As we have written previously, Canadian courts have taken various approaches to permitting third party claims where they may complicate a class proceeding. Among those approaches, courts have stayed third party claims until the conclusion of the common issues trial, sometimes with and sometimes without the requirement that the third party be bound by the findings of fact made at the common issues trial.

Cannon v. Funds for Canada

In a recent decision, Ontario’s Justice Belobaba was persuaded by counsel for all parties that the previously certified common issues must be narrowed to stay the third party claim of some defendants until after the common issues trial, so that the trial would not involve or bind the third parties.

In coming to his conclusion, Justice Belobaba considered competing proposals from the plaintiff and the defendants on how to revise the common issues. Justice Belobaba found that the defendants’ draft order was “completely unacceptable” because it included a stipulation that any findings made in the common issues trial against certain third parties would be binding on those third parties in the individual issues trial and in the third party claim.

Justice Belobaba found that this provision was judicially unworkable because it would create two classes of third parties—one bound, the other not bound—and it would unfairly expose some of the third parties to “sitting duck” summary judgment motions that could be brought by the defendants. Indeed, any prejudice experienced by the defendants in having to re-litigate similar and perhaps identical issues was trumped by the prejudice that would be suffered by the third parties.

Comparing Cannon with early B.C. decisions

It is interesting to compare Justice Belobaba’s decision to the British Columbia Supreme Court’s decision in Campbell v. Flexwatt Corp., where the Court found that while the third party claim would be stayed, the third parties would be bound by the findings of fact at the common issues trial. Making its decision soon after the introduction of the B.C. Class Proceedings Act, the B.C. Supreme Court held that to find otherwise would undermine the Act’s goal of efficient, cost-effective disposition of mass tort cases by binding all class members to a court’s judgment and findings of fact on the common issues.

However, the Flexwatt decision was distinguished three years later by the B.C. Supreme Court in Cooper v. Hobart, where the Court preferred “the more traditional approach [used in individual actions] of directing that third parties are not to be bound by findings of fact at trials in which they do not participate.” The Court found that the decision in Flexwatt turned on the finding there that the defendants had an identity of interest with the third parties on the common issues. Conversely, the Court found in Cooper there was not the same identity of interest between the defendants and the third parties, where it was possible that the defendants may introduce evidence that was prejudicial to the third parties. The Court was careful to note that while it had decided the third parties would not be bound by the factual findings at the trial of the common issues, that the rulings on the common issues themselves would be binding on the third parties.

These cases, along with Cannon, demonstrate that a court’s decision as to whether third parties will be bound by the findings of fact made at the common issues trial depends on the specific facts of a case and the relationship of the defendants and the third parties.

Considerations

Cannon serves as an example of cases where courts have certified a class action despite the presence of third parties, and where the third party claim has been stayed with the stipulation that findings in the common issues trial will not bind the third parties. Defence counsel should consider these possibilities when deciding whether to bring a third party claim within a class proceeding.