SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: CV-08-362807-CP

DATE: 20140422

RE: MICHAEL CANNON / Plaintiff

AND

FUNDS FOR CANADA FOUNDATION, MATT GLEESON AND SARAH STANBRIDGE as trustees for the DONATIONS CANADA FINANCIAL TRUST, PARKLANE FINANCIAL GROUP LIMITED, TRAFALGAR ASSOCIATES LIMITED, TRAFALGAR TRADING LIMITED, APPLEBY SERVICES (BERMUDA) LTD. as trustee for the BERMUDA LONGTAIL TRUST, EDWIN C. HARRIS Q.C., PATTERSON PALMER also known as PATTERSON PALMER LAW, PATTERSON KITZ (Halifax), PATTERSON KITZ (Truro), MCINNES COOPER, SAM ALBANESE, KEN FORD, RIYAD MOHAMMED, DAVID RABY, GREG WADE, GLEESON MANAGEMENT ASSOCIATES INC., MARY-LOU GLEESON, MATT GLEESON and MARTIN P. GLEESON / Defendants

AND

GACICH FINANCIAL ENTERPRISES INC., TAD GACICH, LIFE PLANNING LTD., LORNE ALLEN, et al / Third Party Defendants

Proceeding under the Class Proceedings Act, 1992

BEFORE: Justice Edward P. Belobaba

COUNSEL: Peter Jervis and Remissa Hirji for Certain Third Parties / Moving Parties

Andrew Lewis and Samuel S. Marr for the Plaintiff / Responding Party

Stephanie Sugar for the ParkLane Defendants / observing

Brad Berg for the Bermuda Defendants / observing

Clarke Tedesco for the CMB Third Parties / observing

HEARD: April 9, 2014

MOTION TO “OPT BACK IN”

[1] Four class members, who opted out of a class proceeding more than a year ago, want to opt back in. While they were watching from the sidelines, class counsel achieved a multi-million dollar settlement with some of the defendants and stayed the third party claim. The four moving parties now ask that the court let them back into the class action.

[2] Opting out does not mean “wait and see.”

[3] The motion to opt back in is dismissed with costs.

Background

[4] This class action, brought on behalf of some 10,000 “donors” who say they were the victims of an alleged charitable donation tax scam, was certified as a class proceeding on January 18, 2012.[^1] The certification decision noted that the ParkLane defendants were bringing third party claims against the sales people or “distributors” who sold the charitable donation packages to the donors.[^2] Some of the donors were also distributors,[^3] and as donor-distributors (“DDs”) were class members.

[5] ParkLane sent out a mass email to the distributors on November 30, 2012 advising them of the third party claim and urging them in bold type “to consult a lawyer regarding the matters discussed in this email.” Within a month of this email advisory, class counsel and lawyers acting for some of the third party distributors were discussing bringing a motion to stay the third party claim (until after the common issues trial has been fully resolved.) In December, 2012 a steering committee representing a large group of distributors, including some DDs, retained Rochon Genova (“RG”) as legal counsel. RG advised class counsel on January 12, 2013 that RG (also) intended to bring a motion to stay the third party claim. About a month later, on February 15, 2013 RG requested an urgent case conference to seek an extension of the original opt-out date of February 22, 2013. As it turned out, the February 22, 2013 opt-out date was extended for certain distributors, not once but twice, with a final deadline of March 14, 2014. Class counsel reached a multi-million dollar settlement with the Lawyer and FFCF/Gleeson defendants on July 9, 2013. After several days of hearing, in October, 2013 and January and February, 2014, the ParkLane defendants’ third party claim against the distributors was formally stayed on March 4, 2014.[^4] The final deadline for filing a claim under the multi-million settlement with the Lawyer Defendants was March 14, 2014.

[6] Four of the DDs, Patricia Orser, Lorne and Regina Allen, and Errol Patterson (“the Four DDs”) who had voluntarily opted out of the class action more than a year ago,[^5] now want to opt back in. They filed this motion on April 1, 2014.

[7] There is no suggestion that the opt-out procedure was in any way unclear or confusing. There is no suggestion that any of the Four DDs were misled or misinformed or were otherwise the victims of misconduct. The Four DDs say their opt-outs should be invalidated because at the time they opted out they were “confused” and did not know that it was possible to stay the third party claim. Now that the third party action has been stayed they want to opt back in.

Analysis

[8] The motion is dismissed for two reasons: one, there is no evidence of any misinformation or improper conduct; and two, the only reason offered by the moving parties (“we didn’t know that the third party action could be stayed”) is simply not believable, and, in any event, is irrelevant.

