Cassano et al. v. Toronto-Dominion Bank

[Indexed as: Cassano v. Toronto-Dominion Bank]

87 O.R. (3d) 401

Court of Appeal for Ontario,

Winkler C.J.O., Rosenberg and Lang JJ.A.

November 14, 2007

Civil procedure -- Class proceedings -- Common issues -- Damages -- Plaintiffs bringing proposed class action claiming that defendant breached its contract with its credit cardholders by charging undisclosed and unauthorized fees in respect of foreign currency transactions -- Motion judge dismissing certification motion after finding that compensatory damages could not be determined on class-wide basis as determination of extent of each cardholder's loss would require proof on individual basis of how each cardholder would have used his credit card had he been aware of fees -- Motion judge erring in concluding that damages assessment would require individual assessment of cardholder behaviour -- Trial judge could find that it was appropriate to conduct aggregate assessment of monetary relief under s. 24 of Class Proceedings Act -- Class procedure preferable procedure even if aggregate assessment of damages was inappropriate -- Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 24.

The plaintiffs brought an action claiming that the defendant breached its contract with the holders of its Visa credit cards by charging undisclosed and unauthorized fees in respect of foreign currency transactions. A motion to certify the action as a class proceeding was dismissed. The motion judge held that certification would only be appropriate if compensatory damages could be determined on a class-wide basis, and that damages could not be assessed in that manner as the determination of the extent of each cardholder's loss would require proof on an individual basis of how each member of the class would have used his or her Visa card had he or she known of the fees that applied to foreign currency transactions. The Divisional Court upheld the motion judge's decision. The plaintiffs appealed.

Held, the appeal should be allowed.

The motion judge erred in concluding that the damages assessment flowing from the alleged breach of contract in this case would require an individual assessment of cardholder behaviour. In arriving at that conclusion, he relied on the approach to assessing damages that applies in cases where the defendant repudiates a contract that has alternative modes of performance. The governing principle in that type of case is that a defendant is entitled to have damages assessed on the basis that the defendant will perform the contract in the way that is most beneficial to himself and not in the way that is most beneficial to the plaintiff. That principle for assessing damages had no application to this case because the defendant did not have alternative modes of performing the contract. This was a case where the trial judge could find, based on a review of the evidence, that it was appropriate to conduct an aggregate assessment of monetary relief under s. 24 of the Class Proceedings Act, 1992. Alternatively, even if the trial judge were to conclude that an aggregate assessment of damages was inappropriate, a class proceeding was still the preferable procedure.

APPEAL from the order of the Divisional Court (Cunningham A.C.J.S.C.J., Smith and Cameron JJ.), [2006] O.J. No. 2930, 3 S.C.P.C. (6th) 84 (Div. Ct.), affirming the order of Cullity J., [2005] O.J. No. 845, [2005] O.T.C. 161 (S.C.J.), dismissing a motion to certify an action as a class proceeding under the Class Proceedings Act, 1992.

Cases referred to Chadha v. Bayer (2003), 2003 35843 (ON CA), 63 O.R. (3d) 22, [2003] O.J. No. 27, 31 B.L.R. (3d) 214, 23 C.L.R. (3d) 1, 31 C.P.C. (5th) 40, 223 D.L.R. (4th) 158 (C.A.), affg (2001), 2001 28369 (ON SCDC), 54 O.R. (3d) 520, [2001] O.J. No. 1844, 200 D.L.R. (4th) 309, 15 B.L.R. (3d) 177, 8 C.P.C. (5th) 138 (Div. Ct.) [Leave to appeal to S.C.C. refused [2003] S.C.C.A. No. 106]; [page402] Gilbert v. Canadian Imperial Bank of Commerce, [2004] O.J. No. 4260, [2004] O.T.C. 902, 3 C.P.C. (6th) 35, 134 A.C.W.S. (3d) 556 (S.C.J.); Markson v. MBNA Canada Bank (2007), 85 O.R. (3d) 321, [2007] O.J. No. 1684, 224 O.A.C. 71, 43 C.P.C. (6th) 10, 32 B.L.R.(4th) 273, 2007 ONCA 334 (C.A.), revg (2005), 2005 39888 (ON SCDC), 78 O.R. (3d) 39, [2005] O.J. No. 4625, 22 C.P.C. (6th) 221 (Div. Ct.), supp. reasons [2005] O.J. No. 5285 (Div. Ct.), affg (2004), 2004 6214 (ON SC), 71 O.R. (3d) 741, [2004] O.J. No. 3226, 48 B.L.R. (4th) 129 (S.C.J.), [Leave to appeal to S.C.C. refused [2007] S.C.C.A. No. 346], consd Hamilton v. Open Window Bakery Ltd., [2004] 1 S.C.R. 303, [2003] S.C.J. No. 72, 235 D.L.R. (4th) 193, 316 N.R. 265, 2004 SCC 9, 40 B.L.R. (3d) 1, varg (2002), 2002 41449 (ON CA), 58 O.R. (3d) 767, [2002] O.J. No. 1228 (C.A.); Withers v. General Theatre Corp., [1933] 2 K.B. 536, [1933] All E.R. Rep. 385 (C.A.), distd Other cases referred to Bank of America Canada v. Mutual Trust Co., [2002] 2 S.C.R. 601, [2002] S.C.J. No. 44, 211 D.L.R. (4th) 385, 287 N.R. 171, 2002 SCC 43; Blake v. Attorney General, [2001] 1 A.C. 268 (H.L.); Cloud v. Canada (Attorney General) (2007), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4924 (C.A.) [Leave to appeal to S.C.C. refused, [2007] S.C.C.A. 50]; Hickey-Button v. Loyalist College of Applied Arts & Technology, 2006 20079 (ON CA), [2006] O.J. No. 2393, 267 D.L.R. (4th) 601, 211 O.A.C. 301 (C.A.); Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, [2001] S.C.J. No. 67, 56 O.R. (3d) 214n, 205 D.L.R. (4th) 19, 277 N.R. 51, 24 M.P.L.R. (3d) 9, 2001 SCC 68, 13 C.P.C. (5th) 1; Kumar v. Mutual Life Assurance Co. of Canada, 2003 48334 (ON CA), [2003] O.J. No. 1160, 226 D.L.R. (4th) 112 (C.A.) Statutes referred to Class Proceedings Act, 1992, S.O. 1992, c. 6, ss. 5, 23-26 Criminal Code, R.S.C. 1985, c. C-46, s. 347 [as am.] Authorities referred to Branch, W.K., Class Actions in Canada (Vancouver: Western Legal Publications, 1996)

Harvey T. Strosberg, Q.C. and Paul J. Pape, for appellants. Lyndon A.J. Barnes, Laura K. Fric and Allan D. Coleman, for respondent.

