Court of Appeal for Ontario

Date: 2018-02-01

Docket: M48474 (C64361)

Judges: Simmons, Roberts and Nordheimer JJ.A.

Between

Shirley Houle and Roland Houle Responding Parties (Appellants)

and

St. Jude Medical Inc. and St. Jude Medical Canada, Inc. Moving Parties (Respondents)

Counsel

Brandon Kain and Vladimira Ivanov, for the moving parties/respondents

Margaret Waddell, for the responding parties/appellants and proposed class counsel

Benjamin Zarnett and David Lederman, for Bentham IMF Capital Limited

Heard: January 18, 2018

Decision

Nordheimer J.A.:

[1] Jurisdiction and Background

[1] The appellants have appealed from the order of Justice Paul Perrell of the Superior Court of Justice dated August 29, 2017. The moving parties bring this motion to quash the appeal on the basis that the order in issue is an interlocutory, not final, order and thus is only appealable to the Divisional Court with leave. This motion represents yet another salvo in the seemingly never ending battle over what orders are final and what orders are interlocutory.

[2] The plaintiffs are proposed representative plaintiffs in a proposed class action. The proposed representative plaintiffs and proposed class counsel sought third party litigation funding from Bentham IMF Capital Limited ("Bentham"). The proposed representative plaintiffs, proposed class counsel and Bentham entered into a funding agreement dated August 6, 2017 (the "Funding Agreement") under which Bentham agreed to pay a portion of the legal fees and disbursements for the proposed class action on certain terms.

[3] The proposed representative plaintiffs brought a motion seeking approval of the Funding Agreement and for an order that would make the Funding Agreement binding on all putative class members. The motion judge conditionally approved the Funding Agreement, subject to certain changes being made to certain of its terms, failing which the approval motion would be dismissed. The proposed representative plaintiffs, proposed class counsel and Bentham all objected to the required changes. As a result, rather than make the changes to the Funding Agreement, they appealed the conditional approval order. In apparent recognition that there might be an issue over jurisdiction, appeals were taken both to this court and by way of a motion for leave to appeal to the Divisional Court.

[4] The moving parties contend that the order in issue is an interlocutory order and therefore any appeal lies to the Divisional Court with leave – Courts of Justice Act, R.S.O. 1990, c. C.43, s. 19(1)(b). The responding parties contend that the order is final and thus the appeal lies to this court – Courts of Justice Act, s. 6(1)(b).

[2] The Problem of Defining Final Orders

[5] The problem that this motion once again raises is that there is no definition in the Courts of Justice Act as to what constitutes a final order. This problem is exacerbated by the fact that, notwithstanding the many decisions on the subject, they have not always followed a consistent approach for determining whether an order is final or interlocutory. As Laskin J.A. said in Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc., 2007 ONCA 497, 87 O.R. (3d) 443, at para. 37:

And yet, despite the very large number of decisions on whether a particular order is final or interlocutory, our court's jurisprudence on the distinction has been anything but a model of consistency.

[3] The Foundational Test: Hendrickson v. Kallio

[6] In an effort to resolve the problem, it is of assistance to return to what appears to be the first decision by this court that attempted to delineate the difference between final and interlocutory orders, that is, Hendrickson v. Kallio, [1932] O.R. 675 (C.A.). In that decision, Middleton J.A. said, at p. 678:

The interlocutory order from which there is no appeal is an order which does not determine the real matter in dispute between the parties – the very subject matter of the litigation, but only some matter collateral. It may be final in the sense that it determines the very question raised by the applications, but it is interlocutory if the merits of the case remain to be determined.

[4] Expansion of the Test: Ball v. Donais and Sun Life

[7] Subsequent cases have expanded on that definition. The decision in Ball v. Donais (1993), 13 O.R. (3d) 322 (C.A.) held that where a substantive right of a party was determined, even if other aspects of the proceeding remained to be determined, the resulting order was a final order. This approach was explained in Sun Life Assurance Co. v. York Ridge Developments Ltd. (1998), 116 O.A.C. 103 where Weiler J.A. said, at para. 13:

As stated in Holmsted and Watson on Ontario Civil Procedure at 62-24: "Ball holds that what the Hendrickson test really means is that to be final an order must deal with the substantive merits as opposed to mere procedural rights, no matter how important the procedural rights may be. The test focuses on whether the order under appeal finally disposes of the rights of the parties, in the sense of substantive rights to relief (in the case of a plaintiff) or a substantive defence (in the case of a defendant)."

[5] Interlocutory Orders in Class Proceedings

[8] In support of their position, the moving parties point to various decisions that have dealt with this issue and which have held that the following are all interlocutory orders in the context of class proceedings: orders for security for costs, carriage orders, and orders denying approval of a settlement.

[6] The Complication of Non-Party Orders

[9] The issue in this case is complicated, however, by the fact that two of the parties appealing the conditional approval order are not, strictly speaking, parties to the proceeding. Where "non-parties" are involved, the question of whether an order is final or interlocutory is made more difficult. [1] Indeed, these cases would appear to demonstrate the lack of consistency to which Laskin J.A. referred. Needless to say, the responding parties key in on this distinction to advance their position that the order in issue here is final.

[7] The Smerchanski Principle

[10] The responding parties begin with the decision in Smerchanski v. Lewis (1980), 30 O.R. (2d) 370 (C.A.) where Arnup J.A. said, at p. 374:

This Court has held that an order made in a contest between a party to an action and someone who is not a party is a final order, appealable without leave, if the order finally disposes of the rights of the parties in the issue raised between them.

