COURT FILE NO.: CV-19-00621334-CP
DATE: 20191121
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
THE TRUSTEES OF THE DRYWALL ACOUSTIC LATHING AND INSULATION LOCAL 675 PENSION FUND
Plaintiff
- and -
SNC-LAVALIN GROUP INC., KEVIN G. LYNCH, NEIL BRUCE, SYLVAIN GIRARD, JEAN RABY, ALAIN RHÉAUME, ERIC D. SIEGEL and BENITA M. WARMBOLD
Defendants
Proceeding under the Class Proceedings Act, 1992
BEFORE: Justice Edward P. Belobaba
COUNSEL: Daniel S. Murdoch and Libby Nixon for the Defendants in the Ontario and Quebec Actions / Moving Parties
Michael G. Robb, Anthony O’Brien and Garett M. Hunter for the Plaintiffs in the Quebec Action / Moving Parties
Joel Rochon, Peter R. Jervis, Ronald Podolny, Douglas M. Worndl and Emily Dubis for the Plaintiff in the Ontario Action / Responding Parties
HEARD: November 9, 2019 with additional submissions in writing
Motions to stay ontario action
[1] A law firm files a proposed national class action against the defendant in Quebec. A different law firm representing a different plaintiff files a proposed national class action against the defendant in Ontario. The pleadings in the two actions allege securities misrepresentations in the secondary market and end up being substantially similar in scope and content. The damages claim is in excess of a billion dollars. Neither action has yet been granted leave to proceed under provincial securities law or has been certified as a class proceeding. The leave and certification motions in both actions will be argued sometime next year.
[2] It would obviously be in the best interests of the class, and fairer to the defendant, if the two class action firms simply joined forces and advanced a single national proceeding. But so far, for reasons unknown, this has not occurred. Indeed, quite the opposite. One of the firms is now before this court to put an immediate end to the other’s involvement and achieve exclusive carriage of this billion-dollar class action.
[3] I will refer to the plaintiff in the Quebec action[^1] as PQ and the plaintiff in the Ontario action (this action) as PO. The primary defendant, SNC Lavalin Group Inc., is the same in both actions.
The motions to stay the Ontario action
[4] PQ brings this motion to stay the Ontario action as an abuse of process. The defendant joins PQ and asks this court to stay the Ontario action on the same ground. PO resists and asks that the motions be dismissed.
[5] PQ submits that PO’s action is a duplicative proceeding that was filed in Ontario for no legitimate purpose and is thus an abuse of the process of this court. PQ says that the interests of the proposed national class will be effectively protected in the Quebec action.
[6] The defendant (in both actions) adds that parallel and overlapping class actions in two separate provinces will result in a waste of time, effort and resources, and would be prejudicial to SNC, the individual defendants, and SNC’s continuing shareholders.
[7] PO submits, in response, that it is neither abusive nor improper for different plaintiffs who have retained different counsel to commence parallel cases that may overlap in their subject matter or class definition. More importantly, says PO, the claim it filed in Ontario was not duplicative of the claim that PQ filed in Quebec. Nor was the Ontario action filed for an illegitimate purpose. PO also adds that the appropriate time to decide which of the two actions is preferable is at the certification motion when preferability can be addressed directly on a full record.
[8] I agree, in large part, with PO. I find no evidence of abuse of process on the record before me. I also agree that where parallel proceedings are not an abuse of process but nonetheless raise questions of preferability, these questions are best addressed at certification under the preferability criterion.
[9] For the reasons set out below, the two stay motions are dismissed.
The applicable law
[10] As is often the case in class action litigation, the applicable law when distilled to its essence is not in dispute and can be stated succinctly.
[11] Standing is not an issue. Both moving parties have the requisite standing to bring their stay motions. Even though PQ is not party to the Ontario action, PQ has standing under section 106 of the Courts of Justice Act[^2] which allows not only parties but non-parties to bring a motion to stay any proceeding in this court on such terms as are just. The defendant’s standing, as a party to the Ontario action, is fully supported by s. 106 of the Courts of Justice Act, as just noted, and by Rule 21.01(3)(d) which allows a defendant to bring a motion to stay an action as an abuse of process.
[12] Parallel proceedings per se are not an abuse of process. It is beyond dispute that, as far as possible, multiplicity of legal proceedings should be avoided.[^3] However, in the class action context, proposed class actions which arise from the same occurrence and proceed in two or more provinces in parallel are not unusual. As this court noted in Silver v. Imax:
It is not unusual for class proceedings to be commenced contemporaneously in different jurisdictions. Even where a class proceeding has been certified elsewhere, parallel proceedings may be permitted to continue.[^4]
[13] The reality in most cases is that competing class counsel eventually agree to co-operate. Parallel securities class actions that continue beyond leave and certification soon become a single proceeding for purposes of the common issues trial or settlement. My experience as a class action judge supports this observation of the Divisional Court:
Generally, to date in class action proceedings, through the co-operation of counsel and guidance from the court, issues of potentially overlapping jurisdiction have been worked out on a practical basis in the interests of litigants.[^5]
[14] The question here, of course, given the absence to date of any such co-operation, is whether the Ontario action should be stayed at the pre-certification stage as an abuse of process.
