2018 NLCA 33, 2018 NLCA 33

Deborah Thorne (appellant) v. College of the North Atlantic (respondent) (16/105) Indexed As: Thorne v. College of the North Atlantic 2018 NLCA 33 3 C.A.N.L.R. 1 Court of Appeal of Newfoundland and Labrador Welsh, Hoegg and O’Brien JJ.A. June 6, 2018

Summary: Deborah Thorne was appointed the representative plaintiff in a class action certified against the defendant College of the North Atlantic (CNA). CNA filed a defence and a counterclaim, which was at first struck out on the basis that it did not disclose a cause of action. On appeal, this Court reversed the ruling and remitted the counterclaim to the Supreme Court of Newfoundland and Labrador for consideration of certification under the Class Actions Act, SNL 2001, c. C-18.1 . CNA’s counterclaim was subsequently certified, another judge of the Supreme Court identifying a common issue and appointing Ms.

Thorne as the “defendant” representative. Ms. Thorne appealed on the grounds that the counterclaim did not comply with the certification provisions of the Act . Held: Appeal allowed. Hoegg J.A. (Welsh and O’Brien JJ.A. concurring): Whether CNA’s counterclaim discloses a cause of action and any questions of statutory

interpretation are reviewable on a standard of correctness. Decisions respecting the other parts of

section 5 of the Act and the application of a statutory provision to a set of facts involve questions of mixed fact and law and are reviewable on the standard of palpable and overriding error, unless legal standards respecting them have been mischaracterized or misapplied. The purposes of class actions are to promote access to justice, enable judicial economy, and modify behavior by providing for multiple actions to be heard together. This case involves a counterclaim asserted by a sole defendant in a certified class action.

A counterclaim, unlike a defence, is an independent action raised by a defendant, which, because of the identity of the parties, can conveniently be tried with the plaintiff's claim. A counterclaim is also different from a set-off which is part of a defence pleaded by a defendant against a plaintiff in defence to the whole or part of a claim made by the plaintiff. In this case, having filed suit as a plaintiff by counterclaim, CNA must comply with the provisions of the Act , including the criteria for certification, like any other plaintiff seeking to commence an action under the Act .

Commencing a counterclaim in the class actions context is more involved than doing so in the ordinary (non-class action) context. In the latter context, a defendant can commence a counterclaim at will; in the class actions context, a counterclaim can only be brought if the requirements of the Act are met. Fundamental to this appeal is the distinction between plaintiff class actions and defendant class actions. They are not the same. A defendant class action is when two or more defendants are certified as a class. The Act provides for plaintiff class actions.

There is no provision in the Act for defendant class actions. Section 19(6) of the Act requires that class members be notified if a counterclaim or third party action is asserted in their class action. This notice provision presumes that a plaintiff class action has already been certified and that a counterclaim has been filed. However, the notice provision does not displace the necessity for the counterclaim to comply with the certification provisions of the statute.

In this case, CNA is a sole plaintiff by counterclaim. It is neither a plaintiff acting on behalf of class members nor a defendant to two ormore actions. CNA’s application for certification cannot comply with either

section 3 or 4 of the Act. In reality, the counterclaim whichCNA seeks to prosecute against a group of defendants (who constitute some, but not all, of the plaintiff’s class) is a defendant classaction. CNA is the plaintiff seeking to certify a group of defendants as a class. The Act does not provide for certification of a class ofdefendants or for a sole plaintiff to apply to certify an action against a class of defendants. The Judge’s reliance on

section 13 of the Act as giving him authority to entertain or certify CNA’s counterclaim was also inerror.

Section 13 is directed to the conduct of a class action that has already been certified.

Section 13 in no way touches on anapplication for certification of a class action, nor displaces the need for compliance with

section 5 of the Act. Other issues also arise. For one, the “common issue” identified by the certification judge is not an issue common to all members of theclass (section 5(1)(

c) of the Act). Second, even if the Act provided for defendant class actions and the appointment of representativedefendants, which it does not, Ms. Thorne would not be an appropriate representative defendant. Her interests, as a person alleged to havereceived overpayment from the CNA, are in conflict with those class members who were not overpaid. Nor does CNA’s counterclaim disclose a cause of action and meet the requirement of section 5(1)(

a) of the Act. It cannot be certified andmust be struck. CNA is relying on a contract it has with Qatar, to which Ms. Thorne and the class members are not party. In itscounterclaim CNA has not pleaded any material facts which entitle it to a remedy in contract against the plaintiff class. In the result, the appeal was allowed. No order as to costs was made under

section 37 of the Act. Cases cited: Canada (Attorney General) v. Anderson, 2011 NLCA 82, 315 Nfld. & P.E.I.R. 314 Ring v. Canada (Attorney General), 2010 NLCA 20, 297 Nfld. & P.E.I.R. 86 leave to appeal to SCC refused, (SCC),309 Nfld. & P.E.I.R. 362 (note) Canadian National Railways Co. v. Canada (Attorney General), 2014 SCC 40, [2014] 2 S.C.R. 135 Corporate Express Canada Inc. v. Memorial University of Newfoundland, 2015 NLCA 52, 371 Nfld. & P.E.I.R. 137 Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158 Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534 Abdool v.

Anaheim Management Ltd. (1995), (ON SC), 21 O.R. (2d) 143 (Div. Ct.) Home Hardware Stores Limited v. R. Home Supply Centre Ltd., 2015 BCCA 500, 83 B.C.L.R. (5th) 36 Royal Bank of Canada v. Rizkallo (1984), (BC SC), 59 B.C.L.R. 324 (S.C.) Beddall v. Maitland, [1879] 17 Ch. D. 174 at 178 The Chippewas of Sarnia Band v. Canada (Attorney General) (1996), (ON SC), 29 O.R. (3d) 549, 137 D.L.R. (4th)239 Letang v. Cooper, [1964] 2 All E.R. 929 (C.A.) R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45 Humby Enterprises Ltd. v. A.L.

Stuckless & Sons Ltd., 2003 NLCA 20, 225 Nfld. & P.E.I.R. 268 Counsel: James Hughes Q.C. and Philip Whalen, for the appellant; David Eaton Q.C., for the respondent. This appeal was heard on October 12, 2017 before Welsh, Hoegg and O’Brien JJ.A. The following judgment was delivered on June 6, 2018 by Hoegg J.A. for the Court.

______________________________________________________________ Hoegg J.A.: INTRODUCTION [ 1 ] This appeal concerns issues respecting a counterclaim commenced by the sole defendant in a class action certified under the Class Actions Act, SNL 2001, c. C-18.1 (the Act ). [ 2 ] In Thorne v. College of the North Atlantic, 2014 NLTD(G) 94, a class action against defendant College of the North Atlantic (CNA) was certified and Deborah Thorne was appointed the representative plaintiff. CNA subsequently filed its defence along with a counterclaim, following which Ms.

