In a recent decision with potentially far-reaching consequences – Red Seal – the Saskatchewan ​Court of Appeal has rejected the so-called “Ragoonanan” principle applicable to class actions. The Ragoonanan principle, which derives from an Ontario case of the same name, requires that for each defendant named in a putative class action, there must be at least one representative plaintiff with a cause of action against it.

Decision

The decision in Red Seal was released alongside two other judgments in the same putative class action: Alves and Roussy.  The action involved allegations that the defendant tour companies sold the plaintiffs vacation packages in Cuba, with knowledge that the Cuban resorts could not supply basic water amenities. The defendants were alleged to be liable for failing to take reasonable care in the selection of the Cuban resorts, and selling the tour packages without disclosing the water problems.

In the Alves judgment, the Court of Appeal affirmed the lower Court’s dismissal of the certification motion, based largely on the plaintiffs’ failure to satisfy the common issues and preferable procedure criteria of the Saskatchewan Class Actions Act. Additionally, the Court of Appeal in Roussy prohibited a new representative plaintiff from being added to the proceeding where he had already settled with the defendant, Red Seal, from whom he purchased his vacation package.

Owing to the judgment in Roussy, there was no representative plaintiff with a cause of action against Red Seal. Nevertheless, in the Red Seal judgment, the Court of Appeal rejected a motion by Red Seal to strike the claim against it on this ground pursuant to the Ragoonanan principle.

Richards J.A., writing for a unanimous Court, noted that the Ragoonanan principle had been accepted by both the Ontario and Quebec Courts of Appeal.  However, Richards J.A. preferred the reasoning of the British Columbia Court of Appeal in MacKinnon, where a five-member panel rejected Ragoonanan.

According to Richards J.A., even prior to certification, a putative class action is not an “ordinary” proceeding that is subject to the rules of court in the same way as other types of litigation. Instead, it has a “special character”, and is coloured by the Class Actions Act from the outset. Based on a contextual analysis of the Class Actions Act, Richards J.A. concluded that the statute does not foreclose, but instead contemplates, the certification of proceedings in which there are some defendants against whom no representative plaintiff has a cause of action. As he observed:

““…to the extent the Act pushes the boundaries of traditional standing concepts, it does so deliberately and at the instance of the Legislature”. (para. 45)

Richards J.A. also dismissed concerns that the rejection of the Ragoonanan principle could lead to a flurry of “phantom” class actions, in which plaintiffs attempt to extract settlements from defendants through lawsuits brought on behalf of class members who do not truly exist. He found that such phantom actions – to the extent they are even a real concern – would likely fail the certification motion based on the plaintiff’s inability to show “some basis in fact” for the existence of the class. Additionally, Richards J.A. left open the possibility of bringing a motion to strike a phantom action under the rules of court.

Significance

The Red Seal decision is an important development in Canadian class actions law. It further accentuates the split between appellate courts concerning the validity of the Ragoonanan principle. Now that four provincial courts of appeal are evenly divided on the issue, it is likely that the Supreme Court of Canada will look to resolve the issue in the near future.

Red Seal may also be relevant in adding to the growing attraction of Saskatchewan as a forum for class actions. Saskatchewan is already a “no costs” jurisdiction in which non-resident class members must “opt out”, rather than “opt in”, to certified proceedings. With the rejection of the Ragoonanan principle, plaintiffs’ counsel may increasingly look to Saskatchewan as their jurisdiction of choice.

Case Information

Red Seal Vacations Inc. v. Alves, 2011 SKCA 117 (CanLII)

Date of Judgment: October 18, 2011