Top Class Action Decisions of Q1 2024

The first quarter of 2024 saw the release of a number of important class action decisions which support the following principles:

• The unique circumstances of data breach claims do not mean that a proceeding will be certified in the face of bald allegations or a claim that fails to plead key elements of a cause of action;
• Allegations of breach of an ad-hoc fiduciary duty may be asserted on a class-wide basis against professional advisors;
• Despite the Ragoonanan requirement, a single representative plaintiff may assert claims against corporate families based upon the principle of “enterprise liability”;
• Guiding evidentiary principles ensure the leave test serves an important gatekeeping role in statutory secondary market liability claims;
• Fairness principles prelude a plaintiff from resiling on appeal from a position taken at a certification motion; and
• Settlement approval hearings are not pro forma and require alignment in cross-border proceedings.

Ontario’s Top Court Scrutinizes Data Breach Claims

In Del Giudice v. Thompson, 2024 ONCA 70, a proposed class proceeding pertaining to a data breach involving 106-million Capital One customers, the Court of Appeal for Ontario upheld the lower court’s decision to strike, without leave to amend, the statement of claim and dismiss the certification motion brought on the basis of the cause of action criterion, s. 5(1)(a) of the Class Proceedings Act, 1992.^[1]

Key Takeaways

• The Court of Appeal emphasized the importance of abiding by pleadings rules, striking causes of action and refusing leave to amend where critical elements had not been pleaded.
• By upholding the lower court decision to strike the statement of claim, which had been amended four times ultimately pleading 19 causes of action, the Court of Appeal’s decision signals the importance of the cause of action criteria as a gatekeeping tool in class action proceedings.

Certification Decision^[2]

This action arises from a data breach, alleged to have taken place in March 2019, wherein the aggregated personal and financial information of approximately 106-million credit card applicants who had applied for a credit card with the Capital One respondents, 6 million of whom resided in Canada, was exposed and posted publicly when the servers of the Amazon Web Services respondents, used to store the data of Capital One, were hacked and exposed publicly by a former employee.

In a bifurcated proceeding in which only the cause of action criteria was addressed, the motion judge found that constitutive elements of each of the 19 causes of action had not been pleaded. The plaintiffs’ claim was struck, without leave to amend.

Court of Appeal Decision

The Court of Appeal agreed with the motion judge’s analysis and finding that none of the pleaded causes of action were viable. In particular, the Court of Appeal:

• Held that causes of action including misappropriation of personality, conversion and negligent breach of contract cannot be adapted to support the certification of a cause of action based upon the unique circumstances of a data breach.^[3]
• Referred to its decisions in the trilogy of Owsianik,^[4] Obodo^[5] and Winder,^[6] which established that a hack of a database by a third party does not constitute intrusion upon seclusion. The Court of Appeal held that the respondents alleged missteps in safeguarding the appellants’ information did not satisfy the key element of the tort of intrusion upon seclusion: that the conduct complained of be offensive causing distress, humiliation or anguish to a reasonable person.^[7]
• Upheld the motion judge’s finding that the claim in negligence for future loss from the risk of future identity theft and fraud was not sustainable in the absence of a pleading of fraud where a majority of the class would only suffer a risk of future loss.^[8]
• Confirmed that bald pleadings of pecuniary loss need not be accepted as true where they are patently ridiculous in scope and unsupported by the material facts.^[9]
• Held that a claim in negligence cannot be anchored in psychological harm (or emotional distress resulting from a breach of a duty of care in a data breach case).^[10]

Ultimately, the Court of Appeal held that the appellants were “out of runway” and deferred to the discretion of the motion judge in striking out the pleading without leave to amend, noting that the appellants were provided with repeated opportunities to amend their statement of claim, but on each occasion that they had done so, they had only compounded their problems. In a further and final rebuke, the Court of Appeal denied the appellants an extension of time to seek leave to appeal the costs award of $1.225 million.^[11]

Class-Wide Ad-Hoc Fiduciary Duty a Reasonable Cause of Action

At the end of 2023, the Ontario Court of Appeal released its decision in Boal v. International Capital Management Inc.,  2023 ONCA 840, reversing the Divisional Court and certification decisions and ruling that a representative plaintiff’s claim against her former investment advisors disclosed a reasonable cause of action for breach of a class-wide ad-hoc fiduciary duty.

