Bellan v. Fillmore Riley LLP, 2012 MBCA 84

Citation: Bellan v. Fillmore Riley LLP, 2012 MBCA 84 Date: 20120912 Docket: AI 12-30-07714 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Michel A. Monnin Madam Justice Freda M. Steel Mr. Justice Martin H. Freedman BETWEEN : BERNARD W. BELLAN ) M. T. Green and ) L. W. Bowles (Plaintiff) Respondent ) for the Appellant ) - and - ) D. Lennox, ) J. C. Prober and FILLMORE RILEY LLP ) J. R. N. Boudreau ) for the Respondent (Defendant) Appellant ) ) Appeal heard: - and - ) April 19, 2012 ) STAFFORD F. SWAIN & ASSOCIATES ) Judgment delivered: September 12, 2012 (Defendant) STEEL J.A. 1 This is another

chapter in the Crocus Investment Fund (Crocus) saga. The issue in this appeal is whether the underlying claim should proceed as a class action under The Class Proceedings Act , C.C.S.M., c. C130 (the CPA ), or as a representation order procedure under Rule 10 of the Queen’s Bench Rules. The question is essentially one of statutory

interpretation. 2 The motion judge decided that the matter should proceed by way of a representation order procedure rather than as a class action. For the reasons that follow, I agree. I believe that the passage of the CPA did not eliminate the possibility of a representation order under Rule 10 of the Queen’s Bench Rules.

Moreover, while the question of whether the CPA requires all class actions to proceed under that Act is a question of law, whether a particular action should proceed as a class action or by way of representation order procedure is a discretionary decision which the motion judge was entitled to make. His decision took into account the correct factors, contained no error of law or misapprehension of fact and was not unjust. I see no ground for appellate intervention. 3 My decision dismissing this appeal simply confirms the motion judge’s decision as to the most convenient procedure for this litigation.

The merits of the main action itself were not an issue in front of the court and I make no comment in that respect. FACTS 4 Crocus fell into receivership in 2005. A class action was filed by the respondent, Mr. Bernard Bellan, as the representative plaintiff, on behalf of his fellow shareholders (over 36,000). This class action was brought against the directors and officers of Crocus, and others, who had all signed the prospectuses under which shares of Crocus were sold, either directly or through

agents. 5 The appellant, Fillmore Riley LLP (Fillmore), prepared those prospectuses and it is alleged that this was done negligently; in particular as regards to its obligation to confirm legislative compliance with The Crocus Investment Fund Act , C.C.S.M., c. C308, the statute which governed Crocus.

It is alleged that this led directly to the over-valuation of the fund and the shareholders’ losses. 6 The shareholders did not have a contractual claim against Fillmore since there was no privity between Fillmore and the Crocus shareholders, but it is alleged that the directors and officers did have such a relationship with the law firm. The directors and officers did not have sufficient funds to fully compensate shareholders. For the shareholders to recover against Fillmore, they needed the directors and officers to sue Fillmore.

However, the directors had limited insurance, and they could not afford to either continue the class action litigation or to pursue a claim against Fillmore. The shareholders did not want to settle their claim against the directors and officers without the chance to recover against Fillmore. 7 Ultimately, a compromise was reached.

The class action was settled by way of a court-approved agreement in 2009, in which the directors and officers agreed to pay substantially all of their insurance to Bellan, on behalf of the shareholders, and to assign to Bellan, on behalf of those shareholders, any third-party claim that they had against Fillmore and others. Court-approved notice of the settlement agreement and assignment was mailed to each of the shareholders of Crocus. Seventeen shareholders opted out of the settlement and assignment.

All other shareholders accepted the settlement and assignment, and compensation has been paid to them, albeit they still have a loss. 8 In particular, para. 12 of the order which approved the settlement between Bellan and the officers and directors of Crocus reads: It is declared that any and all claims the Settling Director and Officer Defendants may have, in law or in equity, whether such claims could be made by or on behalf of the Settling Director and Officer Defendants, for contribution or indemnity from any of the Non- Settling Defendants or against any other party in respect of the claims asserted in the Class Actions are assigned to the Plaintiff on behalf of the Settlement Class. 9 In 2011, Bellan filed an amended statement of claim against Fillmore pursuant to the assignment of the claim of the directors and officers of Crocus, acting as the representative of the shareholders pursuant to Rule 10 of the Queen’s Bench Rules.

