1176560 Ontario Limited et al. v. The Great Atlantic & Pacific Company of Canada Limited

[Indexed as: 1176560 Ontario Ltd. v. Great Atlantic & Pacific Co. of Canada Ltd.]

64 O.R. (3d) 42

[2003] O.J. No. 1089

Docket No. 745/02

Ontario Superior Court of Justice

Divisional Court

Lane J.

March 26, 2003

Civil procedure -- Class proceedings -- Certification -- Qualifications of representative plaintiff -- Representative plaintiff required to fairly and adequately represent interests of class -- Representative not to have on common issues an interest in conflict with other members of class -- Class action by franchisees of discount grocery chain against franchisor alleging breach of standard form franchise agreement -- Main allegation that franchisor had withheld rebates due under franchise agreement -- Leave to appeal granted on issue of whether action [page43] satisfying test for certification -- Leave to appeal granted on issue of whether representative plaintiffs had conflict of interest with other members of class -- Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1).

The proposed representative plaintiffs for a class proceeding under the Class Proceedings Act, 1992 ("CPA") were franchisees of a discount grocery chain operated by the defendant, The Great Atlantic & Pacific Company of Canada ("A&P"). The putative class consisted of corporations that had carried on business in Ontario under a standard form franchise agreement with A&P, excluding franchisees who had signed releases in favour of A&P. The main allegation in the proposed class proceeding was that A&P had withheld rebates owing to the franchisees in breach of para. 11 of the respective franchise agreements, which provided that the rebates should be passed on in a manner that "shall be the same for all franchisees". The action arose from A&P's implementation of a billing system that did not particularize the rebates but purported to set out a sum "net" of the rebates. The proposed representative plaintiffs successfully moved for certification of the action as a class proceeding. The defendants moved for leave to appeal the certification order of Winkler J.

Held, the motion for leave to appeal should be granted.

Leave to appeal should be granted upon the following issues: (1) Did the plaintiffs demonstrate that the representative plaintiffs will fairly and adequately represent the interests of the class as required by s. 5(1)(e)(i) of the CPA?; and, (2) Is there a conflict between the representative plaintiffs and other franchisees within the meaning of s. 5 (1)(e)(iii) of the CPA? While Winkler J.'s reasons for granting certification were persuasive, the defendant's argument raised an issue that was open to serious debate. The issue of a representative plaintiff having a conflict of interest with members of the class was also of general importance in the development of the law relating to class proceedings. It was desirable that the matter receive appellate review.

MOTION for leave to appeal an order of Winkler J. (2002), 2002 6199 (ON SC), 62 O.R. (3d) 535, [2002] O.J. No. 4781 (S.C.J.) certifying an action as a class proceeding under the Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1).

Cases referred to Aamco Automobile Transmissions Inc. v. Tayloe, 67 F.R.D. 440 (E.D. Penn. 1975); Ash v. Lloyd's Corp. (1992), 1992 7652 (ON SC), 8 O.R. (3d) 282 (Gen. Div.); Broussard v. Meineke Discount Muffler Shops Inc., 155 Fed. 3d 331, 41 Fed. R. Serv. 3d 1151 (4th Circ. 1998 N.C.); Bywater v. Toronto Transit Commission (1998), 27 C.P.C. (4th) 172 (Ont. Gen. Div.), supp. reasons (1998), 30 C.P.C. (4th) 131 (Ont. Gen. Div.); Campbell v. Flexwatt Corp. (1997), 1997 4111 (BC CA), 44 B.C.L.R. (3d) 343, [1998] 6 W.W.R. 275, 15 C.P.C. (4th) 1 (C.A.) [Leave to appeal to S.C.C. refused (1998), 228 N.R. 197n], revg in part (1996), 1996 3539 (BC SC), 25 B.C.L.R. (3d) 329, 50 C.P.C. (3d) 290 (S.C.), supp. reasons (1996), 3 C.P.C. (4th) 208 (B.C.S.C.); Free World Foreign Cars Inc. v. Alfa Romeo S.p.A., 55 F.R.D. 26 (S.D.N.Y. 1972); Gariepy v. Shell Oil Co. (2002), 23 C.P.C. (5th) 360, [2002] O.J. No. 2766 (Quicklaw), [2002] O.T.C. 459 (S.C.J.); Goldwater v. Alston & Bird, 116 F.R.D. 342 (S.D. Ill. 1987); Hollick v. Metropolitan Toronto (Municipality), 2001 SCC 68, [2001] 3 S.C.R. 158, 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., [2002] O.J. No. 2764 (Quicklaw), [2002] O.T.C. 515 (S.C.J.); Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534, 94 Alta. L.R. (2d) 1, 201 D.L.R. (4th) 385, 272 N.R. 135, [2002] 1 W.W.R. 1, 8 C.P.C. (5th) 1 (sub nom. Western Canadian Shopping Centres Inc. v. Bennett Jones Verchere) Statutes referred to Class Proceedings Act, 1992, S.O. 1992, c. 6, ss. 5, 12 [page44] Authorities referred to Sopinka, J., S.N. Lederman and A.W. Bryant, The Law of Evidence in Canada, 2nd ed. (Toronto: Butterworths, 1999)

