Markson v. MBNA Canada Bank

85 O.R. (3d) 321

Court of Appeal for Ontario,

Rosenberg, MacPherson and Rouleau JJ.A.

May 2, 2007

Civil procedure -- Class proceedings -- Plaintiff bringing proposed class proceeding seeking damages for breach of contract and declaratory, injunctive and restitutionary relief based on allegation that defendant received interest on cash advances in violation of s. 347(1)(b) of Criminal Code -- Motion judge erring in refusing to certify action as class proceeding because restitution and breach of contract claims did not raise common issues and because class proceeding was not preferable procedure with respect to claims for declaratory and injunctive relief -- Sections 23 and 24 of Class Proceedings Act offering solution to common issues problem with respect to restitution and breach of contract claims -- Class proceeding preferable procedure and indeed only viable procedure for remedying alleged wrong and calling defendant to account -- Class Proceedings Act, 1992, S.O. 1992, c. 6, ss. 23, 24.

The plaintiff brought a proposed class proceeding against the defendant alleging that the defendant received interest on cash advances in violation of s. 347(1)(b) of the Criminal Code, R.S.C. 1985, c. C-46. The plaintiff sought a declaration to that effect and injunctive relief to prevent the defendant from continuing its practice. He sought damages for breach of contract and restitution for the amounts received by the defendant in excess of the permissible interest rate. Finally, he sought punitive damages. A motion for certification as a class proceeding under the Class Proceedings Act, 1992 (the "CPA") was dismissed. The motion judge refused certification because the restitution and breach of contract claims did not raise common issues and because a class proceeding was not the preferable procedure with respect to the balance of the claims. The Divisional Court affirmed that decision. The plaintiff appealed.

Held, the appeal should be allowed.

On appeal to the Court of Appeal, the plaintiff for the first time submitted that ss. 23 and 24 of the CPA offered a solution to the common issues problem with respect to the restitution and breach of contract claims. Provided the defendant is not prejudiced, it is open to a plaintiff to recast its case to make it more suitable for certification. The defendant in this case had not shown prejudice.

If the common issues relating to the application for a declaration and injunctive relief were to be determined in the plaintiff's favour, the trial court would have found that the defendant received interest in excess of an effective annual rate of 60 per cent on cash advances. Thus, liability to some class members would have been established. At least some members of the class would therefore be entitled to a remedy, either by way of restitution or damages for breach of contract. Those two findings -- liability and entitlement to a remedy -- were sufficient to trigger the application of ss. 23 and 24 of the CPA. Section 23 could be used to calculate the global damages figure, and s. 24 could be used to find a way to distribute the aggregate sum to class members. The requirement in s. 24(1) that 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 is satisfied where potential liability can be established on a class-wide basis, but entitlement to monetary relief may depend on individual assessments, which may be impractical or inefficient.[page322]

The motion judge erred in principle in his analysis of whether a class proceeding was the preferable procedure. Without class actions, those who cause widespread but individually minimal harm might not take into account the full costs of their conduct. The preferability inquiry should be conducted through the lens of the three principal advantages of a class proceeding: judicial economy, access to justice and behaviour modification. This was manifestly a case where a class proceeding was not only the preferable procedure, but also the only viable procedure for remedying the alleged wrong and calling the defendant to account.

APPEAL from the judgment of the Divisional Court (Dunnet, Jennings, O'Driscoll JJ.), reported at (2005), 2005 39888 (ON SCDC), 78 O.R. (3d) 39, [2005] O.J. No. 4625 (Div. Ct.), dismissing an appeal from the order of Cullity J., reported at (2004), 2004 6214 (ON SC), 71 O.R. (3d) 741, [2004] O.J. No. 3226 (S.C.J.), refusing to certify an action as a class proceeding.