The proceeding originally included a claim against an accountant and business valuator, Stafford F. Swain & Associates, who had provided professional advice to the directors and officers, but that claim has now been settled. 10 In response, Fillmore brought a motion seeking an order striking out Bellan’s statement of claim, with leave to commence a fresh action in accordance with the provisions of the CPA . Fillmore argued that Bellan’s action ought properly to have been brought pursuant to the CPA rather than by way of a representation order. Alternatively, it sought an order for

summary judgment dismissing the statement of claim and, alternatively, an order striking out paras. 4.1 and 34 of the statement of claim, and an order compelling Bellan to amend the statement of claim to aver that the action is one being brought pursuant to the provisions of the CPA . 11 Fillmore’s motion was dismissed and it now appeals the dismissal of that motion. THE MOTION JUDGE 12 The motion judge rejected Fillmore’s argument that the matter should proceed under the CPA .

He concluded that “a class proceeding would not be the preferable procedure for the fair and efficient resolution of this case.” He stated that: POSITION OF THE APPELLANT 13 Fillmore argues that the motion judge erred in two ways. 14 First, it is their position that, as a matter of law, the CPA cannot be circumvented by a party relying on Queen’s Bench Rule 10.01(1)(f).

They argue that there is only one way in which class proceedings, such as the present one, can be brought and that is pursuant to the CPA . 15 In support of this argument, they point out that, prior to the passage of the CPA , class proceedings had been governed by Rule 12.01 of the Queen’s Bench Rules. That rule was repealed in its entirety when the CPA came into force.

Consequently, it is submitted that in passing the CPA and repealing the former Rule 12.01, the legislature intended that multi-party proceedings (such as the present one) were to be governed by the CPA , including the procedure provided for therein. Rule 10 was not designed, nor should it be

interpreted, it is submitted, to give parties the option of deciding how class actions are to be brought and conducted. 16 Alternatively, Fillmore argues that the motion judge erred in the exercise of his discretion in finding that, in the present circumstances, Bellan’s action should be brought pursuant to Rule 10. It is submitted that not only did the motion judge err in failing to give effect to the clear intention of the legislation, but he had no basis for his assertion that “a representative action under Queen’s Bench Rule 10.01(1)(

f) would be less complicated, more efficient, quicker and cheaper.” RELEVANT STATUTORY PROVISIONS 17

Section 41 of the CPA states: Application of Act 41 This Act does not apply to (

a) a proceeding that may be brought in a representative capacity under another Act; (

b) a proceeding required by law to be brought in a representative capacity; and (

c) a representative proceeding commenced before this Act comes into force. 18 The relevant Queen’s Bench Rules read as follows: RULE 10 REPRESENTATION ORDER REPRESENTATION OF AN INTERESTED PERSON Proceedings in which order may be made 10.01(1) In a proceeding concerning, (

a) the

interpretation of a deed, will, agreement, contract or other instrument, or the

interpretation of a statute, order in council, order, rule, regulation, by-law or resolution; (

b) the determination of a question arising in the administration of an estate or trust; (

c) the approval of a sale, purchase, settlement or other transaction; (

d) the approval of an arrangement under

section 59 of The Trustee Act ; (

e) the administration of the estate of a deceased person; or (

f) any other matter where it appears necessary or desirable ;

a judge may by order appoint one or more persons to represent any person or class of persons, including ; (

g) unborn persons; or (

h) persons who cannot readily be ascertained, found or served; who have a present, future, contingent or unascertained interest in, or may be affected by, the proceeding . Order binds represented persons 10.01(2) Where an appointment is made under subrule (1), an order in the proceeding is binding upon a person or class so represented, subject to rule 10.03. Settlement affecting persons who are not parties 10.01(3) Where in a proceeding referred to in subrule (1) a settlement is proposed and one or more persons interested in the settlement are not parties to the proceeding, but (

a) those persons are represented by a person appointed under subrule (1) who assents to the settlement; or (

b) there are parties to the proceeding having the same interest who assent to the settlement, the court, if satisfied that, (

c) the settlement will benefit the interested persons; and (

d) service on the interested persons will cause undue expense or delay; may by order approve the settlement on behalf of those persons. Settlement binding 10.01(4) A settlement approved under subrule (3) binds the interested persons who are not parties, subject to rule 10.03. [emphasis added] 19 For the purposes of this analysis, it is useful to note that the predecessors of Rule 10, under the old court rules, were much more restrictive than the current, more liberal version. Rules 59-61 stated: 59.