Joseph M. Steiner, Laura K. Fric and Joseph Starkman, for defendant, moving party. Thomas G. Heintzman, Q.C., David Sterns, Jonathan Lisus and Gillian Slaughter, for plaintiffs, responding.

[1] LANE J.: -- The defendant moves for leave to appeal from the Order of Winkler J. dated December 9, 2002, whereby he certified this action as a class proceeding and made orders as to communications between the parties (which part of the order is now moot).

Background

[2] The plaintiffs are franchisees of the Food Basics discount grocery chain of which the defendant is the franchisor. There are some 66 franchise stores and 20 corporate stores. All franchises are governed by a standard-form agreement and the defendant is the head lessee of all franchise store locations. Section 11 of the agreement recites that Food Basics may receive allowances from suppliers based on "the purchase of specific goods attributable to franchisees of the Food Basics system". Food Basics will establish a policy of distribution of these allowances which policy "shall be the same for all franchisees" and will distribute the allowances to the franchisees in accordance with the policy. There is a similar clause regarding "exclusivity cost reductions". Both terms are defined in the agreement. I will refer to them simply as rebates.

[3] It is common ground that rebates are a significant contributor to the franchisees' margin. Prior to 1997, the franchisees received their share of the rebates by way of a 4 per cent rebate on their invoices from the defendant. In December 1996, the defendant changed the system (which the agreement allows it to do) and ceased to pay the 4 per cent as a separate item, visible on the invoices, but "factored it" into the net amount shown as owing, a "net billing system". Information as to the rebates disappeared from the invoices.

[4] This change was of concern to the franchisees, primarily because of the absence of any supporting documentation regarding [page45] the calculation of the rebates. The central allegation in this litigation is that the defendant has improperly withheld rebates that it ought to have distributed to the franchisees under s. 11, and that the defendant has never disclosed any information about these rebates despite requests from the franchisees.

[5] The defendant asserts that it has complied with s. 11 and that the claim of the plaintiffs for "any and all rebates and allowances" received from suppliers "regardless of how those rebates and allowances are designated" is overbroad and beyond the contractual language. It also asserts that the claims of the plaintiffs, if allowed, would imperil the whole economic relationship between it and its franchisees.

The Certification Motion

[6] The putative class was defined as:

All corporations which carry on or have carried on business in Ontario at any time under a "Food Basics" Franchise Agreement with the defendant, excluding any of those which may have signed a full and final release in favour of the defendant at the expiry or termination of the last term of their franchise agreement.

[7] The plaintiffs submitted to Winkler J. that the class should be certified because the claims arose from the standard- form agreement, applicable to all members of the putative class, the requirement in s. 11 that the policy as to distribution of the rebates was to be the same for all franchisees and all other requirements were met.

[8] The Class Proceedings Act, 1992, S.O. 1992, c. 6 ("Act") sets out the five elements for certification in s. 5(1). In summary, they are:

-- a cause of action disclosed in the pleading;

-- an identifiable class;

-- common issues;

-- a class proceeding is the preferable procedure;

-- a representative plaintiff who

(a) will fairly and adequately represent the interests of the class;

(b) has a workable plan to advance the action and inform the class;

(c) does not have, on the common issues, an interest in conflict with the other members. [page46]

[9] The defendant conceded the first two issues noted above and objected only to the form of the common issues as stated by the plaintiffs. Winkler J. satisfied himself that they were all met and no issue as to any of them was raised before me except as to the phrasing of the common issues.

