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The Supreme
Court of Canada released its decision in Western Canada
Shopping Centres Inc. v. Dutton 2001 S.C.C. 46, File No. 27138
on July 13, 2001. This decision makes significant changes to the
law and procedure governing class actions in the Province of
Alberta. The case makes it clear that the courts in the Province
of Alberta are now required to be much less restrictive in their
interpretation of the rule which governs viability of class
actions in this province and design procedures to accommodate
proper class actions, whether on an overall or case by case basis.
Summary of
Facts
The Dutton case came to
the Supreme Court of Canada as a result of an action commenced by
two investors on their own behalf and on behalf of 229 other
investors in an immigration fund . The defendants argued that the
action should be struck out under the Alberta Rules of Court
summarily since it did not meet the requirements previously set
out by the courts in Alberta concerning class actions:
That the class be capable of
clear and definite definition;
That the principal issues of
law and fact be the same;
That success on the part of
one of the plaintiffs would necessarily mean success for all
members of the plaintiff class; and
That resolution of the
dispute not require any individual assessment of the claims of
individual class members.
The last of the four conditions
appeared to cause the most concern in this case. One of the
central allegations in the law suit was that Dutton and various
affiliates and advisors of Western Canada Shopping Centre breached
fiduciary duties to the investors by mismanaging their funds. In
the courts below the defendants applied for a declaration and an
order striking out the class action portion of the Statement of
Claim where the plaintiffs purported to represent a class of 231
investors. The defendants’ application was denied in the Court
of Queen’s Bench, but it was specifically left for the trial
judge to determine whether the dispute required any individual
assessment of the claims of individual class members.
Later in the Court of Appeal of
Alberta, a divided court allowed the action to continue as a class
action but granted the defendants the right to examination for
discovery from each of the 231 plaintiffs. The defendants appealed
to the Supreme Court of Canada concerning the class action issue
while the plaintiffs cross-appealed the order of the allowing
examination for discovery of each member of the class. In the
final result, the Supreme Court of Canada dismissed the appeal and
allowed the cross-appeal. Consequently the action is allowed to
proceed as a class action and the defendants’ right of
examination for discovery has been limited to the named
plaintiffs.
Most significantly the Supreme
Court of Canada liberalized considerably the conditions which must
be met to allow a class action to proceed under Rule 42 of the Alberta
Rules of Court. In contrast to decades of previous decisions
from the Court of Appeal of Alberta, the Supreme Court of Canada
determined that even in the absence of comprehensive legislation,
the courts must fill the void by utilizing their inherent power to
settle the rules of practice and procedure concerning disputes
before them. Consequently class actions should be allowed to
proceed under Rule 42 where the following conditions are met:
The class is capable of
clear definition;
There are issues of law or
fact common to all class members;
Success for one class member
means success for all; and
The proposed representative
adequately represents the interests of the class.
The Supreme Court of Canada
rejected all of the defendants’ main arguments which had been
persuasive in a number of previous decisions under Rule 42 of the Alberta
Rules of Court. For example, the Supreme Court made it clear
that it is not essential the class members be identically situated
vis-a-vis the opposing party, nor is it necessary that common
issues predominate over non-common issues or the resolution of
common issues would be determinative of each class member’s
claim. What is required is that the class members’ claims must
share a substantial common ingredient to justify a class action.
Additionally the Court clarified that while all members of the
class must benefit from the successful prosecution of the action,
they do not need to benefit to the same extent. Finally, the
Supreme Court of Canada simply rejected what has previously been
the prime impediment to class actions in Alberta, i.e. the
necessity for individual assessment of damages. The Supreme Court
held that the Trial Court retains discretion to determine how
individual issues of members of a class should be addressed once
common issues have been resolved.
Commentary
One would expect this decision
will lead to a much larger number of class actions in the Province
of Alberta. Some uncertainty will remain until the changes are
made to the old existing Rule 42. Hopefully, this case will also
lead to the end of Alberta litigants having to join in class
actions in far away jurisdictions because the courts in Alberta
would not entertain similar class action proceedings in Alberta.
This paper was prepared by Richard
J. Gilborn, Q.C.
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