Fantl v. Transamerica Life Canada

95 O.R. (3d) 767

Court of Appeal for Ontario,

Winkler C.J.O., Goudge and Simmons JJ.A.

May 7, 2009

Actions -- Abuse of process -- Law firm which represented plaintiff in proposed class proceeding dissolving -- Plaintiff deciding not to follow lawyer who had acted as supervising counsel and instead retaining new firm formed by other partners of old firm -- Former supervising counsel moving unsuccessfully for order striking notice of change of solicitors and then bringing competing action with new plaintiff which overlapped significantly with existing action -- New action constituting abuse of process -- New action stayed.

Civil procedure -- Class proceedings -- Counsel -- Representative plaintiff not required to seek and obtain court approval of decision to choose new class counsel but court having jurisdiction to review that [page768] decision where it is contested -- Test on review whether counsel is competent, whether there were any improper considerations underlying choice made by plaintiff and whether prejudice to class would result from choice -- Lawyers not having vested interest in subject matter of class proceeding entitling them to override representative plaintiff's decision to change counsel.

The plaintiff in a proposed class proceeding retained a law firm, REKO. The retainer agreement was between the plaintiff and REKO, and not between the plaintiff and any of REKO's individual lawyers. K acted as supervising partner, although other lawyers worked more closely on the case. Following the dissolution of REKO, the plaintiff decided to retain a new firm formed by some of the REKO partners, REO. K's new firm, KO, brought a motion for an order striking the notice of change of solicitors and an order requiring the plaintiff to retain KO. In the alternative, KO sought to have the plaintiff removed as representative plaintiff and two new representative plaintiffs substituted in his stead. The motion was dismissed, and the Divisional Court affirmed that decision. KO appealed.

Held, the appeal should be dismissed.

It is unnecessary for a representative plaintiff to seek and obtain court approval for every decision involving the selection or change of counsel. However, the case-management judge charged with responsibility for the supervision of the proceeding should be immediately and directly notified of a change. If the decision is contested and properly comes before the court on motion, the court is within its jurisdiction to review the plaintiff's decision. Once the court's jurisdiction is engaged, any review of the decision must be directed to three factors: (1) the competence of counsel chosen by the plaintiff; (2) whether there were any improper considerations underlying the choice made by the plaintiff; and (3) whether there is prejudice to the class as a result of the choice. Unless this inquiry reveals something was unsatisfactory to the court, it ought not to interfere with the choice of counsel made by the plaintiff. Any intervention based on the court's supervisory jurisdiction must be limited to situations where there is cogent evidence that steps taken may have an adverse impact on the absent class members.

In this case, there was no question about the competence of REO. There were no improper considerations underlying the plaintiff's choice. The fact that the plaintiff was a close friend of one of the REO partners did not constitute an improper purpose. An improper purpose would be one where the plaintiff was seeking to gain a personal advantage, the hope of an advantage not shared by the class members or was motivated in some way that was inconsistent with the interests of the class. To the extent that prejudice was argued by KO, it focused on the economic prejudice to itself rather than on any prejudice to the interests of the class. The Class Proceedings Act, 1992, S.O. 1992, c. 6 does not, and was never intended to, provide lawyers with a vested interest in the subject matter of a lawsuit entitling them to override the choices of the representative plaintiff, including the choice of counsel. There was no demonstrated prejudice to the class. As a result, there was no reason to interfere with the plaintiff's choice of counsel. There was also no basis for removing him as representative plaintiff.

After its motion was dismissed, KO brought a competing class action against the same defendant, with a new representative plaintiff, which overlapped significantly with the existing action. That action amounted to an abuse of process and should be stayed. [page769]

APPEAL from order of the Divisional Court (Cunningham A.C.J.S.C.J., Carnwath and Bellamy JJ.), [2008] O.J. No. 4928, 2008 63563 (Div. Ct.) dismissing an appeal from the decision of Perell J., [2008] O.J. No. 1536, 2008 17304 (S.C.J.) dismissing a motion for an order striking the notice of change of solicitors and for other relief.

