Mont-Bleu Ford Inc. et al. v. Ford Motor Company of Canada, Limited [Indexed as: Mont-Bleu Ford Inc. v. Ford Motor Co. of Canada]

48 O.R. (3d) 753

[2000] O.J. No. 1815

Court File No. 00-DV-420

Ontario Superior Court of Justice

Divisional Court

O'Leary, Southey and Matlow JJ.

May 18, 2000

Civil procedure -- Class proceedings -- Certification -- Preferable procedure -- Motions judge erring in refusing to certify class proceeding on grounds that application under rule 14.05(3)(d) would be preferable procedure to class proceeding -- Class Proceedings Act, 1992, S.O. 1992, c. 6.

In 1999, the defendant Ford Motor Company of Canada Limited changed the way in which it marketed vehicles in Canada. Vehicles that were previously sold exclusively through Ford dealers could now also be sold by Mercury and Lincoln dealers, which retained their exclusive rights to sell Mercury and Lincoln brand vehicles. The plaintiffs, who were Ford brand dealerships, claimed that by reason of the change and pursuant to their Dealer Sales and Service Agreement with Ford, the former Mercury and Lincoln dealerships had become "additional dealers" of Ford brand vehicles. However, under their agreements with Ford, for Mercury dealerships within 15 kilometres of an existing Ford dealership, the change to become an "additional dealer" required a market study showing the change to be necessary. It was admitted that no market study had been conducted. The plaintiffs in an intended class proceeding under the Class Proceedings Act, 1992 sought declarations that Ford had breached its contract with each of the plaintiffs and with each Ford dealer within 15 kilometres of a Mercury dealership. No damages were sought. On the motion for certification, the motions judge stated that the plaintiffs had satisfied all requirements for certification except for the requirement set out is s. 5(d) of the Act, namely, that "a class proceeding would be the preferable procedure for the resolution of the common issues". Having regard to the objectives of judicial economy, access to justice and the modification of the behaviour of the wrongdoer, he concluded that a preferable procedure would be by application under rule 14.03(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The plaintiffs appealed.

Held, the appeal should be allowed.

The issue on the appeal was whether the motions judge was entitled to conclude that an application under rule 14.05(3)(d) would be preferable to a class proceeding for the resolution of the common issues because it would likely lead to greater judicial economy. The answer to this question was negative. First, it appeared that an application under rule 14.05(3)(d) would inevitably lead to a trial with no significant saving from a trial in a class action. Second, a trial of an issue under rule 14.05(3)(d), unlike a class proceeding, would not settle the issues common to the class, but would settle the issue only for the four plaintiffs since Ford made it clear that it would not make any commitment to be bound by the result of the rule 14.05(3)(d) judgment with respect to other members of the proposed class. Only a class proceeding would bind Ford and avoid multiplicity of proceedings and the associated risk of inconsistent results. Finally, the Class Proceedings Act 1992 does not contemplate that members of a class should be forced to stand by for several years watching an action that will not settle their common issues wind its way through the courts before they can exert their rights to a class action. Accordingly, the appeal should be allowed.

APPEAL from an order dismissing an application for certification under the Class Proceedings Act, 1992, S.O. 1992, c. 6.

Cases referred to Bywater v. Toronto Transit Commission (1998), 27 C.P.C. (4th) 172 (Ont. Gen. Div.) [supp. reasons (1999), 30 C.P.C. (4th) 131 (Ont. Gen. Div.)]

Statutes referred to Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5

Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 14.05(3) (d)

Counsel: David W. Scott, Q.C., Peter K. Doody and Lawrence A. Elliot, for plaintiffs/appellants. Bonnie A. Tough and Hugh M. DesBrisay, for defendant/respondent.

The judgment of the court was delivered by

[1] O'LEARY J.: -- Mont-Bleu Ford Inc., Ottawa Motor Sales (1987) Limited, Thorncrest Sherway Inc. and Venture Ford Sales Limited appeal from the refusal by the motions court judge to certify a class action under the Class Proceedings Act, 1992, S.O. 1992, c. 6.

[2] The factual background of this matter is set out at pp. 2-3 in the reasons of the motions court judge from which I quote:

In 1999, the Defendant, Ford Motor Company of Canada Limited ("Ford"), made a fundamental change in the way in which it marketed cars and trucks in Canada. Before this change, Ford marketed, in urban areas, one distinct brand of cars, the Ford line, exclusively (except for one model) through one group of dealers (the "Ford Dealers"). Two other brands, the Mercury and Lincoln lines, were marketed through a separate group of dealers (the "Lincoln and Mercury Dealers"). Ford has now decided to eliminate some lines of cars, and sell one group of cars through both groups of dealers, while allowing the former Lincoln and Mercury Dealers to continue to have exclusive rights to sell vehicles with the Lincoln brand.