Cases referred to Chadha v. Bayer Inc. (2003), 2003 35843 (ON CA), 63 O.R. (3d) 22, [2003] O.J. No. 27, 31 B.L.R. (3d) 214, 23 C.L.R. (3d) 1, 31 C.P.C. (5th) 40 (C.A.), supp. reasons [2003] O.J. No. 1162, 223 D.L.R. (4th) 158 (C.A.) [Leave to appeal to S.C.C. refused [2003] S.C.C.A. No. 106]; Gilbert v. Canadian Imperial Bank of Commerce, [2004] O.J. No. 4260, [2004] O.T.C. 902 (S.C.J.); Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, [2001] S.C.J. No. 67, 56 O.R. (3d) 214n, 205 D.L.R. (4th) 19, 277 N.R. 51, 24 M.P.L.R. (3d) 9, 2001 SCC 68, 13 C.P.C. (5th) 1; Pearson v. Inco Ltd. (2006), 2005 42474 (ON CA), 78 O.R. (3d) 641, [2005] O.J. No. 4918, 205 O.A.C. 30, 261 D.L.R. (4th) 629, 43 R.P.R. (4th) 43, 20 C.E.L.R.(3d) 258, 18 C.P.C. (6th) 77 (C.A.), supp. reasons 2006 7666 (ON CA), [2006] O.J. No. 991, 208 O.A.C. 284, 20 C.E.L.R.(3d) 292, 25 C.P.C. (6th) 1 (C.A.) [Leave to appeal to S.C.C. refused [2006] S.C.C.A. No. 1]; Smith v. National Money Mart Co., [2007] O.J. No. 46, 29 E.T.R. (3d) 199, 37 C.P.C. (6th) 171 (S.C.J.), consd Other cases referred to 1176560 Ontario Ltd. v. Great Atlantic & Pacific Co. of Canada Ltd. (2004), 2004 16620 (ON SCDC), 70 O.R. (3d) 182, [2004] O.J. No. 865 (Div. Ct.), affg (2002), 2002 6199 (ON SC), 62 O.R. (3d) 535, [2002] O.J. No. 4781, 28 C.P.C. (5th) 135 (S.C.J.); Bodnar v. Cash Store Inc., [2006] B.C.J. No. 1171, [2006] 9 W.W.R. 41, 2006 BCCA 260, 55 B.C.L.R. (4th) 53 (C.A.); Carom v. Bre-X Minerals Ltd. (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236, [2000] O.J. No. 4014, 196 D.L.R. (4th) 344, 1 C.P.C. (4th) 62, 11 B.L.R. (3d) 1 (C.A.) [Leave to appeal to S.C.C. refused [2000] S.C.C.A. No. 660] (sub nom. 3218520 Canada Inc. v. Bre-X Minerals Ltd.); Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4924, 192 O.A.C. 239, 247 D.L.R. (4th) 667, [2005] 1 C.N.L.R. 8, 27 C.C.L.T. (3d) 50, 2 C.P.C. (6th) 199 (C.A.), supp. reasons [2005] O.J. No. 733, 7 C.P.C. (6th) 137 (C.A.) [Leave to appeal to S.C.C. [2005] S.C.C.A. No. 50]; Degelder Construction Co. v. Dancorp Developments Ltd., 1998 765 (SCC), [1998] 3 S.C.R. 90, [1998] S.C.J. No. 75, 58 B.C.L.R. (3d) 1, 165 D.L.R. (4th) 417, 231 N.R. 122, [1999] 5 W.W.R. 797, 129 C.C.C. (3d) 129, 20 R.P.R. (3d) 165, 20 C.R. (5th) 77, 5 C.B.R. (4th) 1; Garland v. Consumers' Gas Co., 1998 766 (SCC), [1998] 3 S.C.R. 112, [1998] S.C.J. No. 76, 40 O.R. (3d) 479n, 165 D.L.R. (4th) 385, 231 N.R. 1, 129 C.C.C. (3d) 97, 49 M.P.L.R. (2d) 77, 20 C.R. (5th) 44; Garland v. Consumers' Gas Co., [2004] 1 S.C.R. 629, [2004] S.C.J. No. 21, 186 O.A.C. 128, 237 D.L.R. (4th) 385, 319 N.R. 38, 2004 SCC 25, 43 B.L.R. (3d) 163, 9 E.T.R. (3d) 163; Healey v. Lakeridge Health Corp., [2006] O.J. No. 4277, 38 C.P.C. (6th) 145 (S.C.J.); Hickey-Button v. Loyalist College of Applied Arts & Technology, 2006 20079 (ON CA), [2006] O.J. No. 2393, 267 D.L.R. (4th) 601 (C.A.); Kumar v. Mutual Life Assurance Co. of Canada, 2003 48334 (ON CA), [2003] O.J. No. 1160, 226 D.L.R. (4th) 112 (C.A.); McCutcheon v. The Cash Store Inc. (2006), 2006 15754 (ON SC), 80 O.R. (3d) 644, [2006] O.J. No. 1860, 27 C.P.C. (6th) 293 (S.C.J.); Nantais v. Easyhome Ltd., [2005] O.J. No. 5805 (S.C.J.); Nelson v. C.T.C. Mortgage Corp., 1986 14 (SCC), [1986] 1 S.C.R. 749, [1986] S.C.J. No. 35, 29 D.L.R. (4th) 159, 67 N.R. 161, [1986] 4 W.W.R. 481, affg 1984 572 (BC CA), [1984] B.C.J. No. 3161, 59 B.C.L.R. 221, 16 D.L.R. (4th) 139, [1985] 2 W.W.R. 560 (C.A.); Rumley v. British Columbia, [2001] 3 S.C.R. 184, [2001] S.C.J. No. 39, 95 B.C.L.R. (3d) 1, 205 D.L.R. (4th) 39, 275 N.R. 342, [2001] 11 W.W.R. 207, 2001 SCC 69, 10 C.C.L.T. (3d) 1, 9 C.P.C. (5th) 1; Serhan Estate v. Johnson & Johnson, 2006 20322 (ON SCDC), [2006] O.J. No. 2421, 269 D.L.R. (4th) 279 (Div. Ct.); [page323] Vezina v. Loblaw Companies Ltd., [2005] O.J. No. 1974, [2005] O.T.C. 365 (S.C.J.); Western Canadian Shopping Centres Inc. v. Dutton, [2001] 2 S.C.R. 534, [2000] S.C.J. No. 63, 94 Alta. L.R. (2d) 1, 201 D.L.R. (4th) 385, 272 N.R. 135, [2002] 1 W.W.R. 1, 2001 SCC 46, 8 C.P.C. (5th) 1 (sub nom. Western Canadian Shopping Centres Inc. v. Bennett Jones Verchere) Statutes referred to Bank Act, S.C. 1991, c. 46 Bill C-265 An Act to Amend the Criminal Code (Criminal Interest Rate), 1st Sess., 39th Parl., 2006 Class Proceedings Act, 1992, S.O. 1992, c. 6, ss. 5, 10, 23, 24, 26 Criminal Code, R.S.C. 1985, c. C-46, s. 347 [as am.] Authorities referred to Driedger, E.A., Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983) Ontario, Report of the Attorney General's Advisory Committee on Class Action Reform (Ontario: Ministry of the Attorney General, 1990) Ontario Law Reform Commission, Report on Class Actions (Toronto: Ministry of the Attorney General, 1982)

Linda Rothstein and Kirk M. Baert, for appellant. William G. Horton and Jill M. Lawrie, for respondent.

The judgment of the court was delivered by

[1] ROSENBERG J.A.: -- The issue in this case is whether a claim based on allegations that a financial institution received interest on cash advances in violation of s. 347(1)(b) of the Criminal Code, R.S.C. 1985, c. C-46 is suitable for certification as a class action under the Class Proceedings Act, 1992, S.O. 1992, c. 6 ("CPA"). The alleged violation of s. 347(1)(b) turns on the fact that the defendant bank charges a flat fee (the transaction fee), in addition to compound interest, on every cash advance from its credit cards. Depending on other activity in the cardholder's account and the timing of repayment, it is possible that the interest rate calculated in accordance with s. 347 will exceed the 60 per cent maximum prescribed by s. 347. In these reasons I will refer to an effective annual interest rate exceeding 60 per cent as the criminal interest rate.

[2] The plaintiff seeks three types of relief. First, he seeks a declaration that the defendant's practice violates s. 347 and injunctive relief to prevent the defendant from continuing its practice. Second, he seeks damages for breach of contract and restitution for the amounts received by the defendant in excess of the permissible interest rate. Finally, he seeks punitive damages. [page324]

[3] Cullity J., an experienced class proceedings judge, refused to certify the class because the restitution and breach of contract claims did not raise common issues and because a class proceeding was not the preferable procedure with respect to the balance of the claims. His reasons are reported at (2004), 2004 6214 (ON SC), 71 O.R. (3d) 741, [2004] O.J. No. 3226 (S.C.J.). A majority of the Divisional Court (Dunnet and Jennings JJ.) upheld that decision. O'Driscoll J., dissenting, would have overturned the decision and certified the class proceedings. Their reasons are reported at (2005), 2005 39888 (ON SCDC), 78 O.R. (3d) 39, [2005] O.J. No. 4625 (S.C.J.).

[4] The fundamental question raised by the appeal is whether a class proceeding is appropriate where all members of the class are at risk of being charged a criminal interest rate and thus, potential beneficiaries of the declarative and injunctive relief sought, but only some of the members -- a much smaller number of the class -- were actually victims of the defendant's practice and thus, entitled to damages and restitution. A related issue is whether a class proceeding is the preferable procedure where it is reasonable to conclude that some, perhaps many, might actually prefer that the alleged illegal practice continue rather than risk losing the benefit of taking cash advances on their credit card or having additional restrictions imposed on the size of the advances and repayment terms.

[5] For the following reasons I would allow the appeal, set aside the orders of the Divisional Court and the motion judge, and substitute an order granting the motion for certification. In short, it is my view that a trial judge could find that this is an appropriate case for an aggregate assessment of monetary relief under s. 24 of the CPA. Accordingly, that section, together with the statistical sampling methods permitted by s. 23, will meet the individual assessment problem identified by the motion judge. I am also of the view that the motion judge erred in principle in his analysis of whether a class proceeding is the preferable procedure. As the Chief Justice said in Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534, [2000] S.C.J. No. 63, at para. 29"Without class actions, those who cause widespread but individually minimal harm might not take into account the full costs of their conduct." In my view, this is manifestly a case where a class proceeding is not only the preferable procedure, but also the only viable procedure for remedying the alleged wrong and calling the alleged wrongdoer to account.

