CITATION: Hughes v. Liquor Control Board of Ontario, 2016 ONSC 867
COURT FILE NO.: CV-14-518059CP
DATE: 20160203
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DAVID HUGHES and 631992 ONTARIO INC.
Plaintiffs
– and –
LIQUOR CONTROL BOARD OF ONTARIO, BREWERS RETAIL INC. (carrying on business as “THE BEER STORE”), LABATT BREWERIES OF CANADA LP, LABATT BREWING COMPANY LIMITED, MOLSON COORS CANADA, MOLSON CANADA 2005 and SLEEMAN BREWERIES LTD.
Defendants
Paul Bates and Ronald Podolny for the Plaintiffs
Kent E. Thomson and Matthew Milne-Smith for the Defendant Liquor Control Board of Ontario
Michael A. Eizenga and Ranjan K. Agarwal for the Defendant Brewers Retail Inc. (carrying on business as “The Beer Store”)
Nicole Henderson for the Defendant Labatt Breweries of Canada LP and Labatt Brewing Company Limited
Adam Ship for the Defendant Molson Coors Canada and Molson Canada 2005
Peter J. Cavanagh and Marina Sampson for the Defendant Sleeman Breweries Ltd.
Proceeding under the Class Proceedings Act, 1992
HEARD: January 27, 2016
PERELL, J.
REASONS FOR DECISION
A. INTRODUCTION
[1] Pursuant to the Class Proceedings Act, 1992, S.O. 1992, c. 6, on December 12, 2014, the Plaintiffs, David Hughes, a beer purchaser, and 631992 Ontario Inc., a restaurant known as “The Poacher,” which was licenced to serve and sell beer to its patrons, commenced a proposed class action against the Liquor Control Board of Ontario (“LCBO”), Brewers Retail Inc. (“The Beer Store”), Labatt Breweries of Canada LP, Molson Coors Canada, and Sleeman Breweries Ltd., seeking damages of $1.4 billion, and punitive damages of $5 million for: (1) breach of Part VI of the Competition Act, R.S.C. 1985, c C-34; (2) civil conspiracy; (3) unjust enrichment; and (4) waiver of tort. Subsequently, Labatt Brewing Company Limited and Molson Canada 2005 were added as Defendants to the proposed class action.
[2] Pursuant to section 29 of the Class Proceedings Act, with the consent of the LCBO and with the other Defendants taking no position, the Plaintiffs now seek to discontinue the action against the LCBO. The Plaintiffs also seek leave to deliver a Second Fresh as Amended Statement of Claim that would: (a) remove the LCBO as a party but identify it as a so-called unnamed co-conspirator; and (b) make substantive amendments to the claims being made against the remaining Defendants, removing some claims but adding some new claims or requests for relief.
[3] For the reasons that follow, I dismiss the Plaintiffs’ motion without prejudice to it being reinitiated after the close of pleadings. The Plaintiffs are at liberty to deliver a Second Fresh as Amended Statement of Claim, as they may be advised, but they are not granted leave to discontinue against the LCBO.
[4] In their Notice of Motion, the Plaintiffs also seek scheduling orders with respect to several possible interlocutory motions. In what follows, I shall not refer to the scheduling matters because they are to be dealt with at a case conference after the release of these Reasons for Decision.
B. FACTUAL AND PROCEDURAL BACKGROUND
(a) Introduction
[5] I have reviewed the Plaintiffs’ draft Second Fresh as Amended Statement of Claim but I take the facts largely from the Plaintiffs’ Fresh as Amended Statement of Claim, the affidavit of Linda Visser, who is a partner with Siskinds LLP, counsel for the Plaintiffs, and the affidavit of Laura-Marie Paynter, a law clerk with Siskinds, LLP.
[6] Because I am dismissing the motion for a discontinuance, it is not necessary for me to recount the evidence relevant to whether notice of the discontinuance should be promulgated.
(b) Background to the Proposed Class Action
[7] The LCBO is a Crown agent that derives its authority from the Liquor Control Act, R.S.O. 1990, c. L.18. Under the Act, the LCBO is empowered to establish government stores for the sale of liquor to the public and to fix the prices for the goods sold at the stores. Historically, the LCBO has sold beer in packages of six or less containers. If a beer consumer wishes to purchase beer in packages with more containers (i.e. a 12-pack or a 24-pack), these packages are available at The Beer Store.