In reaching its decision, the Court of Appeal relied heavily upon the Supreme Court of Canada’s decision in Hodgkinson v. Simms^[12] and the Ontario Court of Appeal’s decision in Hunt v. TD Securities Inc.,^[13] both of which evaluated the circumstances in which the existence of an ad-hoc fiduciary duty between a client and professional advisor can be found.

Key Takeaways

• Previously thought to lack the commonality required for certification, the Court of Appeal confirmed that the existence of an ad-hoc fiduciary duty is not immune from being assessed on a class-wide basis.
• Boal opens the door for certification of class actions that not only assert a breach of a class-wide ad hoc fiduciary duty but also assert claims that depend on the existence of the fiduciary duty, such as claims for knowing receipt and knowing assistance.
• Professional advisors should be aware of the five factors which the court has identified as influencing whether a fiduciary relationship exists: vulnerability, trust, reliance, discretion and professional rules of conduct. Advisors should consider these factors in their conduct and when formalizing internal policies to guard against the risk of class proceedings.

Background

In Boal, the plaintiff sought to certify a class action against her two former investment advisors and their investment management company. Both individual defendants were members of the Mutual Fund Dealers Association of Canada (“MFDA”) which had imposed disciplinary sanctions against the defendants for contravening its rules of professional conduct by selling or facilitating the sale of at least $25.8 million in investments to their clients.

The plaintiff alleged the investment advisors breached their fiduciary duty by offering her the opportunity to invest in a company in which the defendants’ relatives held the majority of shares. The defendants failed to disclose their conflict of interest relative to this investment. The plaintiff’s claim turned on whether a fiduciary duty can be established with an investment advisor on a class-wide basis for over 170 clients and prospective class members.

Certification Decision

At the certification motion, the motion judge determined that the plaintiff’s claim lacked commonality. Therefore, it was plain and obvious to the motion judge that the claim for breach of a “class-wide” fiduciary duty could not succeed.^[14]

Divisional Court Decision

On appeal to the Divisional Court, the majority agreed with the certification judge. Justice Sachs disagreed with the majority. In Her Honour’s dissenting reasons, Sachs J. determined that the plaintiff’s focus on the MFDA rules of professional conduct, taken together with the other pleaded aspects of the relationship between the plaintiff and the defendants, touched upon the requisite factors to establish an ad-hoc fiduciary relationship.^[15]

Court of Appeal Decision

On appeal, the Ontario Court of Appeal unanimously agreed with Sachs J.’s dissenting reasons and overturned the majority’s decision. The court declared that the claim did disclose a reasonable cause of action for breach of a “class-wide” fiduciary duty.

In reliance on Hodgkinson and Hunt, the court held that the plaintiff’s claim was framed in such a way that it pleaded the necessary hallmarks of an ad-hoc fiduciary relationship between the defendant advisors and each class member on a class-wide scale, as follows:

1. Vulnerability: The class members’ vulnerability flowed from the fact that the investment advisor defendants had control over information relating to the class members’investments and ability to choose what to disclose to class members.
2. Trust: As the SCC held in Hodgkinson, clients have the right to trust their investment advisors to act in their best interests, to the exclusion of others, in the absence of advice to the contrary. The class members were not advised by the investment advisor defendants that they would not act in their best interest and so were entitled to trust the defendants.
3. Reliance: It was pleaded that the particular class members were longstanding clients of the investment advisor defendants and relied on them to provide accurate information and advice in respect of their investments.
4. Discretion: The investment advisor defendants had unilateral discretion over what to disclose in respect of IPS and other investments. Admissions made by the investment advisor defendants (made public by MFDA) disclosed that the investment advisors abused their discretion and profited from a conflict of interest.
5. Professional Rules or Codes of Conduct: Class members’ reasonable expectations that the investment advisor defendants would act in their best interest were informed by the MFDA rules of professional conduct to which they were entitled to assume the defendants would adhere. These expectations placed class members in a position of vulnerability.^[16]

In light of the foregoing reasons, the court held that it was not “plain and obvious” that the claim for breach of a class-wide fiduciary duty had no reasonable prospect of success and held that the claim as pleaded disclosed a reasonable cause of action. The matter was accordingly remitted back to a motion court to deal with the remaining criteria for certification.^[17]

Enterprise Liability Modifies the Ragoonanan Requirement in COVID-19 Long-Term Care Home Litigation

On March 7, 2024, the Ontario Superior Court of Justice released its decision in Pugliese v. Chartwell, 2024 ONSC 1135, a combined ruling on eight certification motions for proposed class actions brought on behalf of the estates of people who died or people who were infected by COVID-19 in long-term care (“LTC”) homes during the pandemic against 100 defendants representing 304 LTC facilities. The causes of action alleged included negligence, breach of fiduciary duty, breach of contract, breach of the Occupiers Liability Act and breach of s. 7 of the Charter of Rights and Freedoms (the “ Charter”), all of which the court held it was plain and obvious would fail, with the exception of the action in negligence.

