Can damages be awarded on a class-wide basis for a lost opportunity to negotiate a better deal? If so, how will courts quantify the aggregate damages suffered by the class?
The Ontario Court of Appeal tackled these questions for the first time in its recent decision in Trillium Motor World Ltd. (“Trillium”) v. Cassels Brock & Blackwell (“Cassels”). The underlying trial decision was one of the first cases in Canada in which aggregate damages were awarded at the trial stage of a class action.
Aggregate damages under the CPA
Section 24 of Ontario’s Class Proceedings Act (“CPA”) allows for the court to assess and award damages to a class in the aggregate where:
a) monetary relief is claimed on behalf of some or all class members;
b) no questions of fact or law other than those relating to the assessment of monetary relief remain to be determined in order to establish the amount of the defendant’s monetary liability; and
c) the aggregate or a part of the defendant’s liability to some or all class members can reasonably be determined without proof by individual class members.
In deciding whether to award aggregate damages, the court must consider whether it would be impractical or inefficient to identify the class members entitled to share in the award or to determine the exact shares that should be allocated to individual class members.
Aggregate damages under the CPA have seldom been awarded. In our July 24, 2014 blog post, we reported on Ramdath v. George Brown College, the first case in which the Ontario Superior Court awarded aggregate damages on a class-wide basis in Ontario. In that case, the court held that aggregate damages may be awarded if the evidence put forward by class counsel is sufficiently reliable to permit a just determination of all or part of the defendant’s monetary liability without proof by individual class members.
Trial judge’s assessment of damages
Approximately one year after the Ramdath decision, the Ontario Superior Court released its decision in Canada’s first franchise class action to go to trial – Trillium v. General Motors of Canada Ltd. (“GMCL”) and Cassels Brock. The case concerned GMCL’s restructuring during the global financial crisis in 2009. As part of that restructuring, GMCL offered 240 dealers money to terminate their franchise agreements in exchange for full and final releases contained in Wind-Down Agreements (“WDAs”). A substantial majority of the dealers signed the WDAs, and then later commenced class proceedings against GMCL and Cassels, claiming, among other things, that because they had not received proper legal representation and advice from Cassels Brock, they were deprived of the opportunity to negotiate collectively and obtain a larger payment from GMCL.
The trial judge dismissed the case against GMCL, but found liability on the part of Cassels Brock and awarded the class $45 million in aggregate damages against Cassels Brock based on a “loss of chance” analysis. The judge calculated that there was a 55% chance that if the former dealers had negotiated collectively, GMCL would have paid them $218 million instead of the $126 million actually paid. Applying the 55% lost chance to the $92 million difference, the judge quantified the total damage suffered at $50 million, reduced by $5 million to account for the former dealers who opted out of the class.
Court of Appeal’s guidance on aggregate damages
The Court of Appeal dismissed Cassels Brock’s appeal from the liability findings against it, but allowed in part Cassels Brock’s appeal on the calculation of damages. The Court remitted the matter back to the trial judge for a recalculation of the loss of chance damages suffered by the class.
The Court of Appeal set out a two-stage test for calculating damages for loss of chance:
1. Causation: The plaintiff must prove that, but for the defendant’s conduct, it had a chance to obtain a benefit or avoid a loss; and
2. Quantum: The court must determine how much of the plaintiff’s loss is attributable to the defendant’s conduct.
The Court emphasized that in a loss of chance analysis, causation and damages are “inextricably linked”. It rejected the argument that the analysis involved calculating the likelihood of the occurrence of each step in the chain of causation and then multiplying each percentage chance of each contingency occurring.
However, the Court agreed with Cassels Brock’s arguments that the overall starting point for quantification should have been the difference between the amount GMCL had approved for the WDAs and the amount offered to the dealers (being $74.5 million). This brought the figure down to $36.9 million as the upper limit. The Court directed that, in order to arrive at a final new number, a determination should be made as to how many class members elected to participate in the retainer with Cassels Brock.
This case demonstrates the complexity and uncertainty in quantifying aggregate damages based on the “loss of chance” or “lost opportunity” doctrine. Defendants in class actions should be aware that in appropriate cases where liability has been established, courts may be willing to award significant aggregate damages, even where causation is based on hypothetical facts and assumptions.