Chadha et al. v. Bayer Inc. et al. [Indexed as: Chadha v. Bayer Inc.]

54 O.R. (3d) 520

[2001] O.J. No. 1844

Docket No. 459/99

Ontario Superior Court of Justice

Divisional Court

O'Driscoll, Somers and Thomson JJ.A.

May 14, 2001

Civil procedure -- Class proceedings -- Certification -- Preferable procedure -- Plaintiffs alleging that defendants engaged in conspiracy to fix price of iron oxide and that they suffered damages as result of this conspiracy as ultimate purchasers of buildings constructed with materials that included iron oxide -- Application judge erring in certifying action as class action -- Plaintiffs had to establish that any increase in price of iron oxide resulting from alleged conspiracy was passed on to them through chain of distribution -- That issue of liability could not be determined on classwide basis -- Class proceeding would be unmanageable and would not further objectives of Class Proceedings Act -- Class Proceedings Act, 1992, S.O. 1992, c. 6.

The plaintiffs alleged that from 1984 to 1992, the defendants and N Co. held between 90 per cent and 100 per cent of the Canadian market for iron oxide, a substance used to colour certain building materials, and entered into a price-fixing agreement in 1985 that had the effect of increasing the price of iron oxide. The plaintiffs alleged that this agreement amounted to a conspiracy to unduly prevent or lessen competition within the meaning of s. 45(1) (c) of the Competition Act, R.S.C. 1985, c. C-44 and that, as the ultimate owners of buildings containing building products that contained iron oxide, the plaintiffs had suffered damages by virtue of the increased cost of the iron oxide attributable to the alleged price-fixing conspiracy. The plaintiffs estimated that the alleged conspiracy affected over one million Canadians. They brought an action against the defendants for damages, and applied to have the action certified as a class proceeding. The application was allowed. The application judge defined the class as "All homeowners or other end users in Canada who have suffered loss or damages as a result of the Defendants' agreement to wrongfully increase or maintain the price of iron oxide and black pigment and otherwise unduly lessen competition, and in general restrict and inhibit competition, in the pigment market; in particular, all homeowners or other end users of bricks, interlocking or other construction products containing iron oxide pigment or other black pigment manufactured or distributed by [the defendants and N Co.] or where applicable, their corporate predecessors, between 1985 and 1992". He defined the common issue as: "Are the defendants liable to the members of the Plaintiff class for conspiracy to fix the price of iron oxide, and if so, what is the appropriate measure of damages?" The defendants appealed.

Held, the appeal should be allowed.

Per Somers J. (Thomson J. concurring): The Class Proceedings Act, 1992 does not require that the trial of all of the common issues resolve all matters at issue in the litigation or even all issues respecting liability. Nor does the Act require that common issues predominate over individual issues. However, this does not mean that one need only consider the proposed common issues when determining whether the "preferable procedure" criterion in s. 5(1)(d) of the Act is met. The following factors should be considered when applying s. 5(1)(d) of the Act: the nature of the proposed common issue(s); the individual issues which would remain after determination of the common issue(s); the factors listed in s. 6 of the Act; the complexity and manageability of the proposed action as a whole; alternative procedures for dealing with the claims asserted; the extent to which certification furthers the objectives underlying the Act; and the rights of the parties.

The Act is solely procedural and does not create any new causes of action. Therefore, the plaintiffs have a duty to establish on balance that they suffered loss or injury caused by the actions of the defendants. If they are unable to do so, they are not entitled to compensation. There is no practical mechanism to determine whether the plaintiffs were economically injured on a classwide basis. For the plaintiffs to establish such economic injury, they would have to show that at each sale throughout the chain of distribution, each seller passed on to each subsequent purchaser all or part of the alleged overcharge. The plaintiffs face insurmountable problems of proof with respect to the "pass on" issue given the large number of parties in the chain of distribution and the multitude of variables affecting the end purchase price of a building. Assuming that the plaintiffs could establish that the defendants engaged in a conspiracy that increased the price of iron oxide, they would still have to establish on balance that this price increase was passed on to them. The plaintiffs were unable to do this on a classwide basis. Section 24 of the Act, dealing with the aggregate assessment of monetary relief, cannot resolve these problems of proof since damages are only assessed once liability has been established. Nor could statistical evidence adduced by experts resolve the problems of proof present in this case. Section 23 of the Act deals with the admissibility and use of statistical evidence for the purposes of determining issues relating to the amount or distribution of a monetary award under the Act. It does not render otherwise inadmissible statistical evidence admissible for other purposes, such as determining liability. This is not the type of case in which the "pass on" problem can be resolved on a classwide basis using economic formulae.

The only common issues which could be dealt with by means of a class proceeding are whether the defendants conspired, in law and in fact, to fix the price of iron oxide; the duration and extent of this alleged conspiracy and the effect of this alleged conspiracy on the price of iron oxide pigment. Even if the plaintiffs succeeded in establishing the existence of a conspiracy which resulted in an increase in the price of iron oxide, this would not advance the litigation in a legally material way. Rather, such a resolution would only signal the beginning of the liability inquiry. Each plaintiff would still be required to establish, on an individual basis, that he or she suffered loss or injury that was caused by the acts of the defendants. The defendants would only be liable to the plaintiffs if the latter succeeded in proving that the artificially inflated price of iron oxide was passed on to them through the various links in the chain of distribution. This "pass on" issue cannot be resolved on a classwide basis because each claim involves different intermediaries and factors.

Given that certifying the action as a class proceeding would not move the litigation forward, other than in a theoretical sense, certification would not further the goal of judicial inquiry.

The proposed class action is unmanageable. The action would become a "monster of complexity" and cost. It would inevitably break down into a long series of individual trials dealing with many complex issues and parties.

Certifying the action as a class proceeding would also undermine judicial efficiency in that certifying a class of indirect or end purchasers while excluding parties in the chain of distribution exposes the defendants to the possibility of subsequent litigation on the same issues with substantial numbers of other parties and the possibility of either inconsistent results or judgments awarding the same damages to different parties.

The fact that certification of this action would primarily serve the goal of behaviour modification also militates against certification. The Competition Bureau is responsible for the administration and enforcement of the very provisions of the Competition Act which the plaintiffs allege the defendants violated.

The application judge erred in defining the common issue as he did. Liability could not be a common issue in this case because of the myriad of individual issues raised by the "pass on" problem. The plaintiffs were unable to establish loss and causation, and therefore liability, on a classwide basis.

The application judge erred in approving a "circular" class definition which defined the class in terms that depended upon the merits of the individual claims. The class definition was flawed because it referred to those "who have suffered loss or damage" as a result of the defendants' conduct.

The application judge applied ss. 24, 25 and 26 of the Act incorrectly. The plaintiffs could not avail themselves of s. 24 of the Act because the requirements in s. 24(b) and (c) were not met. Rather, it was s. 25 of the Act which applies to cases, such as this one, where, after a determination of the common issues, individual issues remain with respect to the entitlement to damages.

Per O'Driscoll J. (dissenting): The application judge did not err in finding that a class action was the preferable procedure for claims brought by indirect purchasers. He properly found that behaviour modification should be the primary basis for certification in this case. The class definition approved by the application judge was not "circular". A conspiracy is exactly the sort of case which lends itself to treatment as a common cause in a class proceeding. The plaintiffs' action was appropriate for aggregate damage assessment because the plaintiffs were seeking monetary relief; liability would not be in issue if the defendants were found liable for price fixing as part of a common trial issue; and the total aggregate of the defendants' liability could be reasonably achieved.

APPEAL from an order of Sharpe J. (1999), 1999 14812 (ON SC), 45 O.R. (3d) 29 certifying an action as a class proceeding.