The judgment of the court was delivered by

WINKLER C.J.O.: --

Introduction

[1] This appeal arises from the dismissal of a certification motion under the Class Proceedings Act, 1992, S.O. 1992, c. 6 ("CPA"). The [page403] underlying claim involves foreign currency transactions conducted with credit cards issued by the respondent (defendant), the Toronto-Dominion Bank ("TD"). The central claim of the appellants (plaintiffs) is that TD breached its contract with the holders of its Visa credit cards by charging undisclosed and unauthorized fees in respect of those foreign currency transactions. Specifically, the plaintiffs allege that there are three components to the fees that TD charged its Visa cardholders for foreign currency transactions during the putative class periods and that two of these, a "conversion fee" and an "issuer fee", were undisclosed and unauthorized under the terms of the relevant cardholder agreements.

[2] On March 9, 2005, the motion judge, Cullity J., dismissed the motion to certify the action as a class proceeding under the CPA. Based on the claim as pleaded by the plaintiffs, the motion judge held that certification would only be appropriate if compensatory damages could be determined on a class-wide basis. Finding that damages could not be assessed in that manner, the motion judge concluded that the common issues requirement under s. 5(1)(c) of the CPA could not be met because the common issues he could identify were insignificant in the context of each class member's claim as a whole. This in turn led him to conclude that the action did not meet the preferable procedure requirement under s. 5(1)(d) of the CPA. Accordingly, he dismissed the motion for certification. The plaintiffs' appeal to the Divisional Court was dismissed on July 10, 2006 by way of a brief endorsement.

[3] In my view, the motion judge's analysis of the common issues and preferable procedure criteria in this case reflects an error of law that requires intervention by this court. For the following reasons, I would allow the appeal, set aside the orders of the Divisional Court and the motion judge, and substitute an order granting the motion for certification.

The Facts

[4] The plaintiff, Dr. Paul Cassano, was a TD Visa cardholder. As with all other TD Visa customers, his card was issued pursuant to a standard cardholder agreement. On October 11, 1994, Dr. Cassano used his Visa card to pay for hotel charges in New York in the amount of US$563.36. On his TD Visa credit card statement, this amount was converted to CAN$766.62. The hotel mistakenly charged his card twice and so he was given a credit. However, instead of being credited in the amount of CAN$766.62, his credit card statement showed that he was credited with CAN$745.44 for the second mistaken charge. [page404]

[5] On July 12, 1997, Dr. Cassano commenced a putative class proceeding relating to the difference between charges and credits for foreign currency transactions. After some amendments to the statement of claim, including the addition of Dr. Benjamin Bordoff as a second plaintiff, the claim was refined and the plaintiffs now allege that TD's undisclosed practice of incorporating a "conversion fee" and an "issuer fee" in respect of every foreign currency transaction during the proposed class periods was unauthorized by the terms of the relevant standard cardholder agreements between TD and its cardholders. The amended claim was brought on behalf of a putative class of cardholders of both consumer and commercial credit cards. The plaintiffs seek judgment for the total amount of the unauthorized fees that TD collected.

[6] Foreign currency transactions are specifically addressed under the terms of the cardholder agreements in effect from time to time between TD and its cardholders. The claim brought by Dr. Cassano is based on the terms of the 1991 cardholder agreement ("Cardholder Agreement"). The pertinent provisions for the purposes of this appeal are as follows:

Signature on, retention or use of any charge card issued . . . will confirm agreement between the Cardholder and The Toronto-Dominion Bank (the "Bank") as follows:

CARDHOLDER RESPONSIBILITY

2. a) The Cardholder will pay to the Bank the Indebtedness, fees and all other charges in respect of the use of the Card . . .

ANNUAL FEE AND SERVICE FEES

5. The Cardholder shall pay the Bank . . . [an] . . . annual fee for the Account ... This annual fee is specified in the Disclosure Statement. The Cardholder shall also pay the Bank service fees for services provided by the Bank for the Account, the Card, or Twin Cheques, as shown in the Disclosure Statement or as notified to the Cardholder from time to time.

FOREIGN CURRENCY TRANSACTION

10. Foreign currency transactions are converted to Canadian dollars at the exchange rate determined by the Bank on the date when the Bank credits or debits each transaction to the Account. This rate may be different from the rate in effect on the date of the transaction.

AMENDMENT OF AGREEMENT

14. This Agreement and the information contained in the Disclosure Statement may be amended at any time by the Bank by giving notice in writing of [page405] the amendment to the Cardholder . . . Use of the Card . . . following notification of an amendment to this Agreement shall be deemed to be acceptance by the Cardholder of such amendment . . .

[7] It is common ground between the parties that there were three components to the TD foreign exchange rate:

(i) a "basic conversion rate" which was set daily by Visa International;

(ii) an additional one per cent "conversion fee"; and

(iii) an "issuer fee" of 0.4 per cent from 1987 to October 1994, 0.65 per cent from November 1994 to October 2002 and one per cent thereafter.

[8] The parties disagree over whether the reference in para. 10 of the Cardholder Agreement to the "exchange rate determined by the Bank" is sufficiently broad to encompass all three components. The plaintiffs contend that it is not and that the conversion and issuer fee components represent undisclosed, and therefore unauthorized, fees in breach of the Cardholder Agreement. TD conversely asserts that the terms of the Cardholder Agreement provide a broad discretion to determine the exchange rate to be applied to foreign currency transactions. Therefore, TD submits that there is no requirement for additional disclosure relating to the components making up the foreign exchange rate, with the result that there was no breach of contract during the putative class periods. In any event, TD claims that para. 5 of the Cardholder Agreement permits it to charge the conversion fee and issuer fee as "service fees".

[9] As of September 1, 2001 and June 1, 2003 respectively, TD's consumer and commercial cardholder agreements were amended to expressly include disclosure of the conversion fee and issuer fee as part of the currency exchange cost.

The Reasons of the Motion Judge

[10] At the certification hearing, the motion judge considered whether the requirements for certifying a class action under s. 5(1) of the CPA were satisfied. That provision states:

5(1) The court shall certify a class proceeding on a motion under section 2, 3 or 4 if,

(a) the pleadings or the notice of application discloses a cause of action;

(b) there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant; [page406]

(c) the claims or defences of the class members raise common issues;

(d) a class proceeding would be the preferable procedure for the resolution of the common issues; and

(e) there is a representative plaintiff or defendant who,

(i) would fairly and adequately represent the interests of the class,

(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class . . . , and

(iii) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.