Thorne applied to have CNA’s counterclaim struck on the basis that it did not disclose a cause of action. The applications Judge allowed Ms. Thorne’s application and struck the counterclaim. CNA appealed that ruling as well as the certification of Ms. Thorne’s action. [ 3 ] On appeal, this Court upheld certification of Ms. Thorne’s class action but reversed the applications Judge’s ruling which struck CNA’s counterclaim and remitted the counterclaim to the Supreme Court of Newfoundland and Labrador for consideration of certification under the Act ( The College of the North Atlantic v.

Thorne, 2015 NLCA 47 ). [ 4 ] When the matter was subsequently heard in Supreme Court, another applications Judge certified CNA’s counterclaim, identifying a common issue and appointing Ms. Thorne as the “defendant” representative. Ms. Thorne appealed. Her appeal concerns whether the counterclaim filed by CNA complies with the certification provisions of the Act . For the reasons set out below, I am of the view that CNA’s counterclaim does not comply with the provisions of the Act and does not meet the statutory criteria for certification. Accordingly, it cannot be certified as a class action under the Act.

Background and Litigation History [ 5 ] Deborah Thorne is one of several employees (instructors or instructor support staff) who worked for the College of the North Atlantic (CNA) in the State of Qatar (Qatar) during the years 2008 to 2011. In September 2013 Ms. Thorne, as the proposed representative plaintiff for the employees, sued CNA pursuant to the Act for breach of contract. Her claim alleges that the employees’ contracts of employment provided that CNA was to pay them a cost of living allowance (COLA) in addition to their salaries which CNA had not paid despite their demands. Ms.

Thorne pleads the terms of the employees’ employment contracts including

Article 5.2 of the contracts which she alleges stipulate that the employees are entitled to receive the COLA. Paragraphs 5, 6, 7 and 8 of Ms. Thorne’s Amended Statement of Claim set out the basis for her claim: 5. During the summer of 2008, the plaintiff executed a contract which outlined terms governing her employment with the Defendant wherein the Defendant agreed to pay the Plaintiff the sum of $96,122.00 per year. The contract was generally common to all members of the class referred to in paragraph 2 above with various individuals entering into a common contract at various times from 2008 onward. 6.

In November, 2008, the Defendant and/or its employees, agents and assigns invoked and provided a Cost of Living Allowance (COLA) retroactive to September 1, 2008. 7. The Plaintiff repeats the preceding paragraphs and states that by virtue of the terms of the contract with the Defendant, particularly,

article 5.2, the Plaintiff and all others within the Class are entitled to be paid the COLA. 8. Despite demands made to the Defendant by the Plaintiff and/or her legal counsel, the Defendant has failed to pay and/or fully pay the COLA or even provide an adequately or timely response and has chosen to avoid the issue by not communicating. [ 6 ] Ms. Thorne applied to the Court for certification of her action and to be appointed the representative plaintiff for the other employees.

On August 19, 2014, her application for certification was granted and she was appointed the representative plaintiff of the certified class ( Thorne v. College of the North Atlantic , 2014 NLTD(G) 94).

The Judge described the class at paragraph 49 as: Instructors and instructional support staff who were employed by the College of the North Atlantic in Qatar between September 1, 2008 and November 22, 2011, who currently reside in the Province of Newfoundland and Labrador. and stated the common issue to be: Were members of the class entitled by their contracts of employment to receive the full amount of the COLA for the period of September 1, 2008 and November 22, 2011? [ 7 ] The following year a sub-class composed of instructors and instructional support staff who reside in Canada but outside of Newfoundland and Labrador was added ( Thorne v.

College of the North Atlantic , 2015 NLTD(G) 38). Alan Luyt was appointed as the representative plaintiff of the sub-class. At paragraph 22 the applications Judge stated the common issue in the claim to be: Were the members of the class entitled by their contracts of employment to receive the full amount of COLA for the period of September 1, 2008 to November 22, 2011?

CNA’s Counterclaim [ 8 ] CNA filed a defence and counterclaim in February 2015. In its defence, CNA denies that it breached its contracts with its employees and pleads the details of a contract it had with Qatar (the Comprehensive Agreement) which it says provides that its employees in Qatar were subject to a salary cap which CNA alleges affects the COLA the employees claim to be owed. CNA says that the employees were paid in accordance with their contracts of employment and the salary budget as agreed between CNA and Qatar (paragraph 10 of CNA’s defence).

CNA also pleads that the plaintiff and other class members were not party to its Comprehensive Agreement with Qatar and therefore cannot rely on its provisions, saying at paragraph 10(u): The Plaintiff’s claim that an amendment to the Comprehensive Agreement between CNA and the State of Qatar changed the contractual compensation entitlement of the Plaintiff and other class members is without foundation.

The Plaintiff and the class members were not party to the Comprehensive Agreement and amendments to the Comprehensive Agreement had no impact on the individual employment agreement CNA had with the Plaintiff or any other class member. [ 9 ] In its counterclaim, CNA claims that some of its employees in the class including Ms. Thorne were overpaid and seeks reimbursement of the amounts overpaid.

CNA pleads the provisions of its Comprehensive Agreement with Qatar saying at paragraph 13: The Plaintiff by Counterclaim, College of the North Atlantic (“CNA”), is a post secondary educational and skills training institution which operates in various locations in Newfoundland and Labrador and has a mailing address of 432 Massachusetts Drive, Stephenville, Newfoundland and Labrador, A2N 2Z6.

At all material times to this counterclaim, CNA, pursuant to a contract with the State of Qatar, agreed to provide and deliver educational programs and administrative services to the college owned by the State of Qatar and located in Doha, Qatar (the “Comprehensive Agreement”).

The Comprehensive Agreement permitted the college to be called and operate under the name College of the North Atlantic – Qatar (“CNA-Q”). and goes on to plead at paragraph 16 the provisions of the Comprehensive Agreement respecting salary caps which it says pertain to the class members: The total compensation offered to instructors and instructor support persons at CNA-Q was based upon the budget agreed upon between CNA and the State of Qatar in accordance with the Comprehensive Agreement.

