DIVISIONAL COURT FILE NO.: 210/08
COURT FILE NO.: 06-CV-306061-CP
DATE: 20081203
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
CUNNINGHAM, A.C.J.S.C.J., CARNWATH & BELLAMY JJ.
Proceeding under the Class Proceedings Act, 1991
B E T W E E N:
JOSEPH FANTL
Plaintiff
- and -
TRANSAMERICA LIFE CANADA
Defendant
Bonnie Tough, for Roy Elliott O’Connor LLP, solicitors for the Plaintiff – Respondents on the motion appealed from
Alan Lenczner, Q.C., for Kim Orr Barristers P.C., former solicitors for the Plaintiff – Moving Party in the motion appealed from
Mary Jane Stitt, for the Defendant
HEARD AT TORONTO: Nov. 10, 2008
CARNWATH J.:
[1] Kim Orr Barristers P.C. (“KO”) appeals, with leave, from the Order of the Honourable Mr. Justice Perell of April 23, 2008. KO had moved to set aside a Notice of Change of Solicitors in a proposed class proceeding or, in the alternative, to remove Mr. Fantl as representative plaintiff in that proposed class proceeding.
[2] The appellants submit that Perell J. applied an incorrect legal test in failing to appoint Won Kim, of KO, as lead counsel for the class or in refusing to remove Mr. Fantl as representative plaintiff for the class.
BACKGROUND
[3] Joseph Fantl is the plaintiff in a proposed class proceeding against Transamerica Life Canada (“Transamerica”). The action has not yet been certified as a class proceeding.
[4] Mr. Fantl was represented by the law firm of Roy Elliott Kim O’Connor LLP (“REKO”), where Mr. Kim was the supervising lawyer responsible for the matter. REKO dissolved as of December 31, 2007 and two new law firms formed, Roy Elliott O’Connor LLP, or REO, and Kim Orr Barristers P.C., or KO.
[5] Following the dissolution of REKO, Mr. Fantl served a Notice of Change of Solicitors appointing REO as his solicitor of record. KO responded by seeking to set aside the Notice of Change of Solicitors, to have Won Kim appointed as lead counsel to the class, to add Jeong-Ae Seok and Yi-Yea (Riya) Kang as representative plaintiffs and, in the alternative, to replace Mr. Fantl.
[6] Although the moving party is KO, it is Mr. Kim who wishes to be appointed counsel for the class proceeding. He denies there is any financial motivation behind the request and says it is in the best interests of the class of potential claimants that he be the lawyer for the class. KO submits that Mr. Fantl should be replaced as plaintiff because he has chosen Mr. Roy’s new firm to continue the action to the prejudice of the class. It is alleged the choice was made because of Mr. Fantl’s close friendship with Mr. Roy.
[7] It is common ground between the parties that Messrs. Roy, Elliott, Kim and O’Connor all have admirable reputations as civil litigation lawyers and considerable experience in class proceedings. In his affidavit of March 11, 2008, Mr. Kim concedes that Messrs. Elliott, Roy and O’Connor “are all able counsel”.
[8] The action is still at the pre-certification stage. A certification motion scheduled for May of 2007 did not proceed as the parties had begun discussions of a consent certification. In August of 2007, the parties started settlement discussions regarding one aspect of the claim respecting the over-charging of management fees to policyholders.
[9] Following the creation of the new firms, Mr. Fantl wrote REO saying he had chosen that firm as his solicitors for the class action. In his letter, he expressed his confidence in the firm acquired through his personal knowledge of Mr. Roy and Mr. O’Connor.
[10] Following Perell J.’s dismissal of KO’s motion, Mr. Kim launched a competing class action, naming Ms. Kang as representative plaintiff.
[11] This remarkable set of facts reveals a lawyer, discharged by his client, seeking to have the Court appoint him to represent his former client in the class proceeding, over the objections of his former client. Failing that, the lawyer seeks to have his former client replaced with two representative plaintiffs selected by him. 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.
THE STANDARD OF REVIEW
[12] The Supreme Court of Canada has pronounced on the standard of review in appeals from a judge’s Order, in Housen v. Nikolaisen (2002), 2002 SCC 33, 211 D.L.R. (4th) 577 (S.C.C.):
On a pure question of law, the basic rule with respect to the review of a trial judge’s findings is that an appellate court is free to replace the opinion of the trial judge with its own. Thus the standard of review on a question of law is that of correctness (at para. 8).
The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a ‘palpable and overriding error’: Stein v. The Ship “Kathy K” (at para. 10).
Where the trier of fact has considered all the evidence that the law requires him or her to consider and still comes to the wrong conclusion, then this amounts to an error of mixed law and fact and is subject to a more stringent standard of review [than for findings of fact] (at para. 28).