[11] The responding parties refer to certain decisions that have followed on that principle including Morse Shoe (Canada) Ltd. v. Zellers Inc. (1997), 100 O.A.C. 116; Pennington v. Hawley, [2005] O.J. No. 3591 (C.A.) and CanWest MediaWorks Inc. v. Canada (Attorney General), 2007 ONCA 567, 227 O.A.C. 116.

[8] Reconciling the Jurisprudence

[12] It is difficult, in my view, to reconcile the rationale expressed in many of these "non-party" decisions with the fundamental principle that was set out in Hendrickson, as further explained in Ball. It seems difficult to understand how the issues raised in those decisions, in most instances, could be seen as anything but "collateral", as that term was used in Hendrickson, even if the particular issue involving the non-party was finally determined. It is also inconsistent with the point made in Waldman v. Thomson Reuters Canada Ltd., 2015 ONCA 53, 330 O.A.C. 142, where MacFarland J.A. said, at para. 22:

This submission presumes that, to be a final order, an order need only dispose finally of whatever issue was before the motion judge irrespective of whether the order terminates the action or resolves a substantive claim or defence of the parties. Were that so, the distinction between interlocutory and final orders would cease to exist.

[13] This point has been picked up in more recent decisions of this court where an effort has been made to confine the decision in Smerchanski to its particular facts. As Finlayson J.A. said in CC&L Dedicated Enterprise Fund (Trustee of) v. Fisherman (2001), 55 O.R. (3d) 794 (C.A.), at para. 16:

When given its broadest interpretation, the principle in Smerchanski v. Lewis, supra, does not fit comfortably with the general test for determining whether an order is interlocutory or final, as set out in Hendrickson v. Kallio, [1932] O.R. 675 (C.A.) and clarified in subsequent cases such as Ball v. Donais (1993), 13 O.R. (3d) 322 (C.A.). Smerchanski was not intended to mean that all orders directed to a non-party must be final, and the principle expressed therein should not be further expanded in that way.

[14] The effort to confine Smerchanski was repeated in Ambrose v. Zuppardi, 2013 ONCA 768, 368 D.L.R. (4th) 749, where this court agreed with the view expressed above in CC&L.

[9] Application to the Present Case

[15] All of that said, it is not necessary to fully and finally reconcile all of these cases, assuming that would be possible, in order to determine the issue here. That is because, in my view, the order in issue here did not finally dispose of the rights of proposed class counsel and Bentham. On that point, the contents of the actual formal order are important. The operative part of the order reads:

THIS COURT ORDERS that the Funding Agreement is approved if an amended Funding Agreement, revised in accordance with the directions in the Reasons released August 29, 2017, is delivered to the Court within 60 days, failing which the motion for approval is dismissed.

[16] The motion judge did not dismiss the approval motion. Rather, his order conditionally approves the Funding Agreement, subject to certain revisions being made to it. Subject to making the required revisions, the proposed representative plaintiffs, proposed class counsel and Bentham got what they had asked the motion judge for – approval of the funding agreement.

[17] Instead, the responding parties decided not to revise the Funding Agreement, and, as a result, their motion for approval was dismissed. In that respect, the order here is akin to other forms of conditional orders, such as an order for security for costs. Where security for costs is ordered, if the security is not posted, the proceeding may come to an end. Nevertheless, the order requiring that security be posted is still an interlocutory order. On this point, I adopt the observation in Inforica Inc. v. CGI Information Systems and Management Consultants Inc., 2009 ONCA 642, 97 O.R. (3d) 161, where Sharpe J.A. said, at para. 26:

I recognize that failure to satisfy an order for security for costs may lead to a dismissal of the claim, but the sanction for non-compliance with an order cannot alter the nature of the order itself. … But if the claim is dismissed, the dismissal flows from the party's failure to comply with the interlocutory or procedural order, not from the order itself, and does not alter the interlocutory or procedural nature of the order that led to dismissal.

[18] In my view, that point is apposite to the issue that is raised here. It is also consistent with the point made in Sun Life that, in order to be a final order, the order "must deal with the substantive merits as opposed to mere procedural rights, no matter how important the procedural rights may be". No substantive right was determined by the conditional approval order. While the responding parties say that the result is the end of the litigation because the proposed representative plaintiffs will not have funding to pursue their claim, that result is a consequence of the responding parties' decision not to amend the Funding Agreement. It is not a necessary result of the order. Consequently, I conclude that the order in issue is an interlocutory order, only appealable to the Divisional Court with leave.

[10] Standing Issue Not Addressed

[19] In light of that conclusion, I do not need to address the other issue raised by the moving parties, that is, whether Bentham has standing to appeal the order.

Disposition

[20] The appeal is quashed. The moving parties are entitled to their costs of the motion fixed in the agreed amount of $5,000 inclusive of disbursements and HST.

Released: February 1, 2018

"I.V.B. Nordheimer J.A."

"I agree. Janet Simmons J.A."

"I agree. L.B. Roberts J.A."

Footnote

[1] While I accept that proposed class counsel and Bentham are "non-parties", that is not the same thing as accepting that they are "strangers" to the proceeding as that term has been used in many of the non-party cases. I leave for another day whether that distinction suggests that a different approach should be taken to the final/interlocutory analysis.