Key Takeaways

• Ontario class action jurisprudence, unlike other Canadian provinces, requires a plaintiff with a cause of action against every defendant (often referred to as the “Ragoonanan Problem”). Where a proposed class action is filed against several corporate defendants within the same corporate structure, Pugliese indicates that the doctrine of “enterprise liability” can be used by plaintiffs to circumvent the Ragoonanan Problem at certification and assert claims against the corporate enterprise as a whole.
• Where plaintiff’s counsel is unable to overcome the Ragoonanan Problem, a motion judge is unlikely to order a defendant to procure a representative plaintiff to sue it.
• In response to COVID-19, the Ontario legislature enacted the Supporting Ontario’s Recovery Act, 2020^[18] (“SORA”), legislation which the court has confirmed was drafted broadly to limit litigation related to COVID-19 for all but a very limited set of causes of action. Class proceedings alleging causes of action which are the subject matter of SORA are unlikely to be certified.
• Claims alleging a failure by private defendants to protect a proposed class member’s s. 7 Charter rights are not available in the context of COVID-19 claims.

Motion Judge’s Cause of Action Analysis

The court’s s. 5(1)(a) cause of action analysis raised several interesting issues:

The Ragoonanan Problem

In each of the proposed class actions, at least some of the listed defendants were not directly connected to any of the LTC homes in which the representative plaintiffs lived or visited. Accordingly, the representative plaintiffs did not have a direct cause of action against every defendant, raising the Ragoonanan Problem.^[19]

Six of the eight proposed class actions were successful in obtaining certification. The plaintiffs’ degree of success with the Ragoonanan Problem (and, in turn, certification) was determined according to the degree of interconnectedness between the defendants.

(i) Linking defendants through a ‘corporate enterprise’

The six class actions that were successfully certified were each filed against a different “corporate family” (i.e., affiliated and subsidiary companies within the same corporate organization) that privately owned and/or managed LTC homes in Ontario. The plaintiffs alleged that the defendants’ systemic negligence flowed from the corporate head offices, which were each in charge of creating allegedly inadequate guidelines and policies for COVID-19 among their different facilities.^[20]

The court held that the plaintiffs had standing to assert their claims against the broader corporate organization as a whole (and the several companies that fell within it) under the legal principle of “enterprise liability.” Enterprise liability permits a claim against several defendants where there is a wrong committed by one or more of them to further their collective “enterprise.” The court noted that enterprise liability has been recognized in cases to ensure that complex corporate structures are not permitted to defeat legitimate claims.^[21]

In light of the “top down” and enterprise liability approach taken by the plaintiffs in these actions, the court held that the Ragoonanan Problem was satisfied because a plaintiff’s claim against one company in the corporate chain was viewed as a claim against the entire group.^[22]

(ii) Should a defendant be required to find its own plaintiff?

The two unsuccessful certification motions involved actions filed against distinct and unrelated owners and/or operators of LTC homes. Unlike the actions against “corporate families,” the plaintiffs could not rely on enterprise liability to satisfy the Ragoonanan Problem. Since the representative plaintiffs in those actions did not possess a cause of action against each defendant, the proposed class actions could not be certified against those defendants.

In order to solve the Ragoonanan Problem, the plaintiffs made submissions that the defendants should be required to find a plaintiff with a claim against them. The plaintiffs relied on Vecchio Longo Consulting Services Inc. v. Aphria Inc.,^[23] where the court required the defendants to produce a list of purchasers who had potential claims against them in a securities misrepresentation case.

The court refused to order the defendants to procure a plaintiff to act opposite them, holding that such an order would impose a massive and unwanted burden on defendants. The court reminded the parties that class actions are already criticized for being more about “lawyer entrepreneurship than the rights of clients.” On that basis, the idea of a law firm commencing an action without a client and requiring a defendant to find someone to sue it was, as the court put it, “a step too far.”^[24]

COVID-19-Related Causes of Action

SORA was enacted by the Ontario government to limit the litigation that can be commenced against persons who infected or potentially infected an individual with COVID-19, so long as the person acted in or made good faith efforts to act in accordance with public health guidance or laws related to COVID-19, in the absence of gross negligence. The motion judge held that on a plain reading of s. 2(1) of SORA, it was plain and obvious that all COVID-19-related actions would fail with the exception of those claiming a lack of good faith effort to follow public health guidelines or those claiming gross negligence.^[25]

The plaintiffs also pleaded a cause of action for breach of the proposed class members’ s. 7 Charter rights. In reliance upon Robertson v. Ontario,^[26] the motion judge held the plaintiffs’ claims were not subject to Charter scrutiny both because the defendants were not government entities performing government functions and because the challenged conduct amounted to omissions or inaction, rather than positive action.

