The Supreme Court of Canada reviewed the "some basis in fact" standard of proof respecting the preferability requirement on a motion for certification as a class action - That standard did not require the court to resolve conflicting facts and evidence at that stage - Further, it could not be used in a vacuum - There was limited utility in attempting to define the standard in the abstract - Each case had to be decided on its own facts - The jurisprudence emphasized the importance of not allowing the requirement to establish "some basis in fact" to lead to a more fulsome assessment of the contested facts going to the case's merits - The limited scope of the factual inquiry meant that the motions court would often be unable to compare the potential recoveries in the class action and the alternative(s) to it - However, here, the potential alternative procedure had run its course and the results of it were known with certainty - This might be seen as inviting a comparison of those known results with the likely outcome of the proposed class action to determine if the plaintiffs had achieved full, or at the very least substantially full, recovery - However, the allure to that approach faded when due attention was given to the certification process's nature and limitations - The process was not the occasion for a searching examination of the comparison - Without that sort of examination, the most that could be done was to assess on the appropriately limited evidentiary record whether the access to justice barriers that might be addressed by a class proceeding remained after the alternative process had run its course - Nevertheless, where an alternative process's results or limits on recovery were known, they could be considered, but within the constraints of the evidentiary basis that was appropriate on a certification motion - Where neither the alternative nor class proceedings' results were known, the comparative exercise would generally be very limited - See paragraphs 39 to 47.

Practice - Topic 209.7

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Evidence and proof - The Supreme Court of Canada stated that "The party seeking certification of a class action bears the burden of showing some basis in fact for every certification criterion ...: In the context of the preferability requirement, this requires the representative plaintiff to show (1) that a class proceeding would be a fair, efficient and manageable method of advancing the claim, and (2) that it would be preferable to any other reasonably available means of resolving the class members' claims ... A defendant can lead evidence 'to rebut the inference of some basis in fact raised by the plaintiff's evidence' ... With regard to the second aspect of the preferability requirement - that is, the comparative analysis - the representative plaintiff will necessarily have to show some basis in fact for concluding that a class action would be preferable to other litigation options. However, the representative plaintiff cannot be expected to address every conceivable non-litigation option in order to establish that there is some basis in fact to think that a class action would be preferable. Where the defendant relies on a specific non-litigation alternative, he or she has an evidentiary burden to raise it. As Winkler J. (as he then was) put it in Caputo v. Imperial Tobacco Ltd. [(2004 Ont. S.C.J.)]: '... the defendants cannot simply assert to any effect that there are other procedures that would be preferable without an evidentiary basis . . . . It must be supported by some evidence' ... However, once there is some evidence about the alternative, the burden of satisfying the preferability requirement remains on the plaintiff." - See paragraphs 48 and 49.

Practice - Topic 209.9

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Appeals - [See seventh Practice - Topic 209.3 ].

Cases Noticed:

Hollick v. Metropolitan Toronto (Municipality) et al., [2001] 3 S.C.R. 158; 277 N.R. 51; 153 O.A.C. 279; 2001 SCC 68, refd to. [para. 3].

Klay v. Humana Inc. (2004), 382 F.3d 1241 (llth Cir.), refd to. [para. 23].

Cloud et al. v. Canada (Attorney General) et al. (2004), 192 O.A.C. 239; 73 O.R.(3d) 401 (C.A.), refd to. [para. 27].

Rumley et al. v. British Columbia, [2001] 3 S.C.R. 184; 275 N.R. 342; 157 B.C.A.C. 1; 256 W.A.C. 1; 2001 SCC 69, refd to. [para. 27].

Webb v. K-Mart Canada Ltd. et al. (1999), 107 O.T.C. 373; 45 O.R.(3d) 389 (Sup. Ct.), refd to. [para. 27].

Pearson v. Inco Ltd. et al. (2005), 205 O.A.C. 30; 78 O.R.(3d) 641 (C.A.), refd to. [para. 36].

Halibi v. The Becker Milk Co. (1998), 39 O.R.(3d) 153 (Gen. Div.), refd to. [para. 36].

Pro-Sys Consultants Ltd. et al. v. Microsoft Corp. et al. (2013), 345 B.C.A.C. 1; 589 W.A.C. 1; 450 N.R. 201; 2013 SCC 57, refd to. [para. 40].

Irving Paper Ltd. v. Atofina Chemicals Inc. (2009), 99 O.R.(3d) 358 (Sup. Ct.), refd to. [para. 40].

