ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-12-55329
DATE: 2014/06/06

BETWEEN:

Michael Evans and Crystal Evans
Plaintiffs

– and –

The Bank of Nova Scotia and Richard Wilson
Defendants

Michael S. Herbert and Cheryl Gerhardt McLuckie, for the Plaintiffs

Martin Sclisizzi and M. Kremer, for the Defendant Bank of Nova Scotia

HEARD in Ottawa: February 13, 2014

REASONS FOR DECISION ON CERTIFICATION MOTION

R. SMITH J.

Overview

[1] The plaintiffs seek to certify their action as a class proceeding against the Bank of Nova Scotia (the “Bank”) and Richard Wilson (“Wilson”). The plaintiffs seek to sue the Bank and Wilson for damages, including a breach of their privacy rights through the tort of “intrusion upon seclusion”.

[2] Richard Wilson, an employee of the Bank, has admitted to providing private and confidential information of Bank customers to his girlfriend, who then disseminated the private information to third parties for fraudulent and improper purposes. As a result of the Bank employee’s conduct, a substantial number of the Bank’s customers became victims of identity theft and fraud, which has negatively affected their credit rating.

[3] Wilson was employed by the Bank as a Mortgage Administration Officer, from September 24, 2007, until June 12, 2012. In this position he had access to highly confidential customer information.

[4] The Bank identified a marked spike in the number of customer files accessed by Wilson commencing on or about July 1, 2011. The Bank has identified 643 Bank customers (the “Notice Group”) whose files were accessed by Wilson from July 1, 2011, until his computer access was terminated on May 18, 2012.

[5] In June of 2012, the Bank wrote to the Notice Group and advised them that it was possible that there had been unauthorized access to their private information held by the Bank. The Bank offered them a complimentary subscription to a credit monitoring and identity theft protection service. To date, 138 members of the Notice Group have advised the Bank that they have been the victims of identity theft or fraud in the past year. The Bank has compensated these victims for the pecuniary losses that they have suffered.

Position of the Parties

[6] The Bank opposes the certification motion and submits as follows:

(a) That the claim fails to disclose a cause of action because:

(i) It fails to disclose a cause of action for negligence, breach of fiduciary duty, or breach of a duty of good faith by the Bank;

(ii) It fails to disclose a legal basis for the waiver of tort claim (disgorging of profits) because there is no causal connection between the allegedly wrongful conduct by the Bank and the profits it generated;

(iii) The Bank cannot be held vicariously liable for the tort of intrusion upon seclusion for a deliberate breach of customers’ privacy rights by one of its employees; and

(iv) General damages cannot be awarded to members of the class, because they have failed to meet the required threshold to award general damages for emotional distress, namely by showing a recognized psychiatric or psychological injury;

(b) That the proposed class is overly inclusive as there is no evidence to establish which members of the Notice Group’s private information was accessed for an improper purpose, other than the 138 identified customers. Stated another way, there is no evidence to determine whose information Wilson accessed and disclosed to third parties for an improper purpose, other than the 138 individuals who have been defrauded and have advised the Bank of same;

(c) That the plaintiffs have failed to raise any suitable common issues to be determined which are necessary to the resolution of each class members’ claim;

(d) That a class proceeding is not the preferable procedure to resolve the common issues considering judicial economy, access to justice, and behaviour modification. The Bank submits that judicial economy would not be served by certifying a class proceeding given its admission of responsibly to pay any pecuniary damages suffered by any member of the Notice Group as a result of fraud or identity theft;

(e) That the above admission of responsibility removes any common issue to be decided. The Bank suggests that proceeding with a test case or numerous individual actions in the Small Claims Court is a preferable procedure;

(f) Finally, that the plaintiffs are not appropriate representative plaintiffs because they have not demonstrated sufficient participation and have failed to advance the litigation in an effective manner.

[7] The plaintiffs disagree with the Bank’s submissions, outlined above, and submit as follows:

(a) That their statement of claim discloses several causes of action alleged against the Bank including: negligence in supervising and monitoring their employees; breach of contract; the tort of intrusion upon seclusion; breach of fiduciary duty and good faith; vicarious liability of the Bank for its employee’s conduct; and “waiver of tort”, which is an alternative claim advanced to seek damages calculated by requiring the Bank to disgorge its profits during the relevant time period. The plaintiffs further submit that Kershman J. has already decided that a cause of action has been raised in waiver of tort, as he granted leave to amend their statement of claim to plead this tort.

(b) That the proposed class of 643 customers in the Notice Group, all of whose personal information was accessed during the time period that Wilson was providing copies of clients’ personal files to third parties for fraudulent and improper purposes, is not overly inclusive. The Bank chose this group of customers as appropriate individuals to be given notice. The damages suffered by different members of the Notice Group are an individual inquiry;

(c) That the causes of action pleaded raise the common issues of whether the Bank is vicariously liable for the tort of intrusion upon seclusion; whether the Bank was negligent in its failure to supervise Wilson and its other employees and to implement appropriate safeguards to protect their customers’ personal and financial information; whether the Bank breached its contract with its clients by its conduct; whether the Bank breached a fiduciary duty or duty of good faith; and whether doctrine of waiver of tort applies. A resolution of these issues would move the action forward for all class members and is necessary to resolve each class member’s claim against the Bank.