[15] Abuse of process in the class action context. The doctrine of abuse of process engages the inherent power of the court to prevent the misuse of its procedure in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute.[^6] In the class action context, some of our courts have found that multi-jurisdictional class actions may be an abuse of process where they are duplicative and serve no legitimate purpose.
[16] The Manitoba Court of Appeal said this in Hafichuk-Walkin v BCE:[^7]
In our federation, parallel multi-jurisdictional class actions are permissible. However, multi-jurisdictional class actions are abusive when they are duplicative and no legitimate purpose would be served by allowing more than one class action to proceed on behalf of overlapping class members from one or more provinces.[^8]
[17] Canadian courts have found an abuse of process when the same plaintiff or the same law firm files identical or almost identical actions in several provinces for no good reason.[^9] Filing duplicative actions in multiple jurisdictions for example, “as a form of insurance policy” to hedge class counsel’s bets, is not a sufficiently good reason.[^10]
[18] PO argues that the “duplicative and no legitimate purpose” test has only been applied in cases (and should be so limited) where the same plaintiffs or the same lawyers file identical or almost identical class actions in multiple jurisdictions against the same defendant. Here, of course, different law firms filed in Quebec and Ontario on behalf of different plaintiffs.
[19] I know that some judges have found the same plaintiff/same counsel feature to be an important determinant in deciding duplication.[^11] However, as I advised PO during the hearing, the fact that different plaintiffs or different counsel filed the parallel proceedings cannot be determinative. It would not make good legal sense to allow multi-jurisdiction filings to escape scrutiny for abuse of process simply because class counsel was able to persuade another class member to be the representative plaintiff in its parallel action, or worse, another law firm to act as a “beard.” In my view, it is more sensible and certainly more principled to approach every parallel class proceeding that generates an abuse of process challenge with the same core question: can it be shown that the impugned parallel action is a duplicative action that was filed for no legitimate purpose.
[20] Did PO file a duplicative class proceeding in Ontario for no good reason? In my view, as I explain below, it did not.
Analysis
(1) “First to file” not relevant
[21] PQ filed the Quebec action on February 6, 2019. PO filed the Ontario action on June 5, 2019. There is no suggestion that the Ontario action should be stayed simply because the Quebec action was filed first. In common law provinces, and certainly in Ontario, the “first to file” rule that apparently exists in Quebec has been the subject of negative judicial comment. Indeed, this court has suggested that a first-to-file regime, if it were extended across Canada, would exacerbate “the practice of rushing to commence overlapping actions in as many jurisdictions as possible in order to claim turf and secure carriage for law firms - rather than to advance the interests of a putative class and [would give] ambulance-chasing a good name.”[^12]
[22] The Divisional Court echoed these concerns in Mignacca v. Merck Frosst[^13] noting that “a rule of swiftest to the finish line … encourages tactics that may well be contrary to the interests of justice” and that granting priority to the class action filed first anywhere in the country “may result in an arbitrary, unfair order.”[^14]
[23] I agree.
[24] The decision on these stay motions as they affect an Ontario action cannot turn on who filed first. The applicable test is the “duplicative and no legitimate purpose” test.
(2) Duplication not established
[25] It is common ground that an abuse of process motion should be decided on the particular facts or circumstances as set out in the record before the court.
[26] The initial claim (or “motion for authorization of a class action”) that PQ filed in Quebec on February 6, 2019 was unusually circumscribed for a securities misrepresentation claim, only 17 pages in length. The claim referred to a project in Saudi Arabia and more generally accused the defendant of financial misrepresentations relating to improper revenue recognition in violation of applicable international financial reporting standards. The initial Quebec claim was relatively non-specific. PQ did not mention any problems relating to fixed-price EPC contracts or the relevance and importance of IFRS-15, one of the key international financial reporting standards.
[27] PO took more time and filed a longer and more detailed 73-page claim in Ontario on June 5, 2019. The Ontario action set out a more focused presentation of the alleged misrepresentations and corrections and, among other things, made clear that the problems of fixed-price EPC contracts and the alleged non-compliance with IFRS-15 were central to the misrepresentation claims that were being advanced.