[11] With respect to s. 5(1)(a), the motion judge had considerable, and understandable, difficulty in identifying the legal basis for the plaintiffs' claim. The original pleading asserted a claim based on unjust enrichment and a claim for an accounting. At the certification hearing, counsel for the plaintiffs relied only on the defendant's alleged breach of contract in charging unauthorized fees.

[12] The motion judge found that the claim -- read broadly and taken together with the provisions of the terms of the Cardholder Agreement and disclosure statements -- sounded in breach of contract, even though these words appeared nowhere in the pleading. At para. 32 of his reasons, the motion judge noted:

A court at trial might, however, think that the relevant question was whether there was an express or implied agreement that all fees charged would be disclosed. It is, in my opinion, clear from the amendments made to the statement of claim that the alleged failure to disclose the service fees charged on foreign currency transactions is of the essence of the claim that they were unauthorized.

(Emphasis added)

[13] Turning to the requirement under s. 5(1)(b) that there be an identifiable class, the motion judge concluded that the proposed class definition was acceptable for certification purposes. The proposed class is defined as:

All holders of:

(i) consumer TD Visa cards of any category and type up to September 1, 2001; and

(ii) commercial TD Visa cards of any category and type up to June 1, 2003 who incurred credits or debits on such cards as a result of foreign currency transactions.

At para. 43 of his judgment, the motion judge noted that the definition "has the required rational connection with the claims [page407] pleaded and the proposed common issues. It also employs objective criteria that, notwithstanding the size of the class, should enable class members to be identified, and to self-identify."

[14] With respect to the common issues requirement under s. 5(1)(c), the plaintiffs proposed the following seven common issues:

Issue 1 -- Did TD charge its cardholders an unauthorized fee or fees when converting the debits and credits incurred in a foreign currency to Canadian dollars? If so, when, why and what are the particulars?

Issue 2 -- If the answer to Question 1 is "Yes", must TD account for the unauthorized fees? If so, why and to whom?

Issue 3 -- Is TD liable in damages? If so, why and to whom?

Issue 4 -- Should the damages for the class be assessed in the aggregate? If so, why, in what amount and how should the damages be distributed?

Issue 5 -- Is TD liable to pay punitive damages? If so, why and to whom? Should the punitive damages be assessed in the aggregate? If so, why, in what amount and how should the punitive damages be distributed?

Issue 6 -- Should TD pay prejudgment and post-judgment interest? If so, should interest be simple [or] compound, at what rate(s), on what amount(s) and why and how should the interest be distributed?

Issue 7 -- Should TD pay the costs of administering and distributing any monetary judgment? If so, why and what amount should TD pay?

[15] The motion judge found only Issue 1 to be acceptable. He accepted this issue because the resolution of it depended on the interpretation of the documents provided by TD to cardholders, which could be determined on a class-wide basis. He rejected Issue 2 in light of the indication by the plaintiffs' counsel at the certification motion that their client did not seek an accounting of profits or restitution damages.

[16] The motion judge gave lengthy reasons, which are considered in detail below, for concluding that Issues 3 and 4 were not acceptable. He found that the acceptance of Issue 3 would serve no purpose unless a claim for general compensatory damages for breach of contract is included in a certification order. In the [page408] motion judge's opinion, the court's ability on a common issues trial to determine the amount of general compensatory damages depends on whether Issue 4 is acceptable.

[17] In considering Issue 4, the motion judge asked whether it was possible to make an aggregate assessment of the defendant's liability as contemplated by s. 24(1) of the CPA. This provision states:

24(1) The court may determine the aggregate or a part of a defendant's liability to class members and give judgment accordingly where,

(a) monetary relief is claimed on behalf of some or all class members;

(b) no questions of fact or law other than those relating to the assessment of monetary relief remain to be determined in order to establish the amount of the defendant's monetary liability; and

(c) the aggregate or a part of the defendant's liability to some or all class members can reasonably be determined without proof by individual class members.

[18] At para. 50 of his judgment, the motion judge relied on the decision of the Divisional Court and the majority of this court in Chadha v. Bayer Inc. (2001), 2001 28369 (ON SCDC), 54 O.R. (3d) 520, [2001] O.J. No. 1844 (Div. Ct.), affd (2003), 2003 35843 (ON CA), 63 O.R. (3d) 22, [2003] O.J. No. 27 (C.A.), leave to appeal to S.C.C. refused [2003] S.C.C.A. No. 106, for the proposition that "a question relating to an aggregate assessment should not be included if, at the certification stage, the court can determine that one or more of the three preconditions [in s. 24(1)] could not be satisfied even if the other common issues were decided in favour of the plaintiff at trial". The motion judge concluded that s. 24(1) (c) could not be satisfied because the determination of the extent of each cardholder's loss would require proof on an individual basis of how each member of the class would have used his or her Visa card had he or she known of the fees that applied to foreign currency transactions. The motion judge thus rejected Issue 4 on the basis that there were no means by which to determine the defendant's liability to any of the class members without proof on an individual basis.

[19] As for Issue 5, the motion judge found that there was the requisite minimum factual basis for including the issue of punitive damages in a certification order. However, he found that the determination of punitive damages required a consideration of compensatory damages, which he had rejected as a common issue. Ultimately, he concluded at para. 79 of his judgment that "[t]he effect of my refusal to include the claim for compensatory damages in the certification order is that neither liability for, nor the amount of, any such damages will be determined in these [page409] proceedings. In these circumstances, I do not see how the issue of punitive damages can properly be certified."

[20] With regard to the preferable procedure requirement in s. 5(1)(d), the motion judge concluded that the resolution of the single issue he had identified as being potentially suitable for certification -- whether there was a breach of contract -- would not advance the claims of the class members significantly for the reason that compensatory damages would have to be determined on an individual basis, and therefore, could not be managed efficiently on a class-wide basis.

[21] In view of his findings with respect to the common issues and the question of preferable procedure, the motion judge held that the action could not be certified as a class proceeding. Consequently, he found it unnecessary to address the requirements in s. 5(1)(e) of the CPA.

The Reasons of the Divisional Court

[22] A unanimous panel of the Divisional Court dismissed the plaintiffs' appeal. The court concluded that the motion judge made no palpable and overriding error in relation to his findings of fact, nor did he err on a question of law. In particular, the court held that the motion judge correctly described the cause of action and correctly analyzed the nature of the damages assessment that must flow from the breach of contract. In the view of that court at para. 5:

What then followed inexorably was the finding that each cardholder making up the class would have to be canvassed to ascertain whether he or she, in the face of disclosure of all the fees to be charged by the bank, would choose to use the VISA card for foreign exchange transactions, and only if the reply was in the negative, would compensation flow. Clearly that is an unmanageable prospect for class action status.