Cars which had previously only been sold by Ford Dealers -- the Taurus, the Crown Victoria, the Mustang, and the Thunderbird (when it is reintroduced to the market) -- were now to be sold by both Ford and Mercury Dealers.

The Plaintiffs claim that this change made the former Mercury Dealers "additional dealers" in those "vehicles" -- the Taurus, Crown Victoria, Mustang and Thunderbird -- and that, pursuant to the Dealer Sales and Service Agreement ["D.S.S.A."], which each dealer enters into with Ford, such a change required a market study showing it to be necessary before that contract allowed Ford to appoint such "additional dealers" within 15 kilometres of an existing Ford dealership. Ford has admitted that no such market study was conducted.

This action seeks declarations that in making this change, Ford breached its contract with each of the Plaintiffs and with each Ford dealer within 15 kilometres of a Mercury dealership. No damages are sought.

[3] Section 5 of the Class Proceedings Act provides:

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;

(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 of notifying class members of the proceeding; and

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

[4] On the motion for certification Ford Motor Company of Canada Limited conceded that the statement of claim disclosed a cause of action and that there is an identifiable class of two or more persons that would meet the requirements for membership in the proposed class. The motions judge found that the claims of the class members raised common issues and that there are representative plaintiffs that fulfill the requirements of s. 5(e).

[5] Accordingly, the plaintiffs had established all of the requirements for certification except that set out in s. 5(d), namely, that "a class proceeding would be the preferable procedure for the resolution of the common issues".

[6] In dealing with s. 5(d) the motions judge stated:

The test as to whether a class proceeding is a preferable procedure must include consideration of three objectives of the Act, namely judicial economy, access to justice and the modification of the behaviour of the wrongdoer: Buffet v. Ontario (Attorney General) (1999), 1998 14707 (ON SC), 42 O.R. (3d) 53 and Carom v. Bre-X Minerals Ltd. (1999), 1999 14794 (ON SCDC), 44 O.R. (3d) 173.

A class proceeding is a very expensive way of asserting a claim when it involves, as in this case, giving notice of certification to some 165 Ford dealers in Canada who would fall within the class as defined by the plaintiffs.

The cause of action in these proceedings is extremely narrow in that it seeks purely declaratory relief concerning the interpretation of the D.S.S.A. contract with the defendant Ford.

I find that a preferable procedure and a more efficient one would be by way of application to this court under 14.05(3)(d) of the Rules of Civil Procedure. By proceeding in such a way the Court could determine the rights that depend on the interpretation of the D.S.S.A. contract in a timely fashion and this would save the enormous costs of a class proceeding. There is no point in pursuing a complicated procedure for such a simple matter.

I find that the decision of this court following a simple application would go a long way in resolving the issues and since according to the D.S.S.A. the contract is to be interpreted in accordance with the law of Ontario, it is possible that all matters would be resolved at that stage and there would be no risk of inconsistent finding by a court in another jurisdiction.

I also find that the members of the proposed class are economically advantaged and sophisticated business people who are able to assert their right, either alone or in combination completely independently of a class proceeding as stated by Mr. D.E. Bedard the principal shareholder of the Plaintiff Thorncrest Sherway Inc. when he said in the cross-examination on his affidavit that he could have sued the Defendant Ford on his own without a class action and there was no reason that he and any interested dealers could not have gotten together and sued the Defendant Ford without a class action. A refusal to certify the application would not mount to a denial of access to justice for those persons in the proposed class.

With respect to the modification of the behaviour of the alleged wrongdoer, this can be achieved if the plaintiffs are successful in a simple application to this court under rule 14.05(3)(d) of the Rules of Civil Procedure.

[7] In my respectful view, the fact that the named plaintiffs would not be denied access to justice if a class action were not certified and that an application to the court under rule 14.05(3)(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 can accomplish a modification of Ford's conduct if it be wrongful, just as would a class action, is no reason to conclude that such an application would be preferable to a class action.

[8] The issue for the court on this appeal is whether the motions judge was entitled to conclude that an application under rule 14.05(3)(d) would be preferable to a class proceeding for the resolution of the common issues because it would likely lead to greater judicial economy.

[9] To begin with, it is certain from the submissions of all parties that if an application were to be made under rule 14.05(3)(d) it would inevitably lead to the trial of an issue. A trial of an issue would be necessary because of several of the allegations made by the plaintiffs, including the allegation that the D.S.S.A. is an adhesion contract, presented to each dealer on a "take it or leave it" basis such that, to the extent the contract is ambiguous, the doctrine of contra proferentem applies. Ford denies this and a witness for Ford has sworn that he is "not aware of any agreement having been presented to dealers on a 'take it or leave it' basis". An application under rule 14.05(3)(d) would not then result in significantly less time spent at trial than if a class action were to be certified.

