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Court of Appeal Expands on “Preferability” Criteria in Granting Class Certification
Published in the May 2007 issue of Litigation Notes - View Article
The Ontario Court of Appeal recently the overturned the decision of a judge who denied certification of a class action under the Class Proceedings Act (“the Act”).
The appellant is the representative of individuals who hold a credit card with MBNA Canada Bank. The action sought declarative and injunctive relief and restitution for interest rate charges on cash advances that, depending on the individual cardholder’s account, could exceed the 60% maximum prescribed by the Criminal Code.
The motions judge refused to certify the class because he found that the restitution and breach of contract claims did not raise common issues and because a class proceeding was not the preferable procedure with respect to the balance of the claims. A majority of the Divisional Court upheld that decision.
The main question on the appeal was whether a class proceeding is appropriate where all members of the class are at risk of being charged a criminal interest rate and therefore potential beneficiaries of the declarative and injunctive relief sought, but only some of the members were actually victims of the actual practice and entitled to damages. The motions judge accepted the bank’s submission about the inherent difficulty in calculating the interest rate charged as it varied widely between individuals, therefore lacking the common issues for the restitution claim required for certification. The judge also accepted the bank’s argument that a class action would not be preferable because if successful, the result would be a reduction of credit options available to consumers.
The appeal court held that if the plaintiff could establish the defendant’s practice was illegal, then each member of the class would be entitled to declaratory and injunctive relief and the only matter remaining would be the calculation of each class member’s damages. It held that this was an appropriate case for an aggregate assessment of monetary relief under ss. 23 and 24 of the Act, which permit a court to determine the aggregate or a part of the defendant’s liability to class members through statistical analysis and to give judgment accordingly where monetary relief is claimed on behalf of some or all class members and make an order so that some or all of the individual class members share in the award on an average or proportional basis. Although this option was not put before the motions judge, the Court held that the law permits the plaintiff to “recast its case” to make it more suitable for certification, absent prejudice to the defendant. Given the difficulty in determining each individual’s damages as was argued by the bank and the small potential award in each case, the Court held that it would be impractical and inefficient to proceed by individual action and sections 23 and 24 provided a way to avoid an unconscionable result. Sections 23 and 24 could be used to statistically calculate a global damages figure and to find a way to distribute the aggregate sum to class members. The Court held that it may be that some class members who did not actually suffer damage would receive a share of the reward, but that is exactly the result contemplated by the Act as it would be impractical or inefficient to identify the class members entitled to share the reward. The Court reviewed the case law and the Ontario Law Reform Commission’s report on class actions in support of this proposition.
Another interesting ruling by the Court related to the determination of the preferability of a class proceeding. The Court rejected the argument that the proceeding would deprive consumers of options – all it would take is for one individual to succeed in an action and the bank would be required to stop its practice in any event, without having to disgorge profits. It also noted that although a class proceeding may seem unfair to some customers who are denied the advantages of the bank’s cash advance practice, it stated, “In an organized society, however, I do not see this as the kind of fairness concern that should prevent a court from intervening. Rather, the concern should be whether the defendant is acting in accordance with the law.” It appears that the courts are ever more willing to permit class proceedings to undo the benefits gained by companies from illegal consumer practices.
Markson v. MBNA Canada Bank, 2007 ONCA 223 (CanLII)