Analysis

[23] The motion judge is an experienced class action judge. His decision is entitled to substantial deference: see Markson v. MBNA Canada Bank (2007), 2007 ONCA 334, 85 O.R. (3d) 321, [2007] O.J. No. 1684 (C.A.), at para. 33, leave to appeal to S.C.C. refused [2007] S.C.C.A. No. 346. The intervention of this court should be limited to matters of general principle: see Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4924 (C.A.), at para. 39, leave to appeal to S.C.C. refused [2005] S.C.C.A. No. 50. However, legal errors by the motion judge on matters central to a proper application of s. 5 of the CPA displace the deference usually owed to the certification motion decision: see [page410] Hickey-Button v. Loyalist College of Applied Arts & Technology, 2006 20079 (ON CA), [2006] O.J. No. 2393, 267 D.L.R. (4th) 601 (C.A.), at para. 6.

[24] I agree with the motion judge's conclusion that the requirements of ss. 5(1)(a) and (b) of the CPA are satisfied in this case. However, for the reasons as set out below, I do not agree with his analysis of the common issues requirement or the preferable procedure requirement under ss. 5(1)(c) and (d).

(i) Common issues and the breach of contract claim under s. 5(1)(c)

[25] The motion judge held that Issue 1 raised an acceptable common issue of whether there was a breach of contract. He observed that the resolution of this question depended on the interpretation of the documents provided by TD to cardholders, which is a question that could be determined on a class-wide basis. I agree with the motion judge's conclusion that this common issue is acceptable.

(ii) Common issues and the assessment of damages under s. 5(1)(c)

(a) Whether the nature of the breach of contract requires an individual assessment of cardholder behaviour to quantify damages

[26] The motion judge engaged in a lengthy consideration of how the nature of the breach of contract in this case might impact on the manner in which damages would be calculated. In fairness to the motion judge's analysis of the damages issue, he was left to consider the matter in the context of the pleading as it stood at the outset of the certification motion, which was not altered to clearly reflect the contractual basis for the plaintiffs' claim.

[27] The motion judge requested further submissions from plaintiffs' counsel regarding whether they were seeking compensatory or restitutionary damages for breach of contract. Compensatory damages are the normal remedy in breach of contract cases and reflect the amount required to put the plaintiff, so far as money can do it, in the same situation as if the contract had been performed. In contrast, restitutionary damages are a discretionary remedy intended to disgorge the defendant of benefits received from his or her breach of contract. Restitutionary damages, which are measured by the defendant's gain, may be awarded in a case where the plaintiff has suffered no loss, or where the plaintiff's loss is less than [page411] the defendant's gain: see Blake v. Attorney General, [2001] 1 A.C. 268 (H.L.) and Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 S.C.R. 601, [2002] S.C.J. No. 44.

[28] Counsel for the plaintiffs took the position that it was immaterial whether compensatory or restitutionary damages were awarded for breach of contract in this case because the amounts would be the same, namely, the aggregate amount of the unauthorized fees collected by TD. In oral argument before the motion judge, plaintiffs' counsel indicated that he did not intend to seek an award of restitutionary damages because this was not a case where compensatory damages would be inadequate, which is a prerequisite for an award of restitutionary damages. The motion judge therefore proceeded on the basis that the remedies sought in the action did not include restitutionary damages.

[29] The motion judge then considered whether compensatory damages could be calculated on an aggregate basis. Counsel for the plaintiffs argued that compensatory damages could be determined on a class-wide basis because the measure of compensatory damages is simply the amount of the unauthorized fees collected by TD. In contrast, counsel for the defendant submitted that the measure of compensatory damages is the amount that would place cardholders in the same situation as if disclosure of the unauthorized fees had been made. In order to determine whether losses had been incurred, it would be necessary to make an individual inquiry of each cardholder as to whether they would have behaved any differently if the fees had been disclosed.

[30] The motion judge concluded that the defendant's position was correct. His reasoning is noted at paras. 55-57 of his judgment:

The agreement between the Bank and cardholders differs from other contractual arrangements in that the Bank has a right to determine what charges will be made without the agreement of the other contracting parties. They, however, are under no compulsion to use the cards. What they have lost if fees are not disclosed -- and if this is contractually required -- is the freedom to choose whether to use the cards and to pay the fees. The flaw in the reasoning of plaintiff's counsel is, in my opinion, that it ignores the elements of choice that are inherent in the alleged terms of the contract between the parties. It treats the contract as if it imposed an absolute prohibition on charging the impugned fees. If it had done this, the measure of damages might well have been the amount of the fees. But if -- as is the case on the interpretation of the plaintiff's pleading that I have accepted -- the claim is that the breach consisted of charging the fees without prior disclosure, then the damages for which the defendant would be liable must put the cardholders in the same situation as if disclosure had been made. As Scrutton L.J. stated in Withers v. General Theatre Corp., [1933] 2 K.B. 536 (C.A.), at pages 548-9: [page412]

Now where a defendant has alternative ways of performing a contract at his option, there is a well-settled rule as to how the damages for breach of such a contract are to be assessed. . . . The damages are assessed . . . on the basis that the defendant will perform the contract in a way most beneficial to himself and not in the way that is most beneficial to the plaintiff.

In short, as the Bank would have been entitled to charge additional fees if these had been disclosed, the value that cardholders would have received if disclosure had been made, and the measure of the loss suffered by each of them, was the value of the choice that each was deprived of -- the opportunity to decide whether to use a TD card and pay the additional fees for the purpose of foreign currency transactions, or to do otherwise. I accept the submission of defendant's counsel that this value could only be determined on an individual basis.

Cardholders whose behaviour would not have been affected by the non-disclosure suffered no loss. Some cardholders might have ceased to use the card if they had known that fees were included in the exchange rate. Some might have continued to use the card, but less frequently, and the behaviour of others may have been unaffected by the disclosure. It cannot even be assumed that any of the cardholders would have behaved any differently. Without an individual determination, there would be no way of knowing how many fell into each of these categories or the aggregate loss for those, if any, who would have refrained from using -- or limited their use of -- the card.