Under the Comprehensive Agreement salaries paid to instructors and instructor support employees providing services at CNA-Q were to be capped at different levels based upon each particular employee’s qualifications (the “Salary Cap”). [ 10 ] At paragraph 18 CNA pleads that if the plaintiffs’ class action succeeds, then CNA seeks to be reimbursed for all amounts it paid class members that are over the amount Qatar agreed to pay CNA for the employees in the class: To the extent that the claims of the Plaintiff and class members of entitlement in accordance with the maximum amounts provided for under the Comprehensive Agreement (the Salary Cap as defined above) succeeds, CNA claims back from the Defendants by Counterclaim (i.e. each individual class member) all amounts that were paid above the maximum amounts for which the State of Qatar agreed to reimburse CNA for each instructor or instructional support employee in the class. [ 11 ] Ms.

Thorne applied to have the counterclaim struck on the basis that it did not disclose a cause of action against the class. The applications Judge struck it, saying that CNA’s premise that the employees were contractually bound by the salary cap provided by the Comprehensive Agreement was flawed and irremediably defective ( Thorne v. College of the North Atlantic , 2015 NLTD(G) 63). [ 12 ] CNA appealed both certification of the plaintiffs’ claim and the striking of its counterclaim. This Court upheld certification of Ms.

Thorne’s action but overturned the decision striking the counterclaim and remitted CNA’s counterclaim to applications court for consideration of certification under the Act ( The College of the North Atlantic v. Thorne , 2015 NLCA 47 ) . The basis for this Court’s reversal of the Judge’s decision striking the counterclaim was that the Judge had considered affidavit evidence filed by the plaintiff which the plaintiff had not had leave to file.

In remitting CNA’s counterclaim to applications court, this Court said: [54] … If CONA wishes to assert its counterclaim against members of the certified class then it would need to seek and obtain certification of its counterclaim under the Class Actions Act . In short it would have to meet the (relevant) criteria under the Act. This follows from the overall scheme of the Act for the trial of common issues, the result of which will bind members of the class (unless they have opted out). See

section 26 of the Act . [ 13 ] CNA then reapplied to applications court for certification of its counterclaim, stating the proposed common issue as follows: Are members of the class who received compensation greater than the amount provided for in the annual budget pursuant to the Comprehensive Agreement (amounts in excess of the Salary Cap), during the period of September 1, 2008 and November 22, 2011 required to pay the excess amounts to CNA? [ 14 ] In its application, CNA argued, in accordance with its defence pleading, that the plaintiff could not rely on CNA’s Comprehensive Agreement with Qatar because the class members were not party to it.

At the same time, however, CNA argued, in accordance with its counterclaim, that the plaintiff was bound by the provisions of the Comprehensive Agreement respecting the budget and salary cap as agreed between CNA and Qatar. The Applications Judge’s Decision [ 15 ] A different applications Judge heard CNA’s second application for certification of its counterclaim.

[ 16 ] In the course of considering whether CNA’s counterclaim disclosed a cause of action as required by

section 5 of the Act , the Judge reasoned at paragraphs 34 to 36 of his decision ( Thorne v. College of the North Atlantic , 2016 NLTD(G) 165): [34] In the Amended Statement of Claim, at paragraphs 6 and 7, Ms. Thorne avers that: 6. In November, 2008, [CNA] and/or its employees, agents and assigns, invoked and provided a Cost of Living Allowance (COLA) retroactive to September 1, 2008. 7. [Ms. Thorne] repeats the preceding paragraphs and states that by virtue of the terms of the contract with [CNA], particularly,

article 5.2, [Ms. Thorne] and all others within the Class are entitled to be paid the COLA… [35] The position of Ms. Thorne with respect to the origins of the claimed entitlement to a COLA was elucidated somewhat in its application for certification of the common issue. There, at paragraphs 9 and 10, it is claimed: 9. THAT an amendment was made to the Comprehensive Agreement between [CNA] and the State of Qatar that implemented the COLA increase effective September 1, 2008 (see Comprehensive Agreement at

Schedule “B”). 10. THAT all CNA-Q contract employees who were under contract as of September 1, 2008, or who entered a contract with [CNA] subsequent to September 1, 2008, were entitled to, by virtue of their contracts, to the COLA increase that was approved and confirmed by [CNA] as effective September 1, 2008…. [36] Thus the Comprehensive Agreement is specifically referred to and relied upon by Ms. Thorne to establish her claim to an entitlement to be paid a COLA. Nevertheless, counsel for Ms. Thorne argued before me that she has not relied upon the Comprehensive Agreement to base her claim, but only upon

article 5.2 of her employment contract. That is not so. Furthermore, the pleadings do not provide any particulars of how

article 5.2 gives rise to an entitlement to be paid a COLA. [ 17 ] Also, in considering CNA’s application for certification of its counterclaim the Judge acknowledged that he had to accept the facts pleaded as true. He also noted that “CNA would be satisfied if the court were to hold that Ms. Thorne, not being a party to the Comprehensive Agreement, is not entitled to any COLA referred to therein unless the same is specifically referred to in her agreements with CNA” (paragraph 40 of Judge’s decision).

The Judge referenced, at paragraph 43 of his decision, a passage from this Court’s aforementioned judgment ( 2015 NLCA 47 ) which describes Ms. Thorne’s claim as resting “in part on an interaction between her contract of employment with CNA and the Comprehensive Agreement, the effect of which was (she alleges) to make CNA liable to pay her the COLA”. Importantly, this Court stated at paragraph 53 of that decision, that this description of Ms.

Thorne’s claim was “by way of explanation and not as the basis for setting aside the order to strike”. [ 18 ] The Judge appears to have recognized that certification of CNA’s counterclaim did not fit within the scheme of the Act . However, he determined that rule 7A.01(4) of the Rules of the Supreme Court, 1986 and

section 13 of the Act gave him the discretion to allow CNA’s counterclaim to proceed within the plaintiff’s class action, saying “[b]ased upon

section 13 of the Act and Rule 7A.01(4), therefore, I am satisfied that I may interpret and apply the Act and the Rules with the necessary changes to permit the certification of a counterclaim in a class action and to make any order necessitated in the circumstances” (paragraph 15). [ 19 ] At paragraphs 43 to 45, the Judge concluded that CNA’s counterclaim was valid. In so doing he focused on what he said was the incongruity of Ms. Thorne relying of the Comprehensive Agreement to assert her claim with her position that CNA cannot rely on it to assert its counterclaim.

He also stated, at paragraph 45: “It cannot be doubted that if CNA claims that certain of its employees have been overpaid, it could commence an action in contract to recover those overpayments. It may also assert such a cause of action in a counterclaim”.

