In Caetano v Quality Meat Packers, 2017 ONSC 1199, Justice Belobaba of the Ontario Superior Court recently had opportunity to consider whether two representative proceedings commenced on behalf of two separate groups of employees against an insolvent employer ought to be struck because, despite the actions having been commenced within the applicable two year limitation period, the plaintiffs in those two actions had failed to obtain the necessary representation orders within the two year period.

The representative proceedings were brought pursuant to separate Rules of the Rules of Civil Procedure, and Justice Belobaba found that the language of those two Rules provided for divergent results, with one of the actions being time-barred while the other was not.

Justice Belobaba’s decision provides another potential arrow in the quiver of defence counsel seeking to strike representative proceedings, and also clarifies the procedural options available to representative plaintiffs considering commencing a class action or a representative proceeding.

The Abreu action: Rule 10.01 representation orders may be obtained after two years

The Abreu action was brought as a representative proceeding pursuant to Rule 10.01 on behalf of approximately 100 non-union employees alleging wrongful dismissal from the insolvent defendant company. Sub-Rule 10.01(1) provides as follows:

10.01 (1) - In a proceeding concerning,

(a) the interpretation of a deed, will, contract or other instrument, or the interpretation of a statute, order in council, regulation or municipal by-law or resolution;

(b) the determination of a question arising in the administration of an estate or trust;

(c) the approval of a sale, purchase, settlement or other transaction;

(d) the approval of an arrangement under the Variation of Trusts Act;

(e) the administration of the estate of a deceased person; or

(f) any other matter where it appears necessary or desirable to make an order under this subrule,

a judge may by order appoint one or more persons to represent any person or class of persons who are unborn or unascertained or who have a present, future, contingent or unascertained interest in or may be affected by the proceeding and who cannot be readily ascertained, found or served.

Justice Belobaba noted that under this Rule the required representation order can only be obtained after the initial proceeding has been commenced, and that, in his view, there is nothing in the text of Rule 10.01 that plainly and obviously requires that the representation order be obtained within the same limitation period that applies to the contemplated initial proceeding. In this case, the representative plaintiffs did, in fact, commence the action within the applicable two year limitation period, and Justice Belobaba found that they were legally able to bring a proceeding in the capacity of “proposed representatives” without first obtaining the required court order.

Justice Belobaba hastened that the plaintiffs must still obtain the required representation order forthwith, and that the granting of such an order on the facts would not be a foregone conclusion, as the plaintiffs would need to demonstrate that they were unable to to ascertain the employees to be represented by the action, and that the “balance of convenience” favours proceeding by way of a Rule 10.01 representative action.

The Caetano action: Rule 12.08 representation orders must be obtained within two years

The Caetano action was brought within the two year limitation period on behalf of approximately 700 unionized employees alleging wrongful dismissal from the insolvent defendant company. As a threshold issue, Justice Belobaba found that the action must be stayed as the Court did not have jurisdiction to hear the complaint of the unionized employees, which must instead go before labour arbitrators and the Ontario Labour Relations Board. Having stayed the action on this basis, Justice Belobaba then turned to the question of whether the action ought to be struck on the basis of being time-barred.

Rule 12.08 provides a separate mechanism for seeking a representation order in relation to unionized employees, as follows:

Proceeding by Unincorporated Association or Trade Union

12.08 - Where numerous persons are members of an unincorporated association or trade union and a proceeding under the Class Proceedings Act, 1992 would be an unduly expensive or inconvenient means for determining their claims, one or more of them may be authorized by the court to bring a proceeding on behalf of or for the benefit of all.

Justice Belobaba highlighted the precision in this statutory language, stating that a proposed representative “may be authorized by the court to bring a proceeding on behalf of or for the benefit of all” [emphasis added]. Justice Belobaba held that this language can only be read in one way: a representation order authorizing the plaintiff to commence a representative proceeding under Rule 12.08 must be obtained before the proposed representative proceeding is actually commenced.

There is limited case law interpretting Rule 12.08, and this decision adds a new and important restriction on its use.

While the defendants in this case agreed that to the extent that the Caetano action was brought in the plaintiff’s personal capacity it was properly commenced within the two year limitation period, Justice Belobaba found that because the Rule 12.08 representation order had not been obtained within the two year limitation period the Caetano representative action on behalf of the 700 unionized employees was now time-barred and ought to be struck.

Represented persons are not “parties” to class actions or representative proceedings

Importantly, Justice Belobaba also stressed that whether or not the required representation order under Rules 10.01 and 12.08 must be obtained within an applicable limitation period is a question that does not turn on any notion of “adding parties”, as both in the context of class actions and representative proceedings the only “parties” to the action are the certified or court-appointed representative plaintiffs and the named defendants; the class members that are represented under the Class Proceedings Act, 1992 (“CPA”) or the class of persons that is represented under Rules 10.01 and 12.08 are not “parties”. Therefore, Justice Belobaba found that it was irrelevant to undertake an “added parties” analysis under Rule 5.03 or s. 21(1) of the Limitations Act for the purposes of deteriming the limitation period issues.

Implications of the decision

While Justice Belobaba’s decision illustates a potential defence available to defendants seeking to oppose representative proceedings brought pursuant to Rule 12.08, it is interesting to consider what alternatives may have been available to the Caetano plaintiff to avoid the limitation period issue.

Following Justice Belobaba’s decision, where representative plaintiffs seeking to represent persons that are “members of an unincorporated association or trade union” do not believe that they have the requisite time to obain a Rule 12.08 representation order before the expiration of a limitation period, it appears that such representative plaintiffs must assess whether they can either:

(1) commence their action as a Rule 10.01 representative proceeding and subsequently obtain a Rule 10.01 representation order, which entiails demonstrating, among other things, that they could not readily ascertain, find or serve all persons to be represented, or

(2) commence their action pursuant to the CPA, which would, pursuant to s. 28 of the CPA, suspend all applicable limitation periods until after the plaintiff has conducted a certification motion.

It is perhaps a curious result of Justice Belobaba’s interpretation of Rule 12.08 that while the Rule is intended to provide representative plaintiffs the option of proceeding by way of a representative action where otherwise proceeding under the CPA “would be an unduly expensive or inconvenient means for determining their claims”, now following Justice Belobaba’s ruling such representative plaintiffs may nonetheless need to proceed pursuant to the CPA in order to avoid the limitation period pitfalls of proceeding by way of Rule 12.08.