The Facts

[6] The facts underlying this action are fully set out in the comprehensive reasons of the motion judge. I will, however, provide a [page325] brief summary of the relevant facts so that the legal issues can be properly understood. The defendant MBNA is a Schedule II bank under the Bank Act, S.C. 1991, c. 46. It issues MasterCard credit cards. Cardholders (or customers) can use their credit cards to make purchases and to obtain cash advances. The defendant charges a transaction fee for cash advances. At the applicable time, the transaction fee charged was the greater of $7.50 or 1 per cent of the cash advanced. For the purposes of the certification motion only, the defendant concedes that the transaction fee falls within the definition of interest in s. 347.

[7] In addition to the transaction fee, the cardholder is charged compound interest from the day the cash advance is made until it is paid off. While the cardholder is required to pay off a certain minimum amount outstanding on the credit card account each month, the cardholder is not required to pay down the account to zero every month. If a cardholder borrows less than $62.30, does not engage in any other transactions in the month, and pays off the cash advance, including the transaction fee and interest before the end of the month, the defendant will receive a payment of interest, as defined in s. 347, in excess of 60 per cent. Depending on how quickly the cardholder pays off the amounts owing, the effective annual interest rate can be astronomical, in the thousands of per cent.

[8] As this short explanation foreshadows, many variables influence whether or not the defendant receives interest at the criminal rate. The most important are the timing of repayment and other transactions on the account. For example, an isolated cash advance of $62.30, or more, will result in an effective annual interest rate of less than 60 per cent if the cardholder simply repays in accordance with the required minimum monthly payments. Similarly, if the cardholder uses the credit card to not only make cash advances but to purchase goods or services, which do not attract a transaction fee, the effective interest rate on the account may or may not exceed 60 per cent. There are various combinations and permutations that affect the interest rate calculation.

[9] The defendant claims that there is no simple way to determine the interest rate that it charged its customers on various transactions. As of December 2003, it had approximately 2.5 million credit card accounts with current charging practices. Between January 2000 and December 2003, there were eight million cash advance transactions. Of these eight million cash advances, 17 per cent were for amounts less than $62. It has no electronically-preserved data for the period before January 2000 and therefore provided no data as to the number of cash advances for that period. The motion judge described the defendant's position in these terms at para. 36: [page326]

It claims that it is not possible to determine from its database the effective annual interest rate received by it for each cash transaction and that this could be done only by manually and individually tracking each advance from the time it was made to the time it was repaid in full. Even then, assumptions would have to be made about the effect of multiple transactions in the accounts in order to determine when a particular advance was repaid in full.

[10] The plaintiff does not accept this position. The motion judge described his position in these terms at para. 37:

From the information provided in the affidavits filed on behalf of the defendant, a forensic accountant retained by the plaintiff indicated that he was not satisfied of the accuracy and completeness of MBNA's assertion that it cannot determine, on an automated basis, the effective annual interest rate it received for each cash transaction. In his opinion, if his firm was able to review MBNA's systems with the co-operation and assistance of its staff, it would be able to determine if it is possible to identify the potential class members and devise a system to do this.

[11] As I will discuss later when dealing with the question of common issues for the restitution claim, it appears that the motion judge accepted the defendant's position. As he said at para. 55: "There is, in my judgment, insufficient evidence of the likelihood that an appropriate electronic system can be developed -- and of the cost of doing this -- to justify certification of the restitutionary issues."

[12] The defendant denies that its practice in respect of cash advances violates s. 347(1)(b). It relies on a voluntariness defence arising from the decision of the Supreme Court of Canada in Degelder Construction Co. v. Dancorp Developments Ltd., 1998 765 (SCC), [1998] 3 S.C.R. 90, [1998] S.C.J. No. 75 and Garland v. Consumers' Gas Co., 1998 766 (SCC), [1998] 3 S.C.R. 112, [1998] S.C.J. No. 76 ("Garland No. 1"). Those cases hold that there is no violation of s. 347(1)(b) where a payment of interest exceeding 60 per cent arises from a voluntary act of the debtor. The defendant submits that because the cardholder can determine when to pay back the cash advance, whether to make other purchases, how much to borrow and so on, any payment of interest at the criminal rate is voluntary. The defendant submits that this voluntariness defence applies to all of the impugned transactions.

The Reasons of the Motion Judge

[13] The motion judge noted that at least with respect to the representative plaintiff there was little controversy about the facts; that resolution of the claim would depend more on issues of law than issues of fact. As he said at para. 17, the principal issue would relate to the interpretation of s. 347 of the Criminal Code:

The threshold question, that may determine the outcome of the litigation, is whether payments of excess interest on advances obtained pursuant to the [page327] cardholders agreement are necessarily to be considered voluntary. This is, I believe, a question of law as, essentially, it requires an elucidation of the definition provided by Major J. [in Degelder, supra].

[14] The motion judge then identified the central factual issues that would arise if the legal issues were determined in the plaintiff's favour. Factual investigations would be required to identify those cardholders who paid interest at a criminal rate and the amount paid in excess of 60 per cent in each case. [See Note 1 below] However, he indicated that such investigations would be required only in respect of the claim for restitution. This distinction appears to have dominated the motion judge's reasons and ultimately led him to find that a class proceedings is not the preferable procedure.

[15] After reviewing the evidence in much greater detail than I have done here, the motion judge turned to the requirements for certification in s. 5 of the CPA. With respect to s. 5(1) (a) -- disclosure of a cause of action -- as the motion judge noted, this issue was to be determined on the basis of the pleadings, including the provisions of the cardholders agreement and disclosure statement that were to be considered incorporated into the amended statement of claim. He held that the s. 5(1)(a) requirement was made out in respect of the cause of action relating to the alleged violation of s. 347 and consequent unjust enrichment. He was also satisfied that a cause of action based on breach of contract was made out on the theory that the respondent failed to credit excess payments of interest to its customers.

[16] As the motion judge noted, the requirement in s. 5(1)(b) -- existence of a class -- posed a problem of under and over- inclusion. The original class proposed in the statement of claim was as follows:

all persons who (i) hold or have held an MBNA Credit Card and (ii) paid, or have been charged, or will pay, or will be charged interest on Cash Advances on a MBNA Credit Card since MBNA commenced carrying on business in Canada, and the date of judgment in this matter.

[17] While this definition might suffice in respect of the claims for declaratory and injunctive relief, it was over- inclusive because it would include a large number of cardholders who never paid interest at the alleged criminal rate because they (i) never took cash advances or (ii) repaid their advances in a manner that did [page328] not trigger a criminal interest rate. These cardholders would have no restitution claim and, presumably, for the same reason no claim for breach of contract.

[18] The motion judge was also of the view that the definition could be criticized as under-inclusive because it excludes existing cardholders "who have not, and do not, pay interest within the defined period but may do so thereafter" (para. 38).