Daar v. Yellow Cab Co., 67 Cal. 2d 695 (S.C. 1967), distd Other cases referred to Abdool v. Anaheim Management Ltd. (1995), 1995 5597 (ON SCDC), 21 O.R. (3d) 453, 121 D.L.R. (4th) 496, 31 C.P.C. (3d) 197 (Div. Ct.); Anderson v. Wilson (1999), 1999 3753 (ON CA), 44 O.R. (3d) 673, 175 D.L.R. (4th) 409, 36 C.P.C. (4th) 17 (C.A.) [Leave to appeal to S.C.C. refused (2000), 258 N.R. 194n]; Bittner v. Louisiana-Pacific Corp. (1997), 1997 2904 (BC SC), 43 B.C.L.R. (3d) 324 (S.C.); 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.); Cameron v. Taylor (1992), 1992 7575 (ON SC), 10 O.R. (3d) 277 (Gen. Div.); Campbell v. Flexwatt Corp. (1997), 1997 4111 (BC CA), 44 B.C.L.R. (3d) 343, [1998] 6 W.W.R. 275, 15 C.P.C. (4th) 1 (C.A.), additional reasons at (1998), 105 B.C.A.C. 158, 171 W.A.C. 158 [Leave to appeal to S.C.C. refused (1998), 228 N.R. 197n]; Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd., 1983 23 (SCC), [1983] 1 S.C.R. 452, 145 D.L.R. (3d) 385, 47 N.R. 191, [1983] 6 W.W.R. 385, 21 B.L.R. 254, 24 C.C.L.T. 111, 72 C.P.R. (2d) 1; Carom v. Bre-X Minerals Ltd. (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236, 196 D.L.R. (4th) 344 (C.A.), revg (1999), 1999 19916 (ON SCDC), 46 O.R. (3d) 315, 6 B.L.R. (3d) 82 (Div. Ct.), affg (1999), 1999 14794 (ON SCDC), 44 O.R. (3d) 173, 46 B.L.R. (2d) 247, 35 C.P.C. (4th) 43 (S.C.J.) (sub nom. 3218520 Canada Inc. v. Bre-X Minerals Ltd.); Controltech Engineering Inc. v. Ontario Hydro, [1998] O.J. No. 5350 (Gen. Div.), affd [2000] O.J. No. 379 (Div. Ct.); Hollick v. Metropolitan Toronto (Municipality) (1999), 1999 2894 (ON CA), 46 O.R. (3d) 257, 181 D.L.R. (4th) 426, 41 C.P.C. (4th) 93, 7 M.P.L.R. (3d) 244 (C.A.) [Leave to appeal to S.C.C. allowed (2000), 262 N.R. 395n]; Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959, 49 B.C.L.R. (2d) 273, 74 D.L.R. (4th) 321, 117 N.R. 321, [1990] 6 W.W.R. 385, 4 C.C.L.T. (2d) 1, 43 C.P.C. (2d) 105 (sub nom. Hunt v. T & N plc); Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977); Kansas v. Utilicorp United Inc., 497 U.S. 199 (1990); Lau v. Bayview Landmark Inc. (1999), 40 C.P.C. (4th) 301, [1999] O.J. No. 4060 (S.C.J.); Mouhteros v. DeVry Canada Inc. (1998), 1998 14686 (ON SC), 41 O.R. (3d) 63, 22 C.P.C. (4th) 198 (Gen. Div.); Ontario New Home Warranty Program v. Chevron Chemical Co. (1999), 1999 15098 (ON SC), 46 O.R. (3d) 130, 37 C.P.C. (4th) 175 (S.C.J.); Parsons v. Canadian Red Cross Society (2000), 2000 22707 (ON SC), 51 O.R. (3d) 261 (S.C.J.); Robertson v. Thomson Corp. (1999), 1999 14768 (ON SC), 43 O.R. (3d) 161, 43 C.P.C. (4th) 166 (Gen. Div.); Rosedale Motors Inc. v. Petro-Canada Inc. (1998), 1998 14721 (ON SC), 42 O.R. (3d) 776, 86 C.P.R. (3d) 1, 31 C.P.C. (4th) 340 (Gen. Div.); Taub v. Manufacturers' Life Insurance Co. (1999), 1999 19922 (ON SC), 42 O.R. (3d) 576 (Div. Ct.), affg (1998), 1998 14853 (ON SC), 40 O.R. (3d) 379 (Gen. Div.); Tiemstra v. Insurance Corp. of British Columbia (1997), 1997 4094 (BC CA), 38 B.C.L.R. (3d) 377, 149 D.L.R. (4th) 419, [1998] 2 W.W.R. 168, 12 C.P.C. (4th) 197 (C.A.); Vitapharm Canada Ltd. v. F. Hoffman-Laroche Ltd., [2000] O.J. No. 4594 (S.C.J.) Statutes referred to Class Proceedings Act, 1992, S.O. 1992, c. 6, ss. 2, 5(1), 5(5), 6, 11, 23, 24, 25, 26, 26(4), 30(2), 35 Clayton Act (U.S.), s. 4 Competition Act, R.S.C. 1985, c. C-34, s. 36(1) Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04, 21, 39.01(4) Authorities referred to Coutroulis, C.S. and D.M. Allen, "The Pass-On Problem in Indirect Purchaser Class Litigation" (Spring 1999) The Antitrust Bulletin 179 Newberg, H., Newberg on Class Actions, 3rd ed., Vol. 2 (Shepard's/McGraw Hill, 1992) Ontario, Report on Class Actions (Ontario Law Reform Commission, 1982) Ontario, Report of the Attorney General's Advisory Committee on Class Action Reform, M.G. Cochrane, Chairman, February 1990

J.L. McDougall, Q.C., and Kent E. Thomson, for appellants/ defendants. Joel P. Rochon, Vincent Genova and Douglas Lennox, for plaintiffs/respondents.

O'DRISCOLL J. (dissenting):--

I. Nature of the Proceedings

[1] The appellants/defendants appeal to the Divisional Court pursuant to the Class Proceedings Act, 1992, S.O. 1992, c. 6 (the Act):

30(2) A party may appeal to the Divisional Court from an order certifying a proceeding as a class proceeding, with leave of the Superior Court of Justice as provided in the rules of court.

[2] On March 25, 1999 and June 1, 1999, Sharpe J. heard an application for certification brought by the respondents/ plaintiffs under s. 2(2) and s. 5(1) of the Act.

[3] On July 6, 1999, for written reasons now reported: (2000), 1999 14812 (ON SC), 45 O.R. (3d) 29, Sharpe J. certified this action as a "class proceeding" under the following provisions of the Act:

2(1) One or more members of a class of persons may commence a proceeding in the court on behalf of the members of the class.

(2) A person who commences a proceeding under subsection (1) shall make a motion to a judge of the court for an order certifying the proceeding as a class proceeding and appointing the person representative plaintiff.

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] Sharpe J. defined the class as:

2. THIS COURT DECLARES that the "Class" in this proceeding is described as follows:

All homeowners or other end users in Canada who have suffered loss or damages as a result of the Defendants' agreement to wrongfully increase or maintain the price of iron oxide and black pigment and otherwise unduly lessen competition, and in general restrict and inhibit competition, in the pigment market; in particular, all homeowners or other end users of bricks, interlocking or other construction products containing iron oxide pigment or black pigment manufactured or distributed by Bayer Inc. and Northern Pigment Company or where applicable, their corporate predecessors, between 1985 and 1992.

[5] Sharpe J. defined the single common issue as:

6. THIS COURT DECLARES that the common issue for the Class is as follows:

Are the Defendants liable to the members of the Plaintiff class for conspiracy to fix the price of iron oxide, and if so, what is the appropriate measure of damages?

[6] On October 6, 1999 and December 10, 1999, Lane J. heard an application brought by the appellants/defendants under s. 30(2) of the Act (supra) seeking leave to appeal to the Divisional Court.

[7] On December 10, 1999, Lane J. granted leave to appeal under s. 30(2) of the Act for reasons which are now reported: (2000), 1999 19923 (ON SCDC), 48 O.R. (3d) 415.

II. Background and Chronology

[8] The reasons of Sharpe J. summarize the claim [at pp. 31-32 O.R.] as follows:

The statement of claim alleges that from 1984 to 1992, the defendants and Norpico held between 90 and 100 per cent of the Canadian market for iron oxide, a substance used to colour certain concrete building materials. It is further alleged that the defendants and Norpico entered into a price-fixing agreement in 1985 that had the effect of increasing the price of iron oxide. The plaintiffs allege that this agreement was in place until 1991 and that it amounted to a conspiracy to unduly prevent or lessen competition within the meaning of s. 45(1)(c) of the Competition Act, R.S.C. 1985, c. C-44. The plaintiffs allege that as the ultimate owners of buildings containing building products that contain iron oxide, they have suffered damages by virtue of the increased cost of the iron oxide attributable to the alleged price-fixing conspiracy. The record before me indicates that, assuming the plaintiffs can make out a claim and show that the increased cost of the concrete bricks flowed through to them as the ultimate purchasers, the claim would be for $70 to $112 on a $150,000 home.

The statement of claim also alleges a cause of action for abuse of dominant position pursuant to s. 79 of the Competition Act (supra).

[9] The appellants'/defendants' factum contains the following:

2. This case concerns an attempt by the plaintiffs to recover damages, on their own behalf and on behalf of more than 1.1 million others located throughout Canada, alleged to have been caused by reason of collusion among certain suppliers of iron oxide in Canada. Iron oxide is used to colour some concrete building materials, including bricks, mortar, roofing titles [sic] and paving stones. Neither the plaintiffs nor anyone else on whose behalf this action has been commenced have actually purchased iron oxide, either from the Bayer defendants or at all. Rather, this case is asserted on behalf of an extraordinarily large number of "end users", so-called "indirect purchasers", who own structures (including houses or commercial buildings) that contain building materials which in turn contain small amounts of iron oxide manufactured or distributed by the defendants between 1985 and 1992.

3. In short, the class proposed is comprised of purchasers who are indirect purchasers far removed from the conspiracy alleged in the Statement of Claim.

The Defendants

7. Bayer Corporation is incorporated under the laws of the state of Indiana. It is a wholly-owned subsidiary of Bayer AG, which is located in Leverkusen, Germany. Bayferrox iron oxide pigments are manufactured by Bayer Corporation in New Martinsville, West Virginia and by Bayer AG in Germany. Bayer Inc. is a Canadian subsidiary of Bayer AG, which is located in Toronto with additional locations in Montreal and Sarnia. Bayer Inc. distributes coatings, pigments (including iron oxide) and paint components in Canada. It does not distribute bricks or any other concrete building materials.

Affidavit of Ronald Wettlaufer, Appeal Book, Vol. 1, Tab 11, paras. 3-4.

The Representative Plaintiffs

8. Avininder Chadha and Renu Chadha are the representative plaintiffs. They own a house in Richmond Hill, purchased new in 1987. The house is constructed of red brick with coloured mortar and is surrounded, in part, with interlocking paving stone. The plaintiffs offered no evidence as to whether their brick, paving stones or mortar contain iron oxide, and no credible evidence that they have suffered loss or damage as a result of the activities complained of in this proceeding. The only evidence of the plaintiffs having suffered loss or damage is the following unsupported and conclusory assertion of Avininder Chadha:

I verily believe that the inflated cost of the bricks and paving stones used for our home construction have been artificially inflated due to the price-fixing conspiracy described in this Affidavit.

Affidavit of Avininder (Bob) Chadha, Appeal Book, Vol. 1, Tab 9, para. 26

[The Appellants/Defendants complain that this portion of the affidavit is in violation of rule 39.01(4). Sharpe J. held at para. 27 [p. 40 O.R.]: "In my view, that is a sufficient factual basis to qualify him as a representative plaintiff."]

9. Based on the plaintiffs' own estimates of damages and class size, the average claim of members of the class, if proven, is in the range of $15 to $80.

Affidavit of Jeffrey Raphael, Appeal Book, Vol. 1, Tab 10, paras. 22, 24 and 25

10. The representative plaintiffs had no direct contact with any of the defendants. They did not purchase iron oxide or any other products from the Bayer defendants. Rather, they purchased a completed home "from Greenpark" in January, 1987 which contained bricks and paving stones.

Letter from Paroian, Raphael, Courey, Cohen & Houston to Fraser Milner dated March 16, 1999, Appeal Book Vol. 2, Tab 20

11. There are two types of bricks: concrete and natural clay. Clay bricks usually contain no iron oxide. Some concrete bricks, but not all, contain iron oxide. Iron oxide constitutes only approximately 5 per cent of the price of concrete bricks which contain it. Approximately 90 per cent of the bricks manufactured in Ontario are clay and contain either no iron oxide or only a trace amount of iron oxide.