Where the right of an heir-at-law, or of the next of kin, or of a class, or of an unborn person, depends on the construction of an instrument and it is not known or is difficult to ascertain who is such heir-at-law, next of kin, or class, and the court deems it convenient to have the question determined before the heir-at-law, next of kin, or class in question is ascertained, or before the birth of any unborn person, the court may appoint some person to represent the heir-at-law, next of kin, class, or unborn person, and the judgment of the court shall be binding on the person or class or unborn person so represented. 60.

The court may appoint some person to represent, for the purposes of any action or proceeding, the interest of any person or class who may not be ascertained, or who may be unborn, and the judgment of the court shall be binding on the person or class so represented. 61.

Where in any action or proceeding concerning a trust a compromise is proposed and some of the persons interested in the compromise are not parties to the action or proceeding, but there are other persons in the same interest before the court and assenting to the compromise, the court, if satisfied that the compromise will be for the benefit of the absent persons, and that to require service on them would cause unreasonable expense or delay, may approve the compromise and order that the same shall be binding on the absent

persons; and they shall be bound accordingly, except where the order has been obtained by fraud or non-disclosure of material facts. 20 T he former Rule 12.01 was replaced upon the coming into force of the CPA . The current version of Rule 12.01 addresses class proceedings and states: Definition 12.01(1) In this Rule, “Act” means The Class Proceedings Act . Conduct of class proceedings 12.01(2) Class proceedings shall be conducted in accordance with the Act. ….

DECISION Must the Action Proceed under the CPA 21 The issue of whether the enactment of the CPA requires all such possible claims to proceed initially under that Act is a question of law that must be reviewed on a standard of correctness. It is a question of statutory

interpretation requiring a holistic analysis of the relevant provisions themselves, the CPA as a whole, the relevant cases and commentary. 22 Looking first to an examination of the relevant statutory provisions, I note that s. 41 of the CPA states explicitly that the CPA does not apply to “ a proceeding that may be brought in a representative capacity under another Act” (emphasis added).

Turning next to Rule 10 of the Queen’s Bench Rules, it states that in a proceeding concerning “any other matter where it appears necessary or desirable a judge may by order appoint one or more persons to represent any person or class of persons” (emphasis added). 23 Fillmore seeks to limit the scope of the rule to “unborn persons” or “persons who cannot readily be ascertained, found or served.” I do not agree. The rule gives these as examples, which are included in the rule, but the rule is not limited to those examples.

The rule uses the words any person or class of persons, “ including unborn persons; or persons who cannot readily be ascertained, found or served; who have a present, future, contingent or unascertained interest in, or may be affected by, the proceeding” (emphasis added). 24 In any case, over 36,000 shareholders would qualify as “persons who cannot readily be ... served” under the rule and as persons who “may be affected by, the proceeding.” 25 In addition, s. 4(

d) of the CPA requires the court to consider any preferable alternatives to a class action. This has been interpreted to include whether an action pursuant to a representation order may be a better vehicle for a plaintiff’s claims. If a representative proceeding is preferable, the court may exercise its discretion under the CPA to deny class action status, and direct that action be brought pursuant to a representation order. 26 The case of Soldier v.

Canada (Attorney General) , 2006 MBQB 50 at para. 68 , 200 Man.R. (2d) 216 , aff’d 2009 MBCA 12 , 236 Man.R. (2d) 107 , is an example of a case where the court held that a representative action was preferable to a class action. It is true, as Fillmore contends, that one of the bases of decision of the certification judge was that since the plaintiffs were not the proper plaintiffs, there was no cause of action. However, that was held to be an error on appeal. 27 Rather, it was the preferability analysis of the certification judge that was upheld in this court.

The certification judge held that a representative action was the preferred procedure in Soldier and that was confirmed by this court, which held “[e]veryone is agreed that the choice is between a class action and a representative action” (at para. 80). 28 A survey of the relevant commentary and other case law supports the argument of Bellan that class actions and representation orders were intended to co-exist. 29 For instance, Todd Archibald, Gordon Killeen, Q.C. & James C. Morton, Ontario Superior Court Practice, 2012 (Markham: LexisNexis Canada Inc., 2011), observe that (at p. 670):

…. It [Rule 10] is also used as the “simplified procedure” version of proceedings under r. 12 and the Class Proceedings Act, 1992 (“CPA”), particularly in pension fund disputes where the individual amounts in dispute are small while the issues and interests of a large number of disputants are similar if not identical. Rule 10 is designed to encourage an expeditious means of resolving contentious issues without the cost and expense associated with a class procedure. A number of r. 10 orders have been issued since the advent of the CPA. 30 Linda S. Abrams & Kevin P.

