The Supreme Court of Canada recently released its decision in AIC Limited v.Fischer which clarifies the analysis a court must follow in determining whether a class action, as opposed to another process, will be considered the preferable procedure for resolving class members' claims. The Supreme Court determined that the settlement of Ontario Securities Commission (OSC) proceedings which included restitution by the defendants to investors did not insulate the defendants from a securities class action.


This case arose from an investigation conducted by the OSC as to whether certain mutual fund managers had taken reasonable steps to protect the funds from harm that could arise from frequent trading market timing.

OSC staff entered into settlement agreements with the defendants, pursuant to which the defendants agreed to make restitution in the amount of C$205.6-million to their investors. The settlement agreements included factual admissions which were made "without prejudice" to the defendants in "any civil or other proceedings which may be brought."

Following approval of the settlements by the OSC, several investors applied to certify a class action against the defendants advancing allegations about the same conduct that was the subject of the settlements. The civil claim asserts that the amount paid by the defendants to investors under the OSC settlement agreements falls far short of providing full reparation of investor losses and fails to account for management and transaction costs associated with the impugned trades.

The Fischer decision focuses on a single branch of the five-part test for certification: whether a class proceeding would be the preferable procedure for the resolution of the common issues. Canadian courts have long held that this question must be considered in light of the three primary purposes of class proceedings: judicial economy, behaviour modification and access to justice.

The plaintiffs were initially unsuccessful before the motions judge who held that the proposed class action was not the preferable procedure. He found that the OSC proceedings were an alternative procedure that had achieved the three goals of class proceedings. The Divisional Court allowed an appeal of this decision and certified the class action, primarily on the basis that the OSC settlements had not provided investors with substantially all of the monetary relief they sought. The Court of Appeal for Ontario upheld the Divisional Court's decision to certify the class proceeding, but on a different basis. The Court of Appeal focused its decision on procedural considerations such as the OSC's jurisdiction, mandate and remedial powers, and the fact that the OSC proceedings did not provide comparable rights of participation to the affected investors.


Justice Cromwell, writing for the unanimous panel, held that a class proceeding (as compared to the OSC proceedings) "is preferable from the point of view of providing access to justice." In so doing, he clarified that access to justice includes both a substantive and a procedural component.

Justice Cromwell set out a five-part test to assess whether a class action will serve the goal of access to justice.

  • What are the barriers to access to justice?
  • What is the potential of the class proceedings to address those barriers?
  • Are there any alternative procedures to a class proceeding?
  • To what extent do the alternative procedures address the barriers to access to justice?
  • How do the two procedures compare?

The comparison of the two procedures considers whether, on the evidence, the class action has been demonstrated to be the preferable procedure to address both procedural and substantive barriers to access to justice. On this final question, a court must also consider the costs and benefits of the proposed class proceeding in relation to those of the proposed alternative procedure.

In Fischer, the Supreme Court identified two potential barriers to access to justice. The first is economic: the claims for monetary relief of any given individual are not substantial enough to support viable individual actions. The second barrier resulted from the nature of the claim and the fact that the size of the class could potentially number more than one million members. Accordingly, traditional litigation would not provide a fair process to seek a resolution of the common issues.

The Supreme Court found that the only alternative procedure to a class action was the OSC proceeding, the results of which were already known. It concluded that the OSC's main jurisdiction is regulatory, not remedial or punitive. Therefore, compensation of investors is not its primary focus. The Supreme Court observed that, based on the record, it was not possible to determine how the OSC had arrived at the settlement amounts. It also noted that the OSC process had "provided little or no basis for investor participation". Both of these factors supported the Supreme Court's conclusion that the OSC process was not the preferable procedure.

The Supreme Court commented that the OSC proceedings were without prejudice to civil claims and that the motions judge had been satisfied that there was some basis in fact for the plaintiffs' submission that investors may not have been fully compensated as a result of the OSC settlement. It disagreed with the Court of Appeal's conclusion that the substantive outcome in the OSC proceeding was not relevant to the preferable procedure analysis. It determined that both the alternative procedure itself and, when known, the outcome of that procedure should be considered because "[A]cess to justice requires access to just results, not simply to process for its own sake." The Supreme Court concluded that the plaintiffs had sufficiently demonstrated that barriers to access to justice remained after the resolution of the OSC proceedings and that the proposed class action was the preferable procedure for addressing their claims.


This case may have significant consequences for categories of class actions which tend to involve parallel regulatory proceedings such as securities, pensions and competition. The Supreme Court has outlined a framework for analysing whether and when these regulatory proceedings may provide an adequate dispute resolution mechanism that will foreclose class proceedings. Courts are required to scrutinize these regulatory proceedings and other alternate procedures to determine whether they offer sufficient procedural rights to claimants. However, when the substantive outcomes in these alternative proceedings are known, the result achieved may also be relevant to the preferable procedure analysis.

Further, by confirming that a regulatory settlement will not necessarily preclude the possibility of a class action, the decision could have a dampening effect on settlements in OSC and other regulatory proceedings. Conversely, "follow on" class actions which rely on the existence of a regulatory proceeding or determinations reached in such proceedings can be expected to increase.

It will be interesting to see how lower courts apply Fischer. It is arguable that the case has opened the door to some degree of inquiry into the merits of the case on the certification test. If so, this would be a departure from the Supreme Court's prior pronouncement in Hollickv. Toronto (City) that "the certification stage is decidedly not meant to be a test of the merits of the action".