[28] PQ then proceeded to revise its February claim and filed a massively amended claim on October 15, 2019. This amended 45-page claim expanded the content and arguably changed the focus of the initial claim by adding explicit references to IFRS-15 and detailed discussions of the fixed-price EPC contracts problem.
[29] I am not suggesting that PQ’s October amendments simply copied PO’s June claim, only that PO’s June action was not duplicative of PQ’s February action.
[30] PO’s June action on its face is more comprehensive, more sophisticated and frankly very different than the action filed by PQ several months earlier in February. Indeed, the extensive amendments to PQ’s action as filed in October suggest that PQ well understood that the limited scope and content of his initial claim would have to be revised significantly.
[31] The defendant submits that PO has referred to no authority for the proposition that an action is not an abuse of process simply because it was not abusive at the time it was filed. Perhaps so. But it is equally true, that the defendant can point to no case where the impugned parallel action was found not to be an abuse of process when filed but then rematerialized as such after the other action was extensively amended.
[32] I therefore agree with PO that if its June action was not duplicative and was not an abuse of process when it was filed, it cannot become so, four months later, when PQ filed a significantly amended pleading. As is often the case, parallel proceedings are subject to cross-pollination and often end up looking very similar, sometimes almost identical. But that doesn’t mean that the first proceeding should prevail and the second proceeding should automatically be stayed for abuse of process. If this were to happen, the result would be a de facto adoption in Ontario of the much-criticized “first to file” rule.
[33] The question, again, is whether the Ontario action when filed was duplicative of the Quebec action as it was at that time. The answer is “no.” Abuse of process has not been not established on the evidence before me. The two stay motions must be dismissed.
[34] The result is this. The two parallel proceedings remain in place, each moving forward to their respective leave and certification motions before the Quebec and Ontario courts. The defendant says this is unfair and inefficient and points to the extra costs that may be incurred in fighting the same pre-certification battle on two fronts.
[35] There are three responses to the defendant’s submission. One, as this court noted in Tiboni v Merck Frosst,[^15] extra cost “is not a sufficient reason” to grant a stay of one of the potentially overlapping proceedings.[^16] Especially here, in the context of a billion-dollar securities class action claim where defendants often face parallel leave and certification motions.[^17] Two, there is no evidence that the leave motion here will necessarily be a costly proceeding. Three, even if this proves to be the case, there is no reason why the costs could not be reduced by the parties and the two courts co-operating to allow, for example, joint expert reports, joint cross-examinations and even joint hearings. Indeed, I would be pleased to work with Justice Morrison, my Quebec counter-part, to help make the parallel leave motions more efficient and thus less costly.
[36] To summarize my reasons thus far. If two proposed national class actions are filed by different law firms in different jurisdictions, the two class counsel firms should ideally join forces and advance a single national proceeding. If this is not feasible, a motion to stay one of the proceedings as an abuse of process is certainly possible, provided there is compelling evidence that one of the proceedings was duplicative when filed and was filed for no legitimate purpose. However, if there is no abuse of process, and the defendant chooses not to bring a forum non conveniens motion, the two proceedings will continue in parallel. This is not a troubling outcome. As already noted, parallel proceedings are a common feature of modern class action litigation. At some point, however, a court may have to decide which of the two actions should be preferred.
(3) Decide preferability at certification
[37] The Uniform Law Conference of Canada in its 2005 report on national class actions recommended, among other things, that the issue of parallel multi-jurisdictional proceedings should be considered at certification under a more refined “preferability” criterion.[^18] Three provinces, Saskatchewan, Alberta and British Columbia, have acted on this recommendation and have amended their class proceeding statutes accordingly.[^19] See, for example, s. 5(6) of the Alberta Class Proceedings Act:
5(6) If a multi‑jurisdictional class proceeding or a proposed multi‑jurisdictional class proceeding has been commenced elsewhere in Canada that involves subject‑matter that is the same as or similar to that of a proceeding being considered for certification under this section, the Court must determine whether it would be preferable for some or all of the claims or common issues raised by the prospective class members to be resolved in the proceeding commenced elsewhere.[^20]
[38] Earlier this year, the Law Commission of Ontario in its Report on Class Actions[^21] recommended that the Class Proceedings Act[^22] in this province be amended in similar fashion. I understand that the province is currently considering the LCO Report but no amendments have been enacted to date.
[39] PO submits that even without such a statutory amendment in Ontario, it would still be open to the defendant and even PQ to advance the argument before this court at the certification motion that, as a matter of preferability, the Ontario action should not be certified and should give way to the action proceeding in Quebec.