[10] The problem with the trial of an issue under rule 14.05(3)(d) is that it would not settle the issues common to the class. It must be remembered that by virtue of s. 5(d) of the Class Proceedings Act the court must decide whether "a class proceeding would be the preferable procedure for the resolution of the common issues" (emphasis added).

[11] If a class proceeding were to be certified it would resolve the common issues. If there is another procedure for doing so, that method must also be considered by the judge hearing the certification motion in order that he may determine which procedure is the preferable procedure for the resolution of the common issues.

[12] If the parties were willing to and able to bind themselves and the members of the proposed class in such a way that the result of a test case would determine the common issues between Ford and all members of the class, then it might well be that an application under rule 14.05(3)(d) would be the preferable procedure for the resolution of the common issues. That, however, cannot be achieved.

[13] The issue common to all proposed class members is whether the plaintiffs are entitled to a declaration that Ford has breached the D.S.S.A. by allowing Lincoln Mercury dealers to sell cars formerly sold only by Ford dealers within 15 kilometres of a Ford dealer without a market study showing this to be necessary.

[14] It is certain that a rule 14.05(3)(d) application would not settle that issue for the members of the class. It would settle it only for the four plaintiffs.

[15] Ford made it clear to us that it would not make any commitment to be bound by the results of a rule 14.05(3)(d) application with respect to other members of the proposed class. Rather, Ford stated that any decision by it whether to abide by the result of a rule 14.05(3)(d) application would depend on the evidence given on the trial of the issue on such application and the extent to which that evidence seems to be the same as the evidence likely to be presented by any class member in regard to his dispute with Ford. That would leave it open to Ford to refuse to be bound by the result of a rule 14.05(3)(d) application in dealing with other members of the class. Therefore, if a class proceeding is not certified, each class member will still have to bring his own action.

[16] Apart from the refusal by Ford to be bound by the result of a rule 14.05(3)(d) application, there seems to be no way that Ford and the plaintiffs can confer benefits or obligations on an uncertified class. Only a class proceeding will bind the class and Ford and avoid multiplicity of proceedings and the associated risk of inconsistent results.

[17] The suggestion by the motions judge that a rule 14.05(3) (d) application "could go a long way in resolving the issues" and "it is possible that all matters would be resolved at that stage", is not unlike the situation faced by Winkler J. in Bywater v. Toronto Transit Commission (1998), 27 C.P.C. (4th) 172 (Ont. Gen. Div.) at p. 177:

Here, the defendant admits liability for the cause of the fire. This admission, it contends, eliminates the common issue of liability. Since this, it asserts, is the only common issue, the certification motion must fail.

I cannot accede to this submission. This is not to in any way detract from the commendable and timely admission of fault by the defendant. However, an admission of liability in the air does not advance the litigation or bind the defendant in respect of the members of the proposed class. Without a certification order from this court no public statement by the defendant, and no admission in its defence to the nominal plaintiff, binds the defendant in respect of the members of the proposed class. A class proceeding by its very nature requires a certification order for the proposed class members to become parties to the proceeding. If the proposed class members are not parties to the proceedings, the admission of liability, as it relates to them, is no more than a bare promise.

The statement by the motions court judge quoted in this paragraph will be cold comfort to members of the class if a rule 14.05(3)(d) motion is brought but Ford refuses to be bound by it.

[18] In any event it is obvious that a rule 14.05(3)(d) application would not resolve the common issues. The best that can be said for it is that it might be used as a tool by members of the class in dealing with Ford about their common issues. That is not enough to permit a court to find that it, rather than a class proceeding, is "the preferable procedure for the resolution of the common issues" since it would not in fact resolve them.

[19] By way of support for the motions court judge's conclusion that a rule 14.05(3)(d) application would be preferable to a class action, Ford submitted that there is no evidence that any member of the proposed class, other than the four named plaintiffs, have any desire to bring an action against Ford. The implication raised by this submission is that a rule 14.05(3)(d) application by the four plaintiffs would settle the common issues for they are the only ones interested in suing Ford. Ford was unable to point to any evidence that confirmed that submission. What is clear is that the motions judge made no such finding. Indeed it is implicit in his reasons that there are others besides the four named plaintiffs who have such claims and that a rule 14.05(3)(d) application might in his view lead to a resolution of them.

[20] Finally, the Class Proceedings Act does not contemplate that members of a class should be forced to stand by for several years watching an action that will not settle their common issues wind its way through the courts before they can exert their rights to a class action.

[21] I would allow the appeal and remit the matter to the motions judge to be completed by him in accordance with these reasons. I would request counsel to make their written submissions as to costs within 30 days of the release of these reasons.

Appeal allowed.