Turning the Common into the Uncommon: Supreme Court of BC Refuses Certification for Breach of Modified Standard Form Contracts
One of the most important issues in a class action certification proceeding is determining which issues are common to the class. Standard form contracts have long been held to be well suited for class action proceedings because they are identical (or nearly identical) and therefore easily meet the bar for commonality.
Recently, in 676083 B.C. Ltd. v. Revolution Resource Recovery Inc., 2019 BCSC 2007, the Supreme Court of BC (“BCSC”) distinguished true standard form contracts from contracts that started from a standard template but were then subject to subsequent negotiations and modifications. The BCSC went on to deny certification of issues related to breach of contract because the interpretation of the clauses at issue were not suited to a class proceeding.
Ultimately, other issues in the litigation involving a restraint of trade were found to be suitable for certification although the Court rejected 676083 B.C. Ltd.’s suitability as a representative plaintiff.
This is another in a series of alleged overcharging cases. The plaintiff alleged that Revolution Resource Recovery Inc. (“Revolution”), overcharged its commercial customers in providing waste disposal and recycling services in the Metro Vancouver Regional District (“MVRD”). Revolution entered into Customer Service Agreements (“CSAs”) with thousands of customers in the MVRD.
Starting in April 2015, Revolution began implementing a surcharge of 18% of their customers’ monthly bills in order to offset a variety of charges related to compliance with banned waste material policies implemented by municipal authorities. The plaintiff alleged that the CSAs only allow Revolution to recover actual fines, levies, or surcharges imposed by municipal authorities and not operational costs related to their compliance efforts.
When negotiating CSAs with new customers, Revolution started with one of several standard form contract templates, depending on the services requested, and then altered the templates as they negotiated with their clients. As terms were agreed to, Revolution would routinely make handwritten alterations to the template and would routinely strike out, amend, supplement, and add terms to the contract.
Commonality of the Modified Standard Form Contracts
Under s. 4(1)(c) of the Class Proceedings Act, R.S.B.C. 1996, c. 50, an issue can only be certified and proceed by way of a class action if the issue is common to some members of a class or a sub-class. Standard form contracts are often targeted in class action proceedings as they contain identical terms and therefore issues around interpreting those terms can be determined on a class-wide basis.
The Court noted that many of the modifications made to the templates were consequential to the proposed issues for certification and went to the heart of the claim. Importantly, the Court noted that the interpretation of the term at issue may depend on other terms, including other modified pre-printed terms, which would make a tentative answer in a class proceeding subject to further inquiry around how the modified terms affect such an answer.
By modifying a significant amount of the contracts through negotiations with their clients, the Court ruled that the contracts were not offered on a “take or leave it” basis, like other standard form or consumer contracts, and only formed a starting point for further negotiations. This was a significant factor in determining that the CSAs were not in fact a standard form contract.
Taking all these factors into consideration, the Court recognized that even if the contracts are not identical and if answering the issue to be certified may not assist the entire class, this will not automatically result in a refusal to certify. However, the Court determined that it could only answer the question of whether the contract had been breached in this case by making assumptions about what the outcome of several individual inquiries might be. Accordingly, issues related to breach of contract were not suitable common issues.
In determining whether common issues related to restraint of trade existed, the Court also analyzed whether the interpretation of certain pre-printed terms in the CSAs related to termination of the CSA was a common issue. However, on this issue, the Court ruled that the effect of the impugned terms did not depend on the negotiations between Revolution and their clients and were therefore an appropriate common issue that would aid in advancing the litigation.
Businesses who use standard template as the basis for negotiations with their clients should keep in mind that modifying terms on a superficial basis may not be enough to remove the issues from the realm of the common. But, where material terms are altered, this can have a significant bearing on whether a case is certified, especially in respect of breach of contract issues.