Dismissal of a certification application on the merits prevents certification for settlement
When a proposed class action is settled before certification, the parties often apply to certify the action for the purpose of settlement. This lets the settlement bind the entire class (save those who opt out), which is often desirable for defendants (because the class members cannot later pursue individual claims). While actions certified for the purpose of settlement must still meet the certification criteria of class actions legislation, certification for the purpose of settlement is rarely refused.
But it was refused in Leonard v. The Manufacturers Life Insurance Company, 2019 BCSC 598. The court held that it could not certify an action for the purpose of settlement—even though all parties wanted that result—because the court had previously dismissed a certification application on the merits (in 2016 BCSC 534).
The parties in Leonard negotiated a settlement after the plaintiffs appealed the dismissal of the certification application. The parties considered a consent appeal, but were apparently dissuaded by the Court of Appeal Registry. In Leonard, the court described a consent appeal as “sensible” and held that it would have resolved the issue (para. 12.).
Instead of pursing the consent appeal, the plaintiffs asked the trial court to set aside its earlier order and certify the action for the purpose of settlement.
The plaintiffs relied on s. 9(c) of BC’s Class Proceedings Act, which allows a court to “make any other order that it considers appropriate” after denying a certification application. The court rejected that argument: Orders under s. 9(c) can be made only for the purpose of allowing an action to continue as something other than a class action.
The plaintiffs also argued that the court had the inherent jurisdiction to revisit its earlier order. Again, the court disagreed—even if it had the jurisdiction to set aside the order dismissing the certification application, it could do so only to prevent a miscarriage of justice. The parties’ consent was irrelevant.
While certifying the action for settlement may have helped the parties (and charities, given the proposed cy-près settlement), the court held that it was not necessary to avoid a miscarriage of justice. The court found that the parties could still settle the litigation and noted that there were similar proposed class actions in other provinces (authorization has since been denied in the Quebec action).
Indeed, the issue of whether a court can revisit a refusal to certify an action may be even more significant in other provinces. Ultimately, the plaintiffs in Leonard could simply abandon the action. But they could not do so if the case had been brought in some other provinces. For example, under Ontario’s legislation, abandoning any action started under class actions legislation requires court approval (s. 29).
Finally, the Leonard plaintiffs have appealed. In addition to the other issues raised by the case, the Court of Appeal will have a chance to address the possibility of consent appeals. Stay tuned!