Some Comparisons Between Class Actions in Canada and the U.s.: Securities Class Actions, Certification, and Costs

• Author: Philip Anisman and Garry Watson
• Pages: 467-526

467

SOME COMPARISONS BETWEEN CLASS

ACTIONS IN CANADA AND THE U.S.:

SECURITIES CLASS ACTIONS,

CERTIFICATION, AND COSTS

Philip Anisman and Garry Watson1

A. INTRODUCTION

This paper, originally prepared for a U.S. audience,2 focuses on just three

areas of comparison of U.S. and Canadian class actions: (1) certification,

(2) fee-shifting, and (3) securities class actions. It does not deal with two

other contemporary issues: enforcement of U.S. class action judgments

and settlement orders in Canada,3 and cross-border discovery.4

1 Philip Anisman, B.A., LL.B. (Toronto), LL.M., J.S.D. (California, Berkeley),

Barrister and Solicitor, Toronto, and Garry Watson, Professor of Law, Osgoode

Hall Law School, York University, Toronto.

2 This paper was originally prepared for the ABA conference on The Future of

Class Action Litigation in America held in Washington, DC, 9–11 November

2005, as part of a panel on “Class Actions without Borders,” and entitled “Class

Actions Without Borders: Canada — ‘We are much like you, and quite dif-

ferent.’” Section D of this paper was also presented at the Osgoode Hall Law

School, York University, 3rd National Symposium on Class Actions: Class Actions

Without Borders, 6–7 April 2006 in the session on “Securities Class Actions:

New Developments and Implications.”

3 Currie v. McDonald’s Restaurants of Canada Ltd. (2005), 74 O.R. (3d) 321,

[2005] O.J. No. 506 (C.A.) and Parsons v. McDonald’s Restaurants of Canada

Ltd., [2004] O.J. No. 83 (S.C.J.). Briefly, the lessons from this litigation appear

to be the following: Canadian courts may hold Canadian class members to be

bound by a U.S. class action settlement if they were adequately represented

in the U.S. proceeding and received adequate notice of the settlement. If a

Canadian class representative intervenes in the U.S. proceedings and argues on

the merits regarding the fairness of the settlement, that person will be taken to

have attorned to the U.S. court’s jurisdiction, and will be bound by the settle-

ment, but the class members he represents will not be bound, via attornment,

at least where the Canadian class action has not yet been certified.

4 These matters were discussed in another paper prepared by Canadian col-

leagues for the ABA conference: J.J. Camp, Q.C. & Morgan Andersen (of Camp

Fiorante Matthews, Vancouver, B.C.), “The Legal Erosion of the 49th Parallel.”

468 THE CANADIAN CLASS ACTION REVIEW

Certification is important for reasons that are obvious to anyone

familiar with class actions (“no certification, no class action”). Special

attention is paid here to the certification of class actions in Quebec

because the regime in that province appears to be extremely pro-plaintiff.

Fee-shifting is examined because, generally, Canada (unlike the U.S.) is

a “fee-shifting jurisdiction.” While modifications have been made to the

“loser pays” rule in the context of class actions, parties in Ontario and

Alberta are still subject to substantial costs . Securities class actions are of

interest because of the recently effective statutory regime in Ontario that

permits class actions for secondary market activities.

B. CERTI FIC ATION OF CL ASS AC TIONS IN

CANADA: HOW IT DIFFERS FROM THE U.S.

Summary of this section: Today, class actions exist in all Canadian juris-

dictions. The Canadian class action regimes are very similar to the U.S.,

though in Canada the requirements for certification appear on their

face to be generally less restrictive. In particular, in comparison with

other U.S. and Canadian jurisdictions, Quebec appears to have the least

restrictive certification requirements. On the issue of the applicable

standards for certification on consent for settlement, Canadian courts

embrace the double standard rejected in the U.S. in Amchem Products,

Inc. v. Windsor.5

Seven Canadian provinces have class action legislation.6 Moreover, as a

result of a decision of the Supreme Court of Canada there are effectively

class actions in every province.7

5 521 U.S. 591 (1997) [Amchem].

6 Alberta: Class Proceedings Act, S.A. 2003, c. C-16.5; British Columbia:

Class Proceedings Act, R.S.B.C. 1996, c. 50 [B.C. CPA]; Manitoba: The Class

Proceedings Act, S.M. 2002, c. 14, C.C.S.M., c. C130; Newfoundland and

Labrador: Class Actions Act, S.N.L. 2001, c. C-18.1; Ontario: Class Proceedings

Act, 1992, S.O. 1992, c. 6 [Ontario CPA]; Quebec: Code of Civil Procedure,

R.S.Q. c. C-25, arts. 999–1052 [CCP]; Saskatchewan: The Class Actions Act, S.S.

2001, c. C-12.01. In addition, there are class actions in the federal court: see

the Federal Court of Canada Rules, Rules 299.1–299.42.

7 In Western Canadian Shopping Centres Inc. v. Dutton, [2001] 2 S.C.R. 534, 2001

SCC 46 [Dutton], the court held that in the absence of comprehensive legisla-

tion, the courts must fill the void under their inherent power to settle the rules

of practice and procedure as to disputes brought before them. Class actions

should be allowed to proceed under general representative action rules, the

court held, where certain conditions are met: (1) the class is capable of clear

VOL UME 3, No 2, July 2006 469

1) Canadian Certification Criteria

The following are the Ontario certification requirements,8 which are simi-

lar to those in all the provinces, other than Quebec:

CERTIFICATION

5(1) The court shall certify a class proceeding on a motion under sec-

tion 2, 3 or 4 if,

(a) the pleadings or the notice of application discloses a cause of

action;

(b) there is an identifiable class of two or more persons that would be

represented by the representative plaintiff or defendant;

(c) the claims or defences of the class members raise common

issues;

(d) a class proceeding would be the preferable procedure for the

resolution of the common issues; and

(e) there is a representative plaintiff or defendant who,

(i) would fairly and adequately represent the interests of the

class,

(ii) has produced a plan for the proceeding that sets out a work-

able method of advancing the proceeding on behalf of the class

and of notifying class members of the proceeding, and

(iii) does not have, on the common issues for the class, an inter-

est in conflict with the interests of other class members. 1992, c.

6, s. 5(1).

. . .

(5) An order certifying a class proceeding is not a determination of the

merits of the proceeding. 1992, c. 6, s. 5 (5).

British Columbia and most of the other provinces other than Ontario

and Quebec have the following additional certification provision:

(2) In determining whether a class proceeding would be the preferable

procedure for the fair and efficient resolution of the common issues, the

court must consider all relevant matters including the following:

(a) whether questions of fact or law common to the members of

the class predominate over any questions affecting only individual

members;

definition; (2) there are issues of law or fact common to all class members; (3)

success for one class member means success for all; and (4) the proposed rep-

resentative adequately represents the interests of the class.

8 Ontario CPA, above note 6, s. 5.