Location, Location, Location: One Reason Jurisdiction Matters for Proposed Class Actions

When does an action become a class action? The answer depends on what jurisdiction the Plaintiff has advanced her claim, as illustrated by the recent decision of the Manitoba Court of Appeal in McLean et al v Canada (Attorney General),[1] in which the Court was called upon to decide whether a notice of discontinuance was governed by the Court of Queen’s Bench Rules[2] or subject to section 35(1) of Manitoba’s Class Proceedings Act.[3]

In July, 2009, the plaintiffs filed a proposed class action (the “Manitoba Action”) in Manitoba on behalf of “Aboriginal persons or peoples and their families against Canada for recognition of, and compensation for, harms arising from federal government policy requiring them to attend day schools that were established by Canada under the Indian Act[4]”.[5] The plaintiffs filed an amended claim in November, 2009. No further steps were taken and the Manitoba Action was never certified.

The plaintiffs retained new counsel who filed an action (the “Federal Action”) in the Federal Court. The Federal Action was certified and included two of the named plaintiffs in the Manitoba Action.[6]

In November, 2019, one of the plaintiffs in the Manitoba Action filed a notice of discontinuance under r. 23.01(1) of the MCQB Rules to ensure [he/she] was eligible to participate in a settlement reached in the Federal Action. A dispute ensued between the two sets of class counsel over whether fees in the Manitoba Action should be included in the fees claimed in the Federal Action. Class counsel that commenced the Manitoba Action brought a motion to set aside the Notice of Discontinuance.[7]

The motion judge granted the motion and set aside the Notice of Discontinuance. The motion judge concluded that although the action had not been certified and therefore was not a “class proceeding”, that was not determinative. The action was in substance a class proceeding in which “the named plaintiffs represent individual classes or subclasses to a class proceeding”. He thus concluded that the notice provisions in the Manitoba CPA applied, and as counsel had neither notified the named plaintiffs of the pending notice of discontinuance nor obtained the Court’s approval for the discontinuance under section 35(1)(a) of the Act, the Notice of Discontinuance should be set aside.[8]

The Court of Appeal overturned the decision. Reviewing the Ontario Law Reform Commission’s 1982 Report on Class Actions (the “OLRC Report”), the Court of Appeal observed that the authors of the OLRC had been mindful of:

“several potential abuses related to pre-certification settlements and terminations, including that plaintiffs could institute a putative class proceeding and then use the threat of a large judgment to obtain an advantageous settlement for themselves, before certification, at the expense of the remaining potential class members, or that class members’ interests could be sacrificed for lawyers’ fees”[9]

Accordingly, the Commission:

“recommend that the proposed Act should provide that any action commenced under the Act should not be settled, discontinued, or dismissed for want of prosecution without the approval of the court and upon such terms and conditions, including notice or otherwise, as the court considers proper.

[…]

Secondly, it should be noted that, under our recommendation, any time a settlement, discontinuance, or dismissal for want of prosecution of a class action is contemplated, either before or after certification, court approval would be mandatory (emphasis added).”[10]

This recommendation was reflected in the drafting of section 29 of Ontario’s Class Proceedings Act, 1992, which clearly distinguished between certified and uncertified proceedings commenced under the Act:

Discontinuance, abandonment and settlement

29 (1) A proceeding commenced under this Act and a proceeding certified as a class proceeding under this Act may be discontinued or abandoned only with the approval of the court, on such terms as the court considers appropriate (emphasis added).”[11]

However, in a 1999 Report, the Manitoba Law Reform Commission ultimately favoured the approach reflected in British Columbia’s Class Proceedings Act (the “B.C. CPA”)[12] under which “only certified proceedings required court approval”.[13] The Manitoba Commissioners’ recommendation was subsequently incorporated into the drafting of section 35(1) of the Manitoba CPA which mirrored section 35(1) of the B.C. CPA.

Having detailed the Manitoba CPA’s legislative history, the Court of Appeal concluded that “the history of the CP Act [sic] does not support the interpretation adopted by the motion judge.”[14] After reviewing the jurisprudence relied upon by the parties[15] and the principles of statutory interpretation,[16] the Court of Appeal held that:

“When the definition of ‘class proceeding’ is considered in the context of the entire CP Act, the only reasonable interpretation is that a proceeding commenced under the CP Act is an ordinary proceeding, as defined in the QB Rules, before it is certified; if certification is refused; and if, once certified, it is decertified. A proceeding becomes a class proceeding upon, and only upon, certification (emphasis added).”[17]

Though it conceded that “approval of pre-certification discontinuances may provide more protection for putative class members and, thus, carry out that ancillary purpose of the legislation”, the Court of Appeal found that the Manitoba CPA’s legislative history, the relevant case law, and the text and structure of the Act read as a whole all supported a finding that “court approval of the discontinuance of a class proceeding by a plaintiff is required only if the proceeding has been certified as a class proceeding under, i.e., following the procedure set out in Part 2. (emphasis added)”[18]

Accordingly, applying a correctness standard of review, the Court of Appeal allowed the appeal of the motion judge’s order and dismissed the motion to set aside the discontinuance.[19]

Thus, in Manitoba and British Columbia, a proposed representative plaintiff may discontinue a proceeding prior to certification without court approval. This is in contrast to the approach taken in Ontario, where court approval for discontinuance is required for a proposed class action even prior to certification. Ultimately, McLean serves as a reminder that it is important to of have a clear understanding of the rules of the particular jurisdiction in mind, both at the outset of commencing a proposed class action and during any settlement negotiations prior to certification.

 

[1] 2021 MBCA 15 [McLean].

[2] MR 553/88, specifically r 23.01(1) [MCQB Rules].

[3] CCSM c C130 [Manitoba CPA].

[4] RSC 1985, c 1-5

[5] McLean supra at para. 4.

[6] Ibid. at paras. 8-9.

[7] Ibid. at paras. 10-12.

[8] Ibid. at paras. 13-15.

[9] Ibid. at paras. 33-35, quoting from para. 34.; citing to Ontario Law Reform Commission, Report on Class Actions, vol 3 (Toronto: Ministry of the Attorney General, 1982).

[10] Ibid. at para. 36 quoting from p 806 of the ORLC Report.

[11] Ibid. at para. 38 citing to SO 1992, c 6.

Section 29(1) has since been amended and now provides that “A proceeding under this Act may be discontinued or abandoned only with the approval of the court, on such terms as the court considers appropriate”.

However, the effect of the provision remains the same as section 2(a) of the Act states that:

“(2) For greater certainty, unless the context requires otherwise, a reference to a proceeding under this Act includes reference to,

(a) a proceeding commenced under section 2, regardless of whether it has been certified as a class proceeding (emphasis added)”

[12] RSBC 1996, c 50. See section 35(1) of the Act and section 1 which defines a “class proceeding as “a proceeding, including a multi-jurisdictional class proceeding, that is certified as a class proceeding under Part 2 (emphasis added)”.

[13] McLean supra at paras. 41-42, citing to Manitoba Law Reform Commission, Class Proceedings, Report #100 (Winnipeg: Law Reform Commission, 1999) at p 91.

[14] Ibid. at para. 46.

[15] Ibid. at paras. 47-53.

[16] Ibid. at paras. 54-62.

[17] Ibid. at para. 62.

[18] Ibid. at para. 79.

[19] Ibid. at para. 81.

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