[13] To the extent that Perell J.’s decision included the exercise of a discretion, deference is owed by an appellate court. An appellate court should not interfere with the exercise of a trial court’s discretion simply because it would have come to a different conclusion (see: Cowles v. Balac (2006), 2006 34916 (ON CA), 83 O.R. (3d) 660 (C.A.), at paras. 41-42).
[14] An appellate court owes substantial deference to a class action judge. In the context of certification decisions, the Ontario Court of Appeal has held that class action judges are entitled to substantial deference and that the intervention of the Court should be limited to matters of general principle (see: Cassano v. The Toronto Dominion Bank, 2007 ONCA 781, [2007] O.J. No. 4406 (C.A.), at para. 23).
A PLAINTIFF’S RIGHT TO CHOOSE COUNSEL
[15] Perell J. began his consideration of the motion by reviewing the general law on a plaintiff’s right to choose, retain and discharge counsel (para. 44).
[16] He then noted it was necessary to examine whether, in the context of a class proceeding, “the historic principles that govern the relationship between a lawyer and client ought to apply or whether they ought to be adjusted or even displaced” (para. 47).
[17] Perell J. then identified the singular nature of a class action where the representative plaintiff, class counsel and the Court have responsibilities to the putative class members. Further, class proceedings provide access to justice, promote judicial economy and behaviour modification. He stressed the importance of requiring Court approval for abandonments, discontinuances and settlements in uncertified or certified class proceedings, to ensure that the interests of class members not be sacrificed to the interests of the representative plaintiff or class counsel (paras. 51-53). He concluded that the traditional right of a plaintiff to choose counsel must be modified in the light of the Act.
[18] Nowhere in these preliminary considerations does Perell J. commit any error of law or come to any conclusion that is clearly wrong.
PERELL J.’S VIEW OF THE COURT’S JURISDICTION
[19] Mr. Fantl had submitted that the jurisprudence has confined the Court’s jurisdiction to alter the traditional rules that govern the solicitor-client relationship only to the post-certification phase of the class action. After reviewing authorities on the law’s inherent jurisdiction to control its own process (para. 57), Perell J. concluded that the Court’s inherent jurisdiction did not spring into existence with the certification of an action. Thus, while the circumstances of the action being or not being certified may be a factor in how the Court exercises its jurisdiction, certification is not a prerequisite to that jurisdiction. Perell J. cited several authorities which supported his conclusion (para. 58).
[20] Perell J. concluded his analysis of the Court’s jurisdiction as follows:
[59] In my opinion, the Court has jurisdiction from the outset and throughout the proceedings to fully govern the procedure including the authority to supervise the relationships among: (a) lawyer and representative plaintiff; (b) lawyer and proposed class; (c) lawyer and certified class; (d) representative plaintiff and proposed class; (e) representative plaintiff and certified class, and, if necessary, the Court has the authority to replace the solicitor of record or even a representative plaintiff with another person who will bring the action on behalf of a proposed or a certified class of co-claimants.
[21] Perell J.’s analysis of the law with respect to the Court’s jurisdiction is correct.
PERELL J.’S ANALYSIS OF THE ROLES OF THE COURT AND OF THE PARTICIPANTS IN A CLASS ACTION
[22] Perell J. had little difficulty in finding that a class proceeding is designed to have a genuine plaintiff with an individual claim against the defendant and the existence of a genuine solicitor-client relationship between the representative plaintiff and the solicitor of record (para. 61).
[23] Under the Class Proceedings Act, 1992, S.O. 1992, c. 6 (“the Act”), the action begins with a Statement of Claim, names the parties and identifies a solicitor of record. It is a requirement for certification under s. 5(e) of the Act that:
There is a representative plaintiff who,
(i) would fairly and adequately represent the interests of the class,
(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and
(iii) does not have, on the common issues for the class, an interest in conflict with the interests of the other class members.
[24] Perell J. emphasized the need for the representative plaintiff to understand the responsibility to prosecute the action on behalf of and in the interests of the putative class. Citing Englund v. Pfizer Canada, 2007 SKCA 62, [2007] S.J. No. 273 (C.A.), at para. 50 and Hoffman v. Monsanto Capital Inc. and Bayer Cropscience Inc., 2007 SKCA 47, [2007] S.J. No. 182 (C.A.), at paras. 87-92, he concluded that the presence of a genuine claimant reduces frivolous claims, acts as a check and balance to the excesses of entrepreneurial law firms, provides a voice to protect the interests of the absent class members, and goes some distance to ensuring that the access to justice and behaviour modification provided by the Act make a meaningful contribution to both private and social good.
[25] Perell J.’s analysis of the roles of the Court and of the participants in a class action was correct.
