Since Ontario adopted its Class Proceedings Act (CPA) in 1992, consumer class actions involving small individual claims have been hard to certify because commonality is often difficult to establish. However, the recent Ontario Court of Appeal decision in Markson v. MBNA Canada Bank may facilitate the certification process.

Even in cases where there is no reasonable means of proving that each class member suffered a loss, courts can now hypothesize such a loss for the purposes of certification. The Court of Appeal has relegated the concept of universal liability to an administrative issue that can be addressed through assumptions and aggregate awards, rather than considering it a basic requirement for class proceedings.

MBNA was accused of charging an illegal rate of interest to its credit card holders. Under the Criminal Code, it is illegal for a lender to receive more than 60 per cent interest on any loan. The term "interest" is defined to include both actual interest and fees charged on the loan. Markson alleged that MBNA’s cash advances, which required customers to pay both a flat fee and compound interest, violated this provision and sought to certify the proceedings as a class action.

The lower court refused certification. It found that it would be impracticable to determine whether MBNA was liable to each class member. Such a determination would involve a painstaking examination of transactional information when the amounts in question were negligible.

Moreover, MBNA did not have electronic records covering the period before January 2000. This made it impossible to develop a program that could scan available data and isolate potentially excessive interest charges.

The lower court also noted that the proposed class action was not a preferable procedure. Because changes in MBNA’s computing practices would limit the credit options enjoyed by many of its customers, the proceedings would undermine, rather than serve, the interests of the prospective class members.

The Court of Appeal, however, took a very different approach. According to the appellate court, it was unnecessary to determine MBNA’s liability toward each class member when all were ‘at risk’ of being charged a criminal rate of interest. Since some form of wrongdoing could be certified as a common issue, the fact that only a small number of individuals might have been affected by MBNA’s practices — and therefore be entitled to damages — was irrelevant.

Because the CPA allows judges to calculate and distribute compensation on an approximate basis, the difficulties associated with assessing individual claims could be resolved administratively. In the court’s view, it was better to certify a class when only some of its members have suffered an injury than to allow a defendant to get away with illicit practices. The court also held that it would be inappropriate to reward MBNA for the deficiencies of its record-keeping system.

As for the notion that customers would be disadvantaged by more limited credit options, the court noted pithily that, "[a]s a matter of public policy, a criminal should not be permitted to keep the proceeds of the crime."

McCarthy Tétrault Notes:

The Markson case appears to lower the threshold on establishing commonality in consumer class action cases for Ontario plaintiffs. Even if proving liability on an individual basis is extremely problematic, the plaintiffs need only show that there has been some underlying infringement that creates a ‘risk’ of class-wide damages.

From a strategic standpoint, this may increase pressure on defendants to settle at an early stage of the proceedings, even when the merits of the action are quite weak. Unfortunately, this ‘blackmail’ effect goes against the Supreme Court’s threefold justification for class proceedings, namely access to justice, judicial economy and behaviour modification.