Leave to Appeal is granted in franchise class proceeding

August 9, 2011

On June 22, 2011, the Divisional Court granted leave, in part, to appeal from the lower court decision of Justice Strathy in Trillium Motor World Ltd. v. GMC Ltd. et al. in which a proposed class proceeding brought by former General Motors car dealership franchisees against General Motors of Canada (GMC) and Cassels Brock & Blackwell LLP (Cassels) was certified.

The defendants did not seek leave to appeal all thirteen common issues that were certified by Justice Strathy, but both GMC and Cassels took issue with certain common issues. 

GMC sought leave to appeal the validity of the following common issues:

  1. Whether GMC owed a duty of fair dealing to the class members, and breached the duty through its conduct concerning the delivery of Wind-Down Agreements;
  2. Whether GMC owed a duty to disclose material facts concerning its restructuring to franchisees at the time of soliciting the Wind-Down Agreements, and if so whether it failed to disclose material facts;
  3. Whether all class members had a statutory right to associate, and if GMC interfered with the exercise of the right through certain enumerated actions; and
  4. Whether the waiver and release contained in the Wind-Down Agreements was void and unenforceable in respect of the class members’ rights under the Arthur Wishart Act.

 GMC submitted that the above questions could not be answered without findings of fact specific to each class member.

Justice Low rejected that submission with respect to (a), holding that a breach of the statutory duty of fair dealing was “focused squarely and solely on the conduct of the defendant” and as such an analysis of whether the alleged conduct breached the duty “would apply across the board.” The question of whether the impact on the class members constituted an unfairness, and what (if any) loss resulted, would necessarily require an individual inquiry. However, it was noted that the common issue as framed only addressed the defendant’s alleged conduct, and not damages. The common issue was allowed to stand.

In contrast, the suitability for certification of common issue (b) was held to be open to serious debate. The question of what material facts were not disclosed was imbedded in the common issue, and the issue posed an inherently individual materiality inquiry. The knowledge of class members, and what facts were consequential to their decision making process, could not be assumed to be identical.

Justice Low also granted leave with respect to the question of whether the effect on class members of GMC’s alleged conduct with respect to the statutory right of association was a valid common issue.  It was noted that “where questions certified as common go forward for a common trial, they should be clear of ambiguities, particularly ambiguities that could either be construed as begging another question or attracting an inquiry that is necessarily individual.”

Accordingly, leave to appeal was granted with respect to common issues (2) and (3).

Lastly, with respect to common issue (4), leave to appeal was denied with respect to the issue of whether the release and waiver contained in the Wind-Down Agreements was unenforceable.

Cassels sought leave to appeal from the finding of valid common issues with respect to:

  1. whether it owed, and breached, contractual duties to some or all of the class members, ii) whether it owed, and breached, fiduciary duties to some or all of the class members, and
  2. whether it owed, and breached, duties of care to some or all of the class members.

The plaintiff had alleged the loss of the opportunity to be represented as a collective and to negotiate an improvement on GMC’s restructuring. Cassels’ submission was that the above issues all required proof of causation, i.e., whether “but for” Cassels’ alleged breaches each class member would have signed a Wind-Down Agreement. Justice Low noted conflicting authorities as to whether a requisite component of the plaintiff’s action, whether in tort or contract, for damages for loss of chance is whether the plaintiff would have acted differently but for the breach. Due to the unsettled state of the law, and the individual inquiry of whether each of the class members would have acted differently in the absence of the alleged breaches, leave to appeal was granted for the above common issues.

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