Introduction

Can a defendant be sued in a class proceeding despite the fact that there is no representative plaintiff with a personal cause of action against that defendant?

There is a burgeoning body of inconsistent Canadian judicial authority on this important issue. Courts in Québec, Ontario and Alberta have generally held that a representative plaintiff must have a personal cause of action against each defendant. However, the British Columbia courts (with Saskatchewan apparently following suit), have reached the opposite conclusion.

The basis for this inconsistency in the case law appears to lie, at least in part, in s. 2(4) of the British Columbia Class Proceedings Act, which permits the court to certify a person who is not a member of the proposed class as a representative plaintiff if doing so is “necessary” to avoid a “substantial injustice” to the class.1 All other provinces, but for Ontario,2 have analogous provisions in their class action legislation. This may explain the different approaches of the courts in British Columbia and Ontario on this issue. However, it does not explain the differences between British Columbia and the other provinces, as each of British Columbia, Québec and Alberta have provisions that allow non-class members to serve as representative plaintiffs.

This article examines the leading cases on this issue, and concludes that the British Columbia line of authority, and in particular its use of s. 2(4), is flawed and that the Québec, Alberta and Ontario line of authority is the correct one, produces a more fair result and should be the prevailing law.3

Background: When and Why does the Issue Arise?

The issue of whether a representative plaintiff may sue a defendant against whom he/she has no cause of action typically arises in one of two contexts: (1) in motions by defendants to strike out a claim on the basis that it discloses no cause of action; and (2) in certification motions. In the latter context, defendants have raised the issue as part of the “cause of action” prerequisite to certification, arguing that the proposed representative plaintiff must have a cause of action against each of the defendants.4 Alternatively, defendants have raised the issue as part of the inquiry into the adequacy of the proposed representative plaintiff, arguing that the requirement that the representative plaintiff “would fairly and adequately represent the interests of the class” is not met unless there is a “representative plaintiff for each defendant”.5

In support of the argument that there must be a representative plaintiff for each defendant, defendants have invoked the provisions of class proceedings legislation stating that only “members of a class…may commence a [class] proceeding”.6 They have also invoked the general principle that for an individual action to proceed against a particular defendant, there must be at least one plaintiff who has a cause of action against that defendant.7

“To Avoid Substantial Injustice” — Subsection 2(4) of the BCCPA and Equivalents

Plaintiffs faced with the argument that there must be a “plaintiff for every defendant” have invoked s. 2(4) of the BCCPA (and its equivalents) to argue that, while class proceedings legislation generally requires that a class proceeding be commenced by a class member, s. 2(4) suggests a more relaxed approach to the issue.

Subsection 2(4) of the BCCPA states:8

The court may certify a person who is not a member of the class as the representative plaintiff for the class proceeding only if it is necessary to do so in order to avoid a substantial injustice to the class.

The class proceedings statutes of Alberta,9 Saskatchewan,10 Manitoba,11 New Brunswick12 and Newfoundland13 each contain a similar provision.14 Nova Scotia’s new legislation, the Class Proceedings Act, which is not yet in force, also has a provision permitting non-class members to serve as representative plaintiff.15 Only Ontario does not have an analogous provision.

The legislative provisions in British Columbia, Manitoba, Alberta and Saskatchewan (while not using identical language) each permit a court to certify a person who is not a member of the class as the representative plaintiff only if it is necessary to do so in order to avoid a “substantial injustice” to the class.16

Québec’s class proceedings legislation contemplates that a non-profit organization, employee association or other “ideological plaintiff” may commence a class action on behalf of its members, even though the organization or association itself is not a member of the class.17 The concept of an “ideological plaintiff” is addressed further below.