Hague v. Liberty Mutual Insurance Co. (2004), 13 C.P.C.(6th) 1 (Ont. Sup. Ct.), refd to. [para. 40].

McCracken v. Canadian National Railway Co. (2012), 293 O.A.C. 274; 111 O.R.(3d) 745; 2012 ONCA 445, refd to. [para. 41].

1176560 Ontario Ltd. et al. v. Great Atlantic & Pacific Co. of Canada Ltd., [2002] O.T.C. 963; 62 O.R.(3d) 535 (Sup. Ct.), affd. (2004), 184 O.A.C. 298; 70 O.R.(3d) 182 (Div. Ct.), refd to. [para. 42].

Chadha v. Bayer Inc. et al. (2003), 168 O.A.C. 143; 63 O.R.(3d) 22 (C.A.), leave to appeal refused [2003] 2 S.C.R. vi; 321 N.R. 396; 191 O.A.C. 397, refd to. [para. 43].

Caputo et al. v. Imperial Tobacco Ltd. et al., [2004] O.T.C. 112; 236 D.L.R.(4th) 348 (Sup. Ct.), refd to. [para. 49].

Asbestos Corp., Société nationale de l'Amianté and Quebec (Province), Re, [2001] 2 S.C.R. 132; 269 N.R. 311; 146 O.A.C. 201; 2001 SCC 37, affing. (1999), 117 O.A.C. 224; 43 O.R.(3d) 257 (C.A.), refd to. [para. 54].

Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission) - see Asbestos Corp., Société nationale de l'Amianté and Quebec (Province), Re.

Markson v. MBNA Canada Bank (2007), 224 O.A.C. 71; 85 O.R.(3d) 321; 2007 ONCA 334, refd to. [para. 65].

Cassano et al. v. Toronto-Dominion Bank (2007), 230 O.A.C. 224; 87 O.R.(3d) 401; 2007 ONCA 781, leave to appeal refused [2008] 1 S.C.R. xiv; 386 N.R. 389; 252 O.A.C. 399, refd to. [para. 65].

Statutes Noticed:

Class Proceedings Act, S.O. 1992, c. 6, sect. 5(1) [Appendix].

Authors and Works Noticed:

Branch, Ward K., Class Actions in Canada (1998 Looseleaf Update, Release 4), para. 4.690 [para. 21].

Cullity, Maurice, Certification in Class Proceedings - The Curious Requirement of "Some Basis in Fact" (2011), 51 Can. Bus. L.J. 407, p. 417 [para. 48].

Good, Matthew, Access to Justice, Judicial Economy, and Behaviour Modification: Exploring the Goals of Canadian Class Actions (2009), 47 Alta. L. Rev. 185, p. 188 [para. 34].

Iacobucci, Frank, What Is Access to Justice in the Context of Class Actions?, in Kalajdzic, Jasminka, Accessing Justice: Appraising Class Actions Ten Years After Dutton, Hollick & Rumley (2011), p. 20 [para. 24].

Kalajdzic, Jasminka, Accessing Justice: Appraising Class Actions Ten Years After Dutton, Hollick & Rumley (2011), p. 20 [para. 24].

Ontario, Law Reform Commission, Report on Class Actions (1982), vol. I, pp. 127 to 129 [para. 27]; 139 [para. 31].

Ontario, Attorney General's Advisory Committee on Class Action Reform, Report of the Attorney General's Advisory Committee on Class Action Reform (1990), pp. 15 [para. 32]; 16, 17 [para. 33].

Rubenstein, William B., Newberg on Class Actions (5th Ed. 2011), §§ 4:65 [para. 27]; 4:85, fn. 2 [para. 23]; 4:86 [para. 20].

Counsel:

James D.G. Douglas, David Di Paolo and Margot Finley, for the appellant, AIC Limited;

Benjamin Zarnett, Jessica Kimmel and Melanie Ouanounou, for the appellant, CI Mutual Funds Inc.;

Allan C. Hutchinson, Peter R. Jervis, Joel P. Rochon and Remissa Hirji, for the respondents.

Solicitors of Record:

Borden Ladner Gervais, Toronto, Ontario, for the appellant, AIC Limited;

Goodmans, Toronto, Ontario, for the appellant, CI Mutual Funds Inc.;

Rochon Genova, Toronto, Ontario, for the respondents.

This appeal was heard on April 18, 2013, by McLachlin, C.J.C., LeBel, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner, JJ., of the Supreme Court of Canada. Cromwell, J., delivered the following judgment for the court in both official languages on December 12, 2013.