Cases referred to Cassano v. Toronto-Dominion Bank (2007), 87 O.R. (3d) 401, [2007] O.J. No. 4406, 2007 ONCA 781, 230 O.A.C. 224, 47 C.P.C. (6th) 209, 162 A.C.W.S. (3d) 18; Ford v. F. Hoffman-La Roche Ltd. (2005), 2005 8751 (ON SC), 74 O.R. (3d) 758, [2005] O.J. No. 1118, [2005] O.T.C. 207, 12 C.P.C. (6th) 226, 138 A.C.W.S. (3d) 19 (S.C.J.); Heron v. Guidant Corp., [2007] O.J. No. 3823 (S.C.J.) [Leave to appeal refused 2008 204 (ON SCDC), [2008] O.J. No. 48, 232 O.A.C. 366, 163 A.C.W.S. (3d) 906 (Div. Ct.)]; Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, 211 D.L.R. (4th) 577, 286 N.R. 1, [2002] 7 W.W.R. 1, J.E. 2002-617, 219 Sask. R. 1, 10 C.C.L.T. (3d) 157, 30 M.P.L.R. (3d) 1, 112 A.C.W.S. (3d) 991; Ontario New Home Warranty Program v. Chevron Chemical Co. (1999), 1999 15098 (ON SC), 46 O.R. (3d) 130, [1999] O.J. No. 2245, 99 O.T.C. 384, 37 C.P.C. (4th) 175, 88 A.C.W.S. (3d) 1138 (S.C.J.); Parsons v. Canadian Red Cross Society, [1999] O.J. No. 3572, 103 O.T.C. 161, 40 C.P.C. (4th) 151, 91 A.C.W.S. (3d) 351 (S.C.J.); Ricardo v. Air Transat A.T. Inc., [2002] O.J. No. 1090, [2002] O.T.C. 205, 21 C.P.C. (5th) 297, 113 A.C.W.S. (3d) 945 (S.C.J.); Setterington v. Merck Frosst Canada Ltd., 2006 2623 (ON SC), [2006] O.J. No. 376, [2006] O.T.C. 97, 26 C.P.C. (6th) 173, 145 A.C.W.S. (3d) 566 (S.C.J.); Vitapharm Canada Ltd. v. F. Hoffman-La Roche Ltd., [2000] O.J. No. 4594, [2000] O.T.C. 877, 4 C.P.C. (5th) 169, 101 A.C.W.S. (3d) 472 (S.C.J.); Ward-Price v. Mariners Haven Inc. (2004), 2004 13951 (ON SC), 71 O.R. (3d) 664, [2004] O.J. No. 2308, [2004] O.T.C. 474, 3 C.P.C. (6th) 116, 131 A.C.W.S. (3d) 388 (S.C.J.); Western Canadian Shopping Centres v. Dutton, [2001] 2 S.C.R. 534, [2000] S.C.J. No. 63, 2001 SCC 46, 201 D.L.R. (4th) 385, 272 N.R. 135, [2002] 1 W.W.R. 1, J.E. 2001-1430, 94 Alta. L.R. (3d) 1, 286 A.R. 201, 8 C.P.C. (5th) 1, 106 A.C.W.S. (3d) 397 Statutes referred to Class Proceedings Act, 1992, S.O. 1992, c. 6, ss. 5(1), 12, 13, 20, 29(1), (2), 32(2), 33(1), (4) Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134(1) [as am.]

Alan J. Lenczner, Q.C., and Naomi Loewith, for appellant Kim Orr Barristers P.C. Bonnie A. Tough and Jennifer M. Lynch, for respondent Joseph Fantl. Mary Jane Stitt, for respondent Transamerica Life Canada.

The judgment of the court was delivered by

WINKLER C.J.O.: --

Overview

[1] This appeal relates to a representative plaintiff's right to choose new counsel in a class proceeding, following the dissolution [page770] of the law firm originally retained by the plaintiff to prosecute the action.

[2] The appellant is a law firm, Kim Orr Barristers P.C. ("KO"). Joseph Fantl is the representative plaintiff in a class proceeding brought against the defendant Transamerica Life Canada ("Transamerica"). Both Mr. Fantl and Transamerica are respondents in this appeal.

[3] In 2006, Mr. Fantl retained the law firm of Roy Elliott Kim O'Connor ("REKO") to act in the prosecution of the intended class action lawsuit against Transamerica. A team of REKO lawyers worked on the matter. Toward the end of 2007, REKO dissolved.

[4] Certain of the team of lawyers formerly engaged on the file joined the newly formed law firm of Roy Elliott O'Connor ("REO"). Others followed one of REKO's former partners, Won Kim, to form the appellant law firm KO, while the remaining lawyer chose to go elsewhere. Because of the disbanding of REKO, Mr. Fantl was forced to decide what firm to retain to continue the matter. He chose REO because he knew and was a friend of Peter Roy, and because he had some experience with, and respected members of, the firm. As such, he trusted them to carry the case forward.

[5] Mr. Fantl served a notice of change of solicitors naming REO as counsel. KO brought a motion pursuant to s. 12 of the Class Proceedings Act, 1992, S.O. 1992, c. 6 (the "CPA") asking for various forms of relief, including an order striking the notice of change of solicitors and an order requiring Mr. Fantl to retain KO. In the alternative, KO sought to have Mr. Fantl removed as representative plaintiff and two new representative plaintiffs (Yi-Yea (Riya) Kang and Jeong-Ae Seok) substituted in his stead. The motion judge dismissed the motion in its entirety. KO appealed the decision of the motion judge to the Divisional Court, which dismissed the appeal. KO appeals to this court, with leave. An expedited hearing was granted given that a settlement has been reached and the settlement approval hearing relating to the case is imminent.