[8] Labatt Breweries of Canada LP and Labatt Brewing Company Limited (collectively “Labatt”), Molson Coors Canada Inc. and Molson Canada 2005 (collectively “Molson”), and Sleeman Breweries Ltd. (“Sleeman”), are beer manufacturers and beer distributors in Ontario.
[9] Labatt, Molson, and Sleeman own Brewers Retail Inc., a government store under the Liquor Control Act that carries on business as “The Beer Store.” Before recent amendments to the Liquor Control Act, Brewers Retail, which I shall hereafter refer to as The Beer Store, was the predominant retail outlet for the sale of beer to the public.
[10] Pursuant to the Liquor Control Act, other manufacturers of beer could only sell their products through the LCBO or at their own brewing facilities, at The Beer Store, or at “agency stores,” which are local retailers permitted to sell alcoholic beverages along with other goods.
[11] On June 1, 2000, the LCBO and The Beer Store entered into an agreement (the “Market Allocation Agreement”), under which the Plaintiffs allege the parties allocated the Ontario retail beer market between themselves. The Beer Store was, in effect, given a monopoly on certain segments of the beer market, including sales to “licencees” (restaurants, bars and other establishments licenced to serve alcohol to patrons).
[12] In 2010, the provincial government enacted the regulation Minimum Pricing of Liquor and Other Pricing Matters, O. Reg. 116/10. This regulation provides that a manufacturer of beer may apply to the LCBO for a change in the price at which its beer is sold by The Beer Store. Under the regulation, provided the price is above the statutory minimum, the LCBO is to approve the change in price.
(c) The Proposed Class Action
[13] Mr. Hughes is an individual residing in Burlington, Ontario. He purchased beer at various stores owned and operated by The Beer Store at various restaurants, bars and other licenced establishments.
[14] 631992 Ontario Inc. is a restaurant in Burlington, Ontario, carrying on business under the name “The Poacher.” It purchased beer from The Beer Store for sale to its patrons.
[15] On December 12, 2014, the Plaintiffs commenced this action, a proposed class action, by Notice of Action.
[16] In the proposed class action, the Plaintiffs seek to represent the following class:
All persons in Canada who purchased beer in Ontario during the Class Period. Excluded from the class are the defendants, their subsidiaries, and affiliates.
Class Period means between June 1, 2000 and the date on which this action is certified as a class proceeding.
[17] On January 12, 2015, the Plaintiffs served and filed their Statement of Claim dated January 8, 2015.
[18] On May 20, 2015, the Plaintiffs delivered a Fresh as Amended Statement of Claim.
[19] Pausing here, it should be noted that since the Defendants have not pleaded their Statements of Defence, the Plaintiffs are at liberty to amend their Statement of Claim without leave of the court.
[20] Normally, with the defendants not having pleaded, a plaintiff is also at liberty to discontinue claims against any defendant that they do not wish to be a party to the action. However, in a class proceeding or a proposed class proceeding, a discontinuance requires leave of the court pursuant to section 29 of the Class Proceedings Act. It is only because of section 29 of the Class Proceedings Act, 1992 that the Plaintiffs now seek the leave of the court to discontinue against the LCBO.
[21] In their Statement of Claim, the Plaintiffs allege two conspiracies; namely: (1) the “Market Allocation Conspiracy;” and (2) the “Prices and Fees Conspiracy”. The Plaintiffs also advance a claim for unjust enrichment based on the imposition of unlawful licencee prices (“the unlawful licencee prices claim”) and they claim damages for misconduct by a public authority.
[22] The Plaintiffs allege that by entering into the Market Allocation Agreement, the Defendants created a monopoly by Molson, Labatt and Sleeman. The monopoly eliminated price competition in market segments, enabling Molson, Labatt and Sleeman to set prices for beer at supra-competitive levels.
[23] The Plaintiffs allege that from June 1, 2000 and continuing to the present time, as part of the Market Allocation Conspiracy, the Defendants engaged in a conspiracy to allocate sales, territories, customers or markets for the supply of beer sold to consumers and businesses in Ontario. The Plaintiffs allege that the Market Allocation Conspiracy was intended to, did, and continues to, affect the prices of beer in Ontario. The Plaintiffs allege that the Market Allocation Agreement is void as being an unreasonable restraint on trade and as contrary to public policy.