[10] The remaining two issues were contested before Winkler J. The defendant argued that individual proceedings were the preferable procedure, employing either joinder or consolidation of individual actions if necessary to deal with the contractual interpretation. The defendant also challenged the adequacy of the representative plaintiffs because they were said to have conflicts with other members of the class on the common issues and hence were unsuitable representatives. Further, there was no workable plan to advance the action.

[11] In approaching these issues, the motions judge followed Hollick v. Metropolitan Toronto (Municipality), 2001 SCC 68, [2001] 3 S.C.R. 158, 205 D.L.R. (4th) 19 at para. 27, viewing preferability as requiring consideration of judicial economy, access to justice and behavioural modification. He noted the concession that the central issue was s. 11 and that the Act required the proposed representatives to demonstrate the preferability of a class proceeding in all the circumstances. Having thus stated the burden on the plaintiffs, he considered if they had discharged it in a passage (para. 26) that was severely criticized by counsel for the defendant:

In my view, where a plaintiff has met the evidentiary burden of establishing that there is an identifiable class and common issues, can state a narrow issue that is common to the entire class and is as significant to the resolution of each individual claim as is the case here, then he or she has established a basis for a determination that a class proceeding is the preferable procedure. This determination remains, consistent with the Supreme Court's holding in Hollick, subject to the court finding that the proceeding would achieve one or more of the goals of the Act or, conversely, a showing by the defendants that a class proceeding is not the preferable method of dealing with the claims.

(Emphasis added)

[12] He went on to say that the defendant cannot defeat certification by a simple assertion that another procedure exists and would be preferable; defendants needed to support their case by evidence. As noted in Hollick, the proposed plaintiffs are to come forward with sufficient evidence to support certification and the defendant has the opportunity to respond with evidence of its own.

[13] The passage quoted above, and particularly that which I have underlined was criticized by counsel for the defendant as an unwarranted shifting of the onus from the plaintiff to the defendant. This passage was contrasted with the view of Nordheimer J. as expressed in Gariepy v. Shell Oil Co., [2002] O.J. No. 2766 (Quicklaw), 23 C.P.C. (5th) 360 (S.C.J.) [page47] where he rejected the submission that there was an onus on the defendant to show a better way to resolve the common issues; the burden remained throughout on the plaintiff to establish the requirements for certification. It was also contrasted with the decision in Hollick where the Supreme Court emphasized the need for the plaintiff to show some basis in fact for each of the s. 5 requirements and that certification was preferable to alternatives such as joinder. It was submitted that Winkler J. never actually dealt with why certification was preferable to joinder.

[14] In response to these submissions, counsel for the plaintiff noted the distinction between the primary burden of proof and the subordinate onus of adducing evidence to respond to that of the opposite party. He cited passages from The Law of Evidence in Canada; Sopinka et al., 2nd ed. (Toronto: Butterworths, 1999), paras. 3.15-3.30, explaining the shifting onus to adduce evidence versus the overall burden of proof, and submitted that the motion judge had not reversed the burden of proof, but was referring to the evidentiary aspect only. Paragraph 27, immediately after the impugned paragraph (and itself complained of by counsel for the defendant), makes it clear that it is the need for evidence that is meant by the underlined passage. Counsel noted that Nordheimer J. in Gariepy, supra, also referred to the evidentiary obligation in discussing the onus point.

[15] Counsel for the plaintiff further submitted that the motion judge had not stated that the findings of a class and of a narrow issue common to that class of real significance to the resolution of the issue, meant that certification was the preferable course. He meant what he said: the finding was a basis for a preferability determination, subject to a further finding that certification will achieve one or more of the goals of the Act; and importantly, subject to "a showing", that is, some evidence, in support of one of the options such as joinder.

[16] In referring to "bald assertions" that joinder, consolidation, etc. are preferable and the need for the defendant to bring forward evidence, counsel submitted that the motion judge clearly had in mind the several pages of Mr. Petterson's affidavit (actually referred to in detail in the judge's reasons at para. 44) concluding that "proceeding on an individual basis [is] a non option for franchisees". By contrast, the responding affidavit of Mr. Pearden of A&P makes no mention of any procedure as preferable to certification: the burden of his evidence on the manner of trial is that the basic information is not available from A&P's computer system. Presumably its availability will not change if there are individual trials. It is not reversal of the burden of proof [page48] for the judge to conclude that certification is preferable to individual actions where there is evidence supporting certification, and none for joinder as a viable alternative.