(d) The plaintiffs further state that a class proceeding is the preferable method of proceeding and will promote access to justice and judicial economy. In addition, a class proceeding would achieve the objective of positively modifying the behaviour of corporations, such as Banks, which are entrusted with protecting individuals’ personal and financial information. The plaintiffs argue that determining all of the common issues in one court proceeding rather than in hundreds of individual Small Claims Court actions or arbitration is the preferable procedure because it makes efficient use of judicial resources. The damages for the tort of intrusion upon seclusion are modest, which could deter the proposed class members from seeking judicial remedies due to cost considerations. Therefore, access to justice would be enhanced if the class action is certified, as members of the class would incur no out of pocket fees to pursue their cause of action.

(e) The plaintiffs also submit that they are suitable representative plaintiffs and have retained a team of experienced counsel to pursue the action on behalf of the proposed class.

Analysis

[8] Section 5(1) of the Class Proceedings Act 1992, S.O. 1992, c. 6 (“CPA”) sets out five requirements to certify an action as a class proceeding, namely:

The court shall certify a class proceeding on a motion under section 2, 3 or 4 if,

(a) the pleadings or the notice of application discloses a cause of action;

(b) there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;

(c) the claims or defences of the class members raise common issues;

(d) a class proceeding would be the preferable procedure for the resolution of the common issues; and

(e) there is a representative plaintiff or defendant 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 other class members.

[9] Section 6 of the CPA states that:

The court shall not refuse to certify a proceeding as a class proceeding solely on any of the following grounds:

1. The relief claimed includes a claim for damages that would require individual assessment after determination of the common issues.
2. The relief claimed relates to separate contracts involving different class members.
3. Different remedies are sought for different class members.
4. The number of class members or the identity of each class member is not known.
5. The class includes a subclass whose members have claims or defences that raise common issues not shared by all class members.

[10] In Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, at paras. 20 and 25, the Supreme Court of Canada stated that the representative plaintiff must show some basis in fact for each of the certification requirements, as set out in section 5 of the CPA, and as outlined above.

[11] In Pro-Sys Consultants Ltd. v. Microsoft Corp., 2013 SCC 57, [2013] 3 S.C.R. 477, the Supreme Court emphasized that the certification stage does not allow for an extensive assessment of the evidence, nor of the complexities and challenges that a plaintiffs may face in establishing their case at trial.

[12] The plaintiffs have sued both Wilson and the Bank. As against the Bank, their claim alleges negligence, a breach of contract, the tort of intrusion upon seclusion, breach of fiduciary duty and of the duty of good faith, and waiver of tort. The claim further alleges that the Bank is vicariously liable for Wilson’s wrongdoing for each of the above claims.

[13] The plaintiffs have claimed the following damages:

(a) General damages for breach of contract and negligence (general damages);

(b) Damages for the tort of intrusion upon seclusion;

(c) Damages for inconvenience, discomfort, distress and the aggravation of having to clear their credit reports (stress damages).

(d) An accounting and payment of profits earned by the Bank on the mortgages granted to the members of the notice group, pursuant to the doctrine of waiver of tort; and

(e) An order that damages be paid out an aggregate basis.

[14] The Bank has admitted the following facts:

(a) Wilson wrongfully accessed the confidential financial information of an indeterminate number of the Bank’s customers and provided that information to unknown third parties;

(b) The Bank owed the plaintiffs a duty of care subject to the standard of a reasonable person and had an implied contractual obligation to the plaintiffs to make reasonable efforts to maintain the confidentiality of their personal information;

(c) Wilson was an employee of the Bank; and

(d) The Bank is vicariously liable for any pecuniary losses that Wilson’s conduct may have caused to the Bank’s customers.

Admissibility of Lawyer’s Affidavit

[15] The plaintiffs filed an affidavit of a lawyer in the plaintiffs’ counsel’s firm largely setting out his legal opinion on this motion for certification. I agree with the Bank’s submission that a partner’s affidavit filed in support of the motion for certification, containing largely argument and legal opinion, is not to be given any weight with regards to any legal opinion contained therein.

A. CAUSE OF ACTION [Section 5(1)(a)]

[16] In Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401 (C.A.), the Ontario Court of Appeal affirmed that the “plain and obvious” test established in Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959, applies to determine if a cause of action has been pleaded. As in a Rule 21 motion, in determining whether the plaintiffs have established a cause of action, all of the facts pleaded are assumed to be proven, claims that are unsettled in the jurisprudence should be allowed to proceed, and the pleadings should be read generously to allow for inadequacies due to drafting frailties and the plaintiffs’ lack of discovery information.

[17] The causes of action previously mentioned include the tort of intrusion upon seclusion, negligence, breach of contract, breach of fiduciary duty and of the duty of good faith, and waiver of tort. All claims are alleged against both defendants. Wilson has not filed a Statement of Defence and has been noted in default.

(Continues verbatim with the full judgment text exactly as provided above, including all paragraphs through [127], the closing signature, and the repeated case header.)

Mr. Justice R. Smith J.

Released: June 6, 2014

COURT FILE NO.: CV-12-55329
DATE: 2014/06/06

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

Michael Evans and Crystal Evans
Plaintiffs

– and –

The Bank of Nova Scotia and Richard Wilson
Defendants

REASONS FOR DECISION
ON CERTIFICATION MOTION

R. Smith J.

Released: June 6, 2014