The Judge ruled, at paragraph 50, that the counterclaim would be asserted against all class members who advance a claim under the class action and who CNA asserts were paid more than the salary cap, and at paragraph 55 stated that he was satisfied that there was an identifiable class of two or more persons. [ 20 ] The Judge indicated satisfaction with CNA’s assertion that its proposed common issue applied to members of the plaintiff’s class, saying that questions respecting individual membership in the class that would arise along the way were not an impediment to certifying the common issue CNA proposed (paragraphs 62 to 64). [ 21 ] The Judge then certified CNA’s counterclaim.

In so doing, he rejected Ms. Thorne’s argument that CNA’s proposed common issue was not a common issue because it required that preliminary questions be answered, and said that it was not necessary that all class members be identically situated (paragraphs 60 to 64).

He ordered that the certification order be amended to describe the common issues in the litigation as: Were members of the class entitled by their contracts of employment to receive the full amount of the COLA for the period of September 1, 2008 and November 22, 2011? and Are members of the class who received compensation greater than the amount provided for in the annual budget pursuant to the Comprehensive Agreement (amounts in excess of the Salary Cap), during the period of September 1, 2008 and November 22, 2011 required to repay the excess amounts to CNA? [ 22 ] In reasoning that CNA’s counterclaim involved a common issue, the Judge also rejected Ms.

Thorne’s argument that certifying CNA’s counterclaim would not achieve the behavior modification objective of class action legislation because the employees had committed no wrong in receiving their salaries from CNA and their behavior was therefore not in need of modification.

The Judge stated that the three objectives of class action legislation were meant to be considered together, not independently, for the purpose of deciding whether certification of CNA’s proposed counterclaim was the preferable means of resolving its claim against the employees, and went on to decide that resolution of CNA’s counterclaim within Ms. Thorne’s class action would promote the objective of judicial economy, and that the goal of judicial economy took precedence over the objectives of behavior modification and access to justice in this case.

[23] The applications Judge then appointed Ms. Thorne as an “appropriate representative defendant by counterclaim” (paragraphs 78to 79). In so doing he found that her interest did not conflict with that of the other class members. Leave to Appeal [24] Section 36(3) of the Act requires leave to appeal a certification decision. Ms. Thorne sought leave to appeal the Judge’s decision,and in May 2017 this Court granted leave, saying that the appeal “raises a novel issue… and provides this Court with the opportunity notonly to review the applications judge’s basis and reasons for certifying [CNA’s] counterclaim, but also to address relevant principles oflaw together with statutory

interpretation” (Thorne v. College of the North Atlantic, 2017 NLCA 30, at para. 27). This Court identified anon-exhaustive list of issues for consideration on appeal. The Appeal [25] Ms. Thorne argues that the Judge erred in certifying CNA’s counterclaim. She maintains that CNA’s counterclaim does not fitwithin the scheme of the Act and that it does not meet the Act’s criteria for certification of a class action because it does not disclose acause of action.

She says that the Judge misapprehended and mischaracterized her cause of action and that he failed to examine CNA’scounterclaim within the context of contract law principles and class action jurisprudence, and submits that his decision effectivelyrelieves CNA of its burden to show that its counterclaim meets the criteria for certification under the Act. As well, Ms. Thorne arguesthat the Judge’s decisions respecting class definition and the representative defendant are in error as they are not supported by theprovisions of the Act.

ISSUES [26] The central issue on appeal is whether CNA’s counterclaim is a certifiable class action under the Act. Resolution involves thenature of a class action, the nature of a counterclaim, application of the enabling provisions of the Act, and whether CNA’s counterclaimdiscloses a cause of action. Whether the Act provides for a “representative defendant by counterclaim”, whether Ms.

Thorne’s interestsas a representative defendant by counterclaim conflict with other members of her class, and whether there are alternative proceduresavailable to assist in the efficient and fair resolution of issues raised by the parties are also live issues. STANDARD OF REVIEW [27] The standard of review respecting certification of a class action was addressed by this Court in Canada (Attorney General) v.Anderson, 2011 NLCA 82, 315 Nfld. & P.E.I.R. 314 at para. 38 and in Ring v.

Canada (Attorney General), 2010 NLCA 20, 297 Nfld. &P.E.I.R. 86 leave to appeal to SCC refused, (SCC), 309 Nfld. & P.E.I.R. 362 (note) at para. 34. Succinctly stated,whether pleadings in a class action disclose a cause of action for the purposes of section 5(1)(

a) of the Act is a question of law reviewableon a standard of correctness. The other criteria in

section 5 of the Act raise questions of mixed fact and law in respect of which thestandard of review is palpable and overriding error, unless the judge made an extricable error in principle with respect to thecharacterization of a legal standard or its application, in which case the error is one of law reviewable for correctness. Accordingly,whether CNA’s counterclaim discloses a cause of action is reviewable on a standard of correctness. Decisions respecting the other partsof

section 5 of the Act involve questions of mixed fact and law and are reviewable on the standard of palpable and overriding error,unless legal standards respecting them have been mischaracterized or misapplied. [28] The meaning and application of other provisions of the Act to the Judge’s decision and to CNA’s counterclaim also present in thiscase. It is settled law that statutory

interpretation is a question of law reviewable on the correctness standard (Canadian NationalRailways Co. v. Canada (Attorney General), 2014 SCC 40, [2014] 2 S.C.R. 135 at para. 33). (See also Corporate Express Canada Inc.v. Memorial University of Newfoundland, 2015 NLCA 52, 371 Nfld. & P.E.I.R. 137 at para. 16.) The application of a statutory provisionto a set of facts is generally a question of mixed fact and law reviewable on the standard of palpable and overriding error, unless theJudge made an extricable error in principle in so doing.

ANALYSIS Discussion Class Actions [29] Class actions are a relatively recent development in Canadian law, having been enabled by the passing of legislation in mostCanadian jurisdictions. Newfoundland and Labrador’s class action legislation, enacted in 2001, provides a comprehensive scheme forthe prosecution of class actions – defining them, establishing the criteria for their certification, and governing their conduct. [30] The purposes of class actions are to promote access to justice, enable judicial economy, and modify behavior by providing formultiple actions to be heard together (Hollick v.

Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158 at para. 15 per McLachlin C.J.C.). InHollick, the Chief Justice described these advantages as follows: … First, by aggregating similar individual actions, class actions serve judicial economy by avoiding unnecessary duplication in fact-finding and legal analysis. Second, by distributing fixed litigation costs amongst a large number of class members, class actions improveaccess to justice by making economical the prosecution of claims that any one class member would find too costly to prosecute on his orher own.

Third, class actions serve efficiency and justice by ensuring that actual and potential wrongdoers modify their behavior to takefull account of the harm they are causing, or might cause, to the public. … (See Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534 for a more comprehensive explanation ofthe purposes of class actions. See also Abdool v. Anaheim Management Ltd. (1995), (ON SC), 21 O.R. (2d) 143 (Div.Ct.)).

