COURT FILE NO.: 228/05

DATE: 20050822

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N:

KAREN WEBB

Plaintiff

• and -

3584747 CANADA INC.

Defendant

Michael McGowan and David Deluzio for the Plaintiff

John C. Field and Glenn P. Christie for the Defendant

HEARD: June 24, 2005

AMENDED REASONS FOR JUDGMENT

Pitt J.

1This is a motion brought by the Defendant for leave to appeal to the Divisional Court from the Orders of the Honourable Mr. Justice Brockenshire (the “motion judge”), dated February 11, 2005 and May 31, 2005.

2The February 11, 2005 decision dismissed the Defendant’s motion for an Order decertifying this action as a class proceeding. The May 31, 2005 decision varied the process (in part) for the adjudication of the individual class members’ claims.

3Leave is sought pursuant to Rule 62.06(4)(b) only. This subsection provides that leave shall not be granted unless there appears to a Judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted. In Ash v. Lloyd Corp. (1992), 1992 7652 (ON SC), 8 O.R. (3d) 282 (Gen. Div.), the court held it is not necessary to conclude that the decision in question is wrong or probably wrong, but that its correctness is open to serious debate.

GROUNDS FOR LEAVE

4The following are the grounds for leave set out in the defendant’s factum.

(i) the motion judge erred, in the face of the experience of the parties, in finding that entitlement to reasonable notice in an indefinite term employment contract, which exists by operation of law, was a common issue which satisfied the test under Section 5(1)(c) of the Class Proceedings Act, 1992 S.O., Chapter 6 (“CPA”);

(ii) the motion judge erred in finding that the Defendant’s acknowledgement that reasonable notice, absent cause for dismissal, was required upon termination, constituted an “admission of liability”;

(iii) the motion judge erred in finding that this “admission of liability” was a common issue which advanced the litigation;

(iv) the motion judge erred in finding that the preferability test in Section 5(1)(d) of the CPA continued to be met. The motion judge made this finding in the face of the evidence and the experience of the parties which established that the references constituted individual wrongful dismissal trials;

(v) the motion judge erred in finding that there was a workable plan under Section 5(1)(e) of the CPA.

5There is legislative jurisdiction conferred by section 10(1) of the CPA to decertify proceedings where the conditions required by section 5(1) cannot ultimately be satisfied.

6The defendant further submits that there is good reason to doubt the correctness of the motion judge’s decision in varying the process for the reference hearings. The motion judge erred in ordering that Rule 49 does not apply unless an offer to settle is made “within 10 days after the date for a hearing has been confirmed”, thereby depriving the parties of a substantive right under the Rule and which was used to support certification in the first place.

FACTS

7The main action involves former employees of K-Mart Canada Ltd. whose employment was terminated when thirty-one K-Mart stores were closed across Canada as a result of being merged with Zellers and the Bay stores. Roughly five thousand employees were let go (not including those in British Columbia and Quebec or those under union contracts or written contracts with fixed termination dates or terms). The employees were provided with various amounts of working notice and pay in lieu of notice at the time of dismissal. The claimants allege that they were wrongfully dismissed.

8On June 14, 1999, the motion judge certified the former employees’ action for wrongful dismissal as a national class action, with the common issues being:

(a) Whether class members’ contracts of employment required the defendant to provide them with reasonable notice of termination, and /or pay in lieu of notice, if dismissed without just cause; and

(b) whether the class members were so dismissed.

See Webb v. K-Mart Canada Ltd. (1999), 1999 15076 (ON SC), 45 O.R. (3d) 389 (S.C.J.).

9The motion judge excluded, from the class, persons dismissed for just cause, and proceeded to grant summary judgment on the common issues. The defendant’s motion for leave to appeal the certification was dismissed (Webb v. K-Mart Canada Ltd (1999), 1999 15087 (ON SC), 45 O.R. (3d) 638 (S.C.J.)) and the appeal with respect to the common issues was abandoned.

10A process was set up for the determination of the individual issues such as quantum of damages and efforts to mitigate. Summary hearings were to be held, if necessary, before retired judges who were members of ADR Chambers. Twenty-four claims were heard in this manner, which proved to be expensive – the costs were frequently higher than the amounts awarded. As a result, the class counsel applied to amend the hearing system to something less expensive. The motion judge amended the process so that deputy judges of the Small Claims Court were to be appointed as referees for the claims heard in Ontario. See Webb v. K-Mart Canada Ltd. (2001), 2001 27975 (ON SC), 54 O.R. (3d) 587 (S.C.J.). This amendment was successfully appealed to the Divisional Court, affirmed by the Court of Appeal, leave to the Supreme Court of Canada was denied, on the ground that the motion judge exercised the power reserved to the Chief Justice under s. 14(1) of the Courts of Justice Act to direct and supervise the sittings of the Superior Court of Justice and the assignment of its judicial duties. See Webb v. 3584747 Canada Ltd. (2002), 24 C.P.C (5th) 76 (Ont. Div. Ct.), aff’d (2004), 2004 14453 (ON CA), 69 O.R. (3d) 502 (C.A.), leave to appeal to S.C.C. dismissed [2004] S.C.C. No. 114.