Legislative Objectives for Subsection 2(4) and Equivalents

There is no case law that directly speaks to the purpose of these legislative provisions, or to their “substantial injustice” language. However, several law reform organizations have addressed the issue in their reports on provincial class actions legislation. These reports suggest that the purpose of the legislative provisions is to permit a non-member individual or group possessing some special ability, experience or resources to serve as representative plaintiff in a situation where that non-member would be the most appropriate class representative.18 In particular, they suggest that the provisions might be invoked to permit an “ideological” plaintiff, such as a consumer association or other non-profit organization, to serve as representative plaintiff.19

The Ontario Law Reform Commission, which decided not to enact a provision similar to British Columbia’s s. 2(4), discussed possible arguments for and against the enactment of such a provision. The arguments for it included the following:20

…a particular individual, because of some special ability or experience, may be not only an adequate class representative but the most adequate class representative…In some instances, an ideological advocate…such as a consumers’ association, may be an ardent and capable representative, thereby ensuring that the interests of class members will be pressed and protected.

The purpose of British Columbia’s s. 2(4) was addressed in a paper submitted to the 1995 Annual Meeting Proceedings of the Uniform Law Conference of Canada, which stated that s. 2(4) was included “on the belief that a particular non-member individual or group may possess special ability, experience or resources that would allow them to be not only an adequate class representative, but also, the most appropriate class representative”.21

This article was cited by the Alberta Law Reform Institute in its Class Actions report, which concluded that “…the exception [permitting non-class members to serve as representative plaintiff] could be useful in cases where a particular individual or organization possesses special ability, experience or resources that would enable it to conduct the case on behalf of all class members”.22

In concluding that “there are persuasive reasons not to require that the representative necessarily be an actual member of the class he or she has applied to represent”, the Manitoba Law Reform Commission (“MLRC”) placed particular emphasis on the role of s. 2(4) in enabling the participation of ideological plaintiffs. The MLRC report stated that allowing a nonmember to serve as representative plaintiff:23

...avoids potential legal fictions, where a purely nominal plaintiff is put forward by a person or organization that is the real impetus behind the litigation, and also permits an organization with a bona fide interest in pursuing the litigation to do so, even if it has no actual stake in the outcome. An example might be an organization such as the Canadian Association of Consumers, which could have a valid interest in pursuing a claim on behalf of consumers, even if it will not itself benefit from the litigation.

The question remains as to what, if any, impact s. 2(4) of the BCCPA and its equivalents should have upon the issue of whether a representative plaintiff should be allowed to sue a defendant against whom he or she has no cause of action.

Key Case Law — Ontario/Québec/Alberta vs. British Columbia/Saskatchewan

Ontario

Ontario case law on this issue appears to be settled: if there is no representative plaintiff who has a personal cause action against a defendant, then the claim as against that defendant will be struck out (or, depending on the context, will not be certified).

The leading Ontario case is Ragoonanan v. Imperial Tobacco Canada Ltd.24 The plaintiff in Ragoonanan brought a class proceeding against three cigarette manufacturers after her house was destroyed, and her daughter and brother died, in a fire caused by a cigarette. Though the statement of claim named three defendants, it alleged that the cigarette that caused the fire had been manufactured by one of the three. The other two defendants moved under Ontario’s Rules of Civil Procedure to strike out the statement of claim on the basis that it disclosed no reasonable cause of action against them. They argued that “in a class proceeding under the [OCPA], for any given defendant there must be at least one representative plaintiff who has ‘a reasonable cause of action’ disclosed in the pleading against that defendant”.25

Justice Cumming granted the motion to strike, holding that “there must be, at the least, a representative plaintiff with a cause of action against any given defendant…”.26 It was not sufficient for the pleading to disclose a “reasonable cause of action” by the representative plaintiff against only one defendant and then put forward a similar claim by a speculative group of putative class members against the other defendants.27

The decision in Ragoonanan was endorsed by the Ontario Court of Appeal in Hughes v. Sunbeam Corp. (Canada) Ltd.28 The plaintiff in Hughes commenced a class action on behalf of all persons in Canada who had bought ionization smoke alarms manufactured by one of four defendants, though he had personally purchased a smoke alarm from only one of the defendants. The other three defendants moved to strike out Hughes’ claims against them, and were successful at first instance. The Ontario Court of Appeal dismissed Hughes’ appeal on the basis that “if the representative plaintiff does not have a cause of action against a named defendant, the claim against that defendant will be struck out”.29 Justice Laskin, writing for the Court, echoed the reasoning in Ragoonanan and held that “[Hughes] cannot resist a rule 21.01(1)(b) motion by alleging that some as yet unknown members of a proposed class may have a cause of action against these other manufacturers if the class action is certified”.30