[19] In the end, the motion judge rejected the defendant's argument that the defined class was over-inclusive. He did so, it seems, on the theory that each member of the proposed class was potentially at risk of being charged a criminal interest rate and that there was no way to define the class more narrowly. The proposed definition had the advantage of allowing potential class members to identify themselves without running afoul of the rule that the class must be defined without reference to the merits of the claim. Thus, the motion judge rejected an alternative definition of the class that had been proposed by the plaintiff and would have restricted the class to those cardholders who made interest payments in excess of an effective annual rate of 60 per cent.

[20] The motion judge did, however, reformulate the original class definition because of a concern that the definition did not refer to persons who obtained cash advances after the date on which notice of certification was given. Accordingly, at para. 43, he proposed the following definition:

All persons in Canada who, at any time before the date [or the last of the dates] on which notice of certification is given pursuant to the order of this Court, hold or have held, an MBNA credit card on which cash advances could be obtained.

[21] The motion judge held that the common issues requirement prescribed in s. 5(1)(c) was met only with respect to the claims for a declaration and an injunction. Accordingly, at para. 60, he restated and reduced the original 12 common issues proposed to the following:

1. Has MBNA received interest in excess of an effective annual rate of 60 per cent on cash advances made under agreements or arrangements with class members?

2. If so, were, and are, class members entitled to withhold payment of such excess interest:

(a) because MBNA'S receipt of such excess interest would be in violation of s. 347 of the Criminal Code; or

(b) pursuant to such agreements or arrangements?

3. Should MBNA be [e]njoined from charging, or receiving and not crediting, excess interest in the future?

4. Should the class be awarded punitive damages against MBNA? [page329]

[22] The motion judge was of the view that issues concerned solely with the rights of class members to restitution "would not advance the proceeding sufficiently in view of the likelihood that it will be necessary to review the transactions of each cardholder in order to identify those who paid interest at a criminal rate, the amount of such payments and the variables that affected the rate in each case" (para. 53). In Appendix "A" I have set out the common issues proposed by the plaintiff before the motion judge. Some of the common issues rejected by the motion judge were: whether the defendant was required to pay to the class, as restitution, the transaction fees or, alternatively, the interest it has received from the class that exceeds an effective annual interest rate of 60 per cent and whether the cash advance transaction fee was incurred voluntarily by the class so as to give rise to a defence of voluntariness.

[23] The motion judge's finding that there were not appropriate common issues in respect of the restitution claim depended, in part, on his view that since it was unlikely that an electronic system could be developed to identify the transactions on which an effective interest rate exceeding 60 per cent was paid, the case would disintegrate into manually examining millions of transactions. Even if some kind of electronic system could be developed, the expense of this exercise would far exceed the benefit to the individual class members given the plaintiff's concession that restitution to individual cardholders would be in the neighbourhood of $7.50. Accordingly, the motion judge refused to certify the proceeding in respect of the issues directed solely at the restitutionary claims.

[24] The motion judge then addressed s. 5(1)(d), the question of preferable procedure, in relation to the balance of the claims. He seems to have found that a class proceeding would meet the goals of access to justice and behaviour modification. He did not expressly deal with the third goal -- judicial economy. Rather, he found that the preferable procedure requirement was not met in relation to the claims for declaratory and injunctive relief because if the action succeeded, the defendant would be required to comply with the law and compliance with the law would reduce the credit options available to consumers. The basis for this finding was in an affidavit filed by the defendant. In short, the defendant asserted that to avoid receiving a criminal interest rate on transactions it could preclude customers from drawing less than a certain amount and repaying the advance before a certain date. In the result, customers would end up with fewer options and would be required to pay greater amounts of interest. As the motion judge put it at para. 67: "Given the declaratory and injunctive nature of the relief sought by the plaintiff, the right to [page330] opt out would provide cold comfort to class members who would prefer to pay less interest than to participate, as private citizens, in the enforcement of s. 347 of the Criminal Code."

[25] The motion judge considered that it would still be open to the plaintiff to pursue the litigation in his individual capacity, but it was not appropriate to force other consumers to join in the proceeding. As he said at para. 68:

Mr. Markson is free to pursue his objective in his individual capacity but that does not mean that the court should subject cardholders in general to the proceedings when there are reasons why they might well consider orders for the declaratory and injunctive relief as not in their best interests if they were informed of the likely consequences, and there is no evidence to the contrary.

[26] In the result, the motion judge refused to certify the proceeding in relation to the claims for a declaration and an injunction. He nevertheless went on to consider the final criterion, the presence of an appropriate representative plaintiff. The principal challenge to Mr. Markson as an appropriate representative plaintiff rested with the defendant's assertion that it had a defence to his claim that might not apply to the class as a whole based on evidence from which it could be inferred that the plaintiff had deliberately set out to create a transaction that resulted in him paying an effective rate of interest in excess of 60 per cent. The motion judge dealt with this issue at length and resolved the issue in the plaintiff's favour. Since this is not an issue on the appeal I will simply say that I agree with the motion judge's analysis.

[27] The motion judge did not expressly deal with whether the plaintiff had proposed an acceptable litigation plan. Again, however, this is not an issue on the appeal.

The Reasons of the Divisional Court

(a) The majority

[28] Writing for the majority of the Divisional Court, Dunnet J., Jennings J. concurring, agreed with the motion judge. At para. 47, she interpreted the reasons of the motion judge as holding that each cash advance transaction, including its surrounding circumstances"would have to be reviewed in order to determine whether interest at an effective annual rate in excess of 60 per cent was received by each cardholder, the quantum of such excess in each case, whether that receipt arose as a result of a voluntary act and whether, ultimately, the test for unjust enrichment in each case could be established". She held that the record before the motion judge disclosed that notwithstanding resolution of the proposed common issues, individual issues would have to be decided before the defendant's liability to any class member could [page331] be determined. Consequently, she concluded, at para. 49, that "the [plaintiff] failed to demonstrate that a common trial would adjudicate a substantial part of each class member's claims and thus failed to meet the commonality requirement regarding the restitutionary claims".

[29] The majority of the Divisional Court also agreed with the motion judge's analysis of preferable procedure respecting the restitutionary claims and the claims for injunctive and declaratory relief. In particular, the majority concluded, at para. 71, that the motion judge was "entitled to consider the potential negative consequences of a class action to class members when weighing alternative procedures".

(b) O'Driscoll J. (dissenting)

[30] O'Driscoll J., dissenting, held that the motion judge erred in several respects. First, he committed the error identified by this court in Carom v. Bre-X Minerals Ltd. (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236, [2000] O.J. No. 4014 (C.A.), leave to appeal to S.C.C. refused [2000] S.C.C.A. No. 660, by finding common issues in relation to some but not all of the causes of action notwithstanding the causes of action substantially overlapped. O'Driscoll J. held at para. 43 of his reasons that:

Far from being unrelated and disparate claims, in my view, the claim grounded in an alleged breach of s. 347 of the Code and the claim grounded in breach of contract and calling for restitution all revolve around whether the respondent received interest exceeding the rate allowed in s. 347 of the Code from the appellant and other members of the class when the cardholders obtained cash advances on their individual cards.

