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SCC takes a new approach to multi-defendant class proceedings

Class Acts
|Written By Kirk Baert
SCC takes a new approach to multi-defendant class proceedings

Last month, the Supreme Court of Canada released a decision in which it held that a representative plaintiff in a class action need not have a cause of action against each named defendant, as long as members of the class held a cause of action against each named defendant.

This decision represents a shift in the class action landscape and has important practical implications for class counsel and defendants.

In Bank of Montreal v. Marcotte, the Supreme Court developed a flexible and proportional approach to determine whether, under the Quebec Code of Civil Procedure, representative plaintiffs need to have direct causes of action against each named defendant. The Supreme Court determined, in the circumstances of Marcotte, the representative plaintiffs need not have direct causes of action against each defendant, since the same legal issues were present in the action of each class member against each defendant.

This class action concerned claims that certain banks had improperly charged fees for currency exchanges in credit card transactions on the basis these fees were not adequately disclosed. The representative plaintiffs only had credit cards issued from some of the defendant banks. The banks that had no direct relationship with the plaintiffs contested the standing of the plaintiffs to assert claims on behalf of the class against those banks. The Supreme Court rejected this argument.

First, much like s. 5(1)(e) of the Ontario Class Proceedings Act, 1992, nothing under art. 1003 of the Quebec code, which states the representative plaintiff must be an adequate representative of the class, requires representatives to have a direct cause of action against, or a legal relationship with, each defendant in the class action.

Under this provision, the Supreme Court held a court has the authority to assess whether a proposed representative plaintiff could adequately represent members of a class against defendants with whom he would not otherwise have standing to sue.

The focus on this article is whether there are identical, similar, or related questions of fact and law; whether there is someone who can represent the class adequately; whether there are enough facts to justify the conclusion sought; and whether it is a situation that would be difficult to bring with a simple joinder of actions.

Second, the Supreme Court held art. 55 of the code, which requires plaintiffs to have “sufficient interest” in the action, must be interpreted in harmony with Book IX of the Code of Civil Procedure, which governs class actions, in order to achieve the outcome that is best suited to the goals of class actions.

Third, the principle of proportionality must be considered, including balance between litigants, good faith, etc., when assessing whether the representative is adequate, or whether the class contains enough members with personal causes of action against each defendant.

Finally, the Supreme Court held the facts of this case demonstrated the importance of granting the representative plaintiffs standing even where they do not have a personal cause of action against each defendant: the same legal issues were present in the action of each class member against each bank.

The Supreme Court’s balanced and contextual approach in Marcotte stands in contrast to the existing jurisprudence in Ontario. Pursuant to Ragoonanan Estate v. Imperial Tobacco Canada Ltd., for each defendant in a class action, there needs to be a representative plaintiff with a direct cause of action against that defendant.

The Supreme Court’s principled approach in Marcotte looks at the underlying facts and legal analysis to be applied to the case, and is consistent with the twin goals of access to justice and behaviour modification. For these reasons, it should be adopted in Ontario.