Affidavit of Ronald Wettlaufer, Appeal Book, Vol. 1, Tab 11, paras. 6-11

12. Similarly, not all concrete paving stones contain iron oxide. Paving stones can be coloured using a variety of substances including inorganic pigments such as chrome oxide and cobalt blue. Not all paving stones are coloured. In those instances where paving stones are coloured using iron oxide, the price of the iron oxide constitutes only 8-15 per cent of the selling price of the paving stones.

Affidavit of Ronald Wettlaufer, Appeal Book, Vol. 1, Tab 11, para. 19

13. During the relevant period in this proceeding, there were over 15 producers of bricks in Canada. Bayer Inc. sold iron oxide pigment to only 4 of them. There were also between 25 and 31 manufacturers of paving stones. Bayer Inc. sold iron oxide pigment to only 3 of them. Sales were also made to manufacturers of bricks and paving stones by other suppliers of pigments who are not alleged to have participated in the conspiracy upon which the plaintiffs rely to assert their claim.

Affidavit of Ronald Wettlaufer, Appeal Book, Vol. 1, Tab 11, paras. 10-12

14. There is no practical mechanism for identifying the purchasers of concrete brick houses or other structures which, during the relevant period, were coloured with iron oxide pigment supplied by the defendants. . . .

15. There is also no practical mechanism to determine whether the plaintiffs were economically injured on a classwide basis. . . .

16. . . . In summary, the plaintiffs' task in proving their claim in damages is insurmountable and the amount of their damages is too speculative, remote and uncertain to be quantifiable. Any inquiry into alleged damages will involve an assessment of unique and individualized issues involving more than 1.1 million claimants based on a variety of marketplace considerations.

Investigation by the Competition Bureau

18. A complaint was made to the Competition Bureau concerning an alleged price fixing agreement between Bayer Corporation, Bayer Inc. and Northern Pigment Company. The complaint was investigated thoroughly by the Competition Bureau which, among other things, interviewed customers of the defendants. The inquiry was discontinued. Section 22 of the Competition Act provides for a discontinuance of an inquiry where "the [Commissioner] is of the opinion that the matter being inquired into does not justify further inquiry."

Affidavit of Randal T. Hughes, Appeal Book, Vol. 2, Tab 16, paras. 2-5 and Exhibit "A"

The respondents'/plaintiffs' factum states the following:

8. John Giovanelli ("Giovanelli") worked as a key marketing executive for Bayer Canada for several years, most recently as Senior Account Manager/Product Manager. Giovanelli is not only a corporate "insider" but is also a "whistleblower" and has filed an extensive affidavit recounting the conspiracy to fix prices between Bayer and Norpico.

Affidavit of John Giovanelli, sworn February 2, 1999, Appeal Book, Vol. 2, Tab 14, para. 1, 2 and 6.

12. Giovanelli has given evidence of his involvement in a price fixing agreement with his counterpart at Norpico. Giovanelli was directed in 1985 through his superiors at Bayer USA to enter into the price fixing agreement. Some months earlier, Bayer and Norpico had entered into confidential co-producer agreements which formed [the] basis for the price-fixing agreement. The price fixing agreement was in effect from 1985 to 1991.

Affidavit of John Giovanelli, sworn February 2, 1999, Appeal Book, Vol. 2, Tab 14.

13. The particulars of the price fixing agreement are described in detail in the, as yet, unchallenged affidavit of Giovanelli. The strategy was simple: Bayer and Norpico agreed not to increase market share and further agreed to artificially boost the price of pigment by approximately 25 to 40 cents per pound.

Affidavit of John Giovanelli, sworn February 2, 1999, Appeal Book, Vol. 2, Tab 14.

[10] Lane J.'s endorsement granting leave states in para. 2 at (1999), 1999 15080 (ON SC), 45 O.R. (3d) 478:

The parties are agreed and I accept that the motion involves matters of importance beyond the parties themselves. It is the first certification order involving anti-trust law and claims under the Act; and the first to involve a claim by an indirect or downstream purchaser of goods.

[11] Earlier, on June 22, 1998, Sharpe J. heard an application brought by the appellants/defendants under Rule 21 [Rules of Civil Procedure, R.R.O. 1990, Reg. 194] alleging that the action should be dismissed as it did not disclose a cause of action.

[12] On June 29, 1998, Sharpe J. at 1998 14791 (ON SC), 82 C.P.R. (3d) 202 at p. 205, quoting Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959 at pp. 979-80, 990-92, 49 B.C.L.R. (2d) 273 held that "it cannot be said with the degree of certainty necessary at this stage of the proceeding that a party in the position of these plaintiffs has no right of action."

[13] Sharpe J.'s reasons for dismissing the motion under Rule 21 are reported: (1999), 1998 14791 (ON SC), 82 C.P.R. (3d) 202.

[14] The appellants/defendants did not appeal Sharpe J.'s decision of June 29, 1998.

III. Standard of Review

[15] In Anderson v. Wilson (1999), 1999 3753 (ON CA), 44 O.R. (3d) 673 at p. 677, 175 D.L.R. (4th) 409, the Court of Appeal for Ontario said:

This is the first time this court has considered the certification of a class action and I am mindful of the deference which is due to the Superior Court judges who have developed expertise in this very sophisticated area of practice. The Act provides for flexibility and adjustment at all stages of the proceeding and any intervention by this court at the certification level should be restricted to matters of general principle.

[16] Before his appointment to the Court of Appeal for Ontario, Sharpe J. was designated as the class proceedings judge for the Toronto Region.

[17] Paragraph 20 of the respondents' factum states:

It is submitted that the Divisional Court ought to approach any review of Mr. Justice Sharpe's decision with the deference owed to his considerable expertise in this particular area, especially in light of the procedural and discretionary nature of the decision being appealed.

IV. Grounds of Appeal

[18] Did Sharpe J. err in finding that a class action is the "preferable procedure" for claims brought by indirect purchasers?

[19] The motions court judge addressed this matter [at pp. 33-39 O.R.] as follows:

For purposes of the certification motion, the defendants do not contest that the plaintiffs can satisfy the court that they have a possibility of being able to prove a price-fixing agreement at trial. They assert, however, that the claim fails to disclose a cause of action on the ground that the plaintiffs must also be able to satisfy the court that there is a reasonable prospect they can establish that damages resulted to them and their fellow class members. In support of that submission, the defendants now rely on two decisions of the Supreme Court of the United States not cited on the Rule 21 motion. In the first, Hanover Shoe Inc. v. The United Shoe Machinery Corp., 392 U.S. 481 (1968), the court dealt with a defence raised in a treble damages suit under the Sherman Act for alleged monopolization in the shoe machinery industry. The plaintiff was a shoe manufacturer that had direct dealings with the defendant, a supplier of shoe manufacturing machinery. The defendant sought to plead that the plaintiff had sustained no damages as it would have passed on to its customers any allegedly excessive costs. The Supreme Court held that the "passed on" defence was not available to the defendants. The court held that the difficulties in demonstrating the effect of added costs on subsequent parties would be difficult, if not insurmountable, and that allowing the defence would undermine the incentive to immediate buyers to bring treble-damage actions. (see pp. 492-494).

Hanover Shoe was followed in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).

Second, while the decisions of the Supreme Court of the United States deserve serious consideration by this court, they are plainly not binding. Moreover, it appears that the two decisions relied on are based significantly upon policy considerations relating to the enforcement of American antitrust laws. Those policies may well differ from the values underlying Canadian competition law. One need look no further than the treble damage remedy which played a significant role in the Supreme Court decisions referred to above. It may well be the case that the Canadian courts will reach the same conclusion, but as the point is a novel one with a significant factual component, I find that it would be inappropriate to make that determination without affording the plaintiffs the ordinary right of proceeding to trial.

Section 5(1)(d) requires the plaintiff to establish that "a class proceeding would be the preferable procedure for the resolution of the common issues" (my emphasis). The defendants submit that a class action is not the preferable procedure on the ground that the circumstances of each individual member of the proposed class would have to be scrutinized with a view to determining whether that individual had a claim and whether any damages could be established. In my view, this argument overlooks the specific wording of s. 5(1)(d) which requires only that a class action be the preferable procedure for the resolution of the common issues. If the plaintiffs are successful in establishing a price fixing conspiracy and in establishing that damages from such conspiracy flowed through to the ultimate owners of buildings containing the products containing the pigments supplied by the defendants, it will be for the trial judge to determine whether it is necessary to have individual hearings to assess and distribute damages. As I have already indicated, the Act contains provisions which contemplate damage assessment and distribution in cases of this kind without such individual hearings. In any event, for the purposes of the preferable procedure test, I have no difficulty in finding that a class proceeding is the preferable procedure for resolution of the common issues. This is not a case like Abdool v. Anaheim Management Ltd., supra, Mouhteros v. DeVry Canada Inc. (1998), 1998 14686 (ON SC), 41 O.R. (3d) 63, 22 C.P.C. (4th) 198 (Gen. Div.), or Rosedale Motors Inc. v. Petro-Canada Inc. (1998), 42 O.R. (3d) 776, 1998 14721 (ON SC), [1998] O.J. No. 5461 (Gen. Div.), where it was simply not possible to resolve the common issues without scrutinizing the individual circumstances of each member of the proposed class. Here, there is an allegation of a general price-fixing agreement which is alleged to have a price impact upon the ultimate consumers of the product in question. If those issues are to be litigated at all, it seems apparent that a class proceeding is the preferable procedure. It would advance the goal of modification of behaviour as discussed earlier.

With respect, I agree with the analysis and the conclusions of Mr. Justice Sharpe and find no error on "matters of general principle" (Anderson v. Wilson, supra).

[20] Did Sharpe J. err in finding that behaviour modification should be the "primary" basis for certification?

[21] The motions court judge said:

Three important objects have been identified as underlying the Act: (1) judicial economy, (2) improved access to the courts for those whose actions might not otherwise be asserted, and (3) modification of behaviour of actual or potential wrongdoers who might otherwise be tempted to ignore public obligations (Abdool v. Anaheim Management Ltd. (1995), 1995 5597 (ON SCDC), 21 O.R. (3d) 453, 121 D.L.R. (4th) 496 (Div. Ct.)). If the present action is to be certified, among these three objects, the primary one to be served would be behaviour modification. Certification would provide access to the courts in circumstances where the claims might not otherwise be asserted. However, it is apparent from the nature and size of the claim of any individual that the goal of providing a procedure to ensure that victims of wrongdoing are actually compensated is secondary. Similarly, as it is unlikely that any claim would come before the court absent a class action, judicial economy would not be significantly enhanced.