[31] Accordingly, the motion judge erred in separating these issues; the plaintiff had provided a sufficient basis to conclude that a resolution of common issues relating to breach of contract and restitution would, in a significant way, advance those claims. The motion judge also erred in finding that a class proceeding was not the preferable procedure because:

-- Individual actions would be cost prohibitive given the small amounts in issue for any individual. Thus, a class proceeding meets the goal of access to justice.

-- There was no undertaking from the defendant that it would stop its method of charging on cash advances. A class proceeding therefore meets the goal of behaviour modification.

-- The defendant's "in terrorem" argument about the sanctions it would impose upon its customers if it were forced [page332] to comply with the law is not a matter for the court, but for Parliament [See Note 2 below] and the marketplace (para. 55).

[32] Further, O'Driscoll J. was unimpressed with the argument that the plaintiff was not a suitable representative plaintiff. As he said at para. 34"In a 'clean hands' competition between these parties, in my view, the appellant would win in a walk." He concluded, at para. 60, that "this case fits perfectly into the mould designed for class proceedings". He would therefore have allowed the appeal and certified the class action with the common issues identified by the plaintiff, which have been reproduced in Appendix "A".

Analysis

(a) Introduction

[33] This court has repeatedly held that the decisions of experienced judges, like the motion judge in this case, are entitled to substantial deference. Accordingly, as was said in Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4924, 247 D.L.R. (4th) 667 (C.A.), at para. 39, leave to appeal to S.C.C. refused [2005] S.C.C.A. No. 50, this court "should restrict its intervention to matters of general principle".

[34] As indicated, the motion judge found that the following requirements of s. 5 of the CPA had been made out:

-- Disclosure of a cause of action (5(1)(a)) in relation to unjust enrichment based on a violation of s. 347 and breach of the cardholders agreement;

-- Existence of a class (5(1)(b));

-- Common issues (5(1)(c)) in relation to claims for injunctive and declaratory relief and punitive damages; and

-- Acceptable representative plaintiff (5(1)(e)).

[35] I agree with the motion judge with respect to those issues decided in the plaintiff's favour. Accordingly, I will address only the common issues criterion in relation to the claims for restitution and breach of contract, and the question of preferable procedure. [page333] In my view, the motion judge erred in principle with respect to the preferable procedure issue. I am also of the view that by recasting its case to take advantage of ss. 23 and 24 of the CPA, the plaintiff has met the concerns of the motion judge and the Divisional Court regarding common issues for the restitution and breach of contract claims.

(b) Common issues and the claims for restitution and breach of contract

[36] The fundamental problem underlying the question of issues common to the claims for restitution and breach of contract is that the defendant has structured its affairs such that it is practically impossible to determine the extent of its breach of s. 347 of the Criminal Code. In framing the issue in this way, I should not be taken as having found that the defendant deliberately structured its affairs to avoid a possible class proceeding or a finding that it violated s. 347. The fact remains, however, that the effect of the defendant's accounting practices is that the precise extent of any violation of s. 347 can be determined only at great cost.

[37] While the plaintiff continues to assert that it may be possible to design a computer programme that could determine the extent of the alleged breach of s. 347 and identify the individual cardholders who would be entitled to restitution or damages for breach of contract, I have not been persuaded that the motion judge's finding to the contrary is unreasonable. Accordingly, if the millions of transactions have to be examined individually, the motion judge is undoubtedly correct that those claims are not suitable for certification; the time and cost to determine the size of the liability in relation to each member of the class would overwhelm the common issues. However, if the motion judge is correct in finding that each transaction would have to be examined individually, the allegedly illegal conduct of the defendant will continue and its customers will receive no remedy for the previous violations.

[38] On appeal to this court the plaintiff for the first time submitted that ss. 23 and 24 of the CPA offer a solution to the common issues problem with respect to the restitution and breach of contract claims. The relevant provisions are as follows:

23(1) For the purposes of determining issues relating to the amount or distribution of a monetary award under this Act, the court may admit as evidence statistical information that would not otherwise be admissible as evidence, including information derived from sampling, if the information was compiled in accordance with principles that are generally accepted by experts in the field of statistics.

. . . . . [page334]

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.

[39] Provided the defendant is not prejudiced, it is open to a plaintiff to recast its case to make it more suitable for certification: see Kumar v. Mutual Life Assurance Co. of Canada, 2003 48334 (ON CA), [2003] O.J. No. 1160, 226 D.L.R. (4th) 112 (C.A.), at paras. 30-34 and Rumley v. British Columbia, 2001 SCC 69, [2001] 3 S.C.R. 184, [2001] S.C.J. No. 39, 205 D.L.R. (4th) 39, at para. 30. In sum, that is what has occurred here. While the plaintiff has not abandoned its position that it may be possible to design a computer programme to identify those customers who actually paid a criminal interest rate, he now suggests that in the alternative, an aggregate monetary award can meet the commonality concerns. The defendant has not shown how it has been prejudiced by this change in the plaintiff's position.

[40] The statistical sampling authorized by s. 23 cannot be used to determine the defendant's liability. Rather, s. 23 provides a means "of determining issues relating to the amount or distribution of a monetary award". Similarly, this court held in Chadha v. Bayer Inc. (2003), 2003 35843 (ON CA), 63 O.R. (3d) 22, [2003] O.J. No. 27 (C.A.), at para. 49, leave to appeal to S.C.C. refused [2003] S.C.C.A. No. 106, that s. 24 "is applicable only once liability has been established, and provides a method to assess the quantum of damages on a global basis, but not the fact of damage".

[41] If the common issues relating to the application for a declaration and injunctive relief were to be determined in the plaintiff's favour, the trial court will have found that the defendant received interest in excess of an effective annual rate of 60 per cent on cash advances. Thus, liability to some class members will have been established. At least some members of the class would therefore be entitled to a remedy, either by way of restitution or [page335] damages for breach of contract. In my view, those two findings -- liability and entitlement to a remedy -- are sufficient to trigger the application of ss. 23 and 24.

[42] As I have said, because of the way the defendant has structured its affairs it is practically impossible to determine the extent of its breach of s. 347. Once the common issues are resolved, it would be possible to review the statements of each individual cardholder and calculate the cardholder's damages. The vast number of accounts to be reviewed and the small potential award in each case are such that it is impractical and inefficient to do so. Sections 23 and 24 provide a means of avoiding the potentially unconscionable result of a wrong eluding an effective remedy.

[43] Pursuant to s. 24(1), the section applies if: (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 be reasonably determined without proof of individual claims. In my view, this is a case where the aggregate liability to all members of the class can be reasonably determined.

[44] The difficult issue in this case is whether s. 24 can apply where, as here, it is alleged that whether or not an individual was affected by a breach of contract or violation of the Criminal Code can only be done on a case-by-case basis. This depends on an interpretation of s. 24(1). Section 24 has received relatively little attention in the reported cases: see e.g., Serhan Estate v. Johnson & Johnson, 2006 20322 (ON SCDC), [2006] O.J. No. 2421, 269 D.L.R. (4th) 279 (Div. Ct.), at paras. 136-39. However, I agree with Cullity J. in Vezina v. Loblaw Companies Ltd., [2005] O.J. No. 1974, [2005] O.T.C. 365 (S.C.J.), at para. 25 that at the certification stage the plaintiff need only establish that "there is a reasonable likelihood that the preconditions in section 24(1) of the CPA would be satisfied and an aggregate assessment made if the plaintiffs are otherwise successful at a trial for common issues".

