Court of Appeal certifies negligent misrepresentation claim in investor class action

September 8, 2016

In Fantl v. Transamerica Life Canada, the Ontario Court of Appeal upheld the certification of common law negligent misrepresentation claims in an investor class action where “there was a single uniform representation, contained in a statutorily-mandated disclosure document, which was given to each class member and which each acknowledged receiving.”

The proposed class members were investors in Transamerica’s Can-Am Fund, an investment vehicle offered under insurance contracts sold by Transamerica between October 1992 and March 2001. Potential investors in the Fund were provided with both an investment contract and a statutorily mandated disclosure document called an “Information Folder”. Beginning in 1994, the Information Folder indicated that the goal of the Fund was to replicate, on a “best efforts” basis, the performance of the S&P 500 Total Return Index. The misrepresentation claim arose from this statement.

Certain of the insurance contracts also contained an express “best efforts” clause regarding the S&P 500 Total Return Index. A breach of contract claim was also certified but not appealed.

At certification, the motion judge found that a class proceeding was not the preferable procedure for resolving the class members’ negligent misrepresentation claim because the individual issues of reliance, causation and damages would “overwhelm or subsume” the common issues. This decision was reversed by the Divisional Court and by the Court of Appeal.

The Court of Appeal’s decision focused on the preferability analysis and the application of the Supreme Court of Canada’s decision in Fischer v. IG Investment Management Ltd., which had not been available to the certification judge. Applying Fisher, the Court considered three factors: (a) the barriers to access to justice; (b) the potential of a class action to address those barriers; and (c) the alternatives to a class action, including the extent to which the alternatives address the relevant barriers and how the two proceedings compare.

The Court found that in the circumstances of the case, Mr. Fantl’s claim could not reasonably be viewed as economically viable to litigate on an individual or joinder basis such that cost was a significant barrier to access to justice.

The Court also noted that, unlike other cases in which negligent misrepresentation claims have not been certified, the nature of the representation at issue (a single common written representation which every class member acknowledged receiving) obviated concerns that the individual issues would overwhelm the common issues and result in an inefficient or unmanageable action. The Court was of the view that there would be “substantial” overlap with breach of contract claims, the resolution of which would also materially advance the negligent misrepresentation claim.

The Court of Appeal concluded with a note on assumptions about the manageability of individual issues trials:

“Although class actions have been with us in Ontario for almost 25 years, there have, at most recent report, been less than 20 common issues trials: ... Few of these have resulted in individual issues trials. If class actions are to deliver on their promise of access to justice it is perhaps time to test some of the assumptions made about the “manageability” of the individual issues stage of a class action. This appears to be an ideal case in which to do so.”

In summary:

  • The economic viability of pursuing individual claims is an increasing important factor in a court’s consideration of whether a class action is the preferable procedure in cases involving both common issues and individual issues.
  • In determining whether a class proceeding is the preferable procedure for the resolution of common law negligent misrepresentation claims, the nature of the representation is critical. Where there is a single uniform representation, which each class member has acknowledged receiving, there is a greater likelihood that the claim would be certified.

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