Counterclaims [31] This case involves a counterclaim asserted by a sole defendant in a certified class action. [32] Counterclaims are provided for in Rule 11 of the Rules of the Supreme Court, 1986. In pertinent part, rules 11.01, 11.03(a), and11.04 read: 11.01.

(1) Where a defendant has a claim against a plaintiff in respect of any cause of action, whenever and however arising, thedefendant may, instead of bringing a separate proceeding, make a counterclaim in respect of the claim. … 11.03. A counterclaim is a separate proceeding and the Court may (

a) proceed with the counterclaim notwithstanding that judgment may be entered for the plaintiff in the original proceeding, or theoriginal proceeding is stayed, discontinued or dismissed; … 11.04. The provisions of these rules shall apply, with any necessary modification, to a counterclaim as if the counterclaim were astatement of claim and the defendant making it, the plaintiff, and to the defence to the counterclaim, as if it were a defence and the partymaking it, a defendant. [33] At paragraph 9 of Home Hardware Stores Limited v. R.

Home Supply Centre Ltd., 2015 BCCA 500, 83 B.C.L.R. (5th) 36,Newbury J.A., adopting McLachlin J.’s words from Royal Bank of Canada v. Rizkallo (1984), (BC SC), 59 B.C.L.R.324 (S.C.), described a counterclaim in the context of distinguishing it from a defence: A defence is a contention that the plaintiff's claim is not established. It adopts one or more of the following positions: (

i) an objection on grounds of jurisdiction; (ii) a denial of the plaintiff's allegations (traverse); (iii) a submission that if the plaintiff's allegations are true they disclose no cause of action (demurrer); and (iv) a submission that if the plaintiff's allegations are true there are facts which provide a legal justification for the defendant's conduct(confession and avoidance). A counterclaim, on the other hand, is an independent action raised by a defendant, which, because of the identity of the parties, canconveniently be tried with the plaintiff's claim.

While a counterclaim frequently (although not necessarily) arises from the same events asthe plaintiff's claim, and while it may result in reduction of the plaintiff's claim, it is in principle an independent action. [34] In other words, if a defendant wishes to pursue a claim against the plaintiff who is suing him or her, he or she can do so withinthe plaintiff’s suit by filing a counterclaim, although such a defendant is free to file a claim as an ordinary plaintiff outside and regardlessof the plaintiff’s suit. [35] A counterclaim is distinctly different from a set-off.

A set-off is part of a defence pleaded by a defendant against a plaintiff indefence to the whole or part of a claim made by the plaintiff.

Set-off is provided for in rule 14.19: Where a claim by a party to a sum of money, whether the amount is ascertained or not, is relied on as a defence to the whole or part of aclaim made by an opposing party, it may be included in a defence and set-off against the claim, whether or not it is also added as acounterclaim. [36] In Home Hardware, Justice Newbury described the defence of set-off as an equitable defence that goes directly to impeach theplaintiff’s demands (paragraph 10).

If proved, the amount of the set-off may be subtracted from any amount awarded to the plaintiff tothe extent of the plaintiff’s award, potentially reducing the plaintiff’s award to zero. [37] In other words, if the plaintiff succeeds in proving his or her claim, and the defendant succeeds in proving his or her defence ofset-off, the defendant will be able to deduct the amount of its set-off up to the amount of the plaintiff’s award but not amounts in excessof the plaintiff’s award.

This is in contrast to a counterclaim, which, because it is an independent cause of action, is “not governed bythe same rules or subject to the same limitations” as a set-off (Beddall v. Maitland, [1879] 17 Ch. D. 174 at 178). [38] Accordingly, when a defendant files a counterclaim, the defendant becomes a plaintiff by counterclaim, and the original plaintiffbecomes a defendant by counterclaim, as rule 11.04 provides and long-standing practice has established. In this case, that means that forall intents and purposes related to its counterclaim, including certification, CNA is a plaintiff.

Having filed suit as a plaintiff bycounterclaim, CNA must comply with the provisions of the Act, including the criteria for certification, like any other plaintiff seeking tocommence an action under the Act. Commencing a counterclaim in the class actions context is more involved than doing so in theordinary (non-class action) context. In the latter context a defendant can commence a counterclaim at will; in the class actions context, acounterclaim can only be brought if the requirements of the Act are met.

The distinction between plaintiff class actions and defendant class actions [39] Fundamental to this appeal is the distinction between plaintiff class actions and defendant class actions. They are not the same. The Act provides for plaintiff class actions.

Section 3 of the Act provides for a plaintiff to commence a class action. In pertinent part, itreads:

(1) One member of a class of persons who reside in the province may commence an action in the court on behalf of the membersof that class.

(2) The member who commences the action shall apply to a judge of the court within the time period in subsection (3) for an ordercertifying the action as a class action and appointing the member as the representative plaintiff. … [40]

Section 4 of the Act provides for a defendant to certify a plaintiff class if the defendant is sued by more than one plaintiff and theplaintiff’s class has not already been certified. It reads: 4. A person who is named as a defendant in more than one action in the court may apply to a judge of the court for an order certifyingthe actions as a class action and appointing a person to be the representative plaintiff. [41]

Section 4 is clearly directed to judicial economy by permitting a defendant who is facing more than one individual action toapply to the court for certification of the two or more actions against it as a class action and to have a representative plaintiff appointedfrom among the two or more plaintiffs in the individual actions. [42] Defendant class actions are different. A defendant class action is when two or more defendants are certified as a class (WardBranch, Class Actions in Canada, looseleaf (Toronto: Canada Law Book, 2000) at paras. 4.69 and 4.1170).

There is no provision in theAct for defendant class actions. The Newfoundland and Labrador legislation is not alone in this respect. Class action legislation in NovaScotia, New Brunswick, Quebec, Manitoba, Saskatchewan and British Columbia also does not provide for defendant class actions. Thisis in contrast to Ontario’s legislation which provides for defendant class actions – where a plaintiff can apply to certify a class of one ormore defendants and have a representative defendant appointed from the defendant class (Branch, supra). In this regard see TheChippewas of Sarnia Band v.