Given the nature and size of the individual claims, few class members would have any reason to opt out of the class. If there are class members with claims of sufficient size or significance to warrant opting out, it is likely that the objectively precise criteria of the class definition will suffice. It seems unlikely that damages will be assessed on an individual basis. The Act contemplates aggregate assessment of monetary relief, and distribution of awards in an average, proportional or even cy pres basis: ss. 24, 26. Those statutory provisions specifically contemplate cases where it may be "impractical or inefficient to identify the class members entitled to share in the award" (s. 24(3)); and cases where "not all class members can be identified" (s. 26(5)). As the Act specifically contemplates providing a remedy despite the impracticality or inefficiency of identifying class members at the stage of assessment and distribution of damages, it would surely be wrong to frustrate that statutory policy by insisting on a class definition that avoided impracticality or inefficiency of identifying class members at the certification stage.

[22] The Ontario Law Reform Commission Report on Class Actions (1982), p. 143-4:

Proponents of the view that behaviour modification is not a proper role for class actions or other kinds of civil litigation frequently justify their position on the basis that the objective of deterrence should be pursued only through criminal or quasi-criminal enforcement. . . . Such a restriction would unquestionably be beneficial to defendants, since in criminal proceedings they could be convicted and fined only if the prosecution succeeded in proving its case beyond a reasonable doubt.

Even where a criminal sanction is available, and a conviction is obtained, there is evidence to the effect that the fines levied in criminal proceedings do not serve to deprive defendants of the fruits of their wrongful conduct or to require them to internalize the costs of the injuries imposed upon individual victims; accordingly, in many cases a conviction may do no more than impose a "licence fee" upon wrongful conduct, which remains sufficiently profitable to justify continued wrongdoing.

[23] With respect, I agree with the motions court judge and find no merit in this ground of appeal.

[24] Did Sharpe J. err in approving a "circular" class definition?

[25] The words of Sharpe J. at para. 19 [p. 37 O.R.] of his reasons (earlier quoted): "Given the nature and size of the individual claims . . . at the certification stage" are also applicable to this ground of appeal. Sharpe J. went on to say [at p. 37 O.R.]:

I conclude that, given the nature of the claim asserted in this action, the objects of the Class Proceedings Act, 1992, and the provisions of the Act dealing with the assessment and distribution of damage awards in cases of this nature, the alleged impracticality or inefficiency of identifying individual class members is not a bar to certification. As the proposed class definition provides an objectively precise class definition, I find that the requirements of s. 5(1)(b) have been met. It will be for the trial judge to determine if damages are to be awarded, and if an award is to be made, how such damages are to be assessed and distributed.

[26] In Lau v. Bayview Landmark Inc. (1999), 40 C.P.C. (4th) 301, [1999] O.J. No. 4060 (S.C.J.), Winkler J. said at para. 28:

For example, a products liability case, an action arising from a mass disaster or other similar situations represent what may be categorized as "objective" or objectively determinable claims. The harm alleged is not dependent on the plaintiff having certain characteristics but rather arises from the existence of a state of affairs outside the norm, the facts of which are sufficient to establish on the "plain and obvious" test that a cause of action exists. Hence, the evidence of the class, to adopt the words of Sharpe J. in Taub [(1998), 1998 14853 (ON SC), 40 O.R. (3d) 379, 381], may be "inherent in the claim itself".

[27] A "conspiracy" is exactly the sort of case which lends itself to treatment as a common cause in a class proceeding. In Carom v. Bre-X Minerals Ltd. (1999), 1999 14794 (ON SCDC), 44 O.R. (3d) 173 at p. 201, 46 B.L.R. (2d) 247 (S.C.J.); affirmed by the Divisional Court (1999), 1999 19916 (ON SCDC), 46 O.R. (3d) 315, 6 B.L.R. (3d) 82; reversed in part on other grounds by Ont. C.A., October 31, 2000: (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236, 196 D.L.R. (4th) 344. Winkler J. certified claims for conspiracy in Carom v. Bre-X and said at p. 201 (44 O.R. (3d)):

The plaintiff alleges a single conspiracy. The facts of this conspiracy would necessitate repetitious proof in each individual claim. The plaintiff, in order to be successful, must establish the fact of the conspiracy, its breadth and scope, the participants, the acts committed in furtherance of the conspiracy and whether it was directed at the plaintiffs or conducted in a manner that disregarded whether the plaintiffs would suffer harm. The proof required will be time-consuming and costly to provide, even if done once in a common issue trial. This would be greatly exacerbated if necessary in each individual case. Hence in the present circumstances, the trial of the common issues arising from the claim in conspiracy will advance all three goals of the CPA, namely judicial economy, access to justice and behaviour modification of wrongdoers, notwithstanding that more than one of the individual issues set out in s. 6 of the Act may be present.

[28] With respect, I agree with the motions court judge and find no merit in this ground of appeal.

[29] Did Sharpe J. err in approving a class that exposes the defendants to multiple liability?

[30] In my view, this ground of appeal is answered by the following paragraphs of the respondents'/plaintiffs' factum:

66. The prospect of inconsistent results does not arise in an action for price fixing. This is because the trial judge, if he or she finds the Appellants liable for price fixing, will then make a finding of fact as to the total amount of the unjust profits obtained by the Appellants through the conspiracy.

67. Based on the overall damages assessment, the trial judge will determine the percentage of those unjust profits that have been extracted from the Respondents so that he or she can decide what proportion of the unjust profits should be awarded to the Respondents as compensation.

68. If the Respondents are owed something less than 100 per cent of the unjust profits, the proportion of those profits which are not distributed to the Respondents as compensation will remain with the Appellants. At that point, if some other "future litigant" comes forward, he or she will be entitled to claim only the undistributed unjust profits. Under this model of allocation of damages, the Appellants liability for the price fixing conspiracy will be capped (although in this action, it is increasingly unlikely that a future litigant will come forward due to the expiry of the limitation periods. Specifically, the limitation period under the Competition Act is two years.)

69. Future litigants therefore, may be able to come forward to claim their share of the undistributed unjust profits held by the Appellants, but they cannot increase the total size of the "pot" out of which damages are to be awarded.

70. If the prospect of multiple liability in this action ever does arise, then this is something more properly dealt with by the trial judge, and not by this appeal court, at the dawn of the proceeding.

71. In Crown Oil v. Superior Ct., it was argued that certification of an indirect purchaser class action [should be denied] because certification might lead to inconsistent verdicts. The California Court of Appeal held:

It is not the function of this court to give advisory opinions on how to avoid a potential multiple recovery. We, as others, are confident that when the threat of double recovery occurs, the trial court will fashion relief accordingly.

Crown Oil Corp. v. Superior Ct., 177 Cal. App. 3d 604, 613, 233 Cal. Rptr. 164, 169 (Cal. App.), appeal dismissed, 479 U.S. 879 (1986).

[31] Did Sharpe J. err in making damages a common issue?

[32] The Act places clear limits on the procedural rights of both parties to a class action. Here, the appellants/defendants are precluded from conducting endless futile cross-examinations. The Act 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.

(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.

(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.

[33] In Newberg on Class Actions, 3rd ed. (Shepard's/McGraw Hill, 1992), Vol. 2, c. 10, s. 10-17, we find at 10-43:

When aggregate damages for the class are awarded, the litigation is ended from the defendant's standpoint except for payment of the judgment or appeal therefrom. A third stage of litigation remains to determine the distribution of the classwide damage award. This stage is a nonadversary proceeding. The entire aggregate damages recovery may be able to be distributed to class members without undue difficulty or expense. When all or part of the common fund is not able to be fairly distributed to class members, then the court may determine to distribute the unclaimed funds with a cy pres or price reduction approach.

[34] I agree with para. 89 of the respondents'/plaintiffs' factum:

89. . . . Here the measure of damages is not dependant [sic] upon the individual idiosyncracies of class members. Rather, the damages in this case are subject to a rational determination by means of accepted economic formulae and statistics.

[35] In Daar v. Yellow Cab Co., 67 Cal. 2d 695 (S.C. 1967), a Los Angeles taxi company was accused of illegally tampering with its fare meters, thereby deliberately overcharging its customers over a four-year period. A class action was commenced on behalf of the aggrieved passengers. The defendant taxi company insisted that the class action could only go forward if all of the alleged injured passengers could be found and called to trial to prove damages. The California Supreme Court recognized that if the defendants were given such a right then they would effectively be immunized from suit. Rather than allow this to happen the court chose to allow aggregate damages assessment coupled with a cy pres distribution of those damages. The court stated [at para. 16]:

Moreover, absent a class suit, recovery by any of the individual taxicab users is unlikely. The complaint alleges that there is a relatively small loss to each individual class member. In such a case separate actions would be economically unfeasible. Joinder of plaintiffs would be virtually impossible in this case. It is more likely that, absent a class suit, defendant will retain the benefits from its alleged wrongs. A procedure that would permit the allegedly injured parties to recover the amount of their overpayments is to be preferred over the foregoing alternative.

[36] In the U.S.A., courts have held that an aggregate damage assessment does not interfere with any substantive rights of the defendant. In Newberg (supra); s. 10.05:

Aggregate computation of class monetary relief is lawful and proper. Challenges that such aggregate proof affects substantive law and otherwise violates the defendant's due process or jury trial rights to contest each member's claim individually, will not withstand analysis.

[37] In my view, with respect, Sharpe J. did not err as alleged under this ground of appeal.

[38] Did Sharpe J. misapply ss. 24, 25 and 26 of the Act?

[39] In my view, ss. 24, 25 and 26 of the Act were intended by the Legislature to allow for damages to be treated as a common issue in a class proceeding. Sharpe J. noted that s. 26(5) of the Act envisaged occasions when damages may be assessed and awarded on an aggregate basis where individual class members cannot be identified or located.

[40] The Report of the Attorney General's Advisory Committee on Class Action Reform, February 1990, p. 43:

Every class proceeding will not necessarily be for monetary relief, some will inevitably seek injunctions, equitable relief and so on. However, where monetary relief is sought by the class and liability is not in issue (eg. Liability is admitted) special methods of establishing the quantum may be appropriate. It may be impractical, for example, to require thousands of class members to individually prove their claims as they would in an ordinary proceeding. In such a case the court should be permitted to determine the total aggregate of the defendant's liability if to do so can be reasonably achieved.