[24] The Plaintiffs allege that Molson, Labatt and Sleeman were able to impose supra-competitive prices upon “licencee” customers who had no alternative to purchasing beers sold at The Beer Store, which included the most popular brands. The Beer Store was able to impose supra-competitive “listing” and “handling” fees and charges upon competitor brewers who wished to sell their products at The Beer Store.
[25] The Plaintiffs allege that the Defendants were aware and intended that the Market Allocation Conspiracy would result in increased prices for beer (including beer sold to “licencees”) and the Defendants were aware and intended that at least part of the unlawful overcharge on “licencee” prices would be passed on to patrons of “licencees.” The Plaintiffs allege that the Defendants were also aware and intended that the Market Allocation Conspiracy would result in increased prices for “listing” and “handling” fees, and that at least part of the price increase would be passed on to members of the Proposed Class who purchased craft beer from The Beer Store. The Plaintiffs plead that as a direct result of the Defendants’ conduct alleged herein, Class Members continue to pay artificially inflated prices for beer manufactured, marketed, sold or distributed and have thereby suffered losses and damages.
[26] The Plaintiffs allege that the Defendants’ conduct constitutes offences under Part VI of the Competition Act, in particular, s. 45(1). The Plaintiffs claim loss and damages under s. 36(1) of the Competition Act in respect of the unlawful conduct.
[27] The Plaintiffs allege that the Defendants’ conduct constitutes a civil conspiracy to use unlawful means, which resulted in loss and damages to the Plaintiffs and other putative Class Members. They allege that the Defendants intended to cause economic loss and knew or ought to have known, in the circumstances, that their unlawful acts would likely cause injury to the Plaintiffs and other putative Class Members.
[28] In their current Statement of Claim, the Plaintiffs allege that contrary to s. 3(1)(i) of the Liquor Control Act, Molson, Labatt, and Sleeman set prices to “licencees” that were substantially higher than retail prices for the same classes, varieties and brands of beer and illegal. The Plaintiffs seek the disgorgement from Molson, Labatt, Sleeman, or The Beer Store, of the amount by which “licencee” prices exceeded retail prices for the same classes, varieties and brands of beer.
[29] In their Statement of Claim, the Plaintiffs allege that the LCBO engaged in misconduct by entering into the Market Allocation Agreement and improperly fixing or approving “licencee” prices submitted to it by Molson, Labatt and Sleeman, contrary to s. 3(1)(i) of the Liquor Control Act. The Plaintiffs allege that the LCBO’s conduct was commercially unreasonable regulatory action taken for improper purposes and without regard to the interests of the Proposed Class.
[30] The Plaintiffs allege that the LCBO had no statutory authority to enter into the Market Allocation Agreement and that the Agreement is ultra vires because: (1) it inappropriately fettered the discretion of the LCBO to control the sale of beer; (2) it was entered into for an unauthorized statutory purpose to control the sale of liquor in the province and to benefit three large, foreign-owned brewers, to the detriment of Ontario “licencees,” individual consumers, craft brewers and taxpayers; and (3) it was unreasonable and its effect was to discriminate between Labatt, Molson and Sleeman on the one hand, and all other beer manufacturers on the other, as well as between “licencee” customers on the one hand, and retail customers on the other.
[31] The Plaintiffs allege that by entering into the Market Allocation Agreement, the LCBO acted illegally because the purpose and effect of the Market Allocation Agreement is not permitted by, and is contrary to, the Competition Act. Furthermore, the Plaintiffs plead that the Market Allocation Agreement was not authorized by a regulation, contrary to s. 8 of the Liquor Control Act.
[32] The Plaintiffs allege that the LCBO’s breaches of the Competition Act and its conduct in entering into and conducting its business pursuant to the Market Allocation Agreement amounts to misconduct by a public authority warranting an award of compensatory damages against it.
(d) The Decision to Discontinue the Action against the LCBO
[33] Ms. Visser deposed that after the delivery of the Fresh as Amended Statement of Claim, the Plaintiffs’ investigations led them to the conclusion that the LCBO likely had not derived a financial benefit from the conspiracy with the benefits going its co-conspirators, Labatt, Molson and Sleeman.
