Mewburn v Peers, 2013 ABQB 299

Court of Queen’s Bench of Alberta Citation: Mewburn v Peers, 2013 ABQB 299 Date: 20130515 Docket: 1103 00745 Registry: Edmonton Between: Robert Mewburn and Charity Mewburn Plaintiffs - and - Jeremy “Jay” Peers, Robert Peers, Marc Peers, Danielle Peers, David Kauffman, Laleeni Sharma, Dawn Vader, David Lord, Gerard T. O’Neill, and Mowbrey Gil LLP Defendants Brought Under the Class Proceedings Act , S.A. 2003, c. C-16.5 _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice J.D.

Rooke _______________________________________________________ [ 1 ] This action was commenced on January 14, 2011 under the Class Proceedings Act , S.A. 2003, c. C-16.5 (“ Act ”), wherein the Plaintiffs sought relief on their own behalf, and as Representative Plaintiffs on behalf of all investors in Peers Foster Kristiansen Inc. (PFK Investors) and Federal Mortgage Corporation Ltd. (FMC Investors), for recovery of funds invested.

[ 2 ] In accordance with the Court’s procedures which require case management in class proceedings (Rule 4.12 (3)), case management was granted on March 29, 2011.

As part of the conditions imposed therein the parties were to advise whether “during the course of the case management, the action is completely settled or resolved”. [ 3 ] Thereafter, the action, continuing under the amended Act (2010), was amended by the parties on April 21, 2011 to add new defendants, without the need for a further Court Order. [ 4 ] On March 23, 2012, Counsel for the Representative Plaintiffs advised that “[A]fter extensive consultation with group members it has been decided not to pursue the class proceedings in this matter.

The proceedings will likely be amended to a group proceeding consisting of those investors who wish to pursue the matter further.” [ 5 ] By letter dated March 26, 2012, the Court advised Counsel for the class proceedings that the matter would remain under case management as long as it was continuing as a class proceeding. [ 6 ] On October 11, 2012, the Plaintiffs purported to further amend the action to remove reference to the Act and to add numerous other Plaintiffs, and the Court was so advised on October 17 th .

On October 18 th the Court pointed Counsel to the provisions of s. 35 of the Act advising that, in the Court’s view, the effect of “amending the Statement of Claim to change this from a class proceeding to a regular proceeding ... is the ‘discontinu[ing] or abandon[ing]’ of a class proceeding, which is only allowed with the approval of the Court under s. 35(2)”.

The Court went on to advise that the Court’s understanding was that the intent of amendments to s.35(2) of the Act were “to prevent a situation where someone had some informal notice (perhaps from a newspaper article) of a class proceeding” and rested on their laurels expecting that they would be included as a member of the class in the future.

Thus, the Court expressed the concern that it “be satisfied that there be no prejudice to any person so as to prevent potential loss” and concluded that “[i]n the result, your Amended Amended Statement of Claim is not effective without the approval of the Court and the Court would need to be reasonably assured that there is no prejudice to other parties”. [ 7 ] The relevant portions of s. 35 are as follows: 35(1) In this

section , “proceeding” means a class proceeding or a proceeding that is the subject of an application for certification.

(2) A proceeding may be settled, discontinued or abandoned only with the approval of the Court and subject to any terms or conditions that the Court considers appropriate. ...

(7) In dismissing a proceeding or in approving the settlement, discontinuance or abandonment of a proceeding, the Court must consider whether notice should be given under

section 21 and, if so, whether the notice should include any one or more of the following: (

a) an account of the conduct of the proceeding; (

b) a statement of the results of the proceeding; (

c) a description of any plan for distributing any settlement funds.

(8) This

section applies to a proceeding regardless of whether the proceeding is commenced before or after the coming into force of the Class Proceedings Amendment Act, 2010 . [Emphasis added.] [ 8 ] The position of Counsel for the Plaintiffs is simple, as expressed in written communication to the Court namely: ... s. 35(2) of the Class Proceedings Act does not apply to the amendments obtained on October 11, 2012 in these proceedings. This is

because s. 35(1) defines the word “proceeding” to mean a class proceeding or a proceeding that is the subject of an application for certification. In

section 1(

d) of Act , class proceeding means a proceeding certified as a class proceeding. As a matter of statutory