McGuinness, Canadian Civil Procedure Law , 2d ed. (Markham: LexisNexis Inc., 2010), similarly remark that (at para. 4.93, 7.74): Representative proceedings are intended to simplify the process of conducting litigation involving matters that pertain to a disproportionately large number of potential parties. They are intended to provide a means for the expeditious resolution of a dispute without the cost and expense associated with a formal class proceeding, and without a proceeding involving each potentially affected party personally. ….

The settlement Representative Order procedure under Rule 10 (which permits the court authority to appoint a person to represent others who may be affected by the proceeding) is sometimes employed as a simplified alternative to a proceeding under the Class Proceedings Act, 1992 . Differently stated, Rule 10 is now employed as a supplement to the more formalized process of the C.P.A. …. [emphasis added] 31 Even the authors Michael A. Eizenga, Michael J. Peerless & John E.

Callaghan, Class Actions Law and Practice , 2d ed., looseleaf (Markham: LexisNexis Canada Inc., 2009) at para. 3.144 admit that representation orders exist as possible alternatives to proceedings under the CPA . 32 In their civil procedure text, Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario (Markham: LexisNexis Canada Inc., 2010), Justices Perell and Morden write ( at 257) : ….

A representative order under Rule 10 is for situations where parties cannot be readily ascertained, found or served, but the use of the rule has been expanded to provide a simplified approach to the certification procedure under the Class Proceedings Act, 1992 . The use of the rule may also be combined with a class proceeding. 33 Canadian court rules regarding representation orders originated in England. See the comments of McLachlin C.J.C. in Western Canadian Shopping Centres Inc. v. Dutton , 2001 SCC 46 at paras. 19-24 , [2001] 2 S.C.R. 534 . Flexibility has always been a hallmark of representative actions.

As Megarry J. observed in John v. Rees , [1969] 2 All E.R. 274 (Ch. D.) “the rule [as to representative suits] is to be treated as being not a rigid matter of principle but a flexible tool of convenience in the administration of justice” (at p. 283). In Manitoba, Rule 10 predates class action legislation and has been unchanged since its passage. 34 In terms of the case law in Manitoba, as mentioned previously, Soldier is a case which is the inverse of the one at bar.

In that case, the plaintiffs sought to proceed under the CPA , but the defendant resisted on the basis that the matter had to be brought as a representative action. The certification judge agreed with the argument and that decision was affirmed by this court. However, implicit in both the trial decision and the decision of this court is that the two procedures continue to co-exist. Other courts with similar legislation have come to the same conclusion. 35 The legislation in Saskatchewan is quite similar. In fact, in the case of Fontaine v. Canada (A.G.) (21 July 2011), Regina 816/2005 (Sask.

Q.B.), the court concluded that “[t]he remaining objection, that a representation order may not issue where there is class action legislation in force, is not supported by the principles of statutory

interpretation or existing jurisprudence” (at para. 20). However, that decision is presently under appeal. (See Sparvier v. Canada (Attorney General) , 2011 SKCA 115 (QL) .) 36 The Federal Court has had an interesting experience that supports the conclusion that the two procedures should co- exist. In 2002, that court enacted class action rules and repealed its representative action regime. In 2007, the court reversed itself and now accommodates both class actions and representative proceedings expressly in its rules. See Soldier , 2009 MBCA 12 at paras. 84-87 .

And see, for example, Kwicksutaineuk Ah-Kwa-Mish First Nation v. Canada (Attorney General of Canada) , 2012 FC 517 at paras. 81- 89 (QL) . See also The Hon. Allan Lutfy & Emily McCarthy, “Rule-Making in a Mixed Jurisdiction: The Federal Court (Canada)” (2010) 49 Sup. Ct. L. Rev. (2d) 313 at 323-28. 37 The situation in Quebec provides a useful contrast with the legislative scheme in force in Manitoba. In Quebec, it would appear that class proceedings and representation orders exist in two separate compartments and are not intended to overlap.

However, the legislation is explicit in that regard and makes that clear.