11It is instructive to refer to paragraph 13 of the Divisional Court’s decision:

In reaching our conclusion, we are not to be taken as having agreed with the appellant’s attack upon the Judge’s finding that the ADR referral system had failed. There was ample evidence in support of that finding and we would not interfere with it.

Paragraph 18 of the Court of Appeal’s endorsement also states as follows:

We are sympathetic to the efforts of the motion judge to bring about an expeditious resolution of these claims. If the motion judge had appointed Small Claims Court judges as individuals in their private capacity to be paid in accordance with the direction of the referee rather than by the government, and without the involvement of the court’s administrative staff, we do not think that s. 14(1) of the Courts of Justice Act would have been contravened. Indeed, we hope that counsel will be able to agree upon an approach to appointing referees that will result in the individual claims being dealt with in an expeditious and cost-effective manner.

12The plaintiff thereafter brought a motion to appeal the individual hearing system to correct the defects found by the Divisional Court and the Court of Appeal. The defendants brought a cross-motion to decertify the case. The motion judge granted the plaintiff’s motion and dismissed the defendant’s motion. He concluded that:

Despite all of the intervening problems and delays in the many years since certification, in my view the original reasons for finding a class action to be the best procedure still apply, and to this must be added two other factors. First, there are roughly 1,000 of the approximate 5,000 class members who have filed claims. Mr. Field puts that forth as a reason to not continue with a class action, as 80% dropped out. This is of course a great interim success for the defence. However, I am concerned over the 1,000 or so that have been waiting to have their claims processed. If they are now told that the class action, on which they had pinned their hopes and in which they had participated, has been de-certified and they are on their own to seek their own personal legal representation, I have a real concern as to whether that would put the administration of justice in disrepute. Further, by the terms of the Class Proceedings Act, s. 28 (1), limitation periods are suspended for the class members. Mr. Field has indicated that if the action were de-certified, his firm would undertake to waive any limitation defence. However, I have some real concern over whether under the new Limitations Act now effect, such a waiver can be made or enforced. (Webb v. 3584747 Canada Inc. (2005) 2005 3226 (ON SC), 40 C.C.E.L. (3d) 74, [2005] O.J. No. 449 (S.C.J.) at para. 27).

CURRENT STATUS OF THE ACTION

13About 1005 class members have perfected claims, of which 48 have been resolved, 24 being adjudicated and 24 by individual settlement. Some 957 class members are still waiting resolution.

DEFENDANT’S POSITION

14As I understand the defendant’s argument, the motion judge made a major error in law when he certified the action since he found a common issue, in the entitlement of the class members to reasonable notice of termination, a fact the motion judge held was “admitted by the defendants”. The defendant also submits that the motion judge made an error in finding that the common issues significantly move the litigation forward as required by Hollick v. Toronto (City) (2001), 2001 SCC 68, 205 D.L.R. (4th) 19 at 36-37, para. 32 (S.C.C.) and Cloud v. The Attorney General of Canada et al. (2005), 73 O.R. (2d) 401 at 424 (C.A.).

15The defendant submits, in substance, that the referral hearings mandated by the certification process were in essence wrongful dismissal trials that would inevitably overwhelm the determination of the common issues.

16The defendant further submits that the motion judge failed to appreciate that the task posed by the common issues test is not to elucidate the various individual issues which may remain in the common trial, but to investigate whether there are aspects of the case that meet the certification requirement, as set out in Cloud v. Attorney General of Canada, supra, p.415, para. 53.

17The defendant says, in short, the common issues identified by the motion judge are not common issues at all, but well-established principles of law that the defendant does not dispute. In addition, the acknowledgment of a well-established legal principle, like a requirement for reasonable notice in defending a wrongful dismissal action, does not amount to an admission of liability.

18The defendant summarized that part of their argument in paragraphs 53-57 of the factum:

(53) The issue in dispute between the parties is not whether the defendant was required to provide reasonable notice upon termination (as this principle is well established by operation of law) but whether the amount of notice of termination provided to each class member at the time of their dismissal was reasonable in all of the relevant, individual circumstances.

(54) In Bardal v. Globe and Mail, McRuer J. held as follows, with respect to the determination as to whether the notice of termination provided by an employer was reasonable:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.

(55) There is no formula for deciding whether the notice of termination provided to an employee is “reasonable”: “[d]etermining the reasonable notice period is an art not a science”.

(56) The amount of notice owing can be reduced by any replacement earnings that an employee earns during the period of notice of termination. The court will also consider whether the employee has made reasonable efforts to find replacement work. Some of the factors considered by courts in determining whether an employee’s job search was “reasonable” include: the employee’s personal circumstances; the geographical location of the alternative work; pay and status and responsibility.