(1) No evidence of misinformation or misconduct

[9] Under s.12 of the Class Proceedings Act,[^6] the case management judge has wide-ranging discretion to supervise the conduct of the class proceeding and make whatever orders are fair and appropriate. However, it goes without saying, that a wide-ranging discretion should be exercised whenever possible on a principled basis.

[10] The Court of Appeal in Pet Valu[^7] has provided a principled basis for the re-opening and invalidation of opt-outs. Having reaffirmed that class members "ought to be free to exercise their right to participate in or abstain from the class action on an informed, voluntary basis, free from undue influence"[^8] the Court provided this focused rationale for judicial intervention:

Where class members engage in conduct that amounts to misinformation, threats, intimidation, coercion or that reveals some other improper purpose in an attempt to undermine the opt-out process, the court may intervene to restrain and remediate the effect of such conduct. The court may do so based on the jurisdiction under s. 12 of the CPA to protect the fair determination of the proceeding.[^9]

[11] In other words, to re-open and invalidate a voluntary opt-out, the court must find evidence of misinformation or misconduct. If the “opting-back in” party cannot establish that he or she was misinformed about the opt-out procedure or its consequences, or was the victim of some misconduct (such as threats, coercion or intimidation) the decision to opt out must remain intact. Otherwise, the integrity of the out-opt process and the important values of predictability and finality that it strives to achieve would be severely undermined.[^10]

[12] The same principle for judicial intervention – misinformation or misconduct –explains the decisions in Robinson v. Rochester Financial Ltd.[^11] and Gregg v. Freightliner Ltd.[^12] In Robinson, the opt-out period was re-opened because the court found evidence of serious misconduct on the part of the defendant or a party close to the defendant.[^13] In Gregg, the British Columbia Supreme Court permitted four of six out-of-province class members to opt into the B.C. class proceeding because none of the four had received the required notice.[^14] The court found that the other two class members had received notice but had decided not to join the class action.[^15]

[13] Here, as I have already noted, none of the Four DDs say that they were misinformed about the class proceeding or about the opt-out procedure, or were coerced, threatened or intimidated. Nor were they the victims of undue influence. There is no suggestion that they did not see, read or understand the certification notice and the opt-out procedure, or that their decision to opt out was not voluntary. Given the principles noted above, as affirmed in Pet Valu,[^16] there is no basis for judicial intervention.

(2) The reason offered here –“we didn’t know that the third party claim could be stayed” is not believable and, in any event, is irrelevant

[14] For reasons unknown, only Mr. Allen filed an affidavit on this motion and in doing so, purported to speak on behalf of the other three. As it turns out, however, only three of the moving parties can arguably point to the third party action as the source of their concern. Patricia Orser, who opted out on January 28, 2013, was not named as a third party by the ParkLane defendants. Therefore, Ms. Orser’s decision to opt out of the class action was in no way affected by any confusion or concern about the third party claim. She did not file an affidavit on this motion and no other reason has been advanced to impugn the validity of her decision to opt-out.[^17] This leaves only Lorne and Regina Allen, and Errol Patterson (“the Three DDs.”)

[15] Let me consider each of them in turn.

(i) Lorne Allen: I have two difficulties with Mr. Allen’s evidence. One, it is obvious on the evidence before me that he opted out because he wanted no part of the class action and not because of any confusion about the third party claim. The evidence shows that Mr. Allen, as ParkLane’s largest distributor, was a vociferous opponent of the class action from the outset. Indeed, in a phone conversation with class counsel on the day before he opted out, Mr. Allen made clear that he intended to devote “100% of his time” to a “campaign” to contact all class members to encourage them to opt out of the action. In other words, his decision on December 11, 2012 to opt out was prompted by his opposition to the class action and not by any “confusion” caused by the third party claim and whether it could be stayed.

Two, even if the latter were true, Mr. Allen had ample opportunity to discuss his concerns with either class counsel or his then legal counsel, Reg Bradburn. Indeed, it is difficult to believe that he would not have done so. And had he done so, any competent lawyer would have advised Mr. Allen that a motion to stay the third party claim was not only possible but likely. I therefore do not accept Mr. Allen’s evidence that he opted out because he was confused about the third party claim.

(ii) Regina Allen: Like her husband, Lorne Allen, Mrs. Allen was also represented by lawyer Reg Bradburn. She could easily have asked Mr. Bradburn about the third party action and whether it could be stayed. Nothing prevented Mrs. Allen from obtaining legal advice from Mr. Bradburn, class counsel, or any other lawyer before she delivered her opt-out notice. And if something did prevent her from doing so, that evidence is not before the court. Regina Allen did not file an affidavit.

