Ontario passes significant amendments to Class Proceedings Act

On September 17, the attorney general of Ontario announced that the amendments to Ontario’s Class Proceedings Act, 1992 (CPA) have been proclaimed into force, effective October 1, 2020. 

The amendments to the CPA were made as part of the Smarter and Stronger Justice Act, 2020 (the SSJA), which received royal assent on July 8, 2020. These amendments mark the first time that Ontario’s class action legislation has undergone major changes since its enactment over 27 years ago.

The CPA, as amended, can be accessed at the following link: https://www.ontario.ca/laws/statute/92c06. Some of the key changes to the CPA are summarized below. 

Background

The SSJA was introduced by the Ontario attorney general in December 2019. In addition to the CPA, the SSJA amends 18 different statutes in Ontario as part of a broad program of civil justice reform.

According to the attorney general, the changes to the CPA are aimed at making class actions more fair, transparent and efficient for people and businesses in Ontario by, among other things: requiring settlements to be fair, reasonable and in the best interests of class members, resolving cases faster so that class members receive compensation sooner, and enhancing transparency regarding class counsel fees and third-party litigation funding. 

The amendments to the CPA reflect some of the recommendations made by the Law Commission of Ontario (the commission) in its July 2019 final report, “Class Actions: Objectives, Experiences and Reforms,” which was published following two years of study and consultation with various stakeholders across Ontario’s justice system. However, some of the amendments included in the SSJA were specifically considered and rejected by the commission.

The amendments will apply to class actions commenced on or after October 1, 2020, subject to specified exceptions.  

Key changes

More stringent certification test

The SSJA modifies the statutory test for certification of a proposed class action.

Under the new test, the certification of a class action will be preferable only if (a) it is superior to reasonably available alternative means of determining entitlement of class members to relief; and (b) questions of fact or law common to the class members predominate over any questions affecting only individual class members. This test raises the bar for the preferability requirement under section 5(1)(d) of the CPA. 

Streamlined appeals for certification orders

The SSJA eliminates the asymmetrical appeal process in which plaintiffs currently have an automatic right of appeal from orders denying certification to the Ontario Divisional Court whereas defendants are required to seek leave to appeal from orders granting certification.

Under the new legislation, both plaintiffs and defendants will now be able to appeal certification orders directly to the Court of Appeal. 

Availability of defence motions to strike or dismiss prior to certification 

The SSJA requires courts to hear early dispositive motions and motions that may narrow the issues before the certification motion (unless the court specifically orders a motion to be heard with the certification motion.)

In contrast, under the existing framework, dismissal motions are typically heard together with certification motions or following certification. The SSJA also introduces mandatory dismissal for delay whereby the court, on a motion, shall dismiss a class action unless certain steps have been taken to advance the proceeding by the first anniversary of its commencement. For pre-existing class actions, commenced before the amendments to the CPA come into force, the steps in question must be taken by the first anniversary of section 35 of Schedule 4 of the SSJA coming into force.  

Coordination of multi-jurisdictional class actions

The SSJA introduces provisions for the coordination of multi-jurisdictional class actions.

If a class action has been commenced in a Canadian jurisdiction other than Ontario involving the same or similar matters, and some or all of the class members, the court will be required to determine whether it would be preferable for some or all of the claims or common issues of the class members to be resolved in the proceeding commenced in the jurisdiction outside of Ontario. This will reduce the expense of duplicative class actions.

Stricter requirements for settlement approval

The SSJA introduces new statutory requirements for securing court approval of a class action settlement. 

Plaintiffs seeking court approval will be required to make full disclosure of all material facts and file an affidavit detailing the method used for valuing the settlement and the plan for allocating and distributing settlement funds. Evidence demonstrating that the settlement is fair, reasonable, and in the best interests of class members will be required. A court will not approve a settlement unless those with subrogated claims have had a chance to consider the settlement and have approved it in writing. 

Speedier disposition of carriage disputes

Carriage motions will be required to be made no later than 60 days of commencement of the first proposed class action, and heard as soon as practicable. A court’s decision on a carriage motion will be final and not subject to appeal.

Statutory framework for third-party funding

The SSJA introduces new statutory requirements regarding third-party funding arrangements.

Notably, third-party funding agreements will have to be disclosed to defendants and will be contingent upon court approval. A court will not approve an agreement unless it is satisfied that, among other things, the agreement is fair and reasonable and that the funder is financially able to satisfy an adverse costs award in the proceeding. A defendant will be able to recover a costs award made against the representative plaintiff directly from the third-party funder, to the extent of the indemnity provided under the approved funding agreement.

In addition, disclosure of third-party funding arrangements will have to be included in the notice of certification to class members. Consistent with the Ontario Superior Court’s decision in Dugal v. Manulife Financial Corp. [2011] O.J. No. 1239; Supplementary Reasons [2011] O.J. No. 3493, the court will have the ability to order that a non-resident provide security for costs to the defendants.

Reallocation of certain costs and fees

The SSJA changes how costs and fees are awarded in relation to certification.

Under the new regime, the plaintiff will be responsible for the costs of providing any notice of certification under section 17 of the CPA and will only be permitted to recover those costs from the defendant in the event of success in the class proceeding, unless the defendant consents to their payment in whole or in part at an earlier time.

Further, the SSJA introduces mandatory considerations for a court when assessing agreements respecting fees and disbursements between a representative plaintiff and class counsel. A court will not approve such an agreement unless it determines that the fees and disbursements to be paid under the agreement are fair and reasonable, taking into account, among other things, the results achieved for the class members, the degree of risk assumed by class counsel, and the proportionality of fees and disbursements in relation to the amount of any monetary award or settlement.

In addition, a court will be empowered to hold back a portion of fees and disbursements owing to class counsel until, among other things, it is satisfied with distribution of the monetary award or settlement funds in the circumstances.

Takeaways

The SSJA has introduced significant amendments to Ontario’s class action legislation. Generally speaking, these amendments will in all likelihood make the certification test more rigorous. Although the SSJA is now in force, the amendments to the CPA will come into force on a day to be named by proclamation. Almost all of the amendments to the CPA only apply to new class actions. As a result, it may be some time before the full impact of these changes becomes evident.