[6] The motion judge, in refusing to grant the relief requested, held that a representative plaintiff has a right to retain counsel of his or her choice. He found that the test to be applied in determining whether the plaintiff's choice of counsel should stand is whether the counsel is adequate. Thus, he adopted the same test for counsel as is required by s. 5(1) of the CPA in determining whether a representative plaintiff may carry an action forward. [page771]

[7] In this context, the motion judge noted that while the court has a broad supervisory jurisdiction in class proceedings, it should not intervene in a plaintiff's choice of counsel unless the choice would deny putative class members adequate legal representation. He rejected the appellant's theory that the proper test to be applied is whether the plaintiff's choice is in the best interests of the class. Hence, he refused to engage in a comparison of the two law firms to determine which group was superior. The Divisional Court upheld the reasons of the motion judge on these central issues.

[8] Following the dismissal of the motion, KO brought a competing action against Transamerica, with Ms. Kang as the proposed representative plaintiff (the "Kang action"). The Kang action overlaps significantly with Mr. Fantl's action.

[9] The appellant advances the same arguments on this appeal as were made to the courts below, contending that the motion judge erred by applying the wrong test. The competence of REO to act as class counsel is not in issue. This notwithstanding, on a comparison basis applying the test of best interests of the class, the appellant submits that the plaintiff ought to be directed to retain the KO firm. Consequently, the plaintiff's choice of counsel ought to be set aside and new representative plaintiffs appointed in place of Mr. Fantl.

[10] The respondent submits that the motion judge applied the appropriate test and suggests that the key consideration in the analysis should be whether the plaintiff's decision caused any prejudice to the class members. Since there is no dispute as to the competence of REO counsel, and since the settlement discussions have advanced to the point of a settlement approval hearing, the motion judge's decision not to interfere with Mr. Fantl's choice of counsel should be upheld.

[11] I cannot accede to the appellant's submissions. In my view, the representative plaintiff is entitled to select, and is indeed responsible for selecting, class counsel. In a circumstance like this, when a decision properly comes before the supervisory court for review, the criteria to be considered in determining whether the plaintiff's choice of counsel can stand are: competence of counsel; whether the choice was based on any improper considerations; and whether the choice resulted in any prejudice to the class. In the present case, competence of counsel is conceded. There is no evidence of any improper purpose in the selection of counsel or of any prejudice to the class as a result of that decision. Furthermore, the Kang action, commenced after the motion judge dismissed the appellant's motion, is an abuse of process. [page772]

[12] I would dismiss the appeal, and exercise my discretion under s. 134(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the "CJA") and s. 13 of the CPA, to stay the Kang action. My reasons, which differ from those of the motion judge, follow.

The Issues

[13] There are three central issues on this appeal. First, is the representative plaintiff in an intended class proceeding, who is required to retain new counsel after the proceeding has been commenced, entitled to select counsel of his or her own choosing or is the court, in the exercise of its supervisory jurisdiction under the CPA, always required to approve class counsel?

[14] Second, regardless of the answer to the first question, if the selection of counsel comes before the court for review, what is the proper test to be applied in determining whether the plaintiff's selection of class counsel should stand?

[15] Third, the appellant has asked this court to review whether Mr. Fantl should be replaced as the representative plaintiff. This requested relief bears on the status of a competing action, launched by the appellant following the dismissal of its motion, in which Ms. Kang is the representative plaintiff.

Facts

[16] This appeal arises from a proposed class action against Transamerica that has yet to be certified. Mr. Fantl is not the original representative plaintiff in this action. The action was initially started by Michael Millman, a chartered accountant in British Columbia who owned an insurance policy issued by the company that is now Transamerica and which contained an investment option known as the Can-Am fund. Mr. Millman sought to sue Transamerica on the basis that (1) Transamerica had overcharged him for management expenses; and (2) that the Can-Am fund had not tracked or replicated the results of the S&P 500 total-return index as had been promised.

[17] The lawyer retained by Mr. Millman referred the claims to Sutts, Strosberg LLP in Ontario for the purpose of commencing a class action. On December 29, 2003, a statement of claim was issued by Mr. Millman's new counsel against Transamerica.

[18] Although there is disputed evidence as to the timing and roles of the parties, the motion judge found that by autumn 2005, the case had been transferred to the law firm REKO. He further found that, upon the transfer of the file, Mr. Kim became the supervising lawyer on the case. Shortly thereafter, Mr. Millman indicated that he was no longer prepared to act as the representative plaintiff in the case. [page773]

[19] Mr. Fantl was a long-standing friend of REKO partner Mr. Roy and had been seeking legal advice from the firm on an unrelated matter at about the time that the original representative plaintiff removed himself from the file. During discussions, it emerged that Mr. Fantl was also an investor in the Can-Am fund operated by Transamerica. REKO's lawyers invited him to act as the new representative plaintiff in the action and he accepted.

[20] In May 2006, Mr. Fantl signed a retainer agreement with REKO. The retainer agreement was between Mr. Fantl and the law firm, and not between Mr. Fantl and any of REKO's individual lawyers.