[17] Counsel for the defendant replied that the evidence for joinder was to be found in objective facts such as the size of the class, and particularly in the evidence that the actual relationships between A&P and its franchisees vary considerably depending upon the profitability of the various stores and whether A&P has made loans or granted subsidies to less profitable stores to keep them open. The result of this variance was that the economic interests of some franchisees lay in the maintenance of the status quo while others, including the proposed representative plaintiffs, saw an opportunity for gain through the action. With joinder, those who saw the chance for gain would join while those who feared possible change would stay out. That the latter could exercise the right to opt out of the class was not an answer because the Act required there be no conflicts between the class members.

[18] In granting leave to appeal, I must consider that there is "good reason to doubt" the correctness of the decision or that it conflicts with other decisions on the point.

[19] In my view, the motions judge has not reversed the onus and his decision does not conflict with the cases cited. In the impugned passage, which must be read in the context of the whole of the reasons, Winkler J. does not equate the findings of a class and of common issues having significance to the decision, with preferability. He observes that they create a foundation, a base, for a preferability finding, but the court must still consider the goals of the Act and any evidence as to preferability that may be brought by the defendant. I see no conflict with the principles on which Hollick or Gariepy were decided. As to whether there is good reason to doubt the correctness of the decision that certification was the preferable choice, the motion judge observed (para. 28) that the defendant's preferability argument was inextricably linked to the next ground for leave and I postpone the point until I have reviewed that ground.

[20] There is a further ground on which leave to appeal is sought. It is the submission that there is conflict between the economic interests of the proposed representative plaintiffs and at least some other members of the class. It is said that the differences in economic position vis-à-vis A&P mean that the representative plaintiffs will not fairly and adequately represent the interests of the class, and do have an interest in conflict with the other members. Therefore the plaintiffs cannot meet ss. 5(1)(e)(i) and (iii) of the Act and there should be no certification. [page49]

[21] There is much evidence to support the view put forward by counsel for the defendant, that there are many different economic arrangements in existence between A&P and the franchisees. While they have in common the rebates, whatever they are, under section 11 of the standard agreement, many have received concessions from A&P in various forms as A&P sought to preserve the stores in business. Three such franchisees put in affidavits as to their personal reasons for not supporting the certification, particularly a fear that their present economic relationship will be disrupted should the plaintiffs succeed on the claim. The representative plaintiffs, on the other hand, are not in debt to A&P and have not been the beneficiaries of special concessionary arrangements, at least not in recent times. The opt-out provisions of the Act signal that mere dissent is not enough to cause the court to prefer separate actions to certification. However, the defendant contends that this differentiation of economic relationship with the franchisor renders the proposed plaintiffs unsuitable and also is a reason why joinder is preferable: because then those who wish to sue will do so. Thus phrased, there seems to be no practical difference between opting out and, in effect opting in by suing. But the reality may be quite different, given the economic disparity between the parties and A&P's ability to control the profitability of many franchisees, a point emphasized in the reasons of the motion judge.

[22] Like the motions judge, I see the economic vulnerability of the franchisees, especially those indebted to A&P for grants or extra rebates as described by Mr. Pearden, as a good reason to prefer certification. As well, the finding that there is a common issue at the heart of the dispute is a strong indication that certification is appropriate. In Hollick, Gariepy and other cases, [See Note 1 at end of document] there are strong statements tying the existence of a common issue to the preferability decision:

The question of preferability, then, must take into account the importance of the common issues in relation to the claims as a whole.

(Hollick, para. 30)

[23] In this case, the common question as to s. 11 is fundamental to the case of every member of the class. From that interpretation all other issues flow. There is a powerful case for determining such an issue only once and on a basis binding on all parties. [page50]

[24] I am not persuaded that there is good reason to doubt the motion judge's decision that certification is the preferable route, save as to the issue next discussed.