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

[46] This leaves condition (b). Can it be said that 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? The defendant submits that [page336] liability turns on individual assessments and therefore, resolution of common issues concerning the alleged breach of s. 347 and breach of contract would not establish its liability to any particular customer. If the defendant is correct, the kind of action sought to be pursued in this case will almost never be capable of certification. Large institutions allegedly receiving large amounts of illegal profits from millions of small transactions will effectively be immunized from suit.

[47] Condition (b) in s. 24(1) must be interpreted in light of the other parts of the section, and in particular, in light of s. 24(3). It is a basic tenet of statutory interpretation that any provision of a statute must be interpreted having regard to the entire context, as explained in Elmer A. Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983) at 87:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

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

[49] In the context of this case, if the plaintiff can establish that the defendant administered its cash advances in a manner that violated s. 347 and/or breached its contract with its customers, it will have established potential liability on a class-wide basis. Each member of the class would be entitled to declaratory and injunctive relief. The only matter remaining would be the application of the decision on the common issues to the specific account activity of each class member to determine that class member's entitlement to monetary relief. Section 23 can be used to calculate the global damages figure. Section 24 can be used to find a way to distribute the aggregate sum to class members. It may be that in the result some class members who did not [page337] actually suffer damage will receive a share of the award. However, that is exactly the result contemplated by s. 24(2) and (3) because "it would be impractical or inefficient to identify the class members entitled to share in the award".

[50] An example of such an award is found in Gilbert v. Canadian Imperial Bank of Commerce, [2004] O.J. No. 4260, [2004] O.T.C. 902 (S.C.J.). In that case, on consent, Winkler J. certified a class proceeding and approved a settlement. The defendant CIBC was alleged to have charged undisclosed and unauthorized fees or charges in relation to foreign currency transactions on VISA accounts. The members of the class were defined as all persons in Canada issued one or more CIBC VISA cards on or before a certain date. There was apparently no attempt to identify those members of the class who had actually used their VISA cards to conduct transactions in foreign currency.

[51] In Gilbert, CIBC agreed to pay $16.5 million to settle the claims. Slightly less than $14 million [See Note 3 below] was to be paid directly to class members in amounts ranging from 72 cents to $14.32. As Winkler J. observed at para. 15, these amounts were arbitrary and "[did] not purport to compensate class members in terms of actual amounts owing nor [did] they compensate only class members with valid claims". It would have been too costly and time consuming to determine liability and amount on an individual basis. Moreover, like this case, in Gilbert, records were not available for a significant portion of the period in question. But, as Winkler J. said, at para. 15"The CPA anticipates such a problem in s. 24(2) and (3) which provide that the court may order that an award be applied so that individual class members share in an award on an average or proportional basis and that the court shall consider whether it would be impractical or inefficient to identify class members entitled to share in the award or exact shares in making such a determination." [See Note 4 below]

[52] By resort to ss. 23 and 24 in this case it will be possible for the trial court to deal with the problem identified by the motion judge in para. 57 of his reasons that "the cost of investigating, and analyzing, the details of each cardholder's transactions with MBNA -- 8 million since 2000 -- and processing the claims of those who are found to have paid interest at a criminal rate, might well be quite disproportionate in relation to the amounts recoverable". [page338]

[53] In my view, this case, like Gilbert, is the very kind of case which s. 24 was designed to deal with because it is impractical and inefficient to identify specific recipients. Such an award is consistent with the recommendations of the Ontario Law Reform Commission in its Report on Class Actions (Toronto: Ministry of the Attorney General, 1982) at 572:

We therefore recommend that, where the court makes an aggregate assessment, but the circumstances render impracticable the determination of those class members entitled to share in the award or the exact share that should be allocated to particular class members, the court should be empowered to order that the members of the class are entitled to share in the award on an average or proportional basis where the failure to do so would deny recovery to a substantial number of class members who have been injured.

[54] I do not consider this application of the CPA inconsistent with the decisions of the Supreme Court of Canada, such as Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, [2001] S.C.J. No. 67. In that case, the plaintiff could establish that only a very small proportion of the class had actually complained about the pollution. The court nonetheless found that the common issues requirement was satisfied: see para. 26 of Hollick. [See Note 5 below] The court went on to find that the case for certification failed because the preferable procedure requirement was not met.

[55] Nor does this application of the CPA offend this court's holding in Chadha, supra, or Pearson v. Inco Ltd. (2006), 2006 913 (ON CA), 78 O.R. (3d) 641, [2005] O.J. No. 4918 (C.A.), leave to appeal to S.C.C. refused [2006] S.C.C.A. No. 1. In Chadha, the plaintiff adduced no evidence that the result of the defendants' allegedly illegal acts were passed through to the consumers who made up the proposed class. That is not an issue in this case. There is no question that the allegedly illegal fees were passed on to the class members and received by the defendant. The only serious issue is how many members of the class actually suffered an economic loss. This issue can be addressed by ss. 23 and 24.

[56] In Pearson, supra, at para. 77, the court stated that s. 24 might apply if the plaintiff could "show that every member of the class was adversely affected by the disclosure of the nickel pollution by Inco". However, that is how the Pearson case was cast by the plaintiff in this court and the court was not required to consider the full scope of the application of s. 24.

[57] Accordingly, in addition to the common issues identified by the motion judge in relation to the claims for declaratory and [page339] injunctive relief, there are common issues relating to the claims for restitution and breach of contract as follows:

(a) If MBNA received interest in excess of an effective annual rate of 60 per cent on cash advances made under agreements or arrangements with class members, is MBNA required to repay to the class, as restitution, the transaction fees it received from the class, or alternatively, the interest it has received from the class that exceeds an effective annual rate of 60 per cent interest?

(b) Are the terms of the paragraph headed "Interest" of the Cardholder Agreement a bar to the class claim?

(c) Has MBNA breached its contracts with the class by making interest payable that exceeds an effective annual rate of 60 per cent, within the meaning of s. 347 of the Criminal Code?

(d) Has MBNA breached its contracts with the class by failing to credit their accounts with the interest it has received that exceeds an effective annual rate of 60 per cent?

(e) Do provincial Statutes of Limitations have any application to claims of unjust enrichment flowing from interest charged or received in contravention of s. 347 of the Criminal Code?

[58] If these issues are determined in favour of the class, the trial judge will be able to resort to ss. 23 and 24 of the CPA to resolve the issues of quantum and distribution of the monetary award. Section 26 provides a shopping list of methods for distributing an award under s. 24, including abatement and credit to class members by the defendant (s. 26(2)(a)). That said, the trial judge might nevertheless find, pursuant to s. 24(4) that individual claims need to be made to give effect to the order. If so, it may well be that the trial judge will be asked to exercise the power under s. 10 of the CPA to "amend the certification order, . . . decertify the proceeding or . . . make any other order it considers appropriate".