(57) The only common fact between the class members is that they were employed, prior to their termination, by the defendant. Any other issues of fact, specifically those listed in Bardal, supra, are not common. The determination of reasonable notice and mitigation activity is entirely based on the individual’s personal circumstances.

19The defendant submits that the motion judge made an error in resolving the preferable procedure issue in favour of the plaintiff, by failing to recognize that the class proceeding is not preferable for the resolution of the common and individual issues as required by cases like Hollick, Cloud and Chadha v. Bayer Inc. (2003), 2003 35843 (ON CA), 63 O.R. (3d) 22 at 41-42, paras. 53-54 (C.A.).

20The defendant argues that in order to find the class proceeding preferable, it must be found, at a minimum, that it achieves one of the goals of judicial economy, improved access to the courts, and modification of behaviour of active or potential wrongdoers; and neither of these goals has been achieved and experience of the process has shown that they are not achievable.

21Since the nature of the claim is predominantly individual and the certification will result in a multitude of trials that will overwhelm any advantages gained by the trial of a few common issues, a class proceeding is not preferable, as decided in cases like Hollick, Pearson v. Inco Ltd. (2002), 33 C.P.C. (5th) 264 at 299, para. 115 (Ont. Sup. Ct.) and Mouhteros v. De Vry Canada Inc. (1998), 1998 14686 (ON SC), 41 O.R. (3d) 63 at 73 (Gen. Div.).

22In the view of the defendant, there were at least 19 individual issues and only 2 alleged common issues.

23The defendant also submits that the motion judge made a major error in concluding that the representative plaintiff has a workable plan for advancing the proceeding, as the plaintiff has been required to approach the court from time to time to change his plan.

24Finally the defendant submits that the motion judge made a major error in his variation order by introducing a procedure that would have the effect of undermining the objective of Rule 49. That procedure mandated the application of Rule 49 only if an offer to settle is made within 10 days after the date that a hearing is confirmed.

DISPOSITION

25It is notable that although this case has been to both the Divisional Court and the Court of Appeal, admittedly on an issue that is not before this Court, in neither court was there the slightest suggestion that this was not an appropriate case for a class proceeding. In fact, in both the passages referred to earlier from those courts, one can discern something in the nature of an endorsement of the proceedings, subject to the resolution of the jurisdictional issue involving section 14(1) of the Courts of Justice Act.

26In addition, it is important to recognize the deference due to class action judges endorsed by both the Divisional Court and the Court of Appeal. See Anderson v. Wilson (1999), 1999 3753 (ON CA), 44 O.R. (3d) 673 (C.A.) at 667; Brimner v. VIA Rail Canada Inc. (2001), 15 C.P.C. (5th) 27 (Ont. Div. Ct.) and Carom v. Bre-X Minerals Ltd. (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236 (C.A.).

27There is no reason to believe that the motion judge did not appreciate the true nature of wrongful dismissal law, which is admittedly preoccupied almost exclusively with the appropriateness of notice or salary in lieu of notice.

28I am also of the view that section 25(1), (2) and (3) of the CPA effectively dispose of the procedural objections raised by the defendants. This section reads as follows:

Individual issues

(1) When the court determines common issues in favour of a class and considers that the participation of individual class members is required to determine individual issues, other than those that may be determined under section 24, the court may,

(a) determine the issues in further hearings presided over by the judge who determine the common issues or by another judge of the court;

(b) appoint one or more persons to conduct a reference under the rules of court and report back to the court; and

(c) with the consent of the parties, direct that the issue be determined in any other manner.

Directions as to procedure

(2) The Court shall give any necessary directions relating to the procedures to be followed in conducting hearings, inquiries and determinations under subsection (1), including directions for the purpose of achieving procedural conformity.

Idem

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

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

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

29While the proceeding is not without its difficulties, there does not appear to be any good reason to doubt the correctness of the orders in question. In fact, my reading of Cloud, supra,at para. 53 is that it supports certification in this case:

In order words, an issue can constitute a substantial ingredient of the claims and satisfy s.5 (1)(c) even if it makes up a very limited aspect of the liability question and even though many individual issues remain to be decided after its resolution. In such a case the task posed by s.5 (1)(c) is to test whether there are aspects of the case that meet the commonality requirement rather than to elucidate the various individual issues which may remain after the common trial. This is consistent with the positive approach to the CPA urged by the Supreme Court as the way to best realize the benefits of that legislation as foreseen by its drafters.

30The motion is accordingly dismissed.

COSTS

31Subject to any agreement between the parties, brief written submissions on costs are to be made within 20 days of the release of these reasons.

Pitt J.

Released: August 22, 2005

COURT FILE NO.: 228/05

DATE: 20050822

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N:

KAREN WEBB

Plaintiff

• and -

3584747 CANADA INC.

Defendant