Article 1003 of Quebec’s Code of Civil Procedure , R.S.Q., c. C- 25, provides that, in order to pursue a class action in Quebec, plaintiffs must show that the application of the regular rules regarding representation orders would be “difficult or impracticable.” The Quebec Court of Appeal has confirmed in Proulx c. Pyser , [1985] J.Q. No. 607 (QL) , that the plaintiff must do more than simply allege that it would be difficult or impracticable. Furthermore, that court has

specifically stated that a person does not have a choice between recourse to representative proceedings under art. 59 and class actions. 38 It is the cases arising out of Ontario that can provide us with the most useful comparison, even though the wording ofOntario’s Rule 10 is slightly different than Manitoba’s. The first part of the rule is quite similar to Manitoba, but the latter

part isarguably more restrictive.

In Manitoba, “a judge may by order appoint one or more persons to represent any person or class of persons… who have a present, future, contingent or unascertained interest in, or may be affected by, the proceeding.” In Ontario, Rule 10 onlyapplies when such person(s) “cannot be readily ascertained, found or served.” While Manitoba’s rule may be considered to be applicablein a wider group of situations, this distinction is not relevant in the case at bar since the group in question here is a group who both maybe affected by the proceeding and cannot be readily served. 39 The Ontario Court of Appeal’s decision in Potter v.

Bank of Canada, 2007 ONCA 234, 85 O.R. (3d) 9, involved aconflict between class proceedings and representation orders. The appellants wished to bring a class action against the Bank of Canadafor unlawfully extracting funds from the pension plan it established for its employees. One of the issues in the case was whether s. 37(a)of the Ontario Class Proceedings Act, 1992, S.O. 1992, c. 6, prevented the action from being brought as a class action because it couldhave been brought as a representative proceeding under Rule 10. 40 Goudge J.A. stated “[t]he fundamental question is whether s. 37(

a) of the Act encompasses actions that may be broughtunder Rule 10. In my view, it does not” (at para. 36). Instead, he concluded that class proceedings and representation orders wereintended to co-exist, and the preferable procedure should be determined on a case-by-case basis (at paras. 37-40, 43-46). As to thecorrect

interpretation of s. 37(a), he held that “it precludes resort to the Act only where another piece of legislation provides expressly forrepresentative proceedings” (at para. 40). But, fundamental to our case here is the comment that the two procedures co-exist and thedecision to adopt one procedure as opposed to another is not a question of law, but rather convenience and preferability depending uponthe circumstances of each case. 41 Although the Potter case is the only Ontario appellate decision on point, there are a plethora of other Ontario trial courtdecisions to the same effect.

They all support the premise that the class action legislation did not sound the death knell forrepresentation orders under Rule 10; all of the cases accept that there remains some scope for the operation of Rule 10. 42 For example, in the early case of Chippewas of Sarnia Band v. Canada (Attorney General) (1996), (ON SC), 29 O.R. (3d) 549 (Gen. Div.), certification was sought pursuant to the Class Proceedings Act, 1992, for a dispute relating totreaty land entitlements.

However, a representation order was expressly considered as an alternative. 43 Several years later, this issue arose again, in the case of Chiefs of Ontario v. Ontario, [2003] O.J. No. 585 (QL)(S.C.J.). The underlying dispute in that case related to various First Nations’ claims against the government and other entities regardingcasino revenues.

A representation order was granted, with Campbell J. noting that “it is available as a ‘flexible tool of convenience’ andwill in this case avoid many practical difficulties in this case that would otherwise lead to unnecessary inconvenience delay and expense”(at para. 21). 44 Bellan relies on Cullity J.’s decision in Sutherland v. Hudson’s Bay Co. (2005), (ON SC), 74 O.R.(3d) 608 (S.C.J.), which was another pension case. In that case, the plaintiffs were seeking certification under the Class ProceedingsAct, 1992, and the judge raised the possibility of a representation order with respect to certain defendants.

Cullity J. held that arepresentation order was preferable to certification under the Class Proceedings Act, 1992, at least with respect to certain defendants.

Some of the factors considered in reaching this decision were (at paras. 80-86): ▪ the number and dispersal of these defendants; ▪ the fact that no direct claims were being made against them; ▪ their identity of interests; ▪ the lack of necessity for and inappropriateness of the procedures applicable to class defendants under the Class Proceedings Act,1992, in the circumstances; ▪ no objections from counsel regarding ability to provide adequate representation; ▪ no indication that certification of defendant class would promote economy, efficiency or expedition (in fact, the opposite was morelikely); and ▪ these defendants were unlikely to adduce evidence. 45 Thus, Cullity J. proceeded under Rule 10, rather than the Class Proceedings Act, 1992, with respect to thesedefendants.