[21] Between September 2005 and April 2007, the case progressed. The statement of claim was amended, material for the certification was prepared and cross-examinations were conducted. The certification motion did not proceed in May 2007, as scheduled, because Mr. Kim and counsel for Transamerica began to explore the idea of consent certification and a settlement of the management expenses claim. The parties indicated in a case conference on September 12, 2007 that there was a prospect of settlement but that the scope of the funds implicated in the claim was growing significantly, beyond just the Can-Am fund.

[22] The motion judge found that Mr. Kim had been the partner at REKO with the most involvement in Mr. Fantl's case and that Mr. Kim had been assisted in this work to varying degrees by six associate lawyers. The motion judge also noted Mr. Fantl's evidence that he had had minimal contact with Mr. Kim throughout the course of the class action and that Mr. Kim had not provided him with any reports or advice on the case, apart from one brief conversation.

[23] For reasons not disclosed to the motion judge, REKO dissolved on December 31, 2007. Mr. Kim established the firm now known as KO, and REKO's other former partners established the new firm called REO.

[24] Mr. Roy wrote to Mr. Fantl to inform him of REKO's dissolution and to seek instructions with respect to carriage of the class action. On January 5, 2008, Mr. Fantl wrote to REO to say that he had chosen the firm to act as his lawyers for the class action. He cited his "personal knowledge of Mr. Roy, his abilities and integrity as a lawyer and my confidence in his judgment" as among the reasons for his choice. In this regard, the motion judge noted that Mr. Fantl had been the best man at Mr. Roy's wedding. In his affidavit evidence, Mr. Fantl also noted that his choice of counsel was influenced by the fact that [page774] "REO has extensive class action experience and the senior partners have a great deal of experience in complex litigation, including settlement of complicated cases". Mr. Fantl was not cross-examined on his affidavit. REO served the notice of change of solicitors and came on the record on January 18, 2008.

[25] KO subsequently brought a motion to set aside the notice of change of solicitors and to disqualify Mr. Fantl from being the representative plaintiff in the class action. It argued before the motion judge that Mr. Fantl had breached his duty to the intended class members by choosing REO and that, based on the success and progress achieved by Mr. Kim in the action, it was in the best interests of the class that KO be appointed as solicitor of record. KO also argued that, in the alternative, the court should replace Mr. Fantl with two new proposed representative plaintiffs, Ms. Seok and Ms. Kang. Mr. Fantl argued that the court's jurisdiction to govern the solicitor- client relationship was limited to the post-certification phase and that, in any event, Mr. Fantl had fulfilled his duty to the intended class members by choosing adequate counsel.

[26] KO's motion was dismissed. The dismissal was upheld by the Divisional Court. Following the dismissal of the motion, KO brought a competing action against Transamerica, with Ms. Kang as the proposed representative plaintiff. The Kang action covers 25 of the 26 investment funds that are the subject of the proposed settlement agreement in the instant case. The only distinction between the two is that the Kang action does not include the Can-Am fund.

Decision of the Motion Judge

[27] In his reasons [2008 17304 (ON SC), [2008] O.J. No. 1536 (S.C.J.)], the motion judge characterized the "overarching issue in the case" as being whether the court has the jurisdiction to supervise the relationships arising in a class proceeding, both pre- and post-certification: at para. 56. He held that, on the basis of the court's inherent jurisdiction to control its own process and the powers derived from s. 12 of the CPA, the court's jurisdiction to supervise a class proceeding "exists from the outset of the litigation and the Court has the jurisdiction to make orders to protect putative class members as potential parties to the litigation": at para. 58.

[28] Having determined that the court has the jurisdiction to supervise all relationships arising out of a class proceeding from the outset of the litigation, the motion judge turned specifically to a consideration of the solicitor-client relationship. He recognized that in an ordinary action, well- established principles dictate that a litigant has the autonomy to choose counsel without [page775] court interference. However, he noted that these principles cannot be transferred directly to the class action context due to the responsibilities owed by the representative plaintiff, class counsel and the court to absent class members.

[29] The motion judge acknowledged previous case law suggesting that a solicitor-client relationship û with all its concomitant duties and obligations û may not exist between class counsel and proposed class members in the pre- certification stage. However, he held that a sui generis relationship exists between class counsel and proposed class members, and that at least some of the responsibilities inherent in the solicitor-client relationship are owed by counsel to the proposed class.

[30] In considering the proper test for determining whether Mr. Fantl's choice of counsel should stand, the motion judge reviewed the case law that had developed in relation to the adequacy of the representative plaintiff, carriage motions and the removal or change of counsel. Ultimately, he likened the fact situation of the instant case as being akin to that of choosing a solicitor of record at the outset of litigation. He thus applied the standard applied by the court on a certification motion: whether the representative plaintiff has selected "competent counsel that will adequately represent the proposed class if the action is certified": at para. 105.

[31] In so deciding, the motion judge noted that this standard did not require the representative plaintiff to choose the best or more superior counsel. In this respect, while he stated that "Mr. Kim might or might not be a better choice", Mr. Fantl's choice of REO as solicitor of record met the standard of competency and adequacy: at para. 110. Accordingly, the motion was dismissed.