[41] In my view, the respondents'/plaintiffs' action is appropriate for aggregate damage assessment because:

(1) The respondents/plaintiffs are seeking monetary relief

(2) IF the appellants are found liable for price fixing as part of a common trial issue then "liability is not in issue", and

(3) The "total aggregate of the defendant's liability . . . can be reasonably achieved".

As counsel for the respondents/plaintiffs set out in their factum at para. 87:

This case turns upon questions of unjust profits, price fixing, and the impact of the Appellants' alleged behaviour on competitive markets, it is also exactly the sort of case that is amenable to an aggregate assessment.

[42] With respect, I find no error by the motions court judge with regard to this ground of appeal.

[43] Counsel for the respondents/plaintiffs opened and closed their factum with quotations; in my view, each is relevant:

The question is whether a Defendant may sin with relative impunity and retain his ill-gotten gains so long as he takes care to restrict his depredations to a large number of small amounts.

Professor Ziegel, A Practical Approach to Consumer Class Actions in Civil Litigation in Canada (1975), Western Institute for Legal Research and Reform.

[3] [4] Where the tort itself is of such a nature as to preclude the ascertainment of the amount of damages with certainty, it would be a perversion of fundamental principles of justice to deny all relief to the injured person, and thereby relieve the wrongdoer from making any amend for his acts. In such case, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate. The wrongdoer is not entitled to complain that they cannot be measured with the exactness and precision that would be possible if the case, which he alone is responsible for making, were otherwise.

Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563 (1931), a decision of the United States Circuit Court of Appeals for the First Circuit.

V. Result

[44] Counsel for the appellants/defendants have not persuaded me that the order of Sharpe J., dated July 6, 1999, is anything other than correct. Therefore, the appeal is dismissed.

VI. Costs

[45] When asked for their submissions as to costs, each counsel replied: "We are not seeking costs." No order as to costs before Lane J. or on the appeal.

VII. Postscript

[46] On November 2, 2000, counsel for the respondents/ plaintiffs forwarded to each member of the court a copy of the decision of the Court of Appeal for Ontario, dated October 31, 2000, in Carom v. Bre-X, supra, (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236, 196 D.L.R. (4th) 344. On February 9, 2001, counsel for the respondents/plaintiffs forwarded to each member of the court a copy of the decision of Cumming J. in Vitapharm Canada Ltd. v. F. Hoffman-Laroche Ltd., [[2000] O.J. No. 4594].

[47] In a letter to all members of the court, dated February 15, 2001, counsel for the appellants/defendants took the view that it was improper for opposing counsel to have forwarded to the members of the court a copy of the judgment of Cumming J. in Vitapharm because the decision was "neither relevant nor dispositive".

[48] In preparing these reasons for judgment, I read the reasons of the Court of Appeal in Carom v. Bre-X, supra and the reasons of Cumming J. in Vitapharm. However, neither set of reasons affected the outcome of this appeal.

SOMERS J. (THOMSON J. concurring):--

I. Nature of the Proceedings

[1] This is an appeal by the defendants Bayer Inc. and Bayer Corporation ("appellants") pursuant to the endorsement of the Honourable Mr. Justice Lane dated October 7, 1999 and his order dated December 10, 1999. Lane J. granted leave to appeal from the order of the Honourable Mr. Justice Sharpe dated July 6, 1999, certifying this action as a class proceeding pursuant to the Class Proceedings Act, 1992, S.O. 1992, c. 6 (the "Act").

[2] In his order, Sharpe J. (as he then was) defined the class in this proceeding as follows:

All homeowners or other end users in Canada who have suffered loss or damage as a result of the defendants' agreement to wrongfully increase or maintain the price of iron oxide and black pigment and otherwise unduly lessen competition, and in general restrict and inhibit competition, in the pigment market; in particular, all homeowners or other end users of bricks, interlocking or other construction products containing iron oxide pigment or black pigment manufactured or distributed by Bayer Inc. and Northern Pigment Company or where applicable, their corporate predecessors, between 1985 and 1992.

[3] Sharpe J. set out the following common issue for the class:

Are the defendants liable to the members of the Plaintiff class for conspiracy to fix the price of iron oxide, and if so, what is the appropriate measure of damages?

[4] In his reasons for judgment, now reported as Chadha v. Bayer Inc. (1999), 1999 14812 (ON SC), 45 O.R. (3d) 29 (S.C.J.) ("certification judgment"), Sharpe J. summarized the claim as follows at pp. 31-32 O.R.:

In this proposed class action, the plaintiffs allege a conspiracy between the defendants to fix the price of iron oxide pigment used in various construction materials. The plaintiffs claim that they and other owners of buildings which include building products containing iron oxide pigment have sustained damages as a result of the alleged conspiracy. The alleged conspiracy involved an agreement between Bayer Corporation, Bayer Inc. and Norpico [Northern Pigment Company]. The defendant Harcros Pigments Inc. purchased the assets of Norpico and the action against Harcros has been dismissed on consent.

The statement of claim alleges that from 1984 to 1992, the defendants and Norpico held between 90 and 100 per cent of the Canadian market for iron oxide, a substance used to colour certain concrete building materials. It is further alleged that the defendants and Norpico entered into a price-fixing agreement in 1985 that had the effect of increasing the price of iron oxide. The plaintiffs allege that this agreement was in place until 1991 and that it amounted to a conspiracy to unduly prevent or lessen competition within the meaning of s. 45(1)(c) of the Competition Act, R.S.C. 1985, c. C-34. The plaintiffs allege that as the ultimate owners of buildings containing building products that contain iron oxide, they have suffered damages by virtue of the increased cost of the iron oxide attributable to the alleged price-fixing conspiracy. The record before me indicates that, assuming the plaintiffs can make out a claim and show that the increased cost of the concrete bricks flowed through to them as the ultimate purchasers, the claim would be for $70 to $112 on a $150,000 home.

[5] Avininder Chadha and Renu Chadha, the plaintiffs ("respondents"), estimate that the alleged conspiracy affected approximately 1.1 million Canadians.

[6] I have had the opportunity of reviewing the reasons for judgment of my brother O'Driscoll J. and need not add anything to his summary of the facts.

II. Standard of Review

[7] In Anderson v. Wilson (1999), 1999 3753 (ON CA), 44 O.R. (3d) 673 at p. 677, 175 D.L.R. (4th) 409 (C.A.), application for leave to appeal dismissed, [1999] S.C.C.A. No. 476 ("Anderson"), Carthy J.A., writing on behalf of the Ontario Court of Appeal, said the following with respect to the standard of review applicable to certification decisions:

. . . I am mindful of the deference which is due to the Superior Court judges who have developed expertise in this very sophisticated area of practice. The Act provides for flexibility and adjustment at all stages of the proceeding and any intervention by this court at the certification level should be restricted to matters of general principle.

[8] MacPherson J.A., writing for the Ontario Court of Appeal in Carom v. Bre-X Minerals Ltd. (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236, 196 D.L.R. (4th) 344, reiterated this principle at paras. 36 and 37 [pp. 247-48 (51 O.R. (3d))] of his judgment when he stated that judges assigned to hear certification motions "develop an expertise which should be recognized and respected by appellate courts".

III. Grounds of Appeal

[9] Before discussing the grounds of appeal, it is helpful to set out the requirements for certification of an action as a class proceeding under the Act:

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.

[10] Section 5(5) of the Act states that "[a]n order certifying a class proceeding is not a determination of the merits of the proceeding." However, I agree with the statement of Sharpe J. in Robertson v. Thomson Corp. (1999), 1999 14780 (ON SC), 43 O.R. (3d) 389 at p. 391, 43 C.P.C. (4th) 166 (Gen. Div.) that "[t]he certification motion is intended to screen claims that are not appropriate for class action treatment, at least in part to protect the defendant from being unjustifiably embroiled in complex and costly litigation."

Do the pleadings disclose a cause of action?

[11] On an earlier motion, the appellants moved to strike all or portions of the Statement of Claim as disclosing no cause of action pursuant to Rule 21 of the Rules of Civil Procedure. Sharpe J., in a decision now reported as Chadha v. Bayer Inc. (1998), 1998 14791 (ON SC), 82 C.P.R. (3d) 202 (Ont. Gen. Div.) ("Rule 21 judgment"), struck out the plea of abuse of dominant position, but dismissed the balance of the motion. The appellants did not appeal this decision.

[12] In Anderson, supra, at p. 679 O.R., the Ontario Court of Appeal confirmed that the test to be applied under s. 5(1)(a) of the Act is analogous to that used to determine whether a pleading discloses a cause of action pursuant to Rule 21. This "plain and obvious" test was set out by Wilson J. in Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959 at pp. 977 and 979-80, 49 B.C.L.R. (2d) 273. Therefore, I agree with the statement of Sharpe J. at p. 34 O.R. of his certification judgment, supra, that the appellants are bound by the determination on the Rule 21 motion to strike "to the extent they now contend that the statement of claim discloses no cause of action for the purposes of s. 5(1)(a) of the Class Proceedings Act".

Did Sharpe J. err in finding that a class proceeding is the preferable procedure for resolving the common issues in this case?

[13] At p. 38 O.R. of his certification judgment, supra, Sharpe J. stated that "the specific wording of s. 5(1)(d) . . . requires only that a class action be the preferable procedure for the resolution of the common issues" (emphasis added). In my opinion, Sharpe J. erred in interpreting s. 5(1)(d) of the Act restrictively, contrary to the express provisions of the Act and prior judicial authority calling for a broader interpretation of the "preferable procedure" requirement. In doing so, Sharpe J. failed to consider all the factors that are relevant to the determination of whether a class proceeding is the "preferable procedure" and placed undue emphasis on certain factors.

[14] I recognize that the Act does not require that the trial of the common issue(s) resolve all matters at issue in the litigation or even all issues respecting liability. In fact, ss. 11, 24, and 25 of the Act specifically provide for the resolution of individual issues respecting liability or damages once the common issues have been resolved. Nor does the Act require that common issues predominate over individual issues. However, this does not mean that one need only consider the proposed common issues when determining if the "preferable procedure" requirement is met. O'Brien J. explicitly rejected such an approach in Abdool v. Anaheim Management Ltd. (1995), 1995 5597 (ON SCDC), 21 O.R. (3d) 453 at pp. 461, 467, 121 D.L.R. (4th) 496 (Div. Ct.) ("Abdool") when he stated:

I do not accept the submission that any complex, multiple- party lawsuit is entitled to certification merely because that is the "preferable procedure" for resolving common issues which may be involved in the litigation.