[25] The further question at issue, however, is whether the apparent disparity of economic interest between some members and the proposed plaintiffs falls into the language of s. 5(1) (e)(i) and (iii). On the common issue, the prima facie interest of each franchisee is the same: to maximize the rebates received. The representative plaintiffs are well equipped to press that case forward. But it appears that the objections of the dissenting franchisees are to that very fact. If the plaintiffs press the action to success these franchisees fear the disruption of their extra-contractual business relationship with A&P that success in that action might bring. The same result might well occur if there were 30 separate actions. It is really, as the motion judge said, an argument that there should be no lawsuit at all. When significant numbers of the putative class have, for extra-contractual reasons, an interest in seeing an action based on interpreting a contract fail, is it sufficient that they may opt out? Or is that a fundamental flaw in using the class action procedure? Is that conflict one as to the common issue?

[26] Counsel for the defendant submitted that these issues have yet to be canvassed in Canadian class action law, but that U.S. authorities in the field tended to support the need to have regard to the extra-contractual interests and the legal interests beyond the common issue of the franchisees. He drew my attention to Broussard v. Meineke Discount Muffler Shops Inc., 155 Fed. 3d 331, 41 Fed. R. Serv. 3d 1151 (4th Circ. 1998 N.C.) in which the Court of Appeals for the 4th Circuit reversed a trial court decision awarding damages to plaintiffs in a class action. One of the bases for reversal was the improper certification of the action. The certified class contained three groups; former franchisees; current franchisees under a revised franchise agreement; and current franchisees under the former franchise agreement. The court observed that the three groups had different remedial interests. The first group was interested only in damages. The second group could not benefit from a damage award under the revised contract. Some of this group (EDP group) sought to intervene in the court below and on the appeal claiming that their ongoing business relationship with Meineke depended on its financial health which could be imperilled by a large damages award. They urged that the only remedy should be the restoration of funds allegedly diverted from a common advertising account and no damages. The third group could benefit from damages, but also shared a continuing business relationship with Meineke. There was thus a schism as to remedy from the outset. [page51]

[27] The appeals court held (p. 338) that basic due process required that the named plaintiffs possess undivided loyalties to absent class members. The class certified in the court below was such that this requirement could not be met. In the context of a class action regime that did not permit opting out, the conflicts were of particular concern. The representative plaintiffs were all in the third group and repeatedly disavowed the remedy of replenishment of the advertising account and pressed for damages. The court took into account (p. 339) the business interests involved as well as the strictly legal:

Pursuing a damage remedy that was at best irrelevant and at worst antithetical to the long-term interests of a significant segment of the putative class added insult to the injury of abandoning the only remedy in which that segment (the EDP franchisees) was interested.

[28] To a similar effect is the language of the District Court in Free World Foreign Cars Inc. v. Alfa Romeo S.p.A., 55 F.R.D. 26 (S.D.N.Y. 1972) at p. 29:

Plaintiff's interest as a former and terminated franchisee is not co-extensive and consistent with those of the present franchisees who, from all that appears in this record, presently depend upon the economic viability of the defendant. Indeed, plaintiff's interest in this suit may be adverse to this group. Its sole interest is in the recovery of damages. It is of no concern to the plaintiff whether the defendant can survive economically against the threat of heavy and burdensome expenses involved in resisting a class action. It is a matter of concern to present franchise dealers that the defendant remain in business and that they have a continued source of supply of Alfa Romeo automobiles and parts.

And also at p. 29:

It is no answer to say that those franchise dealers who do not desire to be represented by the plaintiff may opt out under the provisions of Rule 23(c)(2). The machinery of the Rule, with its attendant expense, should not be brought into play unless initially plaintiff, who has the burden of proof, justifies its application.

[29] In Aamco Automatic Transmissions Inc. v. Tayloe, 67 F.R.D. 440 (E.D. Penn. 1975), the District Court followed the reasoning of the second cited passage from Alfa Romeo and redefined the class so as to include only former franchisees for whom the economic conflict did not exist.