British Columbia

Subsection 2(4) of the BCCPA (which, as discussed above, has no counterpart in the OCPA) appears to have played a key role in driving British Columbia courts to an opposite conclusion than that reached by the Ontario courts in Ragoonanan and Hughes. In MacKinnon v. National Money Mart Co.,31 the British Columbia Court of Appeal, relying in part on s. 2(4) of the BCCPA, held that a representative plaintiff need not have a cause of action against each defendant; it is enough that prospective class members have a cause of action against each defendant.32

The plaintiff in MacKinnon received short-term “pay day loans” from three companies. He brought an action under the BCCPA alleging that these companies, and several others with which he did not have dealings, levied fees and charges in the course of their short-term loan businesses that amounted to a criminal rate of interest. The defendants with which the named plaintiff did not deal brought a motion to strike out his claim under rule 19(24) of British Columbia’s Rules of Court.33 The defendants’ motion to strike was dismissed by Justice Brown, who felt “bound by the approach taken by [the British Columbia] Court of Appeal” in the Campbell-Harrington-Furlan trio of decisions, which had addressed a similar issue in different contexts.34

The defendants appealed and the Court of Appeal upheld Justice Brown’s decision, preferring the reasoning in the British Columbia case law over the Ontario approach in Ragoonanan and Hughes. In coming to this decision, Justice Saunders held that Ragoonanan could be distinguished simply on the basis that the OCPA does not have a provision equivalent to s. 2(4) of the BCCPA.35 Her Honour reasoned that “the fact that the [British Columbia] Act allows such a situation at all indicates…that the cause of action nexus is not solely between defendants and the representative plaintiff, but also between defendants and the plaintiff class as a whole”.36

Saskatchewan

Saskatchewan courts have followed the approach taken in MacKinnon. In Frey v. BCE Inc., the issue of whether there must be a “plaintiff for every defendant” was considered in the context of a (failed) certification motion, and specifically in the context of the requirement that there be a representative plaintiff who “would fairly and adequately represent the interests of the class”.37 In brief reasons, the court rejected the Ontario authorities and adopted the British Columbia position, reasoning that “...the Saskatchewan Class Actions Act does not mandate otherwise. There is no compelling reason to require something about which the legislation is silent”.38

The court in Frey did not address Saskatchewan’s equivalent to s. 2(4) of the BCCPA, or the fact that MacKinnon dealt with a motion to strike out a pleading on the basis that it disclosed no cause of action, while Frey dealt with a certification motion. Interestingly, Justice Cumming noted in obiter in Ragoonanan that the “plaintiff for every defendant” issue might be addressed differently on a certification motion than it would be on a motion to strike.39 It is not apparent why that would be the case, particularly since the decision in Ragoonanan also noted that the cause of action requirements on a motion to strike out a claim and a certification motion “should be consistent one with the other”.40

Alberta and Québec

Despite having analogous provisions to B.C.’s s. 2(4), Québec and Alberta courts have decided this issue consistent with the Ontario line of authority.

In Bouchard v. Agropur Cooperative, the Québec Court of Appeal cited Hughes with approval, and held that:41

In class actions involving numerous [defendants], our Court has implicitly confirmed the necessity for the petitioner to establish a cause of action with each and every one of them…In my opinion, it is necessary to dissipate any ambiguity on this subject and clearly reaffirm the necessary principle that a representative must establish a cause of action against each [defendant].

In Gillespie v. Gessert, Justice Horner (in considering the “cause of action” prerequisite to certification) emphasized the distinction between a representative plaintiff (appointed on certification of a class proceeding) and the named plaintiffs who commence the class proceeding.42 Her Honour held that while Alberta’s equivalent to s. 2(4) of the BCCPA might permit the court to appoint as representative plaintiff a person who has a cause of action against only one defendant, this does not mean that “...the underlying proceedings are cured such that they will magically disclose a cause of action against [other defendants]”.43 Justice Horner characterized s. 2(4) as a “red herring” in the analysis of whether the pleadings disclose a cause of action.44 This suggests that, in Alberta, there must be a representative plaintiff who has a cause of action against each defendant.