In the case of Paramount Pictures (Canada) Inc. v. Dillon (2006), 29 C.P.C. (6th) 13 (Ont. S.C.J.), when Cullity J. wasagain called upon to decide whether a pension dispute should proceed under the Class Proceedings Act, 1992, or Rule 10, he decided thematter should proceed by way of class proceeding, but he did consider both alternatives and decided the issue after considering a numberof discretionary factors (see para. 38). 46 In Ironworkers Ontario Pension Fund (Trustees of) v.

Research in Motion Ltd. (2007), (ON SC),87 O.R. (3d) 721 (S.C.J.), shareholders sued Research in Motion Ltd. over certain option-granting and accounting practices. The matterwas settled, but in order to implement the settlement, the parties sought and were granted a representation order under Rule 10. AsCampbell J. explained (at para. 20): The Rule is described as the “.... ‘simplified procedure’ version of proceeding under the Class Proceedings Act ....” Rule 10 is “designed

to encourage an expeditious means of resolving contentious issues without the cost and expense associated with a Rule 12 [ClassProceedings Act, 1992, S.O. 1992, c. 6] order”. As such, a number of Rule 10 orders have been issued since the advent of the ClassProceedings Act. 47 In the case of Berry v. Pulley, 2011 ONSC 1378, 106 O.R. (3d) 123, Perell J. compared and contrasted Rule 10 and theClass Proceedings Act, 1992, as follows (at paras. 55-56): .… Under the Act [Class Proceedings Act, 1992], class proceedings may be brought if the criteria of s. 5 of the Act are satisfied.

Incontrast, under rule 10.01(1), there is no certification test and representative actions may be brought for six types of proceedings(including the

interpretation of instruments and the approval of an arrangement under the Variation of Trusts Act, R.S.O. 1990, c. V.1). In both class proceedings and also in proceedings under Rule 10, the court’s order on the merits will bind the class members represented. In class proceedings, but not proceedings under rule 10.01, a putative class member has an opportunity to opt-out. Under the Act andunder Rule 10, the court has the jurisdiction to approve settlements.

Pursuant to rule 10.03, the court may relieve a person from thebinding effect of an order approving a settlement; however, there is no comparable right under the Act, and settlements approved by thecourt are binding on class members without a right for them to be relieved from the binding effect of the court’s order. The utility of this comparison is that it reveals that representative proceedings in general involve a class member being bound to theoutcome notwithstanding that he or she does not fully participate as a party.

The comparison also reveals that in representativeproceedings under the Act, the Legislature intended that class members would not have the right to be relieved of the binding effect of asettlement approved by the court. The Legislature did not, as it did with representative actions under Rule 10, reserve a right for classmembers to be relieved of a binding settlement, and this suggests, in turn, that if a class member wishes to have the autonomy to accepthis or her own settlement, he or she must opt-out of the class proceeding. 48 See also Re Nortel Networks Corp. (2009), (ON SC), 53 C.B.R. (5th) 196 (Ont.

S.C.J.), and ReCanwest Global Communications Corp., 2009 CarswellOnt 9398 (WL) (S.C.J.), both cases where a Rule 10 representation order wassought and granted in the context of Companies’ Creditors Arrangement Act, R.S.C. 1985, c.

C-36, proceedings as opposed to proceedingunder class action legislation for reasons of cost and efficiency. 49 In sum, this wealth of authority from Ontario confirms that class proceedings and representation orders are alternativesto one another; it is possible that a particular action could be brought under either regime and in each case a procedural preferabilityanalysis will have to be conducted.

While the Class Proceedings Act, 1992, offers advantages with respect to notification procedures andopting-out, these rules may sometimes be “overkill” and Rule 10, with its more relaxed procedures, may be more appropriate (seeChippewas of Sarnia Band and Sutherland). Motion Judge’s Exercise of Discretion 50 The standard of review with respect to the question of preferability was discussed in this court’s decision in Soldier. Although, in that case, the defendant was resisting certification, the appeal was from the judge’s decision that a representation order wasthe preferable procedure in the circumstances.

On that point, I wrote that (at para. 3): The certification judge is entitled to substantial deference in the exercise of her discretion in matters of fact and mixed fact and law. Sheconsidered all the facts and gave sufficient weight to all the relevant considerations.