(iii) Errol Patterson: When Mr. Patterson opted out on January 23, 2013 he was part of a distributors’ group that, several weeks earlier, had retained RG as legal counsel. Class counsel had already informed RG that the plaintiff would be bringing a motion to stay the third party claim, and RG had already expressed its intention to do likewise. Had Mr. Patterson contacted RG he would have been so advised, and most likely would also have learned about RG’s intention to request an extension of the upcoming February 22nd opt-out deadline, giving Mr. Patterson even more time to decide what to do. In short, Mr. Patterson had every opportunity to obtain legal advice and learn more about the motion to stay the third party claim but for reasons unknown, he chose not to do so.[^18]

[16] I therefore do not accept the statement made by Mr. Allen in his affidavit on behalf of the Three DDs that they were all confused and didn’t know if the third party claim could be stayed.

[17] But there is a further reason for my rejection of the “didn’t know” statement – it is not relevant. Even if the Three DDs did not have access to legal counsel, I would still have dismissed this motion. All of the DD’s as distributors (and financial advisors) were earning thousands, even hundreds of thousands of dollars annually in sales commissions. They were not unsophisticated business people. If any of them were confused about their dual role as donor/distributor or about whether or not the third party claim could be stayed, it was their individual responsibility to raise these concerns with class counsel, or obtain independent legal advice, or, at the very least, do some legal research whether at a library or on Google. If any of the DDs decided to opt out without doing any of the above, that was their decision to make.

[18] Put simply, if the integrity and finality of the opt-out procedure is to be maintained (and only re-opened in cases of misinformation or misconduct) there can be no room for the argument that “I didn’t have legal advice before I opted out.” As a general rule, the absence of independent legal advice is not and should not become a basis for invalidating an otherwise legitimate opt-out by a responsible adult.[^19]

[19] I therefore conclude that the “I didn’t know that the third party claim could be stayed” submission fails for two reasons – it is not believable on the evidence before me and, in any event, it is irrelevant.

Disposition

[20] The motion to allow Patricia Orser, Lorne and Regina Allen, and Errol Patterson to opt back in to the class proceeding is dismissed with costs.

[21] If the parties are unable to resolve the question of costs, I would be pleased to receive brief written submissions within 14 days from the plaintiff, and within 10 days thereafter from the moving parties.

Belobaba J.

DATE: April 22, 2014

[^1]: Cannon v Funds for Canada Foundation, 2012 ONSC 399, [2012] O.J. No. 168 (S.C.J.).
[^2]: Ibid., at para. 88.
[^3]: There are about 539 distributors. About 189 of the distributors are also donors (“DDs”) and thus class members. Twenty-nine of them have opted out (including the four herein). The other 160 DDs have stayed in the action.
[^4]: Cannon v Funds for Canada Foundation, [2014] ONSC 1056.
[^5]: The Four DDs had all opted out by February 13, 2013 – Lorne Allen on December 11, 2012, Errol Patterson on January 23, 2013, Patricia Orser on January 28, 2013, and Regina Allen on February 12, 2013.
[^6]: S.O. 1992, c.6.
[^7]: 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2013 ONCA 279, [2013] O.J. No. 2012 (C.A.)
[^8]: Ibid., at para. 41.
[^9]: Ibid., at paras. 42 - 43. Emphasis added.
[^10]: Ibid., at paras. 2 and 16.
[^11]: Robinson v Rochester Financial Ltd. 2010 CarswellOnt 7017 (S.C.J.).
[^12]: Gregg v. Freightliner Ltd., 2012 BCSC 415, 2012 B.C.S.C. 415.
[^13]: Supra, note 11, at paras. 3-5; also see Robinson v Rochester Financial Ltd. 2012 ONSC 911 at para. 11.
[^14]: Supra, note 12, at paras. 28-49
[^15]: Supra, note 12, at paras. 23-27.
[^16]: Supra, note 7.
[^17]: Also note that the Notice of Motion provides that the motion to “opt back in” is being brought by “certain class members who are also distributors and third parties.” Ms. Orser is not a third party and has not suggested otherwise. She therefore cannot be included in this motion.
[^18]: If Mr. Patterson’s complaint is that RG failed to advise him, in a timely fashion, that it was acting on his behalf as his legal counsel, that complaint should be directed to RG.
[^19]: There may be that rare and exceptional case where actual legal advice is reasonably required for a fully informed opt-out decision, but the person opting out is impecunious and financially unable to retain legal counsel, and this may be enough to invalidate the opt-out decision. But this is not that case.