Will delivery of a defence before certification become the new norm?

Will delivery of a defence before certification become the new norm?
On July 16, Justice Paul Perell delivered a decision that may result in a substantial re-write of the rulebook for motions for certification. On the defendants’ pre-certification motion for particulars, in Pennyfeather v. Timminco Ltd., Perell directed all the defendants to serve their statements of defence in advance of the certification motion. He rejected the generally accepted convention of permitting defendants to defer committing themselves to a defence position until after it was known whether the case would be certified and the common issues had been identified.
Since at least the 1996 case Mangan v. Inco Ltd., more often than not defendants in class actions have taken the position that they should not be required to comply with the procedural rule that compels delivery of a statement of defence within a prescribed time. They have argued, with success, that until the action is certified, the nature and scope of the claim to which they will be required to respond, including the framing of the common issues, is uncertain, and they might have to reframe the defence depending on the outcome of the motion.

Moreover, if certification is denied, and the individual action abandoned, the defendant may well have been put to unnecessary expense in drafting the statement of defence. Furthermore, if the defendant intended to attack the action under s. 5(1)(a) of the Class Proceedings Act, 1992 (or similar provisions in other provincial statutes) for disclosing no reasonable cause of action, then delivery of a statement of defence would be premature.

In Mangan, now Chief Justice Warren Winkler rejected Inco’s argument that defendants to proposed class proceedings are exempt as of right from the delivery of a statement of defence until after the certification motion. However, he agreed that under the broad discretion conferred on a case management judge under s. 12 of the Class Proceedings Act, an order could be made dispensing with the requirement to file a defence in advance of certification. He concluded that “in the preponderance of cases the statement of defence will not be required for determination of the certification motion,” but obliquely warned (in this case as well as in many others) that “it may be in a defendant’s interest to deliver a statement of defence prior to the certification motion.”

Since Mangan, it has become standard practice for defendants to simply state they do not intend to, and do not have to deliver a statement of defence until after certification. It is so commonplace that in many instances defendants do not even taken the formal step of obtaining an order under s. 12 of the act. Judges have accepted that in most cases the defence is not necessary for determination of the certification motion, and the defendant is given the tactical advantage of not having to articulate its defence to the claim brought against it until after it has conducted an extensive examination of the case brought against it through the lead up to the certification motion.

In Pennyfeather, some of the defendants sought particulars of the plaintiff’s claim pre-certification. In an ironic twist, the plaintiff asserted that he should not be required to provide particulars, since particulars are only ordered in cases where the defendant requires them in order to plead. Since the defendants were not delivering a defence until after certification, no particulars should be compelled pre-certification. Furthermore, as the case was brought under Part XXIII.1 of the Ontario Securities Act, which requires leave of the court before the claim can proceed, the requested particulars were premature.

Perell concluded that some particulars should be delivered, but in a further ironic twist, he ordered that once the particulars were delivered, all, and not just the moving defendants, would have to deliver a statement of defence.

In his reasons, Perell made a 180-degree turn from the custom established by Winkler in Mangan, opining that “as a general rule, it would be preferable that pleadings be closed before the action moves to the certification motion.” In my opinion, based on the current manner in which certification motions are fought, and based on the plain language and intent of the Class Proceedings Act, Perell’s conclusion is reasonable and correct, and in the majority of cases, the defendant should not be permitted to delay delivery of its defence until after certification.

In response to the defendants’ motion for particulars, the plaintiff adopted the generally accepted convention that a defence need not be delivered until after the causes of action and common issues that will be proceeding to trial have been established. Perell did not. He correctly concluded that every cause of action pleaded has the potential to proceed to trial, whether at a common issues trial or otherwise. “The non-certified causes of action are not struck out of the plaintiff’s pleading. The defendant pleads to the original statement of claim and not some truncated version of it. The pleadings are then closed, and the litigation plan and the certification order will define the nature of the common issues trial, which may be followed by individual issues trial or procedures.”

Furthermore, the legislature’s intention was class proceedings be bound by the procedural rules of court, including the rule that a statement of defence be delivered before the certification motion is argued, unless leave is granted to defer delivery.

Undoubtedly, imposing on defendants the obligation to deliver a statement of defence prior to the argument of the certification motion will lead to more motions under Rule 21 in advance of certification in cases where the claim has been poorly pleaded. I do not see that eventuality as a negative result. To the contrary, it is to the benefit of all parties to the proceeding to resolve, and remove or reframe, untenable or incomplete claims before the parties embark on the (now) lengthy, complicated, and expensive process of compiling a certification motion record and arguing the motion.

As Perell noted, addressing frailties in the statement of claim in advance of certification may also remove the need to argue about whether the claim meets the s. 5(1)(a) test at certification. If this point has already been determined, then there will be one less issue to debate on the certification motion. The result should not be one of inordinate delay, as it provides the plaintiff with the opportunity to amend the claim and correct any inadequacies in the pleading well in advance of the certification motion. The result should be a more streamlined certification motion with better pleadings before the court from which the common issues can be framed, without the need to revisit the common issues after a defence is delivered.

Furthermore, in a great many cases, the substantive adequacy of the pleading is not a genuine issue, or is not in dispute at all. In those cases, in particular, there is no reason why the defendant should not be delivering its defence in the ordinary course. A complete set of pleadings will result in a more complete and comprehensive set of common issues, or it may limit and focus the common issues, since the defence may assist in demonstrating the lack of commonality in issues raised by the statement of claim. The defence may also bolster arguments against the preferability of a common issues trial. As Winkler hinted, it can, in fact, be highly advantageous to a defendant to deliver a defence pre-certification.

In my view, in the vast majority of cases, it is better for the court to work from a full set of pleadings at the certification motion. The end result should be advantageous for all the players in the action, with a better understanding of the nature of the entire case that is to be litigated, and fewer post-certification motions.

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