[34] On August 1, 2015, amendments to the Liquor Control Act, R.S.O. 1990, c. L.18 came into force. Some of the amendments were part of a provincial initiative to allow certain supermarkets to sell six-packs of beer.
[35] Other amendments purported to exonerate some or all of the misconduct alleged by the Plaintiffs in their Fresh as Amended Statement of Claim.
[36] Ms. Visser deposed that the amendments represent an unexpected change in the circumstances of the prosecution of this litigation. She deposed that Class Counsel have reason to believe that continuing to sue the LCBO could result in further amendments being made by the provincial government that could restrict or extinguish the claims against all the Defendants.
[37] Further, Mr. Visser deposed that the LCBO has indicated that if not let out of the action, it intends to bring a summary judgment motion, which, if successful, could be prejudicial to the claims of the putative Class Members against not only the LCBO but also the remaining Defendants.
[38] In these changed circumstances, Class Counsel decided to challenge the validity of the amendments as unconstitutional but to discontinue the action against the LCBO and treat it as an unnamed co-conspirator.
[39] Ms. Visser deposed that it was Class Counsel’s opinion that discontinuing the action in this way would not prejudice the putative Class Members because: (a) the remaining Defendants have sufficient assets to satisfy the judgment sought in this proceeding; (b) the remaining Defendants have joint and several liability for the conduct of the LCBO and would be held accountable for all damages; (c) the discontinuance against the LCBO would not discharge the liability of the remaining Defendants because the discontinuance does not include a release, and, in any event, the remaining Defendants would not be discharged pursuant to s. 139(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43; and (d) the Plaintiffs were reserving the right to seek production of documents relevant to this litigation from the LCBO pursuant to Rule 30.10 of the Rules of Civil Procedure and the Freedom of Information and Protection of Privacy Act, R.S.O. 1990, c. F.31, as well as oral discovery pursuant to Rule 31.10 of the Rules of Civil Procedure.
[40] In the proposed Second Fresh as Amended Statement of Claim, the Plaintiffs identify the LCBO as a co-conspirator and refer to it to as the “Unnamed Co-conspirator.” The Plaintiffs plead that the Defendants are jointly and severally liable for the actions and damages allocable to all co-conspirators including the LCBO arising from the Market Allocation Conspiracy and the Prices and Fees Conspiracy.
[41] In this draft pleading, the Plaintiffs abandon “the unlawful licencee prices claim” and the misconduct by a public authority claim against the LCBO.
[42] With respect to the 2015 statutory amendments, which are for obvious reasons not referred to in the earlier versions of the Statement of Claim, the Plaintiffs plead in paras. 23 and 24 as follows:
On August 1, 2015, a series of amendments to the LCA came into force (“the Amendments”). Some of the Amendments purport to affect the claims previously made and/or presently asserted in this litigation. The Plaintiffs do not accept the validity of all of the Amendments.
The Plaintiffs intend to challenge the validity and applicability of certain of the Amendments in due course. In particular, the Plaintiffs seek a declaration that section 10(3) of the LCA, enacted as part of the Amendments, is of no force and effect, by reasons of, among other things, inconsistency with section 45 of the Competition Act.
C. DISCUSSION AND ANALYSIS
1. The Role of Section 29 of the Class Proceedings Act, 1992
[43] In the jurisprudence about class actions, while the most attention is paid to section 5 of the Class Proceedings Act, 1992, which defines the criteria for certification as a class proceeding, section 29, which governs the discontinuance and settlement of class proceedings, is vastly more important to the integrity, viability, and social utility of class actions.
[44] Section 29 states:
Discontinuance, abandonment and settlement
- (1) A proceeding commenced under this Act and a proceeding certified as a class proceeding under this Act may be discontinued or abandoned only with the approval of the court, on such terms as the court considers appropriate.
Settlement without court approval not binding
(2) A settlement of a class proceeding is not binding unless approved by the court.
Effect of settlement
(3) A settlement of a class proceeding that is approved by the court binds all class members.
Notice: dismissal, discontinuance, abandonment or settlement
(4) In dismissing a proceeding for delay or in approving a discontinuance, abandonment or settlement, the court shall consider whether notice should be given under section 19 and whether any notice should include,
(a) an account of the conduct of the proceeding;
(b) a statement of the result of the proceeding; and
(c) a description of any plan for distributing settlement funds.
