Justice Perell’s recent decision in Lundy v. Via Rail addresses a number of new issues concerning the individual issues stage of a class action under Ontario’s Class Proceedings Act. In particular, it addresses the scope of the court’s jurisdiction to design the procedure for the individual issues stage and the timing and content of offers to settle to individual class members. The decision will be highly relevant to future class actions where the class succeeds on common issues of liability but individual issues, such as assessment of damages, remain in dispute.

Background

In this class action, the defendants effectively admitted liability, but no party sought formal judgment on the common issues. Mediation was unsuccessful. The defendants wished to make offers to settle to individual class members, all of whose identities were known. Class counsel refused to present the offers to class members on the grounds that the case was not yet at the individual issues stage. Both sides brought motions to break the impasse.

Key Points

In granting judgment on the common issues and giving other directions, Justice Perell made the following points:

  • The parties may propose to the court how the individual issues stage should be determined before the court decides on a procedure. There is a very extensive jurisdiction for the parties to agree to a process. There is a somewhat more limited but still very generous jurisdiction for the court to order a process.
  • The court’s procedural and evidentiary choices for the individual issues stage must be consistent with justice to class members and the defendants, which will depend upon the nature of the particular case, doing justice to the parties, and principles of natural justice.
  • The principles of proportionality and access to justice emerging from the Supreme Court’s decision in Hryniak v. Mauldin inform what is consistent with justice for the parties.
  • At a minimum, each party is entitled to notice of the case they have to meet and some sort of procedural and evidentiary means to make its case and to meet the case of the opponent. The means chosen must be non-arbitrary and the resulting adjudication must be capable of meaningful appellate review.
  • In some cases it would be inconsistent with justice to take away the right of a defendant to cross-examine class members during the individual issues phase, but there is no absolute right to cross-examine class members.
  • The court does not have the jurisdiction to force the parties to arbitrate, but the parties are free to agree to an arbitration procedure.
  • Unless the parties agree otherwise, individual class members will be exposed to adverse costs awards during the individual issues stage.
  • Successful representative plaintiffs and class counsel are entitled to costs of the common issues stage at the conclusion of that stage. This entitlement to costs does not depend on the outcome of the individual issues, such as any damages assessed in favour of individual class members. (Although the decision is not explicit on this point, this entitlement to costs appears to be the case even if individual liability issues remain to be decided.)
  • Before any offers to settle can be made to individual class members, the procedure for the individual issues stage must be finalized and notice of the outcome of the common issues phase must be given to class members.
  • Each class member is free to be self-represented or retain new lawyers for the individual issues stage, or they may continue their existing relationship with class counsel.
  • Due to the potential conflicts that may arise between a class member’s new lawyer and class counsel operating under a contingency fee agreement, offers to settle to individual class members should be lump sum offers, as opposed to offers that specify how much is offered for costs of the class member’s lawyer for the individual issues stage.
  • Court approval is not required for settlements reached with individual class members after the end of the common issues phase.

Implications

The decision confirms that defendants can make Rule 49 offers to settle to class members during the individual issues phase. Even if not accepted, such offers can result in recovery of a defendant’s legal costs of the individual issues stage or reduced awards to class members if the offer is not accepted and the class member ultimately recovers less than what was offered.

As the court notes, the process selected for the individual issues stage helps to define each class member’s “alternative to acceptance” of any settlement offer. The selection of a process will therefore be of considerable strategic significance for defendants who are unsuccessful on the common issues.

Although broadly stated, the references to creativity, proportionality, and access to justice suggest that, depending on the nature of the individual issues to be decided, the court will be more receptive to summary procedures than extensive discovery and trial. Even so, the decision signals that defendants will be given a fair opportunity to meet the individual cases of class members. One issue that may be addressed in future cases is whether the procedure should differ when the individual issues include issues relating to the defendant’s potential liability. The argument for greater rights of discovery and cross-examination may be stronger where important issues determinative of the defendant’s liability have yet to be decided.