[59] Strictly speaking it is not necessary to state the possibility of an aggregate damage award as a common issue: see Healey v. Lakeridge Health Corp., [2006] O.J. No. 4277, 38 C.P.C. (6th) 145 (S.C.J.), at para. 102. However, I think it is appropriate to do so in this case, given the importance of the issue. I would state the issue as follows: [page340]

Can the amount of restitution and damages for breach of contract be determined on an aggregate basis? If so, in what amount?

[60] There is one further issue that requires consideration in relation to the problem of common issues -- the voluntariness defence. The defendant has taken slightly inconsistent positions in relation to the voluntariness defence. On the one hand, counsel asserted that voluntariness was a complete defence to all of the claims, and on the other, stated that the issue would have to be determined on a case-by-case basis. The motion judge did not directly address this issue. [See Note 6 below] However, in his subsequent decision in McCutcheon v. The Cash Store Inc. (2006), 2006 15754 (ON SC), 80 O.R. (3d) 644, [2006] O.J. No. 1860 (S.C.J.), the motion judge explained that he did not consider voluntariness to be an issue that would have to be determined on an individual basis. At para. 67 of McCutcheon, he said the following in relation to this case:

The facts of Markson differed from those of this case in that there were several variables that could affect whether the interest charged exceeded a criminal rate and a number of these were within the control of the debtors. While, in view of these variables, an examination of the individual facts of each transaction would be required to determine whether interest at a criminal rate had been received and the extent, if any, of the defendants' unjust enrichment, the threshold question whether, and in what circumstances, the payments at such a rate were voluntary depended, as here, on the terms of the agreements between the parties and could therefore be accepted as a common issue.

[61] The so-called voluntariness defence arises from the decisions of the Supreme Court of Canada in Degelder, supra, and Nelson v. C.T.C. Mortgage Corp., 1984 572 (BC CA), [1984] B.C.J. No. 3161, 16 D.L.R. (4th) 139 (C.A.), affd 1986 14 (SCC), [1986] 1 S.C.R. 749, [1986] S.C.J. No. 35. In Degelder, at para. 34, Major J. held that "[t]here is no violation of s. 347(1)(b) [the provision at issue in this case] where a payment of interest at a criminal rate arises from a voluntary act of the debtor, that is, an act wholly within the control of the debtor and not compelled by the lender or by the occurrence of a determining event set out in the agreement" (emphasis in original).

[62] In this case, the defendant submits that since the cardholder controls the amount of the cash advance and the amounts and period of repayment (subject only to certain minimum payment requirements) and whether or not to engage in other transactions [page341] (i.e., credit card purchases) affecting the ultimate interest rate paid, the voluntariness defence protects it from liability under s. 347(1)(b).

[63] Hoy J. considered the question of the voluntariness defence in the context of a class proceeding in Smith v. National Money Mart Co., [2007] O.J. No. 46, 37 C.P.C. (6th) 171 (S.C.J.). [See Note 7 below] The claim in National Money Mart concerned an allegation that the defendants received a criminal rate of interest on "payday loans". At the time the loan is advanced to the customer, the customer provides a personal cheque payable to the lender for a period ending one day after the stated due date of the loan (being the day before the borrower's payday). If the customer is able to pay off the loan before the due date by paying the principal amount and the accumulated interest (at a rate of 59 per cent per annum), there is no cheque cashing fee. If, however, the lender needs to pay off the loan by cashing the personal cheque, certain cheque cashing and other fees are triggered, potentially also triggering a criminal interest rate if those fees come within the definition of interest in s. 347. As in this case, the National Money Mart defendants argued that the voluntariness defence was applicable and would have to be determined on an individual basis. Hoy J. held that application of the voluntariness defence was a common issue. As she pointed out, in Garland No. 1 the Supreme Court of Canada did not approach the voluntariness issue on a case-by-case basis: see also Bodnar v. Cash Store Inc., 2006 BCCA 260, [2006] B.C.J. No. 1171, 55 B.C.L.R. (4th) 53 (C.A.), at paras. 11-12.

[64] I agree with the reasons of Hoy J. in National Money Mart and the motion judge that the voluntariness defence could be accepted as a common issue. The defendant may well be right that since the customer can choose the amount of the cash advance, when to repay it and whether to make additional credit purchases, the payment of interest at a criminal rate arises from a voluntary act of the debtor. However, that defence would apply across the class. It is not apparent to me why decisions, such as the date of repayment, would give rise to a voluntariness defence in one case and not another. At least at this stage, I cannot see why it will be necessary to determine the application of the defence on an individual basis. Accordingly, in my view, the possible availability of a voluntariness defence does not stand in the way of certification. I would therefore include the following as a common issue: [page342]

If MBNA received interest at an effective annual rate in excess of 60 per cent on cash advances made under agreements or arrangements with class members, did payment of interest at that rate arise from the voluntary acts of the class members so as to give rise to a "voluntariness defence" thereby precluding a violation of s. 347 of the Criminal Code of Canada?

[65] To conclude on this aspect of the case, in my view there are common issues in relation to the claims for restitution and breach of contract. In fairness to the motion judge and the Divisional Court, I have reached this conclusion because of the application of ss. 23 and 24 of the CPA, matters that were not raised before those courts.

(c) Preferable procedure

[66] Even though the motion judge found that there were common issues in relation to the claims for injunctive and declaratory relief, he held that a class proceeding was not a preferable procedure because if the action was successful and the defendant was forced to comply with the law, its customers would end up with fewer options and would be required to pay greater amounts of interest. Yet, the motion judge recognized that the plaintiff could pursue an individual action. In my view, the motion judge erred.

[67] First, the findings of the motion judge are fundamentally inconsistent. If the plaintiff did pursue an individual action and obtained a declaration or injunction I cannot imagine why the consequence would be any different than a class proceeding. Surely, the defendant bank would comply with the injunction or conduct its business in accordance with the declaration and stop violating the law, not just in relation to this plaintiff, but for all of its customers. Thus, whether the issue were pursued as an individual action or a class proceeding, the customers would be deprived of certain options.

[68] The only significant result of refusing to allow this action to go forward as a class proceeding but permitting the plaintiff to pursue his individual action is that the defendant, even if found to have violated the Criminal Code and breached its contract with its customers, will not be required to disgorge the illegal profit. In the result, customers will not only lose the options referred to by the motion judge, but they will also receive no recompense for past illegal acts by the defendant. In my view, this is not a reasonable result. To a similar effect see 1176560 Ontario Ltd. v. Great Atlantic & Pacific Co. of Canada Ltd. (2002), 2002 6199 (ON SC), 62 O.R. (3d) 535, [2002] O.J. No. 4781 (S.C.J.), at para. 45, affd (2004), 2004 16620 (ON SCDC), 70 O.R. (3d) 182, [2004] O.J. No. 865 (Div. Ct.).

[69] Second, in my view, the motion judge erred in failing to apply the criteria for preferable procedure as articulated by the Supreme Court of Canada. A succinct statement of the applicable [page343] principles is set out in Hollick, supra, at paras. 27 to 31. I would summarize those principles as follows:

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

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

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

[70] As I read the cases from the Supreme Court of Canada and appellate and trial courts, these principles do not result in separate inquiries. Rather, the inquiry into the questions of judicial economy, access to justice and behaviour modification can only be answered by considering the context, the other available procedures and, in short, whether a class proceeding is a fair, efficient and manageable method of advancing the claim.