[30] Closer to home, in Pearson v. Inco Ltd., [2002] O.J. No. 2764 (Quicklaw), [2002] O.T.C. 515 (S.C.J.), Nordheimer J. at para. 150, found that the plaintiff had not met the requirement that there be an adequate plaintiff under s. 5(1)(e) of the Act. The proposed action arose out of allegations that the defendant had emitted polluting substances from its nickel refinery for many years to the detriment of all who lived in the vicinity. It sought to define a [page52] class of all persons and their descendants, who had resided in the affected area since 1995. The proposed representative plaintiff was a resident of the most badly affected area, whose residents had the largest claims and had been the most active in promoting the action. The judge saw a potential conflict between those most affected and others who, being less affected, might well be amenable to a negotiated resolution of a very different character from one which would attract the most affected. He noted that such a concern had been identified in Agent Orange litigation in the U.S. and that there was evidence before him of just such a substantial divergence of opinion among the members of the proposed class.

[31] In Western Canadian Shopping Centres Inc. v. Bennett Jones Verchere, 2001 SCC 46, [2001] 2 S.C.R. 534, 201 D.L.R. (4th) 385, the Supreme Court reviewed the basis on which class proceedings might be brought under the Alberta Rules in the absence of a specific Act. Not surprisingly, the criteria which emerged bear a considerable resemblance to those established by legislation, including our Act. The third criterion is this (p. 555 S.C.R., p. 401 D.L.R.):

Third, with regard to the common issues, success for one class member must mean success for all. All members of the class must benefit from the successful prosecution of the action, although not necessarily to the same extent. A class action should not be allowed if class members have conflicting interests.

[32] The defendant took some comfort from the last sentence of this passage, but it seems to me that the better view is that the first sentence sets out the scope of the paragraph and that the court is addressing conflicting interests as to the common issues. Other types of conflict may be dealt with in the requirement that the representative plaintiff adequately represent the class. The court may look to the motivation of the representative as well as competence. He or she need not be "typical" or the "best" possible plaintiff, but will vigorously prosecute the interests of the class. This last requirement surely presupposes that the interests of the class members do not conflict, otherwise it would be impossible to prosecute them all vigorously.

[33] The concerns expressed by these courts are similar to those expressed by Mr. Nelson, a dissenting franchisee, in his affidavit:

I am very concerned that the plaintiffs, in litigating this matter, or perhaps more likely, in settling it, will not safeguard those other elements of the financial equation that are less important to them but very important to the non- elite franchisees: things like rent subsidies . . . forbearance on arrears, assisted funding for renovation and the like.

[34] In response, counsel for the plaintiff submitted that there are no relevant cases conflicting with the decision at bar that the [page53] representative plaintiffs are suitable. Paragraph 11 of the standard agreement creates a common interest among all franchisees. There is no conflict on the common issue and no doubt that the proposed plaintiffs will prosecute it vigorously. American cases are of little persuasive value because their regime does not allow for opting out and thus all class members may unwillingly be bound to a result they do not seek. (On this last point, it appears that at least some American jurisdictions permit opting out. Otherwise the references to it as an option would make no sense.)

[35] In Goldwater v. Alston & Bird, 116 F.R.D. 342 (S.D. Ill. 1987), there were several hundred small investors who bought bonds believing them to be tax exempt in a fraudulent marketing scheme. One proposed representative plaintiff maintained that the bonds were not actually tax exempt. This was argued to be antagonistic to the remaining plaintiffs because it would, if successful, expose them to potential tax liability. The court rejected this submission:

Class certification should be denied on the basis of antagonism only if that antagonism goes to the subject matter of the litigation.

[36] The claimed antagonism was not to the fraudulent nature of the scheme, but to a possible result of success in the action. The assumption that other claimants will not risk tax exposure on the small interest received in return for the thousands invested and lost seemed illogical to the court. Counsel for the plaintiff submitted that the effect of this case was to show that the U.S. law does not accept as fatal the kind of conflict suggested here.

[37] Counsel for the plaintiff also submitted that the franchisees who made affidavits were not a reliable source of evidence as to the ability of the proposed plaintiffs to represent the interests of the class. They showed no real familiarity with the material in the record and were not opposed to the suit on legal grounds but on the other grounds noted above.