[31] In my view, the motion judge fell into error in concluding that the damages assessment flowing from the alleged breach of contract in this case would require an individual assessment of cardholder behaviour. In arriving at this conclusion, the motion judge relied on the approach to assessing damages that applies in cases where the defendant repudiates a contract that has alternative modes of performance. The governing principle in this type of case is that a defendant is entitled to have damages assessed on the basis that the defendant will perform the contract in the way that is most beneficial to himself and not in the way that is most beneficial to the plaintiff. That principle was first explained by Scrutton L.J. in Withers v. General Theatre Corp., [1933] 2 K.B. 536, [1933] All E.R. Rep. 385 (C.A.). It was adopted by the Supreme Court of Canada in Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, [2003] S.C.J. No. 72, at paras. 13-23 as a general principle for determining damages in cases where a defendant who wrongfully repudiated a contract had alternative modes of performing the contract.

[32] I am of the view that this principle for assessing damages has no application to the case at bar because the defendant did not have alternative modes of performing the contract in the sense contemplated in Withers and Open Window Bakery. In [page413] Withers, Scrutton L.J. gave helpful examples of when this principle for assessing damages would apply at p. 549 A.C.:

A. undertakes to sell to B. 800 to 1200 tons of a certain commodity; he does not supply B. with any commodity. On what basis are the damages to be fixed? They are fixed in this way. A. would perform his contract if he supplied 800 tons, and the damages must therefore be assessed on the basis that he has not supplied 800 tons, and not on the basis that he has not supplied 1200 tons, not on the basis that he has not supplied the average, 1000 tons, and not on the basis that he might reasonably be expected, whatever the contract was, to supply more than 800 tons. The damages are assessed. . . on the basis that the defendant will perform the contract in the way most beneficial to himself and not in the way that is most beneficial to the plaintiff.

And further:

[Consider] a lease for seven, fourteen or twenty-one years which is wrongfully determined at the end of five years by the landlord. On what basis are damages to be assessed? Answer: On the basis that the landlord can determine the lease in seven years, and therefore the plaintiff can only recover damages on the assumption that he had only two more years of the lease to run.

Evidently, in both these examples, the contract explicitly provided the defendant with different modes of performance.

[33] In Open Window Bakery, the plaintiff contracted to provide services to the defendant for 36 months. The contract provided the defendant with a right to end the contract after 18 months, upon giving three months' notice of the intent to terminate. The defendant wrongfully terminated the contract after 15 months. The trial judge awarded damages reflecting what would have happened if the defendant had not breached its contractual obligations and concluded that the defendant would not have terminated at the earliest opportunity. He awarded damages reflecting the plaintiff's claim for 36-months' salary, less a discount of 25 per cent, which reflected the possibility that the defendant might have validly exercised its right to terminate the contract with notice at some later point.

[34] The majority of this court, with reasons reported at (2002), 2002 41449 (ON CA), 58 O.R. (3d) 767, [2002] O.J. No. 1228 (C.A.) overturned the trial judge's award. Simmons J.A. for the majority held that, regardless of what the defendant might have done if the breach had not occurred, damages must be based on the minimum obligation of the defendant, that is, compliance with the early termination clause. She reduced the damages award accordingly.

[35] The Supreme Court of Canada unanimously upheld the majority's decision. Arbour J., writing for the court, stated at paras. 19-20: [page414]

The trial judge erred in this case in engaging in a tort- like inquiry as to what would have happened if OWB [the defendant] had not breached its contractual obligations to Hamilton [the plaintiff], and in concluding that OWB would not have terminated at the earliest opportunity.

The assessment of damages required only a determination of the minimum performance the plaintiff was entitled to under the contract, i.e., the performance which was least burdensome for the defendant. The plaintiff agreed at the outset that she was entitled to no more by contracting for a contractual term that could be truncated with notice entirely at the discretion of the defendant.

[36] In this case, the terms of the Cardholder Agreement do not provide alternative modes of performance that are in any way analogous to those considered in Withers and Open Window Bakery. The terms of the Cardholder Agreement do provide the defendant with an option of disclosing fees and amending the agreement. They do not, however, provide the defendant with an option of presenting cardholders with a hypothetical choice of asking what they would have done in the event that disclosure of certain fees had been made retroactively in accordance with the terms of the Cardholder Agreement. The motion judge fashioned such an option, and in so doing, he engaged in the tort-like approach to assessing damages that was adopted by the trial judge in Open Window Bakery and rejected by the majority of this court and by the Supreme Court of Canada. In other words, the motion judge asked what would have happened if the defendant had not breached its contractual obligations, rather than asking whether the defendant had alternative means of complying with its existing contractual obligations.

[37] Thus, I do not accept the motion judge's conclusion that a determination of compensatory damages in this case is an unmanageable prospect because of a need to assess how individual cardholders would have behaved had they known of the allegedly undisclosed fees. Reading his reasons in their entirety, it is clear that this error informed his ultimate conclusion that this action was not appropriate for certification as a class proceeding.

[38] In my view, this is a case where the common issues trial judge could find, based on a review of the evidence, that it is appropriate to conduct an aggregate assessment of monetary relief under s. 24 of the CPA, as was contemplated by this court in Markson, supra. Alternatively, even if the trial judge were to conclude that an aggregate assessment of damages is inappropriate, the nature of the claim asserted is such that the provisions of the CPA might well be utilized so as to make a class proceeding under the statute the "preferable procedure for the resolution of [page415] the class members' claims": see Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, [2001] S.C.J. No. 67, at para. 29.

(b) Why the trial judge could find that this is an appropriate case for assessing damages on an aggregate basis under s. 24 of the CPA

[39] This court recently considered the application of s. 24 of the CPA in Markson, supra. The issue in that case was whether a claim based on allegations that the defendant bank received interest on cash advances in violation of s. 347(1)(b) of the Criminal Code, R.S.C. 1985, c. C-46 was suitable for certification as a class action. The alleged criminal rate of interest was imposed by the bank where a cardholder engaged in a particular combination of borrowing and repayment practices.

[40] The motion judge, in reasons reported at (2004), 2004 6214 (ON SC), 71 O.R. (3d) 741, [2004] O.J. No. 3226 (S.C.J.), refused to certify the proceeding because he found that the plaintiff's claims for restitution and breach of contract did not raise common issues and because a class proceeding was not the preferable procedure for pursuing the common issues that remained. The motion judge was of the view that factual investigations would be required to identify those cardholders who had in fact paid interest at a criminal rate and the amount they paid in excess of that rate. He reasoned that it would be necessary to examine millions of transactions individually in order to make such findings and concluded that the expense of this exercise would far exceed the benefit to the individual class members. The majority of the Divisional Court upheld his decision refusing to certify the proposed class action in reasons reported at (2005), 2005 39888 (ON SCDC), 78 O.R. (3d) 39, [2005] O.J. No. 4625 (Div. Ct.).