In my view, some consideration must be given to individual issues involved in the litigation, the purposes of the Act, and the rights of the parties seeking, and opposing, certification.

I believe the preferable approach would be to consider the matter with a view to the aims of the legislation, the requirements contained in ss. 5 and 6 of the Act, and the relative merits of other procedures available under the rules for dealing with the common issues raised. The court should also consider the relative importance of common and individual issues as one of the factors in determining whether to certify or not.

[15] Similarly, in Bywater v. Toronto Transit Commission (1998), 27 C.P.C. (4th) 172 at pp. 181-82 (Ont. Gen. Div.) ("Bywater"), Winkler J. stated as follows:

Thus the central thrust of s. 6 is to ensure that the enumerated individual issues cannot be raised as absolute bars to certification. That is not to say, however, that individual issues are not to be taken into consideration in determining if a class proceeding is the preferable procedure. Indeed to so conclude would render any such exercise meaningless. Moreover, to apply a cumulative or quantitative approach to the individual issues referenced in s. 6 would have a like effect; for while they may exist, they may be relatively insignificant in the total context, or of inequal weight relative to each other or to the common issues. The court in reaching its decision on preferable procedure must of necessity consider all of the common and individual factors as part of the factual matrix.

(Emphasis added)

[16] Therefore, the following factors should be considered when applying s. 5(1)(d) of the Act: the nature of the proposed common issue(s); the individual issues which would remain after determination of the common issue(s); the factors listed in s. 6 of the Act; the complexity and manageability of the proposed action as a whole; alternative procedures for dealing with the claims asserted; the extent to which certification furthers the objectives underlying the Act; and the rights of the plaintiff(s) and defendant(s).

[17] As Winkler J. stated in Carom v. Bre-X Minerals Ltd. (1999), 1999 14794 (ON SCDC), 44 O.R. (3d) 173 at p. 239, 46 B.L.R. (2d) 247 (S.C.J.), revd on other grounds (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236, 196 D.L.R. (4th) 344 (C.A.):

A class proceeding is the preferable procedure where it presents a fair, efficient and manageable method of determining the common issues which arise from the claims of multiple plaintiffs and where such determination will advance the proceeding in accordance with the goals of judicial economy, access to justice and the modification of the behaviour of wrongdoers.

The Class Proceedings Act is a procedural statute and does not create any new causes of action

[18] When determining if the "preferable procedure" requirement is met, one must consider the impact that certification would have on the rights of the defendants as well as those of the plaintiffs. The Act must be applied in a manner which is fair to all the parties to the litigation. As Winkler J. stated in Ontario New Home Warranty Program v. Chevron Chemical Co. (1999), 1999 15098 (ON SC), 46 O.R. (3d) 130 at p. 143, 37 C.P.C. (4th) 175 (S.C.J.):

. . . this court has noted on multiple occasions that there is no jurisdiction conferred by the Class Proceedings Act to supplement or derogate from the substantive rights of the parties. It is a procedural statute and, as such, neither its inherent objects nor its explicit provisions can be given effect in a manner which affects the substantive rights of either plaintiffs or defendants.

[19] The Act is solely procedural in nature and does not create any new causes of action. Therefore, the respondents have a duty to establish on balance that they have suffered loss or injury caused by the actions of the appellants. If they are unable to do so, they are not entitled to compensation. This applies to both their statutory claim under s. 36(1) of the Competition Act and their common law claims for conspiracy and infliction of economic injury by unlawful means.

[20] Section 36(1) of the Competition Act states:

36(1) Any person who has suffered loss or damage as a result of

(a) conduct that is contrary to any provision of Part VI, or

(b) the failure of any person to comply with an order of the Tribunal or another court under this Act,

may, in any court of competent jurisdiction, sue for and recover from the person who engaged in the conduct or failed to comply with the order an amount equal to the loss or damage proved to have been suffered by him, together with any additional amount that the court may allow not exceeding the full cost to him of any investigation in connection with the matter and of proceedings under this section.

(Emphasis added)

[21] Similarly, in their common law claims for conspiracy and infliction of economic injury by unlawful means, the respondents seek compensatory damages, the purpose of which is to compensate plaintiffs for losses actually incurred. On the appellants' earlier Rule 21 motion, the respondents agreed that their common law claim for civil conspiracy falls to be determined under the law as stated by the Supreme Court of Canada in Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd., 1983 23 (SCC), [1983] 1 S.C.R. 452, [1983] 6 W.W.R. 385. This requires the respondents to establish, among other elements, that they have suffered actual damage. See Sharpe J.'s Rule 21 judgment, supra, at p. 204 C.P.R. Moreover, the respondents allege at para. 25(e) of their Statement of Claim that "[t]he Plaintiffs and the Class suffered damages as a result of the defendants' conduct, being the increase in the purchase price of products containing these pigments over the price of an open, competitive market." As for their claim for infliction of economic injury by unlawful means, at para. 27 of their Statement of Claim ". . . the plaintiffs plead that the Defendants' actions were unlawful and intentionally caused them economic harm." Finally, at para. 28 of their Statement of Claim, "[t]he plaintiffs plead that as a result of the defendants' illegal actions, the plaintiffs and class were harmed by having to pay higher prices, and were deprived of the benefits of a free and open competition for the purchase of products containing pigments."

[22] A number of issues must be resolved before liability can be imposed on the appellants. Specifically, the respondents must establish on balance that they have suffered loss or injury as a result of the actions of the appellants. In the instant case, this can only be done on an individual, not a classwide, basis. As the appellants stated at paras. 15 and 16 of their factum:

There is also no practical mechanism to determine whether the plaintiffs were economically injured on a classwide basis. For plaintiffs to establish such economic injury, they must show that at each sale through the chain of distribution -- iron oxide to building materials manufacturers (or to distributors that sold to manufacturers), building materials manufacturers to builders (or to distributors that sold to builders), builder to original purchaser, original purchaser to subsequent purchaser and so on -- each seller passed on to each subsequent purchaser all or part of the alleged overcharge. . . . To the extent that the alleged overcharge was not passed on through the entire chain of distribution to particular end users, then those users have not suffered any loss or damage and have no proper claim against the Bayer defendants in this proceeding.

Determination of damages [and liability] is particularly difficult where, as here, the product actually purchased by each member of the proposed class of plaintiffs -- personal homes or buildings -- is unique and non standardized, and the purchase price in any given case is typically the subject of negotiation -- offer and counter-offer between individual vendors and purchasers in the context of a complex and unique set of factors.

[23] The respondents face insurmountable problems of proof with respect to the "pass on" issue given the large number of parties in the chain of distribution and the multitude of variables affecting the end purchase price of a building. See the Chain of Distribution -- Iron Oxide Pigment illustration included as an Appendix to these reasons [p. 554, post]. These problems of proof are compounded by the fact that the product in question, iron oxide, is used merely as a small component in another product or series of products and the alleged overcharge is only a trivial part of the purchase price of residential or commercial buildings, which are highly individualized end products. Assuming that the respondents can establish that the appellants engaged in a conspiracy that increased the price of iron oxide, they will still have to establish on balance that this price increase was "passed on" to them. This they are unable to do on a classwide basis. For a discussion of the problems of proof involved in actions such as the one at bar, see C.S. Coutroulis and D.M. Allen, "The Pass-On Problem in Indirect Purchaser Class Litigation" (Spring 1999) The Antitrust Bulletin 179.

[24] Section 24 of the Act, dealing with the aggregate assessment of monetary relief, cannot resolve these problems of proof since damages are only assessed once liability has been established. Similarly, the submission of the respondents at para. 3(g) of their factum that "the Class Proceedings Act was expressly designed by the Ontario Legislature to provide procedures which would allow the claims of victims of a price fixing conspiracy to be assessed on an aggregate basis" is erroneous. It is not "claims" or the entitlement to damages which can be assessed on an aggregate basis under the Act, but rather the quantum of damages which can be so assessed.

[25] Nor can statistical evidence adduced by experts resolve the problems of proof present in this case. First, s. 23 of the Act deals with the admissibility and use of statistical evidence "[f]or the purposes of determining issues relating to the amount or distribution of a monetary award under this Act . . ." (Emphasis added). It does not render otherwise inadmissible statistical evidence admissible for other purposes, such as determining liability.

[26] Moreover, as the United States Supreme Court noted at pp. 742-43 of its decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977):

. . . "in the real economic world rather than an economist's hypothetical model," the latter's drastic simplifications generally must be abandoned. Overcharged direct purchasers often sell in imperfectly competitive markets. They often compete with other sellers that have not been subject to the overcharge; and their pricing policies often cannot be explained solely by the convenient assumption of profit maximization. As we concluded in Hanover Shoe, 392 U.S., at 492, attention to "sound laws of economics" can only heighten the awareness of the difficulties and uncertainties involved in determining how the relevant market variables would have behaved had there been no overcharge.

[27] This is particularly so in the case at bar where the end purchase price of a building depends on a multitude of subjective factors, such as the bargaining skills of the purchaser as compared to those of the vendor. This court takes judicial notice of the fact that multiple variables such as regional differences and delivery costs have an impact on the market for newly constructed buildings and, consequently, on the end purchase price of a building. These problems of proof cannot be overcome through the creation of sub-classes. This is not the type of case in which the "pass on" problem can be resolved on a classwide basis using economic formulae. See the judgment of Winkler J. in Parsons v. Canadian Red Cross Society (2000), 2000 22707 (ON SC), 51 O.R. (3d) 261 (S.C.J.), in which he discussed the problems associated with using probability calculations, a form of statistical evidence, to determine entitlement to compensation in class proceedings arising out of the contamination of the Canadian blood supply with the Hepatitis C virus. Also see the article by C.S. Coutroulis and D.M. Allen, supra.