Guidance on Application of Leave Test for Secondary Liability Claims

In its decision in Drywall Acoustic Lathing and Insulation (Pension Fund, Local 675) v. Barrick Gold Corp., 2024 ONCA 105, the Ontario Court of Appeal upheld the lower court decision denying, in part, leave to the plaintiffs (“Drywall”) to commence a secondary market misrepresentation class action under s. 138.3(1), Part XX111.1 of the Securities Act^[27] against Barrick Gold Corp. (“Barrick”) with respect to alleged misrepresentations made in relation to its Pascua-Lama open-pit mining project in Chile and Argentina. While leave to pursue limited misrepresentations had been granted over the course of two leave hearings, the appeal concerned only the motion judge’s denial of leave for Drywall to pursue its claims that Barrick made capex budget and production schedule misrepresentations in its Q3 2011 Report and that the motion judge erred in identifying potential public correction dates for the alleged misrepresentations for which leave had been granted. The appeal was dismissed in its entirety.

Key Takeaways

• Drywall Acoustic affirms the motion judge’s “robust” and “important gatekeeping role” in leave applications pursuant to s. 138.3(1) of the Securities Act. In particular, the court reiterated the following guiding principles regarding the evidentiary foundation of the leave test:
  
  
  • A plaintiff must adduce “sufficient evidence” and not merely “some credible evidence” to demonstrate a reasonable possibility that the action will succeed.
    
  • A leave judge must not assess the evidence from a balance of probabilities standard but the lesser standard of a “realistic or reasonable chance of success” and not attempt to resolve contentious issues arising from conflicting and credible evidence, in effect, conducting a mini-trial.
    
  • A leave judge must also be mindful of the evidentiary limitations at the leave stage in considering the completeness of the record.
• The Court of Appeal clarifies the “linkage test” used at the leave stage to determine whether a public correction exists with respect to alleged market misrepresentations.

Guidance Regarding the Motion Judge’s Gatekeeping Role

Echoing the Supreme Court of Canada’s decision in Theratechnologies Inc. v. 121851 Canada Inc.,^[28] the Court of Appeal noted that the leave requirement requiring a motion judge to execute a “robust” and “important gatekeeping role” was implemented in secondary market misrepresentation actions in response to the risk of “strike suits” launched to provoke unwarranted settlements where s.138.3(1) of the Securities Act removes the usual requirement of proof of reliance and presumes that fluctuations in value are attributable to a misrepresentation.^[29]

The Court of Appeal offered the following guidance regarding the “qualitative evaluation of the proposed action” to be performed by the motion judge pursuant to s. 138.8(1)(b) of the Securities Act:

• The leave judge must review the evidence adduced by both parties, scrutinize and assess the credibility of the evidence, and engage in some weighing of the evidence that both parties are required to proffer under s. 138.8(2); however, in doing so, and to avoid conducting a mini-trial, the leave judge must:
  
  • Assess the case against the threshold of “a realistic or reasonable chance of success” and not “the balance of probabilities”;
  • Not attempt to resolve realistic and contentious issues arising from conflicting credible evidence; and
  • Consider the evidence that is not before them and determine whether the lack of a complete record results in uncertainty about whether a realistic or reasonable chance of success exists.^[30]
• It is not enough under s. 138.8 to show that there is a triable issue; the plaintiff must provide a plausible legal foundation for the claim based upon credible evidence. However, the “some credible evidence” standard is not sufficient; instead, the plaintiff must adduce “sufficient evidence” such that the record before the leave judge demonstrates a reasonable possibility that the action will succeed when the record is reviewed in its totality.^[31]