[41] In overturning the Divisional Court and granting the certification motion, Rosenberg J.A., speaking for the court, disagreed that it would be necessary for the trial judge to determine the extent of liability in relation to each member of the class. He concluded that ss. 23 and 24 of the CPA -- provisions that the plaintiff relied on for the first time on appeal -- offered a solution to the common issues problem posed by the restitution and damages for breach of contract claims.

[42] In the present case, unlike in Markson, the determination of the common issue relating to the breach of contract question will determine liability to all members of the class, with the only possible remaining issue being that of damages. Despite this distinction, the comments in Markson related to the proper interpretation of s. 24 of the CPA are useful for [page416] present purposes. The provisions of s. 24 considered in Markson are as follows:

24(1) The court may determine the aggregate or a part of a defendant's liability to class members and give judgment accordingly where,

(a) monetary relief is claimed on behalf of some or all class members;

(b) no questions of fact or law other than those relating to the assessment of monetary relief remain to be determined in order to establish the amount of the defendant's monetary liability; and

(c) the aggregate or a part of the defendant's liability to some or all class members can reasonably be determined without proof by individual class members.

(2) The court may order that all or a part of an award under subsection (1) be applied so that some or all individual class members share in the award on an average or proportional basis.

(3) In deciding whether to make an order under subsection (2), the court shall consider whether it would be impractical or inefficient to identify the class members entitled to share in the award or to determine the exact shares that should be allocated to individual class members.

[43] At paras. 44-45, Rosenberg J.A. wrote the following about s. 24(1):

. . . I agree with Cullity J. in Vezina v. Loblaw Companies Ltd., [2005] O.J. No. 1974 at para. 25 (S.C.J.) that at the certification stage the plaintiff need only establish that "there is a reasonable likelihood that the preconditions in section 24(1) of the CPA would be satisfied and an aggregate assessment made if the plaintiffs are otherwise successful at a trial for common issues."

In this case, conditions (a) and (c) pose no difficulty. With respect to (a), monetary relief is claimed on behalf of the class. As to condition (c), statistical sampling -- as provided in s. 23 -- can be employed to determine the aggregate or part of the defendant's liability without proof of individual claims. Thus, this condition is also satisfied.

[44] As in Markson, in this case, condition (a) presents no difficulty. Monetary relief is claimed on behalf of the class.

[45] In my view, there is a "reasonable likelihood" that condition (c) would also be satisfied. For the reasons given above, establishing the extent of TD's liability does not require making individual inquiries of cardholders to determine what they would have done if they had known of the fees. Rather, the aggregate of TD's liability may reasonably be expected to be capable of proof by resort to TD's records of the amount of fee income it collected during the relevant time frame.

[46] To date, counsel for TD have refused to provide such a figure or confirm whether one exists. On an answer to a question taken under advisement on the cross-examination of the [page417] TD's representative, Mr. Geoffrey Butler, -- "[t]o advise of the fees earned on foreign exchange transactions by the bank during the period from 1968 going forward" -- counsel for TD stated that this amount is "[n]ot relevant. TD will not argue that the fees collected are less than the amount to prosecute the litigation." This non-response does not provide an evidentiary basis for concluding that the aggregate of the defendant's liability cannot be assessed without proof by individual class members.

[47] Condition (b) remains to be considered. In Markson, Rosenberg J.A. concluded that this condition is satisfied where potential liability can be established on a class-wide basis, but entitlement to monetary relief may depend on individual assessments. In the present case, if a finding were made that there had been a breach of contract in relation to the charging of the fees, there would be no "questions of fact or law other than those relating to the assessment of monetary relief" remaining to be determined. The finding that there had been a breach of contract would make all such fees improper. Accordingly, the only assessment necessary would be to quantify the amount of the fees charged. That falls squarely within the contemplation of [s.] 24(1)(b).

[48] Indeed, the only argument offered by TD on the motion below, and on this appeal, related not to the inapplicability of s. 24(1)(b) but rather to the costs associated with determining quantum by checking individual records. Mr. Butler deposed that the defendant retained copies of individual cardholder's statements from January 1985 to June 1998 on microfiche, which can be reviewed manually. Since June 1998, statement information is recorded both electronically and on microfiche. TD does not therefore argue that no relevant information is available, or that such inquiry would relate to anything other than the assessment of monetary relief, but rather that the costs associated with reviewing the records and determining the amounts charged to each individual cardholder would be significant. Mr. Butler has estimated that it would take 1,500 people about one year to identify and record the foreign exchange transactions on the cardholder statements that are available only on microfiche and that this would cost about $48,500,000.

[49] The economic argument advanced by TD ignores the fact that the damages calculation would only be necessary if TD is found to have breached the contract with its cardholders. Therefore, the essence of TD's argument is that the recovery phase of the litigation, subsequent to a finding of liability, will [page418] cause it to incur significant expense. It would hardly be sound policy to permit a defendant to retain a gain made from a breach of contract because the defendant estimates its costs of calculating the amount of the gain to be substantial. A principal purpose of the CPA is to facilitate recovery by plaintiffs in circumstances where otherwise meritorious claims are not economically viable to pursue. To give any effect to the economic argument advanced by TD here would be to pervert the policy underpinning the statute.

[50] Moreover, a similar economic argument was rejected by Rosenberg J.A. in Markson. His reasons at paras. 48-51 are instructive in this situation:

Section 24(3) . . . contemplates that an aggregate award will be appropriate notwithstanding that identifying the individual class members entitled to damages and determining the amount cannot be done except on a case-by-case basis, which may be impractical or inefficient. Condition (b) must be interpreted accordingly. In my view, condition (b) is satisfied where potential liability can be established on a class-wide basis, but entitlement to monetary relief may depend on individual assessments. Or, in the words of s. 24(1)(b), where the only questions of fact or law that remain to be determined concern assessment of monetary relief.

An example of such an award is found in Gilbert v. Canadian Imperial Bank of Commerce, [2004] O.J. No. 4260 (S.C.J.). In that case, on consent, Winkler J. certified a class proceeding and approved a settlement. The defendant CIBC was alleged to have charged undisclosed and unauthorized fees or charges in relation to foreign currency transactions on VISA accounts. The members of the class were defined as all persons in Canada issued one or more CIBC VISA cards on or before a certain date. There was apparently no attempt to identify those members of the class who had actually used their VISA cards to conduct transactions in foreign currency.