[71] As I have said, the motion judge appears to have accepted that a class proceeding would meet the goals of behaviour modification and access to justice. For the reasons that follow, I agree with that conclusion. The defendant has said that it will continue to conduct business in a manner that may violate the law until presumably the law is changed or it is required to stop by court order. A class proceeding would therefore meet the goal of behaviour modification. While presumably an individual action that resulted in an injunction or declaration would achieve the same result, a class proceeding, unlike an individual action, will also have the advantage of requiring the defendant to account for the economic harm it has caused. As Doherty J.A. observed in Hickey-Button v. Loyalist College of Applied Arts & Technology, 2006 20079 (ON CA), [2006] O.J. No. 2393, 267 D.L.R. (4th) 601 (C.A.), at para. 58"Accountability is an important first step toward behaviour modification."

[72] In my view, access to justice overwhelmingly favours a class proceeding. The amounts involved are so small that no litigant would have an interest in pursuing an individual claim. The legal and other fees to pursue the claim would be hugely disproportionate to the amounts in issue in any individual [page344] claim. No other viable procedure has been identified to resolve the claims.

[73] The goal of judicial economy also favours a class proceeding. Admittedly, maximum judicial economy will result if this action is not certified, in that no claim would be advanced at all. [See Note 8 below] However, this result hardly strikes me as what the courts had in mind in terms of judicial economy. Moreover, it would be an overly rigid interpretation of the CPA and inconsistent with the instruction in Hollick, supra, at para. 15 that "courts not take an overly restrictive approach to the legislation, but rather interpret the Act in a way that gives full effect to the benefits foreseen by the drafters". I agree with Winkler J. in 1176560 Ontario Ltd., supra, at para. 45 that:

Arguments that no litigation is preferable to a class proceeding cannot be given effect. If there is any basis to this argument, it is subsumed in the cause of action element of the test for certification.

[74] Thus, judicial economy should focus on the relationship of the common issues to the other issues in the case. Viewed from this perspective, a class proceeding is not inconsistent with judicial economy. If I am right that the voluntariness defence can be determined on a class-wide basis and that ss. 23 and 24 can resolve the issues of quantum and distribution of the monetary award, the entire case will be determined by resolution of the common issues. It will not be necessary to engage in trials of any individual issues. A class proceeding in this case would achieve litigation efficiency in the sense referred to in the Report of the Attorney General's Advisory Committee on Class Action Reform (Ontario: Ministry of the Attorney General, 1990) at 15, in providing "an efficient means to achieve redress for widespread harm or injury by allowing one or more persons to bring the action on behalf of the many." [See Note 9 below]

[75] A class proceeding will be a fair, efficient and manageable way of advancing the claim. It may be that some customers of the defendant would prefer that it continue to have the right to break the criminal law (if it is doing so), in order to offer its customers some added advantages. In this sense, allowing the plaintiff to pursue a class proceeding may be seen as unfair to some of the customers. In an organized society however, I do not see this as the kind of fairness concern that should prevent a court from intervening. Rather, the concern should be whether the defendant is acting in accordance with the law. As Iacobucci J. said in [page345] Garland v. Consumers' Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, [2004] S.C.J. No. 21, at para. 57"As a matter of public policy, a criminal should not be permitted to keep the proceeds of his crime."

Conclusion

[76] I would allow the appeal, set aside the orders of the Divisional Court and the motion judge, and substitute an order granting the motion for certification on terms that are consistent with these reasons. The case should be remitted to the supervision of the Regional Senior Justice or such judge as he directs to manage the action.

Appeal allowed.

APPENDIX "A"

COMMON ISSUES PROPOSED BY THE PLAINTIFF BEFORE THE MOTION JUDGE

At para. 45 of his reasons, the motion judge enumerated the following as the proposed common issues:

(a) is the cash advance transaction fee "interest" for the purpose of calculating the effective annual interest under s. 347 of the Criminal Code;

(b) in what circumstances does MBNA charge interest at a rate in excess of an effective annual interest rate of 60 per cent;

(c) in what circumstances does MBNA receive interest at a rate in excess of an effective annual interest rate of 60 per cent;

(d) did MBNA receive interest at a rate in excess of 60 per cent, and if so, how much;

(e) if so, is MBNA required to pay to the class, as restitution, the transaction fees it received from the class, or alternatively, the interest it has received from the class that exceeds an effective annual rate of 60 per cent interest;

(f) is the cash advance transaction free incurred voluntarily by the class, so as to give rise to a defence of "voluntariness" to the allegation that the interest received by MBNA exceeds the maximum permitted by s. 347 of the Criminal Code of Canada;

(g) do the class members pay the cash advance transaction fee voluntarily, so as to give rise to a defence of "voluntariness" to the allegation that the interest received by MBNA exceeds the maximum permitted by s. 347 of the Criminal Code of Canada;

(h) are the terms of the paragraph headed "Interest" of the cardholder agreement a bar to the class claim;

(i) has MBNA breached its contracts with the class by making interest payable that exceeds an effective annual rate of 60 per cent, within the meaning of s. 347 of the Criminal Code; [page346]

(j) has MBNA breached its contracts with the class by failing to credit their accounts with the interest it has received that exceeds an effective annual rate of 60 per cent;

(k) do provincial statutes of limitations have any application to claims of unjust enrichment flowing from interest charged or received in contravention of s. 347 of the Criminal Code; and

(l) is the class entitled to punitive damages?

Notes ----------------

Note 1: The respondent also asserted that even if the legal questions were determined in favour of the plaintiff, there would still need to be an individual investigation as to whether in the particular circumstances the payment received was effected by a voluntary act undertaken by the cardholder. This may be inconsistent with the respondent's principal position in this case that voluntariness would by a defence to all of the claims of the class members. I discuss this issue further below.

Note 2: On February 6, 2007, the House of Commons passed bill C-26, An Act to amend the Criminal Code (criminal interest rate), 1st. Sess., 39th Parl., 2006. Pursuant to the provisions of this Bill, some payday lenders will be exempt from the application of s. 347 of the Criminal Code. it is not apparent that the Bill would impact on the issues in this case.

Note 3: A further $1 million was to be paid to the United Way and $1.65 million to the Class Proceedings Fund of the Law Foundation of Ontario.

Note 4: Also see the reasons on Winkler J. in Nantais v. Easyhome Ltd., [2005] O.J. No. 5805 (S.C.J.).

Note 5: Certification ultimately failed in Hollick because the plaintiff could not meet the preferable procedure requirement.

Note 6: He did address a related issue of whether the defendant might have a unique defence against the plaintiff because of the curcumstances surrounding his two transactions. The motion judge held at para. 88 that if the plaintiff's claim was dismissed because of a defence unique to him, it would be possible to appoint a substitute representative plaintiff.

Note 7: The parties brough this case to our attention after the appeal was argued. We recieved additional submissions with respect to National Money Mart on January 22 and 23, 2007.

Note 8: See National Money Mart, above, at para. 135.

Note 9: Quoted with approval by MacPherson J.A. in Carom, above, at para. 5.