I see no palpable and overriding error in herconclusion that a class action is not the preferable procedure in this case and on these facts. …. 51 Again, this deferential standard of review is confirmed (at para. 66): I agree with the Crown that the certification judge’s decision on preferability is a discretionary decision that ought to be accordedsignificant deference.

As I indicated earlier, while the overall decision of the certification judge is entitled to deference, some courtshave pointed out that the decision as to preferable procedure is entitled to special deference because it involves a careful balancing ofcompeting interests. .… Again, as previously mentioned, an appellate court ought not to interfere with the exercise of that discretionwith respect to the issue of preferable procedure unless it is persuaded that the judge erred in principle or was clearly wrong. …. 52 In my opinion, a similarly deferential standard of review ought to be applied in the case at bar in respect of the exerciseof discretion by the motion judge that a representation order was the preferable procedure. 53 However, with respect to representation orders, the jurisprudence indicates that, in deciding whether to make arepresentation order under Rule 10, or its equivalent in other provinces, the courts will apply a balance of convenience test. 54 As Abrams & McGuinness explain (at para. 7.74):

55 The onus is on the party seeking a representation order to prove that the balance of convenience favours the granting ofthe order. In analyzing the balance of convenience, the judge should consider the inconvenience that would be experienced by eachparty if a representation order was or was not granted. 56 A thorough discussion of Rule 10 was undertaken in the case of Police Retirees of Ontario Inc. v. Ontario MunicipalEmployees’ Retirement Board (1997), (ON SC), 35 O.R. (3d) 177 (Gen. Div.), which involved a pension dispute.

Kiteley J. endorsed the following approach (at p. 183): These cases suggest that the test to be applied in considering a request for a representation order is not whether the individual membersof the group can be found or ascertained, but rather whether the balance of convenience favours the granting of a representation orderinstead of individual service upon each member of the group and individual participation in the proceedings. Such an

interpretation isconsistent with the legislative purpose behind this provision, which is designed to encourage an expeditious means of resolvingcontentious issues without the cost and expense associated with a Rule 12 order.

In analyzing the balance of convenience, I mustconsider the inconvenience which would be experienced by each party if the representation order were or were not granted. …. 57 Some of the factors that have been considered are: the vulnerability of the members of the group; their means (or lackthereof); any social benefit or efficiencies that might accrue from the granting of a representation order; and whether the members of thegroup have a sufficient commonality of interest(s) (see Nortel and Canwest).

A representation order may not be appropriate where theapplicant makes no attempt to describe the essential characteristics of the members of the proposed group or to limit the class beingrepresented to persons that have the same characteristics (see Police Retirees). The representative plaintiff ought to share a commonalityof interest with the proposed group (see Ryan v. Ontario (Municipal Employees Retirement Board) (2006), 29 C.P.C. (6th) 24 (Ont.S.C.J.)). 58 Depending on the facts of each case, it is the job of the court to choose the best vehicle for the litigation.

It is up to thediscretion of the judge to decide which procedure is preferable because it is less complicated, more efficient, quicker and cheaper, orbecause the nature of the cause of action asserted requires it. 59 The mechanisms of a class action, such as notice and opting-out, can be slow and costly and take years to resolve, butthey are used to ensure that a judgment on the common issues of law and fact are res judicata for all of the aggregated claims.

There are,in fact, many personal causes of action heard together in a mass joinder. 60 In the case at bar, a cause of action has already been aggregated, or already entrusted to an individual for the benefit ofothers. It involves a cause of action which is not “personal” to the plaintiff, but which, by its very nature, can only be asserted on acollective basis. See Jellema et al. v. American Bullion Minerals Ltd. et al., 2010 BCCA 495, 294 B.C.A.C. 261. 61 In this case, the motion judge who made the order decided the representation order would be more convenient.

Thisjudge had also been assigned as the trial judge for the class action and ultimately presided over the settlement proceedings, so he hadintimate knowledge of the underlying facts and proceedings. He had affidavit evidence in front of him at the motion, which was thesource of his evidentiary findings, as well as having just heard the submissions of counsel. He made a finding that no prejudice wouldresult to Fillmore as a result of proceeding by way of representation order.