Decision of the Divisional Court

[32] On appeal, the appellant submitted before the Divisional Court that the motion judge had applied the wrong legal test when determining whether Mr. Fantl had properly appointed REO as the new class counsel.

[33] The Divisional Court reviewed the motion judge's conclusions and found that he had committed no error of law. In particular, the Divisional Court [2008 63563 (ON SCDC), [2008] O.J. No. 4928 (Div. Ct.)] endorsed the motion judge's central conclusion that, "having selected competent counsel to represent the class, the fact there are other counsel who may be a better choice does not change the standard Mr. Fantl must meet": at para. 37. [page776]

Positions of the Parties

[34] The thrust of the appellant's argument is that, even though the litigation is being conducted by a representative or intended representative plaintiff, where a decision is required in the conduct of the proceeding, including one that occurs at the pre-certification stage, the decision of the plaintiff must receive the court's approval.

[35] The appellant contends that this is necessitated by an overriding concern for the interests of the absent class members. Accordingly, in its submission, the test to be applied by the court is whether the decision made by the plaintiff is in the best interests of the class. This, says the appellant, is the test to be applied by a court throughout a class proceeding, regardless of the issue to be decided or the stage of the proceeding.

[36] The respondents advance a more limited view of the supervisory role of the court in the exercise of its jurisdiction under the CPA. They caution that it is not appropriate for the court to "descend into the arena" and assume the responsibility of the plaintiff in conducting the litigation.

Analysis

[37] In addressing the issues raised in this appeal, I am guided by the reasons of the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, which sets out the standards of review in appeals from a judge's order.

Issue 1: Supervisory jurisdiction of the court

[38] It is now well-settled that class proceedings are sui generis litigation. In part, this is because of the existence of the proposed class in addition to the putative representative plaintiff. As stated by Cullity J. in Heron v. Guidant Corp., [2007] O.J. No. 3823 (S.C.J.), leave to appeal refused 2008 204 (ON SCDC), [2008] O.J. No. 48, 232 O.A.C. 366 (Div. Ct.), at para. 10:

From the commencement of a class proceeding the court, as well as the named plaintiff has responsibilities to members of the class . . . . They are not parties to the proceeding but they are not strangers. Their rights are as much at stake as those of the plaintiffs. It is consistent with their sui generis status, and the objectives of the CPA, that their interests should not be vulnerable to the deficiencies in the ability of the named plaintiff to represent them. (Citations omitted)

[39] The existence of the absent class members, among other factors, is the reason that the court's supervisory jurisdiction is [page777] engaged from the inception of an intended class proceeding. It continues throughout the "stages" of the proceeding until a final disposition, including the implementation of the administration of a settlement or, where applicable, a resolution of all individual issues.

[40] The supervisory jurisdiction of the court over the class proceeding is not in issue on this appeal. The parties acknowledge that the court has supervisory jurisdiction throughout the proceeding. They do, however, posit markedly different theories as to the circumstances in which this jurisdiction must or ought to be exercised.

[41] While I do not agree with the appellant's position that the court must be actively engaged at every turn in the proceeding, I am equally circumspect about the "hands off" approach advocated by the respondents. Neither view accurately captures the role of the court in respect of a class proceeding.

[42] The CPA is specific as to certain matters arising out of litigation conducted under the aegis of the statute that require court approval. These include, inter alia, the abandonment or discontinuance of an action, approval of settlements, notice to class members and class counsel fees: see ss. 29(1), 29(2), 20 and 32(2) of the CPA respectively. In addition to such enumerated and specific matters requiring court approval, the legislature has also seen fit to provide the court, under s. 12 of the CPA, with a broad, discretionary jurisdiction to "make any order it considers appropriate respecting the conduct of a class proceeding to ensure its fair and expeditious determination". Although the court's ongoing supervisory jurisdiction is manifest in the CPA, this is not to say that every decision made by the plaintiff or counsel in the prosecution of the class action lawsuit requires the sanction of the court.

[43] The motion under appeal was brought pursuant to s. 12 of the CPA. The appellant argues that a notice of change of solicitors should not have been delivered without first obtaining an order of the court on motion brought by the representative plaintiff, so as to have the court approve the new class counsel. Further, the appellant contends that this determination should only be made on the basis of the "best interests of the class".

[44] I disagree. The position advanced by the appellant appears to be an attempt to combine certain developed principles of class action jurisprudence so as to elevate the court's supervisory role over the proceeding to one of mandatory intervention. While it is true that the court has a responsibility to the absent class members, the prosecution of the action rests squarely with the representative plaintiff. The representative plaintiff in a class action [page778] lawsuit is a genuine plaintiff, who chooses, retains and instructs counsel and to whom counsel report.

