Ontario Court rejects novel claims bar proposal in class action Minutes of Settlement

24 janvier 2012

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In Durling v. Sunrise Propane Energy Group Inc. released in mid-December Justice Horkins of the Ontario Superior Court of Justice rejected a claims bar which had been included in Minutes of Settlement proposed by Class Counsel and agreed to by the Defendants in a class proceeding which arose out of explosions that occurred in 2008 at a propane facility in Toronto. 

Background  

Subject to the Court resolving two common issues that were in dispute and approving the proposed claims bar, the parties agreed that the action should be certified for the purposes of settlement.  In addition to setting out the usual terms for certification, the Minutes of Settlement included a novel provision that required each class member to register with class counsel’s on-line registration system. Class members would be required to register no later than 6 months from the date of the certification order. A class member who failed to register within the deadline would be forever barred from participating in any future settlement or judgment, and from bringing or continuing any action against the defendants and third parties relating to the explosion subject to further order of the court (the Claims Bar).

Request for the Claims Bar

Notably, all counsel argued that the Claims Bar was in the best interests of the class and would satisfy the access to justice goal of the Class Proceedings Act, 1992 (the CPA) by (a) motivating class members to register their claims; (b) providing certainty about how many are in the class and the type of damages suffered; and (c) fostering settlement.

Class counsel submitted that two complicating factors in the case increased the need for the Claims Bar. First, it would be difficult to recommend a settlement within policy limits without knowing the aggregate value of the claims, and second, subrogated claims worth approximately $20 million would be competing for their share of any settlement monies. Class counsel stated it needed to know the value of the uninsured claims when negotiating with the defendants.

Justice Horkins commented that it was not surprising that defence counsel also supported the Claims Bar because, as Her Honour noted, “each time a class member is barred, the defendants’ exposure drops” and “the claims bar allows the defendants to know exactly how many class members there are and offers them a form of discovery about each registered class member.”

Defence counsel argued the Claims Bar would encourage prompt consideration of settlement because it would remove the uncertainty about the nature and scope of the claims that often plagues a class proceeding. Defence counsel proposed that the Claims Bar was justified because of special circumstances, which the court summarized as including, inter alia, the fact that there has been extensive media attention about the explosions and the class action, and that there have been numerous efforts to notify putative class members to register their claims.

Justice Horkins, however, held there is nothing special or unique about the case that would justify imposing the Claims Bar, and clarified that the issue in this case was not whether special circumstances exist to justify a claims bar, but whether the CPA actually supports the Claims Bar. Her Honour explored this issue thoroughly, and ultimately concluded that the CPA, along with the Rules of Civil Procedure (the Rules) does not support the Claims Bar.

Request to Approve the Claims Bar Denied

The Court held that the Claims Bar would fundamentally change the structure of the CPA. The Court reasoned that the CPA is not an “opt in” system, yet this would be the practical effect of the Claims Bar because class members who decided not to opt-out and were class members would now have to elect to stay in the class action. Examining the provisions of the CPA, Justice Horkins reasoned that counsel was essentially seeking to impose a claims bar at the beginning of the class action, before the pleadings were closed and any discovery had taken place.

Counsel urged Justice Horkins to use the power it has under section 12 of the CPA to impose the Claims Bar, which counsel characterized as a “procedural mechanism that would ensure the fair and expeditious determination of this proceeding.” However, the Court was of the view that the Claims Bar would not ensure the fair and expeditious determination of the proceedings as it ignored the fact that the Claims Bar eliminates access to justice for any class member who does not register. Even if a request for relief was successful, the Court confirmed that a class member should not have to go through the process of trying to get back into the class. Moreover, Justice Horkins cautioned that if settlement monies would have to be shared between class members who register and those who seek to be let back in, tension and conflict between the two groups could easily develop.

In addition to the CPA, the Rules were held not to support the Claims Bar. The Court confirmed that the discretion conferred by section 12 of the CPA is intended to supplement the Rules by accommodating the special nature of class proceedings. The Court stated that requiring registration and collecting evidence that would be shared with the defence, all before the close of pleadings was a form of pre-discovery production that was not a requirement in the Rules.

Justice Horkins examined and distinguished the various cases that counsel relied on as support for the Claims Bar. Her Honour ultimately held there is no precedent for the Claims Bar, and referred to two cases in support of the decision to reject the Claims Bar. First, Ramadath v. George Brown College of Applied Arts and Technology in which the defendant asked the court on a certification motion to bifurcate the proceedings in the event the action was certified, and the Court rejected the request and held the defendant was really trying to turn the action into an “opt-in class action”.  And second, Lambert v. Guidant Corp. in which the defendants on a motion for certification asked the court for an order directing members of the class who wished to make claims to identify themselves prior to trial of the common issues, and the Court rejected the request as it would, in effect, convert the opting out procedure under the CPA into an opting-in process.

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