interpretation, this proceeding was not a proceeding within the meaning of s. 35 at the time of the amendment because it was neither certified as a class proceeding, nor the subject of an application for certification. Therefore I would respectfully submit that approval pursuant to s. 35(2) was not required. [ 9 ] In my view this

interpretation is not appropriate for a number of reasons. [ 10 ] First, this matter was clearly intended to be a class proceeding from the very beginning up until a purported amendment to the Statement of Claim in October of 2012. Indeed, it was only because it was intended to be a class proceeding and was leading on to an application for certification, that case management was required. [ 11 ] Second, while I agree with Counsel that the matter was not a “class proceeding” as defined in s.1(

d) as of October because, as Counsel pointed out, “class proceeding” as defined in s. 1(d) “means a proceeding certified as a class proceeding ...”. I find, however, that this is “a proceeding that is the subject of an application for certification” under s. 35(1). In this finding, I rely upon the facts and provisions of the Act , and in particular the 2010 amendments that came into effect on March 1, 2011.

As noted above, the amendments to s.35 apply “ ... regardless of whether the proceeding is commenced before or after the coming into force of the Class Proceedings Amendment Act, 2010 . [ 12 ] The amendments to s. 35(1) brought in the words “a proceeding that is the subject of an application for certification” as part of the concept of “proceeding” for the purposes of this section, which, I find, has the effect of requiring Court approval for a discontinuance of the proceeding. [ 13 ] The fact that the application for certification has not been formally brought, in my view, does not mean that the proceeding is not the subject of an application for certification.

Indeed, the very purpose of s. 2 makes it clear that once the proceeding is commenced, it must proceed to an application for certification. Moreover, such an application must be made within 90 days or within any other period prescribed by the Court in s. 2(3) (the first mandatory requirement is often overlooked, in favour of the second). [ 14 ] Section 2(1) of the Act provides that: One member of a class of persons may commence a proceeding in the Court on behalf of the members of that class.

Under the subsequent subsections of s.2, the person who commences such an action “must” make an application for certification (s.2(2) (a)). In this case, it is clear that the matter was proceeding in that direction. To that end, case management was directed on March 29, 2011, and, indeed, an application without notice (formerly ex parte ) was brought on April 27, 2011 pursuant to s.39(2)(

a) of the Act and adjourned with directions from the Court. Moreover, it is clear from all of the correspondence between the Court and Counsel for the Plaintiffs that “discussions” were taking place in relation to an application for certification. [ 15 ] Third, while the wording could be more clear in s. 35(1) (perhaps by adding the words “, or will be” after the word “is”), the

interpretation proposed by Counsel for the Plaintiffs would, in my view, thwart the very concerns that the amendments to s.35(1) were intended to address. [ 16 ] Therefore, for these reasons I find that any time after an action has been formally commenced as a class proceeding under the Act , as was this action, it cannot revert to a “regular proceeding” without approval of the Court under s. 35(2) . [ 17 ] Having made this finding, I must now turn to the question in s.35(2) of whether to approve the discontinuance of the class action, and any terms or conditions upon which such discontinuance will be allowed. [ 18 ] The Defendants did not indicate that they were opposed to the application for discontinuance, raising only the question of costs.

[19] Assistance in determining the appropriate considerations to allow the discontinuance are found in caselaw discussed during theapplication. While it was decided under the former wording of s.35(1), the decision of Slatter J. in Davey v. CNR, 2006 ABQB 704recognized (at para.5) that, while it was not then required, it was “... prudent for the parties to have any discontinuance of a proposedclass action reviewed by the Court.” The Court then looked to Ontario jurisprudence for guidance, as the Ontario Act requires leave ofthe court to discontinue both proposed and certified class proceedings.

The consideration noted was “... that a plaintiff who starts arepresentative action has duties to all members of the putative class ...” and with that comes a responsibility to ensure reasonable noticeto the class members. [20] If discontinuation of the action as a class proceeding under the Act is to be considered, the question of what the appropriate termsand conditions should be, depends on the circumstances of the case. In Smith v Crown Life Insurance Co., [2002] O.J.

No. 5539, whichwas considered by Slatter J. at para. 6, the application was brought to discontinue a class action before certification because a settlementhad been reached with the named plaintiffs. The Court required reasonable notice to be given to the class members before thediscontinuance would be allowed. In Vennell v. Barnardo’s (2004) (ON SC), 73 O.R. (3d) 13 the Court consideredan application to discontinue the class proceeding and continue the action as an individual action, and leave was granted because thecourt was satisfied that appropriate notice had been given to the potential members of the class.

