This commentary was first published in the February 20, 2009 issue of The Lawyers Weekly (published by LexisNexis Canada Inc.).
The last twenty five years have not been kind to consumers in Canada. This is not because of a lack of consumer protection laws - quite the contrary. The reason is almost entirely due to the unwillingness of the federal and provincial governments to provide the necessary resources for the enforcement of the laws that exist. As a result, much of the legislation has no bite to it and is often openly flouted in practice.
Fortunately, however, an unexpected best friend of consumers has appeared from almost nowhere to come to the consumer's aid. That best friend is class actions. A class action is an action brought on behalf of all members of a designated class of plaintiffs who claim to have been adversely affected by the defendant's wrongful conduct and who seek relief. If the action is successful, it may result in a large sum of money being paid into a fund for distribution among the members of the class or a finding that the members of the class have a valid cause of action and requiring the members to prove what damages they have suffered individually.
Class actions (then known as representative actions) were first introduced in the English Equity courts in the 18th century but had limited scope because, definitionally, the actions could only be used to secure equitable remedies.
The class action remedy was extended to the common law courts in England after the fusion of the common law and chancery courts in 1873. However, this did not have the desired effect of making class actions more accessible because the English courts held that class actions were not available for the recovery of damages, the reasoning being that damages are individual and not common to the members of a class. Canadian courts also followed these precedents with the result that class actions never took root in Canada until legislation was adopted in the 1990s to reverse the judicial precedents..
Nevertheless, consumer advocates agitated in the 1970s and 1980s for reform of the class action rules so that class actions would be available to aggrieved consumers. Quebec heeded the call and introduced class action rules, based on the US model, in the Quebec Civil Procedure Code of 1978. However, this precedent had little impact in the common law provinces.
The logjam was broken in 1982 with the publication of the three volume report on Class Actions by the Ontario Law Reform Commission. This seminal Report spelled out in detail the case for class actions and provided the blueprint for a balanced and modern class actions law that took into consideration the large body of US experience in the area.
The Ontario Tory government of the day was unwilling to implement the Report's recommendations. An attitudinal change came about with the election of the Liberal Peterson administration in 1988 and the appointment of Ian Scott as attorney general. Scott was the most progressive attorney general in Ontario's postwar history and was a true friend of the consumer. He established a committee to advise him on the terms of the new legislation and the Class Proceedings Act was adopted in 1992.
British Columbia followed Ontario's lead in 1995. All of the common law provinces, with the exception of Prince Edward Island, have now adopted class action legislation. Class action rules have also been adopted by the Federal Court of Canada following a remarkable Supreme Court of Canada decision (Western Canadian shopping Centres Ltd. v. Dutton [2001] 2 S.C.R. 534). This held that Canadian superior courts had inherent jurisdiction to fashion class action rules as part of the courts' procedural powers and that the courts did not have to wait for supporting legislation.
The result has been a complete transformation of the class actions scene in Canada. Several hundred class actions have been brought across Canada since 1993 (almost all of them at the provincial level), and about half of them have been successful or have been settled out of court. The actions have covered every conceivable type of claim - framed in contract, tort, breach of trust, unjust enrichment and breach of statutory obligations - against a wide range of generally deep pocket businesses and, no less important, against the federal and provincial governments and against municipalities. Trade unions have also been targeted. The recoveries have varied, from a few dollars for each member of the class (in the case of claims against banks for excessive charges) to billion dollar settlements against the Canadian Red Cross and the federal and provincial governments for HIV infected blood, and the more recent settlement with the federal government arising out of abuses suffered by students at the native residential schools.
Not everyone is enamoured of class actions. Class action defendants complain that class actions have become an entrepreneurial activity by hungry lawyers and that Canadian courts have been too indulgent in allowing class actions to proceed even when the legal basis for the claims has been very tenuous. There are also complaints about one-way cost rules allowing plaintiffs to recover costs against an unsuccessful defendant but making it very difficult to recover costs from an unsuccessful plaintiff.
Plaintiffs' lawyers also have concerns of their own, notably about the uncertain status of national class actions and the duplication that arises when action has to be brought in each province where members of a class are located. Even greater concerns have been generated by the Supreme Court of Canada's 2007 decision in Union des Consommateurs v. Dell Computers, which upheld the validity of arbitration clauses under Quebec law in Dell's online contracts for the sale of computers. (The law has since been changed in Quebec.) Appellate courts in British Columbia and Ontario have held that the Supreme Court's decision is not binding on them. However, the position remains deeply uncertain and will not be resolved until the issue is argued before the Supreme Court.
Leaving aside these inevitable complications, there should be no doubt in any reasonable person's mind that class actions have become a major and innovative weapon for the redress of consumer grievances and, one would like to think, a powerful deterrent to potential wrongdoers. Public law institutions also need to rethink their position and about how best they can discharge their statutory and common law obligations if they wish to avoid becoming defendants in class action proceedings. However, class actions can only bridge part of the gap in the enforcement of existing laws and there is still plenty of room for federal, provincial and municipal initiatives to provide consumers with the protection they need and deserve.