In Lipson v. Cassels Brock & Blackwell LLP, Justice Perell revisited the scope of examinations for discovery in class action proceedings. Perell J. held that as a general rule, where there will be individual issues trials after the common issues trial, a representative plaintiff being examined for discovery in advance of the common issues trial is required to answer questions relevant to both the common issues trial and the representative plaintiff’s individual issues. However, the representative plaintiff is not required to answer questions relevant only to other class members’ individual issues.
The plaintiff in this class action sued lawyers at Cassels Brock & Blackwell (Cassels) in respect of a legal opinion that Cassels provided to the Canadian Athletic Advisors in 2000 about the tax consequences under the Income Tax Act of participating in a Timeshare Donation Program. Pursuant to the strategy, taxpayers would donate both cash and resort timeshares to charities with the expectation of receiving tax credits for doing so. Cassels provided a number of legal opinions, ultimately opining that it was unlikely that the Canada Customs and Revenue Agency could successfully deny the tax credits.
The plaintiff alleged that, between 2000 and 2003, the plaintiff and 900 other Canadian taxpayers participated in the Timeshare Program, expecting to receive tax credits for their charitable donations. In 2004, the CRA disallowed the anticipated tax credits in their entirety. In 2006, some of the participants in the program commenced litigation against the CRA as test cases to determine the availability of the tax credits for the donations. By March of 2008, the test cases settled and the CRA allowed the participants to receive tax credits for the cash portions of theur donations. However, CRA did not allow a tax credit for the value of the donated timeshares. For Mr. Lipson and others, this represented the larger share of their anticipated credits. To recover his losses, Mr. Lipson commenced this class action against Cassels.
The proceeding was certified as a class action in 2013, with the expectation that the issues that were individual to each class member would be tried after the common issues. The action then proceeded to discoveries.
In his examination for discovery, Mr. Lipson refused to answer a number of questions, including questions related to his individual issues. Cassels submitted that these questions were improperly refused as they related to the common issues. Cassels also submitted that although some of the questions also related to individual issues about other class members, as a practical matter, it was not possible to separate the individual issues from the common issues.
Cassels moved on these refusals, arguing that by refusing to answer questions related to the individual issues, the representative plaintiff had denied Cassels meaningful discovery.
In considering the defendant’s motion, Justice Perell carefully reviewed the Class Proceedings Act, 1992, Ontario’s Rules of Civil Procedure, and Chapter 16 of the Ontario Law Reform Commission’s Report on Class Actions (1982) with respect to the scope of discovery in class proceedings.
Justice Perell held that the law relating to the scope of discovery of a representative plaintiff needed to be revisited and rearticulated with more precision. He held that this rearticulation should be that “the general rule is and should be that the representative plaintiff is subject to the same discovery obligations as any plaintiff in a normal proceeding, but the representative plaintiff may answer or refuse to answer questions that are relevant only to other Class Members’ discrete individual issues (para. 4).”
The defendant has the right to expect that the representative plaintiff examined for discovery should answer, to the best of his or her knowledge, information and belief, any proper question relevant to any matter in issue in the action. Additionally, Justice Perell clarified that the defendant should not have a right to discover a class member without leave of the court. That being said, Justice Perell indicated that the representative plaintiff can be examined about his or her own individual issues because those individual issues would be a matter in issue in the action.
In light of the foregoing, in this case, Justice Perell opined that while Mr. Lipson could properly refuse to answer questions about the individual issues of other class members, he ought to have answered questions that arose from the pleadings in his own case.
Interestingly, Justice Perell pointed out that Mr. Lipson’s position was not that the questions posed were improper, but rather that the answers to certain questions should await a later stage of the proceeding. In Justice Perell’s view, however, this approach was neither necessary nor efficient. Indeed, Justice Perell could see no reason why the common issues trial could not be dispositive of Mr. Lipson’s case in its entirety. Justice Perell pointed out that if Mr. Lipson were successful at the common issues trial, the next step would be the individual issue stage for the representative plaintiff. The representative plaintiff’s individual issues trial could therefore happen immediately after the common issues trial and in this way the representative plaintiff’s individual issues trial could serve as a sort of test case for the other individual issues trials. As a result, permitting Mr. Lipson to answer questions at his examination for discovery that would have to be answered in any event would be efficient and fair to both Cassels and to Mr. Lipson. Justice Perell warned, however, that this rule is not absolute and in some cases there may be no utility and little to be gained by a comprehensive examination of the representative plaintiff.
Despite this analysis, Justice Perell noted that even if he did not treat this case as a case of first instance about the scope of the discovery of a representative plaintiff, the result would have been the same. In that regard, Justice Perell was satisfied that the questions that Mr. Lipson refused to answer were related to the issues that were certified in any event.
The effect of this decision should be more streamlined discovery in class proceedings, and will make examinations of representative plaintiffs more meaningful from defendants’ perspectives. While it may have been preferable from a defendant’s perspective for Justice Perell to have found that a representative plaintiff must inform him- or herself as to the other class members’ individual evidence, the decision can nonetheless be characterized as helpful for defendants, and brings welcome clarity to the law.