MacKinnon — Floodgates Opened by a “Red Herring”?

To borrow the phrase used by Justice Horner in the Alberta Gillespie case, British Columbia’s s. 2(4) and its equivalents are “red herrings”; they are nondeterminative to deciding the issue of whether a representative plaintiff should be able to sue a defendant against whom he/she has no cause of action. The use of s. 2(4) in this way was not contemplated by the respective provincial legislatures that enacted it. As exemplified by a recent Manitoba decision discussed below, such use also has the potential to open the floodgates for courts to routinely, and unnecessarily, permit representative plaintiffs to sidestep aspects of the test for certification.

The court in MacKinnon relied upon s. 2(4) as a sign that the legislature intended “flexibility in the Act” and that the condition that a representative plaintiff should have a cause of action is not “a condition…inherent to a class action”.45 In doing so, the court arguably paid inadequate deference to the onerous criteria (i.e., the necessity to avoid substantial injustice) which must be met before the drastic step of certifying a non-class member as representative plaintiff can be ordered. These criteria serve as important floodgates to prevent abuses (or, at the very least, unintended uses) of class proceedings legislation, and to preserve fairness. The Manitoba decision in Bellan v. Curtis46 is perhaps a harbinger for the floodgates risk associated with MacKinnon. The defendants in Bellan argued that certain causes of action should be struck out on the basis that the representative plaintiff (as opposed to other putative class members) did not have them. This argument is similar but distinct from the argument addressed by MacKinnon as to whether there must be a “plaintiff for every defendant”. In Bellan, Justice Hanssen relied on MacKinnon and dismissed the motion to strike. Though Justice Hanssen did not cite Manitoba’s equivalent to s. 2(4) of the BCCPA, he held that the approach adopted by the courts in British Columbia is consistent with the MLRC’s recommendation that “there are persuasive reasons not to require that the representative necessarily be an actual member of the class he or she has applied to represent”.47 Justice Hanssen did not make any reference to the strict “substantial injustice” prerequisite to permitting a nonclass member to serve as representative plaintiff.

Conclusion

The floodgates concern that arises from decisions like MacKinnon and Bellan is that class actions will be certified without the representative plaintiff having a cause of action against one of the defendants. Why does this matter? Fundamentally, it is a question of fairness. Defence counsel is already in a difficult position in defending a class proceeding in that the defendant has access to only one of the multitude of class members on discovery. This problem becomes amplified in a common-issue trial of a class proceeding. If the representative does not even have a cause of action against the defendant, the defendant is further hampered in its ability to know the party and case against it, and in particular the ability to obtain and test the evidence against it on certification and at trial. In that situation, a defendant would be required to either try to obtain discovery evidence effectively through an intermediary (which is neither efficient nor fair) or to seek an extraordinary order from the court to obtain discovery evidence from an individual other than the representative plaintiff (which would, in essence, require a defendant to find someone to sue it). The unsatisfactory nature of these options points to the conclusion that there must be something very wrong with permitting a representative plaintiff to sue a defendant against whom he/she has no personal cause of action.

Moreover, as a practical matter, a certification order can potentially create a costs-driven settlement dynamic which favours the plaintiff. This is a further reason to require that the certification and “cause of action” criteria be strictly enforced.

The floodgates need not have opened, and need not stay open. In most cases the solution to the issue is to simply require that plaintiffs’ counsel put forward representative plaintiffs who have, between them, all of the causes of action which are asserted against each defendant. Doing so would fairly require that in each case, absent the exceptional criteria required to invoke s. 2(4) of the BCCPA and its equivalents, the principal criteria for class certification be met, and thereby avoid creative interpretations of class proceedings legislation.

This article first appeared in the Butterworths Class Action Defence Quarterly March 2008