“FAIRLY AND ADEQUATELY REPRESENT THE INTERESTS OF THE CLASS”
[26] As noted above, s. 5(e) of the Act requires the presence of a plaintiff in the action who “would fairly and adequately represent the interests of the class”. Citing Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534, at para. 41, Perell J. concluded that the provision of adequate representation depended on the plaintiff’s motivation to prosecute the claim, the ability to bear the costs of the litigation and the competence of the solicitor for the class to prosecute the claim. He then went on to develop and emphasize that the Act does not require perfect or the best representation (para. 67). The Act requires only fair and adequate representation for the class members. Referring to Western Canadian Shopping Centres Inc., he cited a passage from para. 41 of that report:
The proposed representative plaintiff 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.
THE RELATIONSHIP BETWEEN CLASS COUNSEL AND THE PUTATIVE CLASS BEFORE CERTIFICATION
[27] Mr. Fantl had submitted that before certification, Mr. Kim could not claim to be acting for the proposed class members. Thus, the submission ran, Mr. Kim’s actions were nothing more than an illustration of disloyalty by a lawyer to a former client. Those actions allegedly included breaches of contract, fiduciary duty and the Rules of Professional Conduct of the Law Society of Upper Canada.
[28] These submissions caused Perell J. to conduct an exhaustive survey of the relationship between class counsel and putative class members before certification.
[29] After reviewing Pearson v. Inco Ltd., 2001 28084 (ON SC), [2001] O.J. No. 4877 (S.C.J.); Heron v. Guidant Corp., [2007] O.J. No. 3832 (S.C.J.), at para. 10, leave to appeal refused 2008 204 (ON SCDC), [2008] O.J. No. 48 (S.C.J.); and, Lau v. Bayview Landmark Inc., 2004 859 (ON SC), [2004] O.J. No. 2788 (S.C.J.), Perell J. concluded that the Court had jurisdiction to govern and change the selection of both representative plaintiff and class counsel. In coming to this conclusion, at para. [93], his reasons incorrectly cite para. [38] of Cullity J.’s reasons in Lau, above. Perell J.’s cite is:
…the ultimate responsibility to protect the interests of class members lies with the class.
[Emphasis added]
Cullity J. wrote:
…the ultimate responsibility to protect the interests of class members lies with the court.
[Emphasis added]
Read in context, Perell J. agreed with Cullity J. that the Court had the ultimate responsibility.
[30] In para. [94], Perell J. concluded his analysis:
[94] The lessons I draw from the Lau v. Bayview Landmark Inc. case are that the Court has the jurisdiction to govern and change who is a representative plaintiff and who is the solicitor of record and that the Court should exercise that jurisdiction carefully and having regard to the interests of the representative plaintiff and the class members. I do not read this case, however, as requiring the Court to make any particular order in the circumstances that are present in the case at bar.
In coming to this conclusion, Perell J. made no error of law. His conclusion was reasonable.
THE RELEVANCE OF CARRIAGE MOTION CASE LAW
[31] Before Perell, J., the parties sought to support their submissions by reference to carriage motions. Simply put, a carriage motion asks the court to choose between or among two or more representative plaintiffs in two or more class actions springing from more or less the same circumstances and the same potential class members. A decision on a carriage motion requires consideration of a variety of factors to determine what is in the best interests of the class and fair to the defendants:
In my view, the main criterion for the determination of the issue must be keeping in mind the policy objections of the CPA, what resolution is in the best interests of the putative class members while at the same time fair to the defendants?
Factors to consider in determining who should be appointed as solicitor of record in a class action include: the nature and scope of the causes of action advanced, the theory advanced by counsel as being supportive of the claims advanced; the state of each class action including preparation, the number, size and extent of involvement of the proposed representative plaintiffs, the relative priority of commencing the class actions; and the resources and experience of counsel.
[Vitapharm Canada ltd. v. F. Hoffman-La Roche Ltd., [2000] O.J. No. 4594 (S.C.J.), paras. 48 & 49]
[32] Before Perell J., Mr. Kim relied on Vitapharm. Curiously, only one of the six factors recited in para. 49 appear to apply – the resources and experience of counsel.
[33] Mr. Fantl argued that the motion brought by Mr. Kim was not a carriage motion and that jurisprudence on carriage motions did not apply.
[34] On this issue, Perell J. found:
[101] My own view is that the carriage motion jurisprudence should not be ignored because the case law demonstrates that the Court must pay attention to the interests of the proposed class members during the pre-certification phase of the action, and the Court must be constantly looking forward in anticipation that an action may become certified. The case law about carriage motions also discusses to varying degrees the roles and needs of the representative plaintiff, class counsel, and the absent class members.