I have not been persuaded otherwise upon appeal. 62 Given his long experience with these matters, the motion judge’s reasons for agreeing that a representation order wasmore convenient were brief. Nonetheless, the soundness of reasons is not measured by the number of words used. The reasons were tothe point and correct. He held that it was “necessary [and] desirable” for this lawsuit to proceed with a representation order pursuant toRule 10.01(1)(f). Not only was he entitled to exercise his discretion as he did, but I believe he made the correct decision.

Fillmore hasnot shown any error in this exercise of discretion. CONCLUSION 63 Both class actions and representation orders co-exist, and both have their own place and their own utility. They arecomplementary tools having the goal of promoting access to justice in the most efficient and cost-effective manner. The court mayselect the procedure which is most appropriate for the particular case and circumstances.

Indeed, in Sutherland, the Ontario court bothcertified a class action under the Class Proceedings Act, 1992, and also granted a representative order under Rule 10 of the Ontario rules,recognizing that some aspects of the case were more appropriate for class treatment, and other aspects of the case were better handled byway of a representation order. 64 Not all multi-party proceedings must proceed by way of class action. There are other tools in the judicial toolbox.

Such tools not only include a representation order under Rule 10, but also joinder under Rule 5 and consolidation under Rule 6, all ofwhich deal with multi-party proceedings. Class action legislation is only engaged if it is preferable and more efficient than thealternatives. Indeed, class action legislation was passed to enhance access to justice, judicial efficiency and behaviour modification, notto prolong litigation and increase cost. The Supreme Court of Canada has told us that “it is essential … that courts not take an overlyrestrictive approach” to class action legislation (Hollick v.

Toronto (City), 2001 SCC 68 at para. 15, [2001] 3 S.C.R. 158). 65 There are two final points I wish to make. The original statement of claim was issued in 2010. Fillmore brought amotion before the Master for an order compelling Bellan to amend his statement of claim to comply with Queen’s Bench Rule 25.02 andto amend his statement of claim by designating only one law firm as his lawyer, in conformance with the rules. Assisting counsel, rather

than primary counsel for Bellan, attended at this motion. That counsel was briefed only on the issues raised by the motion. Bellan’sstatement of claim was struck out with leave to refile. There was no mention either in the motion or the order as to the procedure bywhich the claim would be prosecuted. 66 However, at the hearing of the motion, a discussion took place and assisting counsel for Bellan indicated that the actionwould be proceeding by way of class action and he would make that clear if the claim had to be refiled. He did so without discussing thematter with lead counsel.

The disposition sheet stated, among other things, “s/c to be amended to comply with Rule 25.02 ... eliminaterepetition and specifically plead The Class Proceedings Act.” 67 The statement of claim was refiled in 2011 and is essentially identical to the original statement of claim except for thefact that the paragraphs are now in separate, renumbered paragraphs and the addition of para. 34, which states: This action is not a class action brought under the Class Proceedings Act. It is a representative action with the Plaintiff having beenappointed in a representative capacity pursuant to the Settlement Order. 68 Mr.

Lennox, lead counsel at the motion and on appeal, explained that he had not had an opportunity to discuss withassisting counsel the manner in which the action would be proceeding, and hence the erroneous representation to the Master. 69 Fillmore argued on the motion in front of the motion judge that, as a result of such comments by assisting counsel, thiscase must now proceed as a class action. The motion judge did not accede to that argument, and neither do I.

It is a technical, formalisticargument which is based on an unfortunate lack of communication between counsel for Bellan. 70 Given all that has transpired since that appearance in front of the Master, it cannot be said that Fillmore has been misledor prejudiced in any regard. In fact, it should be noted that the original statement of claim, which Fillmore successfully had struck by theMaster (with leave to refile), contained in para. 4 the statement that “Mr.

Bellan brings this action as a representative action on behalf ofthe shareholder class against the Defendants.” The refiled statement of claim contained the same words, numbered as para. 4.1, alongwith the addition of para. 34 mentioned above. 71 Second, the order made by the motion judge does not actually contain a clause appointing Bellan as the representativeplaintiff under Rule 10. On this point, see Payne v. Ontario (Minister of Energy, Science and Technology), [2002] O.J.

No. 1450 (QL)(S.C.J.), aff’d on other grounds (2002), (ON CA), 162 O.A.C. 48, where the court made an order nunc pro tunc toremedy the oversight. Since this matter was not raised upon appeal, at this juncture, I will say only that this procedural oversight shouldbe rectified in front of the motion judge. 72 I would dismiss the appeal with costs. J.A. I agree: J.A. I agree: J.A.