[38] One major difference between our Act and the U.S. situation exemplified by Meineke is the ability of potential members here to opt out. Counsel for the plaintiff submitted that it made all the difference: franchisees unhappy with the possible economic impact of a successful action may opt out, but their unhappiness is not a basis for denying others the opportunity to employ the class action procedure. Counsel for the defendant submitted that opting out was not the solution: the Act prohibited certification where there were conflicts such that the proposed plaintiffs could not adequately represent the interests of the class as a whole. As noted, in Alfa Romeo, supra, the court found that an opt-out provision existed but was no answer to the conflict within the proposed class. [page54]

[39] Is there good reason to doubt the correctness of the decision to certify the action as a class proceeding despite the alleged conflict described above between the proposed plaintiffs and some members of the class as presently described? In order to answer this question affirmatively, I do not have to actually doubt the correctness: it is enough that the correctness is open to serious debate: Ash v. Lloyds' Corp. (1992), 1992 7652 (ON SC), 8 O.R. (3d) 282 (Gen. Div.). While I find, with respect, the reasons of Winkler J. very persuasive, I am nevertheless of the view that the arguments of the moving party on the s. 5(1)(e) issue raise an issue that is open to serious debate.

[40] In his reasons, Winkler J. found that (para. 35) "evidence from class members regarding their opposition to a class proceeding is of no assistance in determining whether a class proceeding should be certified". In the American courts there have been decisions to the contrary, including at least one at the appellate level. The rules being interpreted are substantially similar. While such decisions are not "conflicting" within the meaning of our Rule, nevertheless they give a basis for considering that the matter is open to serious debate. In my view the issue is both open to debate and of general importance in the development of the law relating to class actions. It is desirable that the matter receive appellate review.

[41] The defendant also seeks to appeal against the wording of two issues as prejudging the merits of the case. The questions framed in the order are:

1. Does the Franchise Agreement require the defendant to distribute to the franchisees the Allowances and Exclusivity Cost Reductions (in total "Rebates") referred to in Paragraph 11 of the Franchise Agreement and Schedule A thereto, regardless of the other nomenclature used by the defendant or its suppliers?

2. Does the plain meaning of the Franchise Agreement obligate A&P to provide the franchisees with its internal financial and accounting information and access to its internal financial and accounting records as referred to in . . . the Statement of Claim? If not, what information and documentation is A&P required to provide to the franchisees under the Franchise Agreement?

[42] It was submitted that this wording prejudged the issue of nomenclature and that the judge had prejudged the same issue at para. 59 of his reasons where he referred to the existence of evidence that "A&P has consistently failed to produce proper records to the franchisees despite . . . A&P's obligation to do so in accordance with its duty of utmost good faith as franchisor." Whether this amounts to "prejudgment" seems doubtful to me; it seems to go no farther than to state what the evidence is and the [page55] position taken. But that the wording of the questions is itself prejudgment is not tenable. The issue of whether the nomenclature or the nature of the rebate governs appears to be a part of the case and it surely must be in the question if it is to be decided. There is no basis for leave to appeal on this point.

[43] The defendant also objects to the approval of the Plan produced by the plaintiff for the prosecution of the action. The motion judge thought it ambitious but workable in a case managed environment. The defendant submitted that the Plan fails to grapple with the most difficult issues in forwarding the action such as the basis upon which experts' reports can be based when the meaning and scope of s. 11 is unsettled. The approval of a Plan is a fact-driven exercise and raises no principle requiring appellate review. Such a Plan is always a work in progress and cannot be expected to cover every eventuality in advance.

[44] The orders made pursuant to s. 12 of the Act are now moot and it is not desirable that leave to appeal be given.

[45] For these reasons, leave to appeal is granted upon the following issues:

Did the plaintiffs demonstrate that the representative plaintiffs will fairly and adequately represent the interests of the class as required by s. 5(1)(e)(i) of the Act?

Is there a conflict between the representative plaintiffs and other franchisees within the meaning of s. 5(1)(e)(iii) of the Act?

[46] Counsel for the defendants also asked for leave to appeal the costs order. Although I think that the granting of leave on a substantive ground opens up the costs order, I grant the leave sought as a precaution.

[47] Costs of the motion for leave reserved to the panel hearing the appeal.

Order accordingly.

Notes

Note 1: Campbell v. Flexwatt Corp. (1997), 1997 4111 (BC CA), 15 C.P.C. (4th) 1, 44 B.C.L.R. (3d) 343 (C.A.) (para.18); Bywater v. Toronto Transit Commission (19980, 27 C.P.C. (4th) 172 (Ont. Gen. Div.) at p. 177.