Canada (Attorney General) (1996), (ON SC), 29 O.R. (3d) 549, 137 D.L.R. (4th) 239where the plaintiff Band applied for and obtained certification of several defendants as a class and the action as a defendant class action. [43] Ontario’s class action legislation was passed a decade prior to the Act, which suggests that this province made a policy choice,like several other Canadian provinces, not to provide for defendant class actions in its enabling legislation. [44] There is one reference to counterclaims in the Act. It is found in section 19(6) which concerns notice of certification:

(6) Unless the court orders otherwise, a notice given under this

section shall … (

d) describe any counterclaim or third party action being asserted in the action including the relief sought; … [45] Accordingly, section 19(6) of the Act requires that class members be notified if a counterclaim or third party action is asserted intheir class action. This notice provision presumes that a plaintiff class action has already been certified and that a counterclaim has beenfiled. However, the notice provision does not displace the necessity for the counterclaim to comply with the certification provisions ofthe statute. This is not to say that counterclaims cannot ever be commenced under the Act.

Rather, it is to say that whenever acounterclaim or third party action is asserted by a defendant or defendants, the class members must be notified. Can CNA’s counterclaim be certified under the Act? [46]

Part I of the Act deals with certification, and sections 3(1) and (2) address the application process for a litigant seeking to have aclass action certified. Section 3(1) reads: One member of a class of persons who reside in the province may commence an action in the court on behalf of the members of thatclass. [47] Section 3(2) of the Act addresses the application process.

It reads: The member who commences the action shall apply to a judge of the court within the time period in subsection (3) for an ordercertifying the action as a class action and appointing the member as the representative plaintiff. [48] In this case, CNA, a corporate entity, is the sole defendant in the plaintiff’s class action and the sole plaintiff by counterclaim. As a sole plaintiff by counterclaim, it is not a member of a class of persons who reside in the province on whose behalf it is seeking totake action.

Accordingly, CNA as a sole plaintiff cannot comply with section 3(1) of the Act so as to commence a class action or section3(2) so as to apply for certification of a class action on behalf of members of a class. [49]

Section 4 of the Act permits a defendant in more than one action to apply to certify all of the actions against it as a class action soas to have them heard and decided together if the criteria for certification are met. In this case CNA is the sole defendant in a plaintiffclass action. It is not named as a defendant in more than one action so as to apply to have the actions against it certified as a class. If Ms.Thorne and several members of the class had filed individual suits, then CNA as a defendant in more than one action could have appliedunder

section 4 to have the individual suits against it certified as a class action to avoid being saddled with defending several differentactions individually. The benefit of

section 4 to CNA has already been achieved by the certification of Ms. Thorne’s class action and herappointment as the representative plaintiff. [50] In the result, CNA’s application for certification cannot comply with either

section 3 or 4 of the Act. It is neither a plaintiffacting on behalf of class members nor a defendant to two or more actions. [51] In reality, the counterclaim which CNA seeks to prosecute against a group of defendants (who constitute some, but not all, of theplaintiff’s class) is a defendant class action. CNA is the plaintiff seeking to certify a group of defendants as a class. The Act does not

provide for certification of a class of defendants or for a sole plaintiff to apply to certify an action against a class of defendants. Nor isthere any provision for the appointment of a representative defendant to fairly and adequately represent the interests of a defendant class. [52] CNA’s inability to fit within

section 3 of the statute so as to apply for certification of its counterclaim means that it cannot get outof the starting gate. Indeed CNA’s counsel admitted on appeal that CNA could not fit within the provisions of the statute if it hadattempted to certify CNA as a class by commencing a plaintiff class action as opposed to commencing a counterclaim. If CNA cannotachieve its goal of certifying a claim as plaintiff, sole or otherwise, against a group of employees as a class action, surely it cannot do soindirectly by virtue of a counterclaim.

This would constitute an end-run around the requirements for certification. On this basis alone,CNA’s counterclaim should be struck and Ms. Thorne’s appeal allowed. Does CNA’s counterclaim disclose a cause of action? [53] Whether CNA’s counterclaim discloses a cause of action has been a central issue for both Ms. Thorne and CNA in the SupremeCourt and in this Court. Because it raises an important issue, it must be addressed. [54]

Section 5 of the Act sets out requirements to be met for certification of a class action applied for under either

section 3 or 4:

(1) On an application made under

section 3 or 4, the court shall certify a class action where: (

a) the pleadings disclose a cause of action; (

b) there is an identifiable class of 2 or more persons; (

c) the claims of the class members raise a common issue, whether or not the common issue is the dominant issue; (

d) a class action is the preferable procedure to resolve the common issues of the class; and (

e) there is a person who (

i) is able to fairly and adequately represent the interests of the class, (ii) has produced a plan for the action that sets out a workable method of advancing the action on behalf of the class and of notifyingclass members of the action, and (iii) does not have, on the common issues, an interest that is in conflict with the interests of the other class members. [55] The first criterion is that the claim proposed for certification must disclose a cause of action (section 5(1)(a)). [56] Any plaintiff claim must disclose a cause of action and CNA’s counterclaim is no exception. In Letang v.

Cooper, [1964] 2 AllE.R. 929 (C.A.) at 934 Lord Justice Diplock defined a cause of action as “…simply a factual situation the existence of which entitles oneperson to obtain from the court a remedy against another person”. This definition has been consistently relied on in Canadianjurisprudence and by this Court for many years. Accordingly, CNA’s counterclaim must assert facts which, if proved, entitle, orpotentially entitle, the plaintiff to a remedy at law. Also, while not always essential, statements of claim generally state the principle orprinciples of law which give rise to the entitlement claimed. [57] Ms.

Thorne appeals the Judge’s decision to certify CNA’s counterclaim on the basis that it does not, as pleaded, disclose a causeof action. In Canada (Attorney General), this Court explained that the test for determining whether a claim discloses a cause of action iswhether “it is plain and obvious that the claim cannot succeed”: [30] In Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 S.C.R. 261, (filed subsequent to submissions of the partieson this appeal) McLachlin C.J. reiterated: [20] The test for striking out pleadings is not in dispute.

The question at issue is whether the disputed claims disclose a cause of action,assuming the facts pleaded to be true. If it is plain and obvious that a claim cannot succeed, then it should be struck out: … [58] This Court also referred to paragraphs 22 and 24 of R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45 asinstructive on the proper approach to addressing applications to strike: [22] A motion to strike for failure to disclose a reasonable cause of action proceeds on the basis that the facts pleaded are true, unlessthey are manifestly incapable of being proven: Operation Dismantle Inc. v.

The Queen, (SCC), [1985] 1 S.C.R. 441, atp. 455. No evidence is admissible on such a motion: r. 19(27) of the Supreme Court Rules (now r. 9-5(2) of the Supreme Court CivilRules). It is incumbent on the claimant to clearly plead the facts upon which it relies in making its claim. A claimant is not entitled torely on the possibility that new facts may turn up as the case progresses. The claimant may not be in a position to prove the factspleaded at the time of the motion. It may only hope to be able to prove them. But plead them it must.