[45] This is clear from a reading of the CPA. In order to obtain certification, s. 5(1) of the CPA requires that the court be satisfied that the representative plaintiff "has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class". In other words, as stated by the Supreme Court of Canada in Western Canadian Shopping Centres v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534, [2000] S.C.J. No. 63, at para. 41:

In assessing whether the proposed representative is adequate, the court may look to the motivation of the representative, the competence of the representative's counsel, and the capacity of the representative to bear any costs that may be incurred by the representative in particular (as opposed to by counsel or by the class members generally). The proposed representative need not be "typical" of the class, nor the "best" possible representative. The court should be satisfied, however, that the proposed representative will vigorously and capably prosecute the interests of the class. (Citations omitted)

[46] As is also stated in this passage, an important part of this representative plaintiff's plan is the retention of "competent" counsel.

[47] I do not view it as necessary for the plaintiff to seek and obtain approval of the court for every decision involving the selection or change of counsel. However, I am of the view that the case-management judge charged with responsibility for the supervision of the proceeding should be immediately and directly notified of such a change. Further, if this decision is contested and properly comes before the court on motion, the court is well within its jurisdiction to review the plaintiff's decision.

Issue 2: Test for reviewing a plaintiff's choice of counsel

[48] The parties vigorously disputed the test to be applied when the court reviews a representative plaintiff's choice of counsel. In his reasons, the motion judge correctly identified the issues and canvassed the relevant case law in deciding that question. In my view, he made no error in holding that the choice of counsel upon REKO's dissolution was a matter for Mr. Fantl to deal with and that his decision did not warrant interference by the court. Nonetheless, I would arrive at that result for different reasons and based on a different analysis than that of the motion judge.

[49] The appellant has argued that this court should evaluate Mr. Fantl's choice of counsel by determining whether he was acting in the "best interests of the class" in so choosing. On the other [page779] hand, the respondent contends that the motion judge was correct in applying a test of adequacy to Mr. Fantl's choice of counsel. In my view, both approaches miss the mark. Once the court's jurisdiction is engaged, any review by the court of a decision as to choice of counsel must be directed to three factors: (1) Has the plaintiff chosen competent counsel? (2) Were there any improper considerations underlying the choice made by the plaintiff? (3) Is there prejudice to the class as a result of the choice?

[50] Unless this inquiry reveals something unsatisfactory to the court, it ought not to interfere with the choice of counsel made by the plaintiff. The court is not a substitute decision- maker for the plaintiff in the litigation. Accordingly, any intervention based on its supervisory jurisdiction must be limited to situations where there is cogent evidence that steps taken may have an adverse impact on the absent class members.

[51] In formulating these criteria for review of the choice of counsel by the plaintiff, I am necessarily rejecting the argument of the appellant that the only test to be applied by the court is whether the choice is "in the best interests of the class". It must be remembered that the broad and guiding "best interests" principle developed in recognition of the distinction that must be made between the interests of individual class members and the interests of the class as a whole when the court is considering certain issues: see Parsons v. Canadian Red Cross Society, [1999] O.J. No. 3572, 40 C.P.C. (4th) 151 (S.C.J.); Ford v. F. Hoffman-La Roche Ltd. (2005), 2005 8751 (ON SC), 74 O.R. (3d) 758, [2005] O.J. No. 1118 (S.C.J.); and Ontario New Home Warranty Program v. Chevron Chemical Co. (1999), 1999 15098 (ON SC), 46 O.R. (3d) 130, [1999] O.J. No. 2245 (S.C.J.). Here, the context is very different.

[52] Moreover, where the issue before the court is the plaintiff's choice of counsel, insofar as the "interests of the class" must be considered, they are sufficiently addressed under the prejudice criterion. Where there is no prejudice, the choice of "competent counsel" who has not been selected for any improper purpose will also be in the interests of the class.

[53] By applying these criteria, the court avoids the "contest" approach proposed by the appellant, which pits two sets of competing lawyers against each other and undermines the role of the representative plaintiff in selecting counsel. Such an approach is neither necessary nor productive where, as here, competence is conceded and there is no evidence that the plaintiff has [page780] acted improperly or in a manner that prejudices the interests of the class.

[54] The appellant contends that the "contest" approach is appropriate in the present circumstances because the choice of counsel is analogous to a carriage motion. I disagree. A carriage motion is a motion to determine which of two or more overlapping, competing intended class actions should be allowed to proceed and which should be stayed. A carriage motion involves a competition which, of necessity, requires a comparison of the competing proceedings. Unlike a carriage motion, there is no competition between proceedings here. It is for this reason that any analogy between a carriage motion and the present circumstances breaks down.

Application of the test to the instant case

[55] The instant proceeding involves the choice of counsel upon dissolution of the class counsel law firm. The retainer agreement was entered into between Mr. Fantl and REKO, and not with Mr. Kim or any other individual lawyer. A team of lawyers at the predecessor firm dealt with the case.

[56] On dissolution, some of the team formed the appellant, some formed REO and one lawyer joined another firm. Lawyers in each of these factions had participated in the work on the file to varying degrees. The lawyer who did the most work on the file was the associate who left and went to an unrelated firm.