[45] Pursuant to section 29, court approval is required if a proposed class action is converted into an individual action or if a class action is discontinued: Chopik v. Mitsubishi Paper Mills Ltd., [2003] O.J. No. 192 (S.C.J.); Epstein v. First Marathon Inc., 2000 CanLII 22797 (ON SC), [2000] O.J. No. 452 (S.C.J.); Vennell v. Barnado’s (2004), 2004 CanLII 33357 (ON SC), 73 O.R. (3d) 13 (S.C.J.); Frank v. Farlie, Turner & Co., LLC, 2011ONSC 7137.
[46] Before giving approval of discontinuance, the court must be satisfied that the interests of the class will not be prejudiced: Durling v. Sunrise Propane Energy Group Inc., [2009] O.J. No. 5969 (S.C.J.) at paras. 14-29; Sollen v. Pfizer, 2008 ONCA 803, [2008] O.J. No. 4787 (C.A.), aff’g 2008 CanLII 8618 (ON SC), [2008] O.J. No. 866 (S.C.J.); Frank v. Farlie, Turner & Co., LLC, supra; Coleman v. Bayer Inc., [2004] O.J. No. 1974 (S.C.J.) at paras. 30-39; Coleman v. Bayer Inc., [2004] O.J. No. 2775 (S.C.J.).
[47] A motion for discontinuance should be carefully scrutinized, and the court should consider, among other things: whether the proceeding was commenced for an improper purpose, whether there is a viable replacement party so that putative class members are not prejudiced or whether the defendant will be prejudiced. See: Logan v. Canada (Minister of Health), [2003] O.J. No. 418 (S.C.J.), aff’d (2004), 2004 CanLII 184 (ON CA), 71 O.R. (3d) 451 (C.A.).
[48] The case law about section 29 explains that policy reasons for requiring court approval for the discontinuance of a proposed class action include: (1) deterring plaintiffs and class counsel from abusing the class action procedure by bringing a meritless class proceeding (a so-called strike suit) to extract a payment as the price of discontinuing the class proceeding; and (2) providing an opportunity to ameliorate any adverse effect of the discontinuance on class members who might be prejudiced by the discontinuance: Hudson v. Austin, [2010] O.J. No. 2015 (S.C.J.); Durling v. Sunrise Propane Energy Group Inc., supra at paras. 14-29; Sollen v. Pfizer, supra.
[49] There are other policy reasons for requiring court approval for discontinuances and settlements. For example, the scrutiny of a court approval process discourages various forms of abuse of the class action procedure, one of which I shall call “contrived and improvident settlements.” The contrivance is that class counsel brings a genuinely meritorious class action (i.e., not a meritless strike suit) and then settles the case cheaply but in a way that is highly remunerative from class counsel’s point of view and a modest cost of doing business for the defendants but improvident from the class members’ point of view. Visualize, after the defendants secure a $100 million profit from provable price-fixing or from selling a defective product causing harm to one million consumers, the defendants settle for $20 million, some of which is paid by the defendants’ insurers. From the settlement proceeds, $6 million is paid as counsel fee. Class counsel also receive $2 million for disbursements and the expenses of distribution, with a resulting distribution to class members of $12 each.
[50] I hasten to note that I am not suggesting that there is anything contrived, abusive, or improper in the request for leave to discontinue in the immediate case. The point I wish to emphasize by the above illustration is that under Ontario’s class action regime, section 29 is a fundamentally important provision that imposes on the judiciary a very substantial responsibility to scrutinize and supervise settlements and discontinuances. The policy reason for section 29 and its importance was recognized by the Ontario Law Reform Commission in its influential report, Report on Class Actions (Toronto: Ministry of the Attorney General, 1982) at p. 168, where the Commissioners write, with my emphasis added:
The Commission recognizes that class representations or class lawyers, acting out of self-interest, may occasionally attempt to make a settlement that is unfair to class members. …. [T]he Commission does not believe that this possibility is a sufficient ground to reject the adoption of an expanded class action procedure. In our view, it would be inappropriate to deny all relief to persons with individually nonrecoverable claims, which can be asserted only by means of a class action, on the ground that, in some class actions, the relief actually achieved may be denied or reduced through in appropriate behaviour by representative plaintiffs of counsel. Rather, an expanded class action procedure should be designed to give the judiciary an effective discretion to supervise all settlements and lawyer’s fees. This discretion should permit the courts to preclude settlements that are unfair to class members or to the defendant, and to ensure that the measure of compensation received by lawyers reflects the adequacy of their representation of the class.