[28] The case at bar is not analogous to Daar v. Yellow Cab Co., 67 Cal.2d 695 (S.C. 1967) ("Daar"), as the respondents contend at para. 82 of their factum. In Daar, a taxi company in Los Angeles was accused of tampering with its fare meters illegally, thereby deliberately overcharging its customers over a four-year period. A class action was commenced on behalf of aggrieved passengers. Unlike the case at bar, there was no issue of "pass on" in Daar because the plaintiffs were the "direct purchasers". Provided that the plaintiffs in Daar could establish that the company had adjusted and set the meters to register rates in excess of those approved by the authorities, the defendant's liability would be established. All the members of the proposed class were overcharged. There were no outstanding individual issues to resolve in Daar other than those relating to the assessment and distribution of damages. In other words, each plaintiff's right to recover was based on questions of law and fact that were common to the class. That is not the situation in the present case, for the reasons elaborated upon earlier.

The proposed common issues and the number and nature of individual issues to be determined in this action

[29] In the case at bar, the only common issues which can be dealt with by means of a class proceeding are, in essence, whether the appellants conspired, in law and in fact, to fix the price of iron oxide; the duration and extent of this alleged conspiracy; and the effect of this alleged conspiracy on the price of iron oxide pigment. In fact, at p. 38 O.R. of his certification judgment, supra, Sharpe J. noted that "[t]he defendants do not dispute that the question of whether they entered a price fixing agreement is a common issue."

[30] However, in Controltech Engineering Inc. v. Ontario Hydro, [1998] O.J. No. 5350 at para. 15 (Gen. Div.), affd [2000] O.J. No. 379 (Div. Ct.) and Rosedale Motors Inc. v. Petro-Canada Inc. (1998), 1998 14721 (ON SC), 42 O.R. (3d) 776 at p. 787, 31 C.P.C. (4th) 340 (Gen. Div.), Sharpe J. held that "a common factual core to the claims" of the proposed plaintiffs is not enough in and of itself. As the Ontario Court of Appeal stated in Anderson, supra, at p. 683 O.R., for the purposes of s. 5 of the Act, a common issue "need only involve a matter, that if determined, would move the litigation forward" (emphasis added). Also see the Ontario Court of Appeal decision in Carom v. Bre-X Minerals Ltd, supra, at para. 41.

[31] I have concluded that even if the respondents succeed in establishing the existence of a conspiracy which resulted in an increase in the price of iron oxide, this would not advance the litigation in a legally material way. Rather, such a resolution would signal ". . . but the beginning . . . of the liability inquiry" (Abdool, supra, at p. 475 O.R., per Moldaver J., as he then was). Each plaintiff would still be required to establish, on an individual basis, that he or she suffered loss or injury that was caused by the acts of the appellants.

[32] This is because the appellants will only be liable to the respondents if the latter succeed in proving that the artificially inflated price of iron oxide was passed on to them through the various links in the chain of distribution. This "pass on" issue cannot be resolved on a classwide basis because each claim involves different intermediaries and factors, as discussed earlier. This is not a situation such as the one in Kansas v. Utilicorp United Inc., 497 U.S. 199 (1990) (in which the Supreme Court of the United States nonetheless held that only the direct purchaser had a cause of action under s. 4 of the Clayton Act) where there was a "perfect and provable pass-on of the allegedly illegal overcharge" because government regulation, rather than market forces, determined the amount of overcharge that the direct purchaser passed on to the end purchaser. This problem of "tracing" the price increase, if any, through the levels of distribution at issue in the instant case is compounded b y the fact that the purchase price of the end product, namely homes and other structures, depends on a number of variables unique to each claim.

[33] As Winkler J. stated in Mouhteros v. DeVry Canada Inc. (1998), 1998 14686 (ON SC), 41 O.R. (3d) 63 at p. 73, 22 C.P.C. (4th) 198 (Gen. Div.):

The presence of individual issues will not be fatal to certification. Indeed, virtually every class action contains individual issues to some extent. In the instant case, however, what common issues there may be are completely subsumed by the plethora of individual issues, which would necessitate individual trials for virtually each class member. Each [class member's] experience is idiosyncratic, and liability would be subject to numerous variables for each class member. Such a class action would be completely unmanageable. (Emphasis added)

The objectives of the Class Proceedings Act and the manageability of the proposed action

[34] This brings me to a consideration of the extent to which certifying the action in issue would further the purposes underlying the Act. In Abdool, supra, this court held at p. 472 O.R. that the three main objectives of the Class Proceedings Act, 1992--access to justice, judicial economy and behaviour modification--". . . should be considered and weighed when determining whether the requirements of s. 5(1)(d) of the Act have been met . . .".

[35] At p. 472 O.R. of Abdool, supra, Moldaver J. described the goal of judicial economy as "resolving a large number of disputes in which there are common issues of fact or law within a single proceeding, avoiding inconsistent results, and preventing the court's resources from being overwhelmed by a multiplicity of proceedings". The British Columbia Court of Appeal in Campbell v. Flexwatt Corp. (1997), 1997 4111 (BC CA), 44 B.C.L.R. (3d) 343 at p. 362, 15 C.P.C. (4th) 1 (C.A.), additional reasons at (1998), 105 B.C.A.C. 158, 171 W.A.C. 158, leave to appeal refused (1998), 228 N.R. 197n (S.C.C.), noted that a court "must do something in the nature of a cost/benefit analysis in deciding whether to certify a proceeding".

[36] Given that I have concluded that certifying this action as a class proceeding would not "move the litigation forward", other than in a theoretical sense, it is clear that certification in this case would not further the goal of judicial economy. As was the case in Tiemstra v. Insurance Corp. of British Columbia (1997), 1997 4094 (BC CA), 38 B.C.L.R. (3d) 377 at p. 379, 12 C.P.C. (4th) 197 (C.A.), ". . . an adjudication of the common issue in the plaintiff's favour would not materially improve the position of the members of the proposed class in resolving their individual claims."

[37] Moreover, I have concluded that the proposed class action is unmanageable. One must remember that manageability is to be assessed in the context of the entire action, not just the common issue trial. The action would become a "monster of complexity" and cost. It would "inevitably break down into a long series of individual trials dealing with many complex issues and many parties . . . Any potential judicial efficiency [would] be lost through this process": see Bittner v. Louisiana-Pacific Corp. (1997), 1997 2904 (BC SC), 43 B.C.L.R. (3d) 324 at p. 341 (S.C.).

[38] As a result, I reiterate the statement of Donald J.A., writing for the British Columbia Court of Appeal in Tiemstra v. Insurance Corp. of British Columbia, supra, at p. 382 B.C.L.R., that "[t]here is no point in pursuing a complicated procedure for little or no benefit."

[39] Certifying this action as a class proceeding would also undermine judicial efficiency in that certifying a class of indirect or end purchasers while excluding parties in the chain of distribution exposes the appellants to the possibility of subsequent litigation on the same issues with substantial numbers of other parties and the possibility of either inconsistent results or judgments awarding the same damages to different parties. While this problem could theoretically be rectified by defining the class as including both direct and indirect purchasers of construction products containing iron oxide, as was the case in the respondents' original Statement of Claim, this would further complicate already "hopelessly complex" proceedings.

[40] Sharpe J. acknowledged at p. 36 O.R. of his certification judgment, supra, that "[i]f the present action is to be certified, among these three objects [underlying the Act], the primary one to be served would be behaviour modification." With respect to the two other objectives of the Act, Sharpe J. stated as follows at this same page:

Certification would provide access to the courts in circumstances where the claims might not otherwise be asserted. However, it is apparent from the nature and size of the claim of any individual that the goal of providing a procedure to ensure that victims of wrongdoing are actually compensated is secondary. Similarly, as it is unlikely that any claim would come before the court absent a class action, judicial economy would not be significantly enhanced. (Emphasis added)

[41] Therefore, it appears that certification of the present action would serve primarily the goal of behaviour modification. This also militates against certification. In Abdool, supra, Moldaver J. stated at p. 476 O.R. that ". . . since the type of transaction giving rise to the various claims is now governed by the provisions of the Securities Act . . . this alone would suffice to modify the future behaviour of the defendants." In the case at bar, there is a specialized statutory authority, the Competition Bureau, that is responsible for the administration and enforcement of the very provisions of the Competition Act the respondents allege the appellants violated. Therefore, it cannot be said that a class proceeding would be the preferable procedure for the resolution of the common issues when the primary object of the action would be to modify the behaviour of the appellants and potential wrongdoers. There is another procedure better-suited to achieving this goal.

[42] In fact, the affidavit evidence presented discloses that a complaint was lodged with the Competition Bureau ". . . concerning the [alleged] co-producer and price fixing agreements between Bayer Canada and Northern" (Affidavit of John Giovanelli, Appeal Book, Vol. 2, Tab 14, para. 48). The Director of Investigation and Research of the Competition Bureau decided to discontinue the inquiry into this matter (Affidavit of Randal T. Hughes, Appeal Book, Vol. 2, Tab 16).

[43] However, I do not endorse the categorical position of the appellants set out at para. 30 of their factum that "[i]ndirect purchasers should not be entitled to assert a cause of action by way of a class proceeding in a case involving alleged antitrust violations [because a] . . . class proceeding is not the preferable procedure for resolution of such claims."

[44] In light of my conclusions with respect to the application of s. 5(1)(d) of the Act to the case at bar, it is neither necessary nor advisable to determine whether a class of indirect purchasers could ever assert claims involving alleged antitrust violations. See the comments of Cumming J. in Vitapharm Canada Ltd. v. F. Hoffman-Laroche Ltd., [2000] O.J. No. 4594 at para. 44. There may well be claims by indirect purchasers involving alleged antitrust violations which can be advanced by means of a class proceeding. However, it is not appropriate to certify this particular action as a class proceeding.

Did Sharpe J. err in defining the common issue as he did?

[45] For the reasons enunciated above, I have also come to the conclusion that Sharpe J. erred in defining the single common issue [at p. 38 O.R.] as:

Are the defendants liable to the members of the Plaintiff class for conspiracy to fix the price of iron oxide, and if so, what is the appropriate measure of damages?

[46] Liability cannot be a common issue in this case because of the myriad of individual issues raised by the "pass on" problem. The respondents are unable to establish loss and causation, and therefore liability, on a classwide basis in the instant case. As Sharpe J. stated in Taub v. Manufacturers' Life Insurance Co. (1998), 1998 14853 (ON SC), 40 O.R. (3d) 379 at p. 381 (Gen. Div.), affd (1999), 1999 19922 (ON SC), 42 O.R. (3d) 576 (Div. Ct.), "[m]ost class proceedings arise from situations where the fact of wide-spread harm or complaint is inherent in the claim itself. Obvious examples are claims arising from mass disasters such as subway or air crashes or claims based on allegations of harm from wide-spread pollution." This is not one of those cases.