The facts pleaded are the firmbasis upon which the possibility of success of the claim must be evaluated. If they are not pleaded, the exercise cannot be properlyconducted. [23] … Whether the evidence substantiates the pleaded facts, now or at some future date, is irrelevant to the motion to strike. Thejudge on the motion to strike cannot consider what evidence adduced in the future might or might not show. To require the judge to doso would be to gut the motion to strike of its logic and ultimately render it useless. [24] This is not unfair to the claimant.

The presumption that the facts pleaded are true operates in the claimant’s favour. The claimantchooses what facts to plead, with a view to the cause of action it is asserting. If new developments raise new possibilities — as theysometimes do — the remedy is to amend the pleadings to plead new facts at that time.

Accordingly, the question is whether it is plain and obvious that CNA’s counterclaim cannot succeed. [ 59 ] Before examining CNA’s counterclaim, it is helpful to examine Ms. Thorne’s pleadings. They allege that the members of the class were instructors or support staff of CNA in Qatar whose standard form employment contracts stipulated that they were entitled to receive the Cost of Living Allowance (COLA) that CNA invoked and provided retroactive to September 1, 2008 in addition to their annual salaries. In paragraph 24 of Ms.

Thorne’s application for certification, she explained the basis of her claim: THAT the Plaintiff repeats Paragraphs 11 and 12 above and states that the claim is an alleged breach of contract, which by virtue of

Article 5.2 of the Terms and Conditions of Employment for Employees of CNA-Q, every contract employee that falls within the Class definition is entitled to any COLA funds obtained by the Defendant from the State of Qatar… [ 60 ] Ms. Thorne does not plead or rely on any contract or agreement between CNA and Qatar. Nowhere in her Statement of Claim or her Amended Statement of Claim is there reference to the Comprehensive Agreement between CNA and Qatar.

She simply pleads entitlement to monies from CNA based on the terms of the class members’ employment contracts with CNA, which she alleges provided for CNA to pay the COLA to class members and which she alleges CNA did not do. [ 61 ] Ms. Thorne’s application for certification also does not refer to the Comprehensive Agreement. The reference to “COLA funds obtained from Qatar” in Ms. Thorne’s application for certification is not a pleading. Neither is it an assertion that COLA funds were due either to them or to CNA from Qatar.

Rather, it is an explanatory statement in her application that COLA funds alleged to be due the class members had been received by CNA from Qatar and not passed on to the class members. There is a difference between material facts pleaded in a statement of claim and explanatory information in an application related to an action. [ 62 ] Ms. Thorne’s action was certified and the certification was upheld by this Court. It is also worth noting that CNA admitted at the certification hearing that Ms. Thorne’s pleadings disclosed a reasonable cause of action.

CNA’s Counterclaim [ 63 ] CNA’s counterclaim bears scrutiny so as to determine whether it pleads material facts that disclose a cause of action which entitles CNA to a remedy at law, or, in other words, whether it is plain and obvious that it cannot succeed. CNA’s counterclaim is pleaded as follows: 13. The Plaintiff by Counterclaim, College of the North Atlantic (“CNA”), is a post secondary educational and skills training institution which operates in various locations in Newfoundland and Labrador and has a mailing address of 432 Massachusetts Drive, Stephenville, Newfoundland and Labrador, A2N 2Z6.

At all material times to this counterclaim, CNA, pursuant to a contract with the State of Qatar, agreed to provide and deliver educational programs and administrative services to the college owned by the State of Qatar and located in Doha, Qatar (the “Comprehensive Agreement”). The Comprehensive Agreement permitted the college to be called and operate under the name College of the North Atlantic – Qatar (“CNA-Q”). 14. The Defendants by Counterclaim are the class members as represented by Deborah Thorne. Mrs. Thorne resides in the City of St. John’s, in the Province of Newfoundland and Labrador, A1A 3M2.

At all material times to this counterclaim, the Defendants by Counterclaim were employed by CNA to be instructors or provide instructor support at CNA-Q. 15. CNA relies on the preceding paragraphs hereof without restating them in this counterclaim. 16. The total compensation offered to instructors and instructor support persons at CNA-Q was based upon the budget agreed upon between CNA and the State of Qatar in accordance with the Comprehensive Agreement.

Under the Comprehensive Agreement salaries paid to instructors and instructor support employees providing services at CNA-Q were to be capped at different levels based upon each particular employee’s qualifications (the “Salary Cap”). 17. The Plaintiff and some other class members were actually paid amounts that exceeded the maximum amounts for which the State of Qatar has agreed to reimburse CNA.

For example, in June 2008 when Deborah Thorne was offered her Second Employment Contract (to run from 17 August, 2008 to 31 July, 2010), based upon her qualifications, her total compensation should have been capped at $92,419.00 CDN. However, in error, the total compensation that was offered in her Second Employment Contract was in excess of the Salary Cap. 18.

To the extent that the claims of the Plaintiff and class members of entitlement in accordance with the maximum amounts provided for under the Comprehensive Agreement (the Salary Cap as defined above) succeeds, CNA claims back from the Defendants by Counterclaim (i.e. each individual class members) all amounts that were paid above the maximum amounts for which the State of Qatar agreed to reimburse CNA for each instructor or instructional support employee in the class. 19. The Plaintiff by Counterclaim claims against each class member any and all amounts that were paid in excess of the Salary Cap.

For example, CNA claims special damages in the amount of $7,093 against Deborah Thorne as this was the amount she was overpaid during her term of employment with CNA. 20. Therefore, the Plaintiff by Counterclaim claims against the Defendants by Counterclaim; i.e. each individual class member who was paid more than the Salary Cap: a. special damages, in the amount of overpayment; b. interest pursuant to the Judgment Interest Act , RSNL 1990, c.

J-2; and c. such further and other relief as this Honourable Court shall allow. [ 64 ] The counterclaim pleads, incorporated from CNA’s defence, that members of the plaintiff class and CNA had contractual

relationships. CNA also pleads that members of the plaintiff class were paid more than the amounts CNA agreed with Qatar to pay them pursuant to a contract CNA had with Qatar known as the Comprehensive Agreement. At the same time, CNA pleads, incorporated from its defence, that members of the plaintiff class were not privy to the Comprehensive Agreement and cannot rely on its terms. [ 65 ] The Comprehensive Agreement is a contract CNA entered into with Qatar, a third party.

Any agreement CNA had with Qatar is immaterial to the plaintiff class unless the members of the plaintiff’s class were privy to or bound by it. CNA can make whatever contracts it wants with whatever third party it wants, but its contracts with third parties cannot bind the members of the plaintiff class unless they agreed to be bound by them. There is nothing in CNA’s pleadings that asserts that members of the plaintiff class were privy to or bound by the Comprehensive Agreement. In fact, CNA specifically pleads that members of the plaintiff class cannot rely on the Comprehensive Agreement.

