On November 30th the Superior Court released its decision in de Muelenaere v Great Gulf Homes Limited. Mr. de Muelenaere is the representative plaintiff in a proposed class proceeding relating to the installation of allegedly defective shower valves in a newly built condominium containing 437 units.
This pre-certification stage motion asked the Court to determine how communications between defendants and putative class members, including settlement offers, should be regulated at this relatively early juncture in a class proceeding.
The defendant developer had received 24 letters from unit holders seeking to resolve their claims directly with the developer, and without necessarily involving class counsel. In response to those expressions of interest the developer offered to retrofit the units with a specially designed valve along with a small payment for inconvenience. In exchange, the developer required the unit holder to execute a Release from future actions, including the proposed class proceeding. The Release contained details about the proposed class action, including contact information for putative class counsel.
The representative plaintiff brought a motion seeking an order that would (a) set aside settlements that had been reached between the developer and the putative class members (b) amend certain provisions in the Release and, (c) direct the developer to implement a procedure whereby putative class counsel receive notice of any offers to settle. The motion raised squarely the scope of a solicitor-client relationship at the pre-certification stage and that the rights of putative class members in relation to settlements reached outside of the structure of a class proceeding.
Mr. Justice Perell dismissed the motion. In doing so, he found that provided defence counsel takes care to ensure that putative class members are not misled in any way that may affect their rights as members of the proposed class nor undermine the integrity of the class proceeding more generally, defense counsel are free to communicate with putative class members for the purposes of collecting information or settling claims. Mr. Justice Perell underscored that defence counsel's conduct in this regard would be guided by their professional obligations pursuant to the Rules of Professional Conduct.
While Mr. Justice Perell acknowledged that the Court has the power to intervene in communications that are abusive or misleading in the pre-certification stage, it should only do so sparingly.
In the case at bar, the Court found that, with some minor modifications, the defendants' Release provided those wishing to settle their claims individually with enough information regarding the class proceeding. The Release further recommended independent legal advice and enclosed the contact information for the putative class counsel. The Court held that there was no basis upon which to interfere with the individual settlements or to force the defendant to disclose the individual unit holders' identities. The Court left open the possibility that the extent to which the Releases are binding could be raised at a common issues trial, though it did not elaborate on the point.
Pre-certification communication between defendants and putative class members has long been an issue in which defendants have sought guidance. This decision offers a helpful and thoughtful contribution to the law guiding these communications and to the responses available to defendants in the shadow of a putative class proceeding.