Did Sharpe J. err in approving a "circular" class definition which defines the class in terms that depend upon the merits of the individual claims?

[47] In his order, Sharpe J. certified the following class:

All homeowners or other end users in Canada who have suffered loss or damage as a result of the defendants' agreement to wrongfully increase or maintain the price of iron oxide and black pigment and otherwise unduly lessen competition, and in general restrict and inhibit competition, in the pigment market; in particular, all homeowners or other end users of bricks, interlocking or other construction products containing iron oxide pigment or black pigment manufactured or distributed by Bayer Inc. and Northern Pigment Company or where applicable, their corporate predecessors, between 1985 and 1992. (Emphasis added)

[48] In his endorsement granting leave to appeal in this case, now reported as Chadha v. Bayer Inc. (1999), 1999 15080 (ON SC), 45 O.R. (3d) 478 (S.C.J.), Lane J. stated at p. 480 O.R.: "I am of the view that the decision [of Sharpe J.] is in conflict with the other Ontario decisions referred to on the central point of the definition of the class and that it is desirable for that reason that leave be granted."

[49] I have concluded that the class definition approved by Sharpe J. is flawed because it refers to those "who have suffered loss or damage" as a result of the defendants' conduct. In Hollick v. Metropolitan Toronto (Municipality) (1999), 1999 2894 (ON CA), 46 O.R. (3d) 257, 41 C.P.C. (4th) 93, leave to appeal granted, [2000] S.C.C.A. No. 41, 262 N.R. 395n, the Ontario Court of Appeal confirmed at p. 263 O.R. of its decision that ". . . when the court is considering s. 5(1)(b) it is not appropriate to define that class in terms that depend upon the merits; e.g., those who have suffered injury." Similarly, in Robertson v. Thomson Corp. (1999), 1999 14768 (ON SC), 43 O.R. (3d) 161 at p. 169, 43 C.P.C. (4th) 166 (Gen. Div.), Sharpe J. stated:

I agree with Winkler J. in Bywater, and with Newberg, Class Actions, 3rd ed. at p. 6-61, that the class should be defined in objective terms, and that circular definitions referencing the merits of the claim or subjective characteristics ought to be avoided. Such definitions make it difficult to identify who is a member of the class until the merits have been determined. Definitions based upon the merits of the claim also violate the statutory policy that the merits are not to be decided at the certification stage.

[50] Before Lane J., the respondents submitted that the class definition is not circular because the most important part of the definition follows the words "in particular" and it is objective. I agree with the comments of Lane J. at p. 480 O.R. of his endorsement, supra, to the effect that "the definition was approved with both parts and must be construed that way."

[51] Moreover, the class definition would still be flawed even if I were to expunge the first part, up to the words "in particular". To define the class as "all homeowners or other end users of bricks, interlocking or other construction products containing iron oxide pigment or black pigment manufactured or distributed by Bayer Inc. and Northern Pigment Company or where applicable, their corporate predecessors, between 1985 and 1992" would remedy the circularity of the current definition, but would constitute an over-inclusive class definition. A class definition was rejected as "over- inclusive" in Mouhteros, supra, at p. 68 O.R.

[52] In my opinion, the difficulties involved in producing a workable class definition are further evidence that a class proceeding is not the preferable procedure in this case. It is possible that the class definition could be reworked. However, it is unnecessary to do so in light of the other barriers to certification in this case.

Did Sharpe J. err in accepting the affidavit of Avininder Chadha?

[53] Although the appellants did not argue this point as a ground of appeal, it is my opinion that Sharpe J. erred in accepting as sufficient the affidavit of the proposed representative plaintiff, Avininder Chadha. Under s. 35 of the Act, "[t]he rules of court apply to class proceedings." This includes the rules pertaining to affidavits. Rule 39.01(4) of the Rules of Civil Procedure, dealing with evidence on motions and applications, states: "An affidavit for use on a motion may contain statements of the deponent's information and belief, if the source of the information and the fact of the belief are specified in the affidavit."

[54] At para. 26 of his affidavit, Mr. Chadha deposes that he and his wife purchased a new, two-storey brick dwelling from Greenpark in or about January 1987, and that this home is surrounded, in part, with interlocking paving stones. However, at no point in his affidavit does Mr. Chadha depose that the bricks, paving stones or mortar in his home contain iron oxide manufactured by the defendants. Moreover, the only evidence of the plaintiffs having suffered loss or damage is the following unsupported and conclusory statement at para. 26 of Mr. Chadha's affidavit: "I do verily believe that the inflated cost of the bricks and paving stones used for our home construction have been artificially inflated due to the price-fixing conspiracy described in this Affidavit." I would have struck out this portion of the affidavit on the basis that it fails to state the source of Mr. Chadha's belief, the matter in issue is a contentious one, and this defect cannot be saved through the application of rule 1.04. See Cameron v. Taylor (1992), 1992 7575 (ON SC), 10 O.R. (3d) 277 (Gen. Div.). Had this been done, it is my opinion that there would no longer be a sufficient factual basis to qualify Mr. Chadha as a representative plaintiff under s. 5(1)(e) of the Act. Specifically, I would not be satisfied that Mr. Chadha is a member of the proposed class as required under s. 2(1) of the Act or that he "would fairly and adequately represent the interests of the class" as required under s. 5(1)(e)(i) of the Act.

[55] The deficiencies in Mr. Chadha's affidavit illustrate the practical problems involved in establishing the "pass on" of any alleged overcharge through the chain of distribution, down to the ultimate purchaser, in this case.

Did Sharpe J. apply sections 24, 25 and 26 of the Act incorrectly?

[56] I conclude that Sharpe J. also applied ss. 24, 25 and 26 of the Act incorrectly. Section 24 of the Act provides that the aggregate assessment of monetary relief can only be used 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.

[57] For the reasons set out earlier, I am of the opinion that liability cannot be a common issue in this case. As a result, I am of the view that the respondents cannot avail themselves of s. 24 of the Act because the requirements in (b) and (c) are not met.

[58] The Attorney General's Advisory Committee on Class Action Reform stated as follows at p. 43 of its 1990 Report (M.G. Cochrane, Chairman):

However, where monetary relief is sought by the class and liability is not in issue (eg. liability is admitted) special methods of establishing the quantum may be appropriate. It may be impractical, for example, to require thousands of class members to individually prove their claims as they would in an ordinary proceeding. In such a case the courts should be permitted to determine the total aggregate of the defendant's liability if to do so can be reasonably achieved. (Emphasis added)

[59] Rather, it is s. 25 of the Act which applies to cases, such as the one at bar, where after a determination of the common issues, individual issues remain with respect to the entitlement to damages.

[60] This distinction was recognized and applied by Winkler J. in Bywater, supra, at pp. 178-79, when he stated:

The plaintiff urges that an aggregate damages assessment applying to all class members be made a common issue. Section 24 of the Act permits of an aggregate determination of damages where appropriate . . .

In my view, the case at bar is not appropriate for an aggregate assessment of damages. The action advances claims for personal injury, property damage and claims under the Family Law Act. These claims cannot, "reasonably be determined without proof by individual class members" as required by s. 24(1)(c). Furthermore, each individual claim will require proof of the essential element of causation, which, in the words of 24(1)(b), is "a question of fact or law other than those relating to an assessment of damages". . . . . .

Furthermore, aggregate assessment cannot be a common issue here because this case does not meet the requirements of ss. 24(1)(b) and (c). Even if by class definition the members of the proposed class have all suffered exposure to smoke, the extent of such exposure and any damage flowing from it will vary on an individual basis.

IV. Result

[61] I adopt the following statement made by the Ontario Law Reform Commission in its Report on Class Actions, Vol. 1, 1982 at p. 140:

While . . . the Commission is of the view that class actions can serve a useful function, we do recognize, of course, that not every wrong can be remedied in the courts; some individuals may justifiably be denied access by means of a class action where the overall costs of pursuing their claims in this fashion outweigh any benefits that might accrue to them or to society. (Emphasis added)

[62] I have come to the conclusion that this is such a case. It follows that in my opinion the appeal must be allowed and the order of Sharpe J. certifying this action as a class proceeding set aside.

V. Costs

[63] At the conclusion of submissions both counsel indicated that they would not be seeking costs. Accordingly, no costs would be awarded.

Appeal allowed.

APPENDIX: Chain of Distribution--Iron Oxide Pigment

Principal Pigment Producers Selling in Canada, 1984-1994

DE MATEOS Norpico Pfizer/Harcros Bayer HAMBURGER COLUMBIAN CHEMICAL DEANSHANGER

PIGMENT DISTRIBUTORS

(including McKenzie & Feinmann, L.V. Lomas, Norpico)

PRODUCERS OF BRICK, ROOF TILE, MORTAR, PAVING STONE, CONCRETE BLOCK, PATIO BLOCKS AND RETAINING WALLS (MORE THAN 35 PRODUCERS--BAYER SOLD TO ONLY 4 BRICK PRODUCERS AND ONLY 3 PAVING STONE PRODUCERS)

PIGMENT INTEGRATED INTO BUILDING MATERIALS

Building Material Distributors

Subcontractors

(BUILDING MATERIALS INTEGRATED INTO STRUCTURES)

General Contractors

Residential, Commercial and Industrial Builders

REAL ESTATE MARKET--SALES AND RESALES

1,933,000 HOUSING STARTS 1984-1994

ALL INDUSTRIAL CONSTRUCTION 1984-1994

ALL COMMERCIAL CONSTRUCTION 1984-1994

ALL OTHER USES OF BRICK, ROOF TILE, MORTAR, PAVING STONE, CONCRETE BLOCK, PATIO BLOCKS AND RETAINING WALLS

SOURCES: AFFIDAVIT OF AVININDER CHADHA, EXHIBITS "F", "G", APPEAL BOOK VOL. 1, pp. 108, 120, 145 AFFIDAVIT OF RONALD WETLAUFER, paras. 12, 19, 23, 45, APPEAL BOOK VOL. 1, pp. 120, 194, 197, 198, 204