In the Davey v. CNR decision itself,Slatter J. was concerned that media coverage of this proceeding being initiated as a class action, might mean that some individuals couldbe under the mistaken impression that the class proceeding is ongoing and that they are members of the class. To avoid that prejudice,the plaintiff had agreed to issue a notification to the broader public, even though they had not issued a press release in the first instance(para.9). See also Hudson v.

Austin 2010 ONSC 2789 (Perell J.), particularly at paras. 16, 32-37 and 42-43. [21] The question arose during the application, as to whether prejudice to the Defendants was a relevant consideration. This questionwas considered in Campbell v. Canada (Attorney General) 2009 FC 30 at para. 10-12, where Hansen J. found that Slatter J. (in Davey v.CNR) “... was only concerned with the possible prejudice to the putative class members.” She went on to say that she was “ ... notpersuaded that potential prejudice to the Defendants is a relevant factor on this motion.” This finding was noted in Durling v.

SunrisePropane Energy Group Inc. [2009] O.J.

No. 5969 at para. 19-20, where Cullity J. stated that “Hansen J. held that prejudice to thedefendants was not a relevant consideration and that, in the absence of prejudice to the class, approval to discontinue would be granted.”He went on to note that this ... acceptance that potential prejudice to the class was the ‘central consideration’ is obviously consistent with the recommendations of theLaw Reform Commission and the statement of the Court of Appeal in Sollen that the requirement of court approval is intended for theprotection of class members. (referring to Sollen v.

Pfizer Canada Inc. 2008 ONCA 803, and to the Ontario Law Reform Commission in its Report on Class Actions,Ministry of the Attorney General, 1982). [22] I am in agreement with this view that the protections in s.35(1) are intended for the protection of the members of the class, orpotential class, not the defendants. [23] In the case at hand, Counsel for the Plaintiffs corresponded on July 6, 2011 with all of the 248 investors of Peers FosterKristiansen Inc. (“PFK”) and Federal Mortgage Corporation Ltd. (“FMC”), who they identified as potential members of the class, toadvise that they had filed a Statement of Claim on behalf of the Plaintiffs and were in the process of seeking certification of theseproceedings as a class action.

On July 20, 2011 the Trustee in Bankruptcy notified investors of the class action proceeding through itswebsite.

Further correspondence was sent on October 24, 2011 by Counsel for the Plaintiffs to the 79 individuals who had expressedinterest in the class proceedings. [24] In light of the notifications to the potential members of the class and the concerns that I and Slatter J. have expressed, I direct thatthe Plaintiffs give notice to prospective class members of the intent to discontinue the class proceeding by: posting on the website of theTrustee in Bankruptcy; correspondence to all of the 248 investors; and that they issue a press release and send it to the Edmonton Journal,Calgary Herald, National Post and Globe and Mail.

After proof of same they may obtain a formal Court Order approving thediscontinuance. A copy of the proposed notice shall be an appendix to the Order resulting from this decision. [25] I order that the discontinuance be filed not earlier than 90 days after the notice is filed to ensure that any putative class membershave sufficient time to commence individual actions, if, upon receiving notice of the intention to discontinue, they decide to pursuepersonal actions. [26] On the matter of costs, I note that none of the Defendants had filed a Statement of Defence in this action, so the expenses

incurred to date in the action are limited. Absent agreement on the subject (if in place to be incorporated into the Order resulting from this decision), the parties may speak to costs. Heard on the 20th day of December, 2012. Dated at the City of Edmonton, Alberta this 15 th day of May 2013. J.D. Rooke A.C.J.C.Q.B.A. Appearances: Louis M.H. Belzil for the Plaintiffs Steve Leitl for the Defendants Jeremy “Jay” Peers, Robert Peers, Marc Peers & Danielle Peers Schuyler Wensel, QC for the Defendant David Kaufman Carmen L. Plante for the Defendants Laleeni Sharma, Dawn Vader & David Lord Daniel P. Carrol, QC for the Defendant Gerard T. O’Neill Gregory W. Jaycock for the Defendant Mowbrey Gill