Therefore, the Comprehensive Agreement between CNA and Qatar cannot be a basis for CNA’s entitlement to a remedy from members of the plaintiff class. [ 66 ] This Court’s decision in Humby Enterprises Ltd. v. A.L. Stuckless & Sons Ltd. , 2003 NLCA 20 , 225 Nfld. & P.E.I.R. 268 at paras. 3 to 10 instructs in this regard. In Humby , the plaintiff subcontractor (Humby) commenced an action in contract against Stuckless, the general contractor, as well as against Corner Brook Pulp & Paper, a third party.

Stuckless had entered into a contract with Corner Brook, but Humby had no contractual relationship with Corner Brook. Humby’s claim against Corner Brook was struck by Green J. (as he then was) on the basis that no material facts were pleaded which established a contractual relationship the breach of which would entitle Humby to a remedy at law against Corner Brook.

The striking of Humby’s claim against the third party was upheld by this Court, with Welsh J.A. writing that the pleadings did not disclose a contractual relationship between Humby and Corner Brook so as to entitle Humby to a remedy. [ 67 ] A similar triangle of parties is at play in CNA’s counterclaim. CNA, like the plaintiff in Humby, is relying on a contract it has with Qatar, to which Ms. Thorne and the class members are not party. In its counterclaim CNA has not pleaded any material facts which entitle it to a remedy in contract against the plaintiff class.

CNA’s pleadings do not allege that members of the plaintiff class had a contractual relationship with Qatar or that the members of the class were bound by the terms of the Comprehensive Agreement respecting salary caps. Neither does CNA allege any breach of the employment contracts it had with the members of the plaintiff class. Moreover, there is no indication in the record or the pleadings that such a breach of contract could be pleaded. CNA’s assertion that members of the plaintiff class were mistakenly overpaid is not a breach of contract by the members of the plaintiff class.

Accepting that members of the plaintiff class were overpaid, there is no further pleading as to how or why this fact entitles CNA to recover the overpayments. This is not to say that CNA would never be able to take some sort of action to recover monies it mistakenly overpaid to members of the plaintiff class. Rather, it is to say that such an action could not be based on a breach of the contracts between CNA and members of the plaintiff class based on the Comprehensive Agreement.

The allegation that some members of the plaintiff class were paid more money than what CNA and Qatar agreed they should be paid would only be material to CNA’s counterclaim if the class members were bound by the agreement between CNA and Qatar. What is material to the claim CNA makes against the class members is not what CNA agreed to with Qatar, a third party, but what CNA agreed to in the contracts CNA had with the class members. CNA has not pleaded any facts which entitle it to a remedy at law against class members.

Accordingly, CNA’s counterclaim does not disclose a cause of action and therefore does not meet the requirement of section 5(1) (

a) of the Act . It cannot be certified and must be struck. It is, as the first certification judge said, irremediably defective. [ 68 ] Something must also be said about the Judge’s reliance on

section 13 of the Act as giving him authority to entertain or certify CNA’s counterclaim was also in error.

Section 13 is directed to the conduct of a class action that has already been certified.

Section 13 in no way touches on an application for certification of a class action nor displaces the need for compliance with

section 5 of the Act . Other Issues Common Issue [ 69 ] CNA explained that its counterclaim is not against all members of the plaintiff class but only against approximately half of them. The common issue as stated by the Judge is whether members of the class who received compensation greater than the amount provided for in the annual budget and salary cap provisions set out in the Comprehensive Agreement during the period of September 1, 2008 and November 22, 2011 are required to repay the excess amounts to CNA.

The proposed defendants were not identified, although CNA pleads that only some members of the plaintiff class were overpaid and that Ms. Thorne is one of them. It is immediately apparent that the common issue is not an issue common to all members of the class ( section 5(1) (

c) of the Act ), even if defendant class actions were permitted under the Act. While members of a class do not have to be identically situated in every respect, they must share a common issue. Ms. Thorne’s Appointment as the “Defendant Representative” [ 70 ] The Judge appointed Ms. Thorne as a “representative defendant”. As noted above, the Act does not provide for defendant representatives. Even if the Act provided for defendant class actions and the appointment of representative defendants, which it clearly does not, Ms. Thorne would not be an appropriate representative defendant. Ms.

Thorne has been appointed, pursuant to section 5(1) (e), as the representative plaintiff who is fairly and adequately able to represent the interests of the plaintiff class members. As one of the members of the plaintiff class CNA alleges were overpaid, however, her interests diverge from the members of the class who were not overpaid. In fact, they are in direct conflict with those members of the certified plaintiff class who are not alleged to have been overpaid. The conflict is illustrated by considering that Ms.

Thorne’s representation of the class could well be influenced by the prospect of her ultimately owing more to CNA than she would recover from CNA, therefore inclining her to settle or discontinue the action so as to protect herself and others in her position while forsaking the members of the class who were not overpaid by leaving them without representation or remedy. [ 71 ] In

summary, the Judge erred by determining that CNA’s counterclaim met the statutory requirements for certification, by determining that CNA’s counterclaim disclosed a cause of action, by determining that CNA’s proposed common issue was a common issue, by appointing Ms. Thorne as representative defendant.

Alternative Procedures [ 72 ] Finally, the possibility of CNA pleading the defence of set-off arose during the appeal hearing. Pleading the defence of set-off would not engage the requirements of sections 3 or 5 of the Act in the way a counterclaim would. Nor would it enable CNA to pressure members of the class who were allegedly overpaid in the way that a counterclaim could, because the reach of set-off extends to and ends at the amount awarded to a plaintiff.

CNA frankly acknowledged at the appeal hearing that its reason for counterclaiming rather than pleading the defence of set-off was that counterclaiming gave it a tactical advantage over the class members by setting up the prospect that class members could end up owing more to CNA than they would recover from CNA if they succeeded in their class action, thereby pressuring the class members to abandon their class action out of fear that they would end up owing more than they would recover.

In any event, even if CNA were to plead the defence of set-off, CNA would still have to prove the defence, and if it were pleaded in contract, such proof would require CNA to prove that members of the plaintiff class were bound by the terms of the Comprehensive Agreement including the salary cap – something which they do not appear to be able to do. [ 73 ] In the result, I would strike CNA’s counterclaim and allow Ms. Thorne’s appeal. In accordance with the costs regime established in

section 37 of the Act , I would make no order as to costs. Appeal allowed.