[51] Requiring a court approval process for settlements and discontinuances goes some distance in deterring abuses of the class action regime and facilitates satisfying the three major purposes of class proceedings; namely, access to justice, behaviour modification, and judicial economy. Section 29 by requiring court approval of settlements and discontinuances manifests the Legislature’s intention that the integrity and social utility of class actions be maintained and advanced.
[52] In understanding the policy reasons for requiring leave of the court for the discontinuance of a class action, it is also helpful to note that under the entrepreneurial model that Ontario implemented for class actions, the Legislature out-sourced to class counsel a role and function that is, in Ontario and other jurisdictions, played by regulators, public sector officials, or administrative tribunals. The Class Proceedings Act, 1992 is very much a public law statute infusing the court with jurisdiction over subjects otherwise regulated by the Ontario Securities Commission, the Competition Tribunal, provincial and federal labour relations officers and boards, and ministries of health, education, aboriginal affairs, financial institutions, and corporate and consumer affairs.
[53] In this regard, it is informative to recall that the Ontario Law Reform Commission in its Report on Class Actions, supra before making its recommendations for a class action model for Ontario, considered the alternative model where the role of class counsel is played by a public official who gets a salary unconnected to the recovery in the class action. For instance, the Commissioners considered the experience in the United States where State Attorney Generals are empowered to represent classes of persons within their states injured by price-fixing or other conduct that violates antitrust law (See Report, Volume 1, p. 284).
[54] The case at bar is an example of the public law function played by the Class Proceedings Act, 1992 and the public law role played by Class Counsel. It is Class Counsel - not the Commissioner of Competition - which has taken on the role of initiating proceedings to enforce the Competition Act and it is Class Counsel’s recommendation that the LCBO be treated as an unnamed co-conspirator and that the LCBO no longer be a party to the proposed class action.
2. The Application of Section 29 in the Immediate Case
[55] With this background to section 29, I turn now to the immediate case where for what appears to me to be pragmatic, tactical, and political reasons, Class Counsel recommends that the proposed class action be discontinued against the LCBO. However, in my opinion, it is, at least, premature to discontinue the action against the LCBO. In the immediate proposed class action, any discontinuance should occur, if at all, only after the close of pleadings.
[56] There is no doubt that the LCBO is a proper party defendant to the Plaintiffs’ various causes of action now before the court. And the LCBO may be a necessary party to have before the court having regard to the fact that it is one of the contracting parties to the Market Allocation Agreement that fuels the Market Allocation Conspiracy, the Prices and Fees Conspiracy, and the common law and statutory causes of action. Usually, if the subject-matter of an action concerns the validity of a contract, all the contracting parties would be before the court.
[57] However, for present purposes, I need not decide whether or not the LCBO is technically a necessary party defendant, because my initial concern is that it would not be in the interests of the Class Members to let the LCBO out of the main action only to have it reappear as a third party joined by one or more of the remaining Defendants. At this time, none of Labatt, Molson, or Sleeman has delivered a Statement of Defence and, thus, it is unknown whether they intend to assert cross-claims against the LCBO or third party claims that might make it useful to have the LCBO as a party to the litigation.
[58] Labatt, Molson, and Sleeman take no position with respect to the motion for leave to discontinue, but their “no position” is not a commitment by them to forgo third party proceedings against the LCBO should a cross-claim not be available to them. I, therefore, dismiss the Plaintiffs’ motion as premature but without prejudice to it being reinitiated after the close of pleadings.
[59] I also dismiss the Plaintiffs’ motion on its merits, but again without prejudice to the request for a discontinuance being reinitiated after the close of pleadings. Put shortly, the reason for the dismissal is that I am not satisfied based on the evidentiary record now before the court that it would be appropriate to grant leave to discontinue.
[60] In reviewing the evidence and arguments advanced in favour of discontinuing the action, I am the opposite of impressed and I rather am depressed by the argument that it is not in the interests of the putative Class Members to provoke the provincial government into passing more ultra vires amendments to the Liquor Control Act in aid of its Crown agent, the LCBO. Apart from the fact that it is pure speculation what the provincial government might do in the future, I am not prepared to condone this timidity to uphold the rule of law as a reason for granting leave to discontinue.
