On January 31, 2008 the Supreme Court of Canada granted leave to appeal from a decision of the Quebec Court of Appeal declining to enforce a national class action settlement approved by the Ontario Superior Court of Justice. The appeal arose in the context of a class action filed in Quebec by Michel Lépine (on behalf of residents of Quebec) against Canada Post Corporation and Cybersurf Corp. The Quebec Superior Court had refused to find that Mr. Lépine’s class action should be dismissed following the settlement of similar class actions in British Columbia and Ontario, although the Ontario class action settlement sought to bind a class that included residents of Quebec.

As most provinces in Canada now have class action legislation, it is common to see overlapping class definitions. In some disputes a provincial court may be called upon to certify a national class which binds residents in other provinces. While Canadian courts have in the past certified national classes, the effect of those decisions on pending class action lawsuits in other provinces has very rarely been litigated since, in most cases, counsel in the various provinces have coordinated the settlement and certification of the class action for settlement purposes by the various courts involved. In the Canada Post case, however, Quebec counsel were not part of the settlement negotiated in Ontario even though it involved Quebec residents. That is why attempts to enforce the settlement in Quebec met with opposition. The Supreme Court of Canada’s decision to grant leave to appeal on this issue may lead to new guidance as to the role of Canadian courts in national class actions and the legal principles underlying national class actions in Canada.

In 2000, Canada Post started selling internet access using a package designed by the co-defendant, Cybersurf. The package was sold for $9.95 and Cybersurf undertook to provide free internet access in exchange for constant advertisements on the user’s computer screen. The free internet access was discontinued in 2001, and Cybersurf advised customers that there would be a monthly charge for the service. Three class actions were filed relating to the discontinuation of the program, one by Mr. Lépine in Quebec (on behalf of Quebec residents), one by Paul McArthur in Ontario (on behalf of all residents of Canada except for Quebec) and one by John Chen in British Columbia (on behalf of British Columbia residents).

Throughout 2002 and 2003 attempts were made to settle the class actions, but Mr. Lépine and his counsel refused to agree to a settlement. Notwithstanding this fact, in July 2003, counsel for Canada Post and the plaintiffs in British Columbia and Ontario negotiated a settlement which was contingent on approval of the settlement by the courts in British Columbia and Ontario. The settlement contemplated that the proposed classes in the proceedings would be modified so that the British Columbia action would include only British Columbia residents and the Ontario action would include residents across Canada, except for British Columbia residents, but including Quebec residents. Under the settlement, the members of each class would be entitled to a refund of the purchase price and to three months of free internet service.

In the meantime, the Quebec motion for authorization to institute a class action proceeded and was heard by the Quebec Superior Court from November 5 to 7, 2003. The motion was taken under advisement on November 7. Mr. Lépine was also informed that the litigation in Ontario had been settled, and that a hearing would be held before the Ontario Superior Court of Justice to approve the settlement, which purported to bind Quebec residents. Counsel for Mr. Lépine did not appear before the Ontario Court but advised the Court in writing that the Quebec Superior Court had heard the motion for authorization and the matter had been taken under advisement.

With the Quebec decision still under reserve, approval of the negotiated settlement in Ontario was granted by the Ontario Superior Court of Justice on December 22, 2003. The approval was for a national class (which excluded British Columbia residents but included Quebec residents). Approval was granted notwithstanding the fact that the Court had been informed of the status of the proceedings in Quebec.

The next day, December 23, 2003, the Quebec Superior Court granted Mr. Lépine’s motion seeking authorization of the class action. On February 21, 2004, a notice appeared in various Quebec publications advising that the Quebec class action had been authorized and that the action would be issued and served.

On April 7, 2004, the Supreme Court of British Columbia certified and approved the settlement as it related to the action filed on behalf of residents of British Columbia. In accordance with the settlement agreements, notices were published across Canada, including in Quebec, Ontario and British Columbia, notifying class members of the settlement in Ontario and British Columbia, and the procedure for making claims.

Canada Post then filed a motion before the Quebec Superior Court to have the decision of the Ontario Superior Court of Justice approving the settlement recognized and declared enforceable, with the result that the Quebec class action would be dismissed on the basis of res judicata. The Quebec Superior Court refused to grant Canada Post’s motion. In doing so, the Quebec Superior Court quoted extensively from a decision of the Ontario Court of Appeal, Currie v. McDonald’s Restaurants of Canada Limited,1 and from the Ontario court’s analysis of the procedural requirements that must be satisfied before a decision authorizing a class action which purports to bind non-resident class members can be enforced. In particular, the Court discussed at length the requirement that adequate notice be given. The Quebec Superior Court found that publication of the notice regarding the Quebec action and the notice with respect to the settlement approved in Ontario, combined with the fact that the Ontario notice did not tell class members how to distinguish between their rights under the two class actions, was a source of confusion. Consequently, the Ontario decision could not be recognized and enforced in Quebec.

The Quebec Court of Appeal agreed with the Quebec Superior Court. The Court of Appeal was of the view that the Ontario Superior Court of Justice should have declined to exercise jurisdiction over Quebec residents and that the notice of the proposed settlement was confusing and inadequate. Consequently, the Court of Appeal held that the Quebec Superior Court was right to declare the settlement approved in Ontario unenforceable against Quebec residents. The Court of Appeal found that failure to provide proper notice was a violation of the fundamental principles of procedure, pursuant to Article 3155 (3) of the Civil Code of Québec. Based on the principles of Article 3155, the Court of Appeal agreed that the Quebec Superior Court was justified in not recognizing the Ontario decision. The Quebec Court of Appeal also expressed concerns over why the Ontario Superior Court of Justice, guided by the principles of courtesy between the provinces, had not declined to exercise its jurisdiction with respect to Quebec residents given the courtesy it had extended to the Supreme Court of British Columbia.

The Supreme Court of Canada’s decision to grant leave seems to be a sign that the Supreme Court is interested in considering the issue of national class actions in Canada. It remains to be seen whether the Supreme Court of Canada will provide specific guidance to courts with respect to principles applicable to national class actions or if it will focus on the particular facts of this case.