[57] The record indicates that, although Mr. Kim was the senior partner on the case, he did not take instructions from, or report to, Mr. Fantl and that he only accompanied Mr. Fantl to cross-examinations. He attended one settlement meeting with the defendant at which defendant's counsel offered to settle the claim, expand the class definition and communicate this development to class members.

[58] In the context of this file, and in the eyes of Mr. Fantl, there was more to the REKO firm than just Mr. Kim. Mr. Fantl was faced with three choices. He could go with the appellant, the REO firm or choose a different firm. He chose the REO firm.

[59] The appellant argues that the failure to retain KO was akin to a dismissal of counsel. I do not accept this characterization of the facts before this court. The appellant was not terminated by the plaintiff. Indeed, KO had no relationship with the plaintiff capable of termination. Rather, its complaint is that the plaintiff did not choose to retain its lawyers after REKO's dissolution.

[60] Turning to the first factor of the test, competence of counsel of choice was conceded in the present case. I note the appellant's submission that competence of counsel is not a useful [page781] benchmark since every lawyer in Ontario is competent and thus no motion challenging a plaintiff's choice of counsel is likely to ever be successful. I disagree. Where competence is a live issue, the court should consider under this head: (1) the nature of the lawsuit; (2) the complexity of the litigation; (3) the fact that it was a class proceeding; (4) the experience of counsel as to subject matter and class actions; (5) the resources of counsel; (6) the stage of the proceedings at which the review occurs; and (7) any other considerations the court might deem to be appropriate.

[61] Moreover, when considering competence of counsel, the court must take into account the fact that, after certification, class counsel will be in a solicitor-client relationship with the class members, with all of the responsibilities that entails, extending until the implementation of a settlement or final disposition of any individual issues. In other words, given that the class may include a large number of people, this obligation may be significant and prolonged: see, generally, Cassano v. Toronto- Dominion Bank (2007), 2007 ONCA 781, 87 O.R. (3d) 401, [2007] O.J. No. 4406 (C.A.) and Ward-Price v. Mariners Haven Inc. (2004), 2004 13951 (ON SC), 71 O.R. (3d) 664, [2004] O.J. No. 2308 (S.C.J.), at para. 7.

[62] These criteria serve to advance an object of the CPA, namely, to obtain first class representation for class members.

[63] Turning to the second factor, there is no evidence of any improper purpose or motive on the part of the plaintiff in making his decision to retain REO. The appellant points to the plaintiff's friendship with Mr. Roy, one of the partners of REO, as the driving factor in choice of counsel. While that was a consideration, it was not the only factor for the plaintiff's choice of counsel. As noted by the motion judge and as indicated in the record, Mr. Fantl was attracted to REO because of the competence of counsel, which is not disputed, and its reputation in class action work.

[64] In any event, I would not accept that the fact of an acknowledged friendship between the plaintiff and his counsel of choice would constitute an improper purpose in and of itself. An [page782] improper purpose would be one where the plaintiff was seeking to gain a personal advantage, the hope of an advantage not shared by the class members or was motivated in some way that was inconsistent with the interests of the class.

[65] Turning to the third factor, to the extent that prejudice was argued by the appellant, this line of argument focused on the economic prejudice to the appellant rather than on any prejudice to the interests of the class. The appellant emphasized what was characterized as the policy arguments in support of entrepreneurial lawyers, which were said to advance one of the goals of the CPA -- access to justice. Effectively, the appellant's argument is that it would be unfair for a plaintiff, upon dissolution of his or her counsel's law firm, to choose any lawyer other than the lawyer who had previously acted as the lead counsel. In other words, in a class action, the lawyer's time and effort on the file constitutes an equity investment by the lawyer in the case. It is argued that if representative plaintiffs are allowed to switch counsel at will, there will be less of an incentive for counsel to take on class actions and make an investment of time and effort that may be lost.

[66] There is no question that class proceedings are entrepreneurial in nature. However, the proposition advanced by the appellant would only be supportable if the creation of an entrepreneurial class-action bar was a policy goal underpinning the CPA. This argument fails because as far as the CPA is concerned, the entrepreneurial lawyer is a means to an end, not an end in and of itself. Were it otherwise, one of the criticisms of the CPA, that it promulgates plaintiffless litigation benefiting only the lawyers involved, would be well- founded. Such is not the case.

[67] Sections 33(1) and (4) of the CPA, which provide for contingency fees and a multiplier effect on fees to reward risk and success, are intended to provide sufficient incentives for lawyers to take on class proceedings that would not otherwise be attractive. This is the entrepreneurial aspect of class proceedings legislation that enhances access to justice. The CPA does not, nor was it ever intended to, provide lawyers with a vested interest in the subject matter of the lawsuit entitling them to override the choices of the representative plaintiff in the litigation, including the choice of counsel.

[68] In any event, Mr. Kim's investment of time and effort in the action while at REKO will be protected through the process of dissolving that firm.