Application to the Facts

In response to Drywall’s allegations that the leave judge had erred in not identifying Barrick’s disclosure regarding its capex budget and production schedule as misrepresentations when they were made in October 2011, the Court of Appeal held that the leave judge appropriately weighed the evidence, including the lack of any direct evidence that Barrick knew or believed prior to its October 2011 disclosure that its budget and forecast were inaccurate or unreliable. The Court of Appeal emphasized that the leave judge recognized that production and discovery were not complete but made note of the “unusually well developed record,” as she was entitled, in holding that the record before her was sufficient to support her conclusions.^[32]

Regarding Drywall’s allegations that the leave judge had erred by not identifying statements made in November 2012 through June 2013 as possible public corrections of the alleged misrepresentations made in February and March 2012, the Court of Appeal held that the leave judge had appropriately accepted Drywall’s submission that Barrick’s disclosure in July 2012 was a public correction of the alleged misrepresentation, and that no subsequent statements could be understood as a public correction of the February and March 2012 alleged misrepresentation. The Court also noted that the July 2012 disclosure was followed by a $1.45 drop in share value.^[33]

Finally, the Court of Appeal rejected Drywall’s submissions that the overlapping subject matter (capex budget and production schedule) between the November 2012-June 2013 statements and the alleged misrepresentations was sufficient to satisfy the “linkage test” at the leave stage for a potential public correction. Instead, the Court of Appeal held that the leave judge had cited the linkage test correctly, namely that “a sufficient linkage or connection will exist if the alleged public correction can reasonably be taken as correcting the alleged misrepresentation, but not otherwise. A mere coincidence in subject matter will not suffice.” The Court of Appeal further held that the leave judge did not encroach upon the jurisdiction of the common issues judge and instead reasonably concluded that the motion record before her was sufficient for her to use the leave test to screen possible public corrections, in keeping with the principles of judicial economy.^[34]

Plaintiff Cannot Resile on Appeal From Position on Certification Motion

In Frayce v. BMO Investorline Inc., 2024 ONSC 533, the Ontario Divisional Court upheld the dismissal of a certification motion brought by plaintiff investors against discount brokerages. The plaintiffs alleged that the defendants were illegally receiving class members’ money through “trailing commissions,” payments intended to compensate brokers for advice and services provided to clients about their investments.

In June 2022, Canadian securities regulators began prohibiting the payment of trailing commissions to discount brokerages. Although the payment of trailing commissions to discount brokerages ended prior to the prohibition, the plaintiffs argued that the receipt of trailing commissions was always illegal as it caused financial harm to investors by taking such payments while providing nothing in return, contrary to Canadian securities law.

Key Takeaways

• Frayce highlights the need for parties to be careful not to use hindsight reasoning when regulators prohibit an activity. In the absence of evidentiary proof, the fact that an activity is illegal now is not enough for a court to find “some basis in fact” that it was always illegal (even if the prohibition had been previously contemplated).
• It is a risky strategy for a representative plaintiff to take the position at certification that one issue will resolve all the issues in an action. While such a position may be helpful in demonstrating commonality, it can result in a domino effect, causing all other common issues to fall where the “core issue” fails.
• Fairness considerations do not allow a party appealing a decision to reverse a strategic position taken before the lower court to have another kick at the can.

Certification Decision^[35]

The motion judge refused certification. The allegation that trailing commissions were illegal before the prohibition could not satisfy the “some basis in fact” requirement. The motion judge found there was no evidence in the record to support the allegation that the defendants’ receipt of trailing commissions had always been contrary to Canadian securities law. The motion judge determined that given the lack of “some basis in fact” to support this claim, the plaintiffs’ other common issues were bound to fail.

Divisional Court Decision

In a unanimous decision, the Divisional Court rejected the plaintiffs’ arguments on appeal and upheld the refusal to certify the proposed class action holding:

1. The motion judge did not err in his assessment of the “some basis in fact” test.

Although the issue of whether trailing commissions were contrary to securities law was a legal one, the court held that it was not exempt from the “some basis in fact” analysis. The motion judge was entitled to assess the evidence and determine whether there was an “air of reality” to the plaintiffs’ legal claim to weed out baseless claims at certification. Upon examining the vast evidentiary record filed by the plaintiffs, the motion judge determined that the plaintiffs’ allegation of illegality lacked an air of reality and, therefore, some basis in fact. The motion judge’s weighing of the evidence in the defendants’ favour was entitled to significant deference.^[36]

2. The motion judge did not err in his ruling that all of the plaintiffs’ claims failed because the claim of illegality failed.