[102] While the carriage motion jurisprudence should not be ignored for the wisdom it contains, in my opinion, it would be a mistake to treat the motion now before the Court as a carriage motion. To do so would have the deleterious effect of encouraging competition for the carriage of class proceedings based simply on what is alleged to be in the interests or the best interests of the class. Encouraging that competition is to manufacture a serious problem out of a solution for another problem. The test used for resolving a carriage motion is a solution for a genuine problem of a competition between redundant or overlapping class proceedings and it was not meant to be used to encourage more competitions for the carriage of a class proceeding.
Perell J. made no error in law in so concluding.
PERELL J.’S DECISION ON THE MOTION
[35] Perell J. concluded:
[107] The discussion has gone on at some length. However, despite the length of the discussion, the reasons for my conclusion for the case at bar, already noted in the introduction, which is to dismiss the motion, can actually be stated quite quickly. The reasons amount to no more than concluding that Mr. Fantl is a genuine plaintiff and while in the context of a class proceeding the Court has the jurisdiction to overrule a plaintiff’s choice of lawyer, the court should defer to the plaintiff’s choice, unless it is demonstrated that the choice is inadequate; that is, the Court should only intervene if the plaintiff’s choice would deny the proposed class or the class in a certified class action the relationships and the representation to which it is entitled in a class action.
[36] Much was made by counsel for Mr. Kim and KO of the opening sentence in para. [108] of Perell J.’s reasons, which reads as follows:
[108] The test of representation for the class in a class action is one of adequacy not of superiority and it is not a test of what is in the best interests of the class or proposed class. It follows that the test of showing inadequacy of representation that would justify setting aside a notice of change of solicitors will not be an easy test to satisfy and it will not be satisfied by facts and arguments that another choice of lawyer or law firm would be better or best choice for the plaintiff to make.
[37] Counsel for KO says the opening sentence of para. [108] is an incorrect statement of the law. I respectfully disagree. Rather than seize on the sentence in isolation, it must be read within the context of para. [108] itself and in the larger context of the argument developed in the preceding paragraphs, particularly paras. [103] to [107].
[38] In those preceding paragraphs, Perell J. concludes 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. That standard is the selection of counsel competent to prosecute the claim, as described in Western Canadian Shopping Centres Inc., above.
[39] In para. [108] itself, Perell J. continues his comparison of alleged superiority of counsel versus adequacy of counsel. He finds the test for establishing inadequacy of representation sufficient to support setting aside a Notice of Change of Solicitors cannot be met “by facts and arguments that another choice of lawyer or law firm would be better or best choice for the plaintiff to make”. Perell J. made no error in law nor came to a conclusion clearly wrong in so finding.
[40] On the motion before him, Perell J. found Mr. Fantl’s choice of law firm to continue the class proceeding was adequate and he deferred to it. Based on his careful review of the law, he made no legal error in doing so and the decision was reasonable in every respect.
[41] The appeal is dismissed.
COSTS
[42] The costs of the leave motion before Lederman J. were reserved by him to this Court. At the end of the hearing, counsel agreed to attempt to settle the matter of costs. They have been unable to do so and have filed written submissions with respect to costs.
[43] Counsel for KO submits that no award of costs should be made to any party in the matter. He relies on Perell J.’s para. [113]:
[113] My inclination is to make no order for costs, if for no other reason than the novelty of the points involved…
[44] Counsel for KO further notes Lederman J.’s comment that “the decision has significant implications for the development of class action principles generally”. Lederman J. appears to have granted leave on a reading of para. [108], urged by counsel for KO,s that it expressed an incorrect statement of the law. For reasons which I have elaborated above and with respect to Lederman J., I prefer a reading of that paragraph that reflects the conclusion of the paragraph itself and the reasons developed by Perell J. in prior sections of his judgment.
[45] This is an appropriate case for costs to follow the event both here and on the leave motion below. I accept Transamerica’s submissions that it was necessary for it to attend both on the leave application and on the appeal.
[46] KO shall pay to REO costs of $10,000 for the appeal and $5,000 for the leave motion, inclusive of fees, disbursements and GST, on a partial indemnity basis payable in thirty days. KO shall pay to Transamerica its costs of $4,000 on the appeal and $2,000 on the leave application, inclusive of fees, disbursements and GST, on a partial indemnity basis payable in thirty days.
CUNNINGHAM A.C.J.S.C.J.
CARNWATH J.
BELLAMY J.
Released: December 3, 2008
COURT FILE NO.: 210/08
DATE: 20081203
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
CUNNINGHAM, A.C.J.S.C.J., CARNWATH & BELLAMY JJ.
B E T W E E N:
JOSEPH FANTL
Plaintiff
- and -
TRANSAMERICA LIFE CANADA
Defendant
JUDGMENT
CARNWATH J.
Released: December 3, 2008