[40] I agree with this submission. The language of s. 5(1)(d) of the CPA requires the court to consider, among other things, whether the proposed class action would be the preferred procedure (as opposed to say, small claims court actions, regulatory agencies or other available proceedings.) Section 12 of the CPA allows the court to “make any order it considers appropriate respecting the conduct of the class proceeding to ensure its fair and expeditious determination.” The Court of Appeal has confirmed that the scope of s. 12 is far-reaching and is engaged “from the inception of an intended class proceeding” and “continues throughout the ‘stages’ of the proceeding until a final disposition …”[^23]
[41] If the Ontario action clears the leave hurdle and advances to certification, both the defendant as a party and PQ as a “participant”,[^24] could argue that the Quebec action should be preferred under the s. 5(1)(d) analysis and the Ontario action should be stayed. The value of doing so at certification is that this court would have the benefit of a more complete record.
[42] More specifically, at the certification motion, this court could well have information about the results of the leave and certification motions in Quebec and could fashion an outcome in Ontario that would truly be in the best interests of the national class. This could include staying the Ontario action altogether or allowing it to proceed further, possibly with a modified class definition or a revised list of common issues. Put simply, whether or not the Ontario action is destined to be certified, which of course remains to be seen, the best interests of the national class will be better determined at the certification stage where the court will have the benefit of more complete information.
[43] If I am wrong in my understanding of this court’s jurisdiction under ss. 5(1)(d) and 12 of the CPA as just described, I am still obliged to dismiss the two stay motions because abuse of process has not been established on the record before me.
Disposition
[44] The motions to stay the Ontario action are dismissed.
[45] Initially, when asked at the hearing, neither PQ nor PO requested costs. The defendant, however, preferred that a costs award be made, at least as between the defendant and PO. After some further discussion, the defendant and PO agreed that a $15,000 costs award as between them would be fair and reasonable. I therefore fix costs at $15,000 payable forthwith by the defendant to PO.
Justice Edward P. Belobaba
Released: November 21, 2019
[^1]: Graff v SNC Lavalin Group Inc. et al, (Que. Sup. Ct. File No. 500-06-000975-199). [^2]: Courts of Justice Act, R.S.O. 1990, c. C.43. [^3]: Ibid., s. 138. [^4]: Silver v Imax Corporation, 2009 72334 (ONSC) at para 133. [^5]: Mignacca v Merck Frosst Canada, (2009) 2009 10059 (ON SCDC), 95 O.R. (3d) 269, at para. 50. [^6]: Toronto v CUPE, 2003 SCC 63, at para. 37; Canam Enterprises Inc. v Coles (2000), 2000 8514 (ON CA), 51 O.R. (3d) 481 (C.A.) at para. 55. [^7]: Hafichuk-Walkin v BCE Inc, 2016 MBCA 32. [^8]: Ibid. at para. 40. [^9]: See, for example, Englund v Pfizer Canada, 2007 SKCA 62; Collins v BCE Inc., 2010 SKQB 74; Duzan v Glaxosmithkline, 2011 SKQB 118; Ewert v Canada (Attorney General), 2012 BCSC 621; Hafichuk-Walkin, supra, note 7; and Ammazzini v Anglo American PLC, 2016 SKQB 63. [^10]: Hafichuk-Walkin, supra, note 7, at para. 56. [^11]: Ibid. at para. 10. [^12]: Tiboni v Merck Frosst Canada, 2008 37911 (ON SC), [2008] O.J. No. 2996 (ONSC) at para. 37. [^13]: Mignacca, supra, note 5. [^14]: Ibid, at para 47. [^15]: Tiboni, supra, note 12. [^16]: Ibid. at para. 39. [^17]: A billion-dollar securities class action involving Barrick Gold has been proceeding in parallel in Ontario and Quebec and, I am told, several other provinces. I granted leave in the Ontario action: see DALI Local 675 Pension Fund (Trustees) v. Barrick Gold, 2019 ONSC 4160. The leave motion in Quebec is still before the court. [^18]: Report of the Uniform Law Conference of Canada’s Committee on the National Class and Related Interjurisdictional Issues, (Vancouver: March 9, 2005). [^19]: Alberta Class Proceedings Act, S.A. 2003, c C-16.5, section 5(6). See also the British Columbia Class Proceedings Act, R.S.B.C. 1996, c. 50, s. 4.1 and the Saskatchewan Class Actions Act, S.S. 2001, c. C-12.01, s.6.1. [^20]: Alberta CPA, supra, note 19, s. 5(6). [^21]: Ontario Law Commission, Class Actions Final Report (July 2019). [^22]: Class Proceedings Act, 1992, S.O. 1992, c. 6. [^23]: Fantl v. Transamerica Life Canada, 2009 ONCA 377 (C.A.) at para. 39. [^24]: Section 14 of the CPA provides that the court, at any time in a class proceeding, may “permit one or more class members to participate in the proceeding.” PQ is a class member in the Ontario proceeding.