In Gilbert, CIBC agreed to pay $16.5 million to settle the claims. Slightly less than $14 million was to be paid directly to class members in amounts ranging from 72 cents to $14.32. As Winkler J. observed at para. 15 these amounts were arbitrary and "[did] not purport to compensate class members in terms of actual amounts owing nor [did] they compensate only class members with valid claims". It would have been too costly and time consuming to determine liability and amount on an individual basis. Moreover, like in this case, in Gilbert, records were not available for a significant portion of the period in question. But, as Winkler J. said, at para. 15"The CPA anticipates such a problem in s. 24(2) and (3) which provide that the court may order that an award be applied so that individual class members share in an award on an average or proportional basis and that the court shall consider whether it would be impractical or inefficient to identify class members entitled to share in the award or exact shares in making such a determination."

[51] So too in this case, the trial judge may find it possible to resort to ss. 24(2) and (3) of the CPA in order to fashion a [page419] remedial order that avoids potential costs and inefficiencies that might arise from an attempt to determine the quantum of damages on an individual basis. Further, the class here is more limited than in Gilbert v. Canadian Imperial Bank of Commerce, [2004] O.J. No. 4260, [2004] O.T.C. 902 (S.C.J.) or Markson in that it does not include all TD Visa cardholders, but only those who used their cards for foreign currency transactions. In this case, the effect of the restrictive definition of the class, combined with the common issue of breach of contract, is that if the common issues judge decides that the imposition of the allegedly undisclosed fees was a breach of contract, then the defendant's liability will extend to each member of the plaintiff class.

[52] Even in the event that a trial judge were not prepared to rely on ss. 24(2) and (3) to fashion a remedial order in this case, I note that the combined operation of ss. 24(4), (5) and (6) of the CPA authorize the court to require that class members submit individual claims in order to give effect to an aggregate award of damages. These provisions state:

24(4) When the court orders that all or a part of an award under subsection (1) be divided among individual class members, the court shall determine whether individual claims need to be made to give effect to the order.

(5) Where the court determines under subsection (4) that individual claims need to be made, the court shall specify procedures for determining the claims.

(6) In specifying procedures under subsection (5), the court shall minimize the burden on class members and, for the purpose, the court may authorize,

(a) the use of standardized proof of claim forms;

(b) the receipt of affidavit or other documentary evidence; and

(c) the auditing of claims on a sampling or other basis.

The court thus has at its disposal mechanisms for receiving individual claims in order to give effect to an aggregate damages award in a case where the quantification of damages turns on an assessment of documentary, rather than testimonial, evidence.

[53] For these reasons, in my view, the question of whether the damages can be assessed on an aggregate basis raises an acceptable common issue.

(iii) Preferable procedure and s. 5(1)(d)

[54] The motion judge's conclusion that a class proceeding is not the preferable procedure flowed from his interpretation of the contract and his finding that it would be necessary to conduct [page420] individual examinations of class members to ascertain their subjective reaction to the undisclosed fees, as well as how, if at all, their credit card use would have been affected by their knowledge of these fees. In view of my conclusion that individual assessments of cardholder behaviour are not required to determine the extent of liability in this case, a class proceeding is clearly the preferable procedure, particularly where an aggregate assessment of damages under s. 24 is possible.

[55] I am of the view, however, that even if the common issues judge were to determine that it is not appropriate to award aggregate damages in this case, a class action is still the preferable procedure in light of the governing principles that apply to the preferable procedure inquiry under s. 5(1) (d). These principles, which were articulated by the Supreme Court of Canada in Hollick, supra, were summarized in Markson, at para. 69:

(1) The preferability inquiry should be conducted through the lens of the three principal advantages of a class proceeding: judicial economy, access to justice and behaviour modification;

(2) "Preferable" is to be construed broadly and is meant to capture the two ideas of whether the class proceeding would be a fair, efficient and manageable method of advancing the claim and whether a class proceeding would be preferable to other procedures such as joinder, test cases, consolidation and any other means of resolving the dispute; and,

(3) The preferability determination must be made by looking at the common issues in context, meaning, the importance of the common issues must be taken into account in relation to the claims as a whole.

[56] Having regard to the first two of these principles, the court must consider judicial economy and the institutional capacity of the courts to efficiently address a matter of this potential size. It must also consider access to justice and the availability of any other remedial process to the putative class members. And finally, the court must consider the questions of general deterrence and accountability.

[57] It seems to me that this is a case much like Markson, where Rosenberg J.A., at para. 5, concluded that a class proceeding "is not only the preferable procedure, but also the only viable procedure for remedying the alleged wrong and calling the alleged wrongdoers to account". The relatively small amounts of money that are likely to be at stake in individual claims and the disproportionately high costs associated with litigating claims on an individual basis overwhelmingly favour a class proceeding: see Markson, at para. 72.

[58] The third principle requires that the preferability determination be made by looking at the common issues in relation to the [page421] claim as a whole. The claim as a whole includes any individual issues as well as the common issues. The scheme of the CPA, which is a procedural statute, provides for the resolution of common issues and any individual issues that remain. The statute also provides for the assessment of damages on an individual or aggregate basis, as well as a series of options for the distribution of individual and aggregate damages.

[59] In the present case, the resolution by the court of the common issue of whether there was a breach of contract is highly significant in relation to the other issues raised in this action. Both the defendant and the potential class members have an obvious interest in the determination of whether the fees charged for the foreign currency transactions were in breach of the relevant cardholder agreements.

[60] Further, although much of the focus of the argument on the motion below and the appeal in this court focused on the provisions of the CPA that permit an aggregate assessment of damages, it must be noted that the certification decision does not necessarily turn on whether damages can be assessed on an aggregate basis. Indeed, assessing damages on an aggregate basis is usually the exception to the general rule in class proceedings, in that it is akin to determining the whole of the litigation through the common issues trial. While the common issues trial is obviously an essential component of a class proceeding, it is not the whole of the proceeding. The statute is a powerful procedural mechanism that permits the court to take a variety of approaches in resolving the claims of class members.

[61] McLachlin C.J.C. in Hollick, supra, was alive to the fact that class actions typically call for a resolution of both common and individual issues. In addressing the preferable procedure requirement in s. 5(1)(d) of the CPA, the Chief Justice noted that the wording of s. 5(1)(d) calls for a determination as to whether "a class proceeding would be the preferable procedure for the resolution of the common issues". However, as she observed at para. 29, there will often be more to a class proceeding than the resolution of the common issues:

The Act itself, of course, requires only that a class action be the preferable procedure for "the resolution of the common issues" . . . and not that a class action be the preferable procedure for the resolution of the class members' claims. I would not place undue weight, however, on the fact that the Act uses the phrase "resolution of the common issues" rather than "resolution of class members' claims". As one commentator writes:

The [American] class action [rule] requires that the class action be the superior method to resolve the "controversy." The B.C. and Ontario Acts require that the class proceeding be the preferable procedure for the [page422] resolution of the "common issues" (as opposed to the entire controversy). [This] distinctio[n] can be seen as creating a lower threshold for certification in Ontario and B.C. than in the U.S. However, it is still important in B.C. and Ontario to assess the litigation as a whole, including the individual hearing stage, in order to determine whether the class action is the preferable means of resolving the common issues. In the abstract, common issues are always best resolved in a common proceeding. However, it is important to adopt a practical cost-benefit approach to this procedural issue, and to consider the impact of a class proceeding on class members, the defendants, and the court.