The court noted that, although the approach of focusing on one “core issue” to determine the certifiability of a proposed class action is not suitable for every case, there was nothing wrong with the motion judge’s focus on the illegality issue in this case. The court determined that all of the plaintiffs’ claims required a finding that the defendants’ receipt of trailing commissions was illegal. As there was no basis in fact for the illegality claim, the other claims were doomed to fail.^[37]

3. The motion judge did not err in relying on a concession made by the plaintiffs.

At the certification motion, the plaintiff’s reply factum took the position that the question of illegality of trailing commissions was binary, and its determination would lead to a “full and final resolution of all the issues in the action.” The court held that the plaintiffs’ concession that their claims turned entirely on the illegality issue was a strategic position that ultimately failed. The court ruled that it was not appropriate to allow the plaintiffs to resile from this position on appeal.^[38]

Approval Challenges Where There Is Disparity Between U.S. and Canadian Settlements

In Kwong v. iAnthus Capital Holdings Inc., 2024 ONSC 1311, the motion judge took the rare step of refusing to approve the settlement of a class proceeding recommended by the representative plaintiff and class counsel where there was a gross disparity between the settlement value for Canadian class members as compared to U.S. class members in a related proceeding.

Key Takeaways

• Settlement approval hearings are not pro forma and require appropriate evidence supporting the fairness and reasonable of the settlement to class members.
• Parties to cross-border class proceedings should co-ordinate strategy between proceedings and ensure alignment of settlement value.

Background

The plaintiff alleges common law claims for misrepresentation in the secondary market and common law oppression under s. 138.3 of the Securities Act as against iAnthus Capital Holdings (“iAnthus”), a cannabis company, alleged to have released statements containing misrepresentations within its core and non-core documents between May 2018 and March 2020.

A class proceeding was filed against iAnthus in the Southern District of New York in May 2020 and putative class actions were commenced in Ontario in July 2020 and September 2020. In November 2023, the Ontario class action was certified as a class proceeding for the purpose of settlement approval when the parties advised that they had reached a settlement, subject to court approval. The U.S. proceeding is scheduled for a hearing for settlement approval on April 10, 2024.

Proposed Settlement

The Ontario plaintiff sought approval for a settlement of C$500,000, of which $195,787.85 would be available for distribution to the class, following the deduction of fees for class counsel, the claims administrator, disbursements and an honorarium for the representative plaintiff. In contrast, the motion judge noted that the U.S. class proceeding was proposed to settle for US$2.9 million. Evidence filed on the motion by an objector indicated that 60.5% of total trading took place in Canada, compared to 39.3% in the U.S. and 0.2% in Germany.

Decision to Reject Settlement

The motion judge noted the following principles as being relevant to the approval of settlements in class proceedings:

• The court shall not approve a settlement unless it determines that the settlement is fair, reasonable and in the best interests of the class;
• There is a strong presumption of fairness when a proposed settlement, negotiated at arm’s length, is presented for approval on the recommendation of experienced class counsel;
• The burden lies on the party seeking approval to establish that the settlement falls within the zone of reasonableness; to find that a settlement is not fair and reasonable, it must fall outside a range of reasonable outcomes;
• An objective and rational assessment of a settlement is required, but the court must not substitute its judgment for that of the parties or attempt to renegotiate a settlement;
• Factors to be considered in determining whether a settlement is reasonable and in the best interests of the class include: the likelihood of recovery or success; the amount and nature of the discovery, evidence or investigation; the proposed settlement terms and conditions; the recommendation and experience of counsel; the future expense and likely duration of litigation; the number of objectors and nature of objectors; the presence of good faith, arm’s-length bargaining and absence of collusion; the information conveyed regarding the dynamics and positions of the parties during negotiations; the nature of communications by counsel and the representative plaintiff with class members.^[39]

In applying these principles, the court found that, notwithstanding the risks to the plaintiff of proceeding and the presumption of fairness that a settlement is reasonable, the plaintiff had failed to meet his burden, on a balance of probabilities, of establishing that the settlement was fair, reasonable and in the best interests of the class.

In particular, the motion judge noted that she was troubled by the “gross” disparity between the U.S. and Canadian settlements, the lack of evidence of class size and recovery per class member, the lack of evidence about the investigations undertaken by the plaintiff, and the lack of explanation about the indemnity offered by the company to the individual defendants resulting in $2 million in insurance funds not being available to settle the dispute.^[40]

Our Class Actions Group has broad class action defence experience in securities law, financial services, mining, oil and gas, consumer products, product liability, pharmaceutical, natural health products, telecommunications, condominiums, competition, copyright, privacy and insurance defence. Please contact the authors or a member of the group for further information.