[69] In conclusion, in light of the three factors set out above, namely, that competence of counsel is not in issue, there is no [page783] evidence of any improper purpose or considerations in choice of counsel, and no demonstrated prejudice to the class, there is no reason to interfere with the choice of counsel by Mr. Fantl.

Issue 3: Substitution of the representative plaintiff and the status of the Kang action

[70] Before Perell J., the appellant sought an order adding Ms. Seok and Ms. Kang as potential representative plaintiffs to replace Mr. Fantl as the plaintiff. Perell J. denied its request.

[71] On appeal, the appellant argued that Mr. Fantl's decision not to retain the appellant, in the face of Mr. Kim's success on the file, suggests that Mr. Fantl will not best represent the class members and, thus, ought to be removed. On behalf of Ms. Kang and Ms. Seok, it argued that they should be substituted as representative plaintiffs. The respondents opposed, saying that, as with the commencement of the Kang action, this is simply an attempt to determine who will represent the interests of the class.

[72] Mr. Fantl has prosecuted the action to the point of settlement. There is no suggestion that he has been less than diligent in this respect. Indeed, Mr. Fantl stepped in to represent the class when the original representative plaintiff chose to abandon that role. He did so after being approached by solicitors from REKO, some of whom now stand with opposing interests on this appeal.

[73] While not necessarily determinative, the choice to approach Mr. Fantl to act in the representative capacity indicates that none of the counsel had any concerns about his ability to perform that role at that time. Moreover, when the plaintiff assumed the representation of the class, it must have been implicitly understood by his solicitors that he would be the one providing instructions for the litigation of the action.

[74] In light of these factors and my conclusion above that Mr. Fantl chose competent counsel, did not act with an improper purpose or act to the prejudice of the class, there is no basis to interfere with the decision of the motion judge not to remove or replace Mr. Fantl as the representative plaintiff in this action.

Stay of Kang action

[75] The appellant commenced the Kang action following the dismissal of the motion to strike the notice of change of solicitors and replace the representative plaintiff, notwithstanding its admission before the motion judge that such a move would be "disingenuous": at para. 99. Indeed, the Divisional Court commented on this development in the following terms, at para. 11 of its reasons: [page784]

Most remarkable of all, and independent of this motion under appeal, the lawyer has started a separate class proceeding against Transamerica in the name of Ms. Kang, the proposed representative plaintiff. This is the same Ms. Kang whom the lawyer seeks to have added as representative plaintiff with Mr. Fantl, or, in the alternative, to replace Mr. Fantl, his former client, with Ms. Kang and Ms. Seok.

[76] I agree with the observation of the Divisional Court that the bringing of the Kang action after having lost the motion before the motion judge was "most remarkable". The only purpose for doing this can be to provide a platform for a carriage motion to challenge the instant proceeding as the proper proceeding to take the action forward to settlement on behalf of the class.

[77] Apart from the fact that the appellant brought the second duplicative proceeding, which would in my view be determinative in and of itself, a carriage motion would also involve the appellant in bringing a proceeding against its former client.

[78] The essence of the respondents' argument is that the Kang action amounts to an abuse of process. I agree. Accordingly, pursuant to the jurisdiction conferred upon this court under s. 134(1) of the CJA and s. 13 of the CPA, I would stay the Kang action.

[79] If allowed to proceed, the Kang action would inevitably be stayed in any event. Considering the factors outlined by Cumming J. in Vitapharm Canada Ltd. v. F. Hoffman-La Roche Ltd., [2000] O.J. No. 4594, 4 C.P.C. (5th) 169 (S.C.J.), at para. 49, there is no question that Mr. Fantl's action would proceed over the Kang action given that it is so "significantly more advanced than the other": Setterington v. Merck Frosst Canada Ltd., 2006 2623 (ON SC), [2006] O.J. No. 376, 26 C.P.C. (6th) 173 (S.C.J.), at para. 22; and Ricardo v. Air Transat A.T. Inc., [2002] O.J. No. 1090, 21 C.P.C. (5th) 297 (S.C.J.), at para. 24.

[80] Further, as this action is on the cusp of settlement, the delay caused by a carriage motion would only serve to postpone the class members' access to justice. Even the appellant recognized that time was of the essence in this case, given the imminent settlement approval hearing, when it sought and was granted an expedited hearing of this appeal. Therefore, regardless of whether the competing actions are analyzed through the lens of best interests of the class or through that of prejudice, I reach the same inevitable conclusion that the Kang action should be stayed. The class members are entitled to certainty.

Conclusion

[81] In conclusion, I would dismiss the appeal. Further, I would grant a stay of the Kang action. Mr. Fantl shall receive [page785] costs of $10,000 for the appeal and $5,000 for the leave motion, inclusive of disbursements and GST. The appellant shall also pay to Transamerica its costs of $6,350 for the appeal and $2,000 for the leave motion, inclusive of disbursements and GST.

Appeal dismissed.