Certification rejected in case compared with Greek myth of Tantalus

May 25, 2011

The Ontario Superior Court of Justice, in Williams v. Corporation of the City of Toronto, recently dismissed a motion to certify a class proceeding against the City of Toronto despite finding that the proposed representative plaintiff and the potential class members had been “tantalized” by the City, in the sense of reaching for, but never grasping, a claim for rent reduction and damages for rent overcharge, “reminiscent of the Greek myth of Tantalus”. Justice Perell told the story of the myth, commenting: “Tantalus was punished for his misdeeds by eternal confinement below a fruit tree beside a pool of fresh water.  As punishment, if Tantalus reached for fruit to eat, the tree branches would raise beyond his grasp, and if he stopped for water to drink, the water would recede.”  His Honour stated that Mr. Williams, the proposed representative plaintiff, “who does not deserve any punishment, has been tantalized by the defendant, City of Toronto, but unfortunately, certifying this application as a class proceeding, would just prolong the agony of a futile pursuit for access to justice for the Class Members.”

Background

As a result of amendments to regulations passed under the Assessment Act, municipally-licensed rooming houses were reclassified from “multi-residential” to “residential,” which resulted in lower municipal property taxes and an attendant reduction in rent for rooming house tenants. The proposed representative plaintiff sought to certify a class proceeding against the City for negligence in failing to give statutorily prescribed notice of the rent reduction as required under sections 131(3) and (4) of the Residential Tenancies Act, 2006 and under sections 136(3) and (4) of its predecessor the Tenant Protection Act. The proposed representative plaintiff was a rooming house tenant in the Parkdale area of the City and brought the proposed class proceeding on behalf of other rooming house and bachelorette tenants who missed rent reductions and who were overcharged rent by their landlords from 2004 to present. The proposed representative plaintiff alleged that the City’s failure to give him notice caused him to overpay his rent and he suffered damages as a result.

No Cause of Action Established1

In his consideration of the requirements for certification Justice Perell determined that the critical issue in the assessment of whether the action could be certified was whether the City owed the proposed representative plaintiff a private law duty of care associated with its statutory obligation to give notice to tenants. Justice Perell held that the City had no duty of care to the proposed representative plaintiff and therefore, the first criterion for certification, namely the requirement of a cause of action, was not met. His Honour held that the City should have contemplated that its failure to send out a notice could affect the potential class members because the class members might not otherwise know that the taxes had been reduced with a corresponding reduction in rent. While this established foreseeability of injury and proximity for the purpose of determining whether a duty of care exists, Justice Perell held that the relationship between the City and the proposed representative plaintiff was not sufficiently close so as to give rise to a duty of care. His Honour held that under the Residential Tenancies Act, 2006, which was the statutory foundation of the proximity analysis, the representative plaintiff was not in such a close and direct relationship with the City to make it fair and just that the City be held liable. Although it would be foreseeable to the City that harm might be occasioned in the sense that an uninformed tenant might miss the opportunity for a rent reduction, the extent of the harm to a group of tenants was not foreseeable nor was the harm to some or all of the tenants inevitable. Harm was not inevitable because landlords were obligated to provide a rent reduction whether or not notice was given. As such, the proposed representative plaintiff’s personal experience of not receiving a rent reduction may not be universal to all the potential class members. In addition, Justice Perell held that there were policy issues that negate the presence of sufficient proximity between the City and the proposed representative plaintiff that would negate a prima facie duty of care if one existed. The imposition of a general duty of care on municipalities to tenants that did not receive notices under the Residential Tenancies Act, 2006 would give rise to a potential for indeterminate liability by municipalities across the province. From a policy perspective, His Honour reasoned that it was undesirable and unnecessary to impose a duty of care on a municipality to be indirectly responsible for a financial liability that directly belongs to landlords to their tenants.

Despite Justice Perell’s conclusion that the cause of action requirement for certification had not been satisfied, His Honour nonetheless considered whether the application for certification satisfied the remaining criteria for certification as a class proceeding. Finding that the remaining requirements for certification could be established, Justice Perell held that but for the failure to show a cause of action, the application for certification would have been successful.


1.Justice Perell also dismissed three non-dispositive jurisdictional arguments raised by the City in response to the proposed representative plaintiff’s application for certification, including the arguments that: (i) the proceeding was barred by res judicata and the application for certification constituted an abuse of process given an unsuccessful mandamus application brought by the proposed representative plaintiff; (ii) the claim falls within the exclusive jurisdiction of the Ontario Landlord and Tenant Board; and (iii) the proceedings were not properly commenced and should have been brought by way of an action, not by application.

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