See Branch, supra, at para. 4.690 [W.K. Branch, Class Actions in Canada (Vancouver: Western Legal Publications, 1996)]. I would endorse that approach.

(Emphasis added)

[62] What is sometimes overlooked in the focus on the common issues at the certification stage is that the CPA includes provisions permitting the use of modified procedures for conducting individual assessments of damages. The thrust of these provisions is to ensure that the court has the means to conduct cost-effective and timely determinations of individual issues following the common issues trial. As a result, the fact that damages may not be amenable to aggregate assessment at the conclusion of a common issues trial is not fatal to certification of a class proceeding.

[63] Indeed, the resolution of individual issues is an essential element of many class proceedings and is crucial if there is to be an advancement of the goal of access to justice. Put another way, although the prospect of an aggregate assessment of damages is a factor in favour of certification, it is not a prerequisite. An action may well be certified as a class proceeding even in cases where individual assessments of damages in small amounts may be necessary. Absent this possibility, the purposes of the CPA would be seriously eroded.

[64] Therefore, what is called for in addressing the preferable procedure requirement is to look not just at the common issues trial, but at the other procedural options for conducting the class action litigation pursuant to the CPA. In this regard, I note that s. 25 of the CPA confers broad jurisdiction on the common issues trial judge to fashion procedures to be followed where, among other things, damages cannot be assessed in the aggregate. This section deals specifically with individual participation in a class proceeding following a favourable determination on the common issues. Under its various subsections, the common issues trial judge has, inter alia, the authority to: direct a further trial (s. 25(1)(a)); appoint "one or more persons [page423] to conduct a reference" (s. 25(1)(b)); and give directions on the procedures to be followed (s. 25(2)). The broad jurisdiction of the common issues judge is amplified by s. 25(3), which provides that:

25(3) In giving directions under [s. 25(2)], the court shall choose the least expensive and most expeditious method of determining the issues that is consistent with justice to class members and the parties, and in so doing, the court may,

(a) dispense with any procedural step that it considers unnecessary; and

(b) authorize any special procedural steps, including steps relating to discovery, and any special rules, including rules relating to admission of evidence and means of proof, that it considers appropriate.

[65] In the case at bar, the key issue raised by the plaintiffs' claim is whether there was a breach of contract on the part of TD. If the trial judge finds that there was no breach, the litigation will be concluded. On the other hand, if TD is found to have breached its contract with its cardholders, the trial judge may determine that damages can be assessed either in the aggregate or on an individual basis.

[66] If the individual approach to assessing damages is deemed to be appropriate, the assessment should still be straightforward and cost-effective. Given my rejection of the need for extensive inquiries of each cardholder as contemplated by the motion judge, in the event that there is a finding favourable to the class members on the breach of contract issue, all that remains is a relatively straightforward accounting exercise that can be accomplished either by the class members providing their credit card statements or by the defendant producing its records to show the amount of any charges and the individuals to whom any amounts owing should be paid.

[67] The CPA also provides a range of options for distributing amounts awarded under ss. 24 or 25. For example, s. 26(2)(a) permits the court to require the defendant to distribute monetary relief directly to class members "by any means authorized by the court, including abatement and credit". I draw particular attention to s. 26(3), which states:

26(3) In deciding whether to make an order under clause (2) (a), the court shall consider whether distribution by the defendant is the most practical way of distributing the award for any reason, including the fact that the amount of monetary relief to which each class member is entitled can be determined from the records of the defendant.

(Emphasis added) [page424]

[68] Evidently, the CPA provides a procedural mechanism on which the trial judge could rely to distribute amounts awarded under either s. 24 or s. 25. Thus, in my view, the preferable procedure requirement is satisfied in this case regardless of whether the assessment and distribution of damages, if necessary, are to be conducted on an aggregate or individual basis.

(iv) Representative plaintiff and litigation plan requirement under s. 5(1)(e)

[69] As for the remaining certification requirements in s. 5(1)(e), there was nothing before this court to indicate that the adequacy of the proposed representative plaintiffs or their litigation plan was being seriously challenged. I would not expect that there will be any serious issue relating to s. 5(1) (e) of the CPA, but to comport with the statute, the requirements found in this provision must be addressed in the certification order.

(v) Recasting of the common issues

[70] For the foregoing reasons, it is my view that the action is appropriate for certification as a class proceeding. However, the common issues as framed by the plaintiffs must be recast: see Kumar v. Mutual Life Assurance Co. of Canada, 2003 48334 (ON CA), [2003] O.J. No. 1160, 226 D.L.R. (4th) 112 (C.A.), at paras. 30-34.

[71] There was some discussion during argument as to whether it was appropriate to refer to possible defences among the list of common issues. In my view, it is generally only appropriate to include such defences as common issues when they rise to the level of making a subclass necessary under s. 5(2) of the CPA. Otherwise, setting out defences as common issues has the inherent risk of compromising the defendant's position at the common issues trial. Common issues are not intended to supplant pleadings. Moreover, the defendant at the common issues trial will unquestionably raise the defences that are also common by way of response to the allegations contained in the common issues.

[72] Accordingly, I would frame the common issues as follows:

Issue 1 -- Was TD in breach of the standard Cardholder Agreement by charging cardholders the conversion fee and issuer fee in respect of foreign currency transactions during the class period?

Issue 2 -- If so, are there compensatory damages? [page425]

Issue 3 -- Can the amount of compensatory damages, if any, be determined on an aggregate basis? If so, what is the amount of damages and how should they be distributed?

Issue 4 -- Is TD liable to pay punitive damages? Should the punitive damages be assessed in the aggregate? If so, in what amount and how should punitive damages be distributed?

Issue 5 -- If questions 1-3 are answered in the affirmative, should TD pay prejudgment and post-judgment interest? If so, in what amounts?

Issue 6 -- Should TD pay the costs of administering and distributing any monetary judgment? If so why and in what amount?

Conclusion

[73] I would allow the appeal, set aside the orders of the Divisional Court and the motion judge, and substitute an order granting the motion for certification on terms that are consistent with these reasons.

[74] If counsel are unable to agree upon costs, they may file brief written submissions within 30 days.

Appeal allowed.