[61] I am not impressed with the argument that the putative Class Members will not be prejudiced because Class Counsel are confident that the Class Members do not need to dip into the financial pockets of the LCBO for compensation to remedy the wrongdoing, because the Class Members will have available to them the ample financial pockets of the co-conspirators Labatt, Molson, and Sleeman, to respond to the Plaintiffs’ $1.4 billion claim.
[62] The superfluousness of the financial means of the LCBO to satisfy the joint and several liability of the conspirators of which it remains a member is also not a reason to discontinue an action. I can accept that a defendant might be let out of an action because it will be judgment proof, and I am familiar with the tactic of joining a defendant because unlike its co-defendants it is not judgment proof, but I cannot accept as correct the novel argument that a solvent and presumably culpable defendant from whom the plaintiff requires documentary and oral discovery should be let out of an action because there are other solvent defendants, who will be responsible jointly and severally for the damages suffered by the plaintiff and caused by all the conspirators.
[63] For several reasons, I am also not impressed with Class Counsel’s argument that the LCBO should be let out of the action based on the premise that after the delivery of the Fresh as Amended Statement of Claim, the Plaintiffs’ investigations led them to the conclusion that the LCBO likely had not derived a financial benefit from the conspiracy with the benefits rather going to its co-conspirators, Labatt, Molson and Sleeman.
[64] First, the Plaintiffs needed no investigations to conclude that the LCBO likely had not derived a financial benefit. Indeed, that circumstance was noted in the Fresh as Amended Statement of Claim, which does not include the LCBO in the unjust enrichment claim. Second, at this early juncture, I am not convinced that the LCBO received no quid quo pro for signing the Market Allocation Agreement. Third, the fact that a defendant derived no financial benefit from its wrongdoing is not a reason to let it out of an action to pay damages for causing harm.
[65] These last observations bring me to another reason why the evidence and argument to justify the court granting leave to discontinue is deficient at the present time. There is no evidence or argument to explain why the $1.4 billion claim for Misconduct by a Public Authority is being abandoned. This is not a claim for which Labatt, Molson, and Sleeman would be jointly and severally liable and the Plaintiffs do not suggest that the claim has no merit.
[66] Based on the evidentiary record now before the court, the request for leave to discontinue all the actions against the LCBO, including the Misconduct by a Public Authority claim, is not based, as it is in some class action cases, on the plaintiff coming to the realization that his or her case against the defendant is without merit or unlikely to succeed and, therefore, a discontinuance without costs is a way to avoid significant legal costs. In class actions, the realization of the meritless-ness of the claim might be a good reason to grant discontinuance, but that reason is not advanced in the immediate case. I do not foreclose that there may be good reasons to not encumber the claims against the conspirators with a free-standing viable claim against the LCBO as a public authority. The point I make here is that the explanation has not yet been provided.
[67] Finally, I dismiss the motion with leave to reinitiate it after the close of pleadings because I am not satisfied based on the evidence and argument that Class Counsel, which I assume for good reason joined the LCBO as a party, has adequately explained why the LCBO should now be oxymoronically identified as an unnamed co-conspirator and let out of the action. The matter of who should be joined or disjoined to a class action is a matter that goes beyond the over-simplification of asking just whether the putative class members are prejudiced by a discontinuance against a particular defendant.
[68] Recalling that class proceedings are an aspect of public law, in the case at bar Class Counsel have taken on the role of the Commissioner of Competition, and I am not satisfied that the Commissioner of Competition, based on the evidence now before this court, would make the same recommendation as Class Counsel to discontinue the action as against the LCBO.
[69] I wish to be clear that I have only assumed that the LCBO is a wrongdoer and I am not deciding that the action cannot ever be discontinued against the LCBO. Rather, I am deciding that it is at least premature to discontinue the action and that the current evidentiary record is inadequate to justify discontinuance against the LCBO.
D. CONCLUSION
[70] For the above reasons, I dismiss the Plaintiffs’ motion without prejudice to it being reinitiated after the close of pleadings.
[71] This is not an occasion for costs.
Perell, J.
Released: February 3, 2016