Court File and Parties

Court File No.: CV-21-00002102-00CP Date: 2022 03 31 Ontario Superior Court of Justice

Between: James Davis, Plaintiff And: Desjardins Financial Services Firm Inc., Desjardins Global Asset Management & The Personal Insurance Company, Defendants

Counsel: Alexandra Monkhouse, Andrew Monkhouse, Alexandra Cutler for the Plaintiff Trevor Lawson and Christine Lonsdale, for the Defendants

Heard: December 15, 2021

Sequencing Motion Reasons

L. Shaw J.

1. Introduction

[1] The parties cannot agree on the sequencing of the defendants’ proposed summary judgment motion and the plaintiff’s certification motion pursuant to the Class Proceedings Act, 1992, S.O. 1992, c. 6 (the “CPA”).

[2] The plaintiff is the representative plaintiff in a proposed class action. Mr. Davis was an employee of the defendant, The Personal Insurance Company (“TPIC”), a home and auto insurer. All the named defendants are subsidiary companies of the Desjardins Group.

[3] The plaintiff commenced this action pursuant to the CPA on June 9, 2021. According to the statement of claim, since 2011, the defendants have been engaged in a practice called “negative vacation banks”, where employees are provided an advance on their vacation time during the first year of their employment. This amount accrues throughout their employment and then when the employee leaves the company, the balance of the vacation bank is deducted from the employee’s final wages. The plaintiff alleges that this is done without authorization from the employee.

[4] According to the statement of claim, the proposed class is comprised of employees of the defendants within Canada since 2011, who have been or are subject to the negative vacation bank policy (the “policy”).

[5] Mr. Davis commenced his employment with TPIC in 2016 and resigned on July 18, 2019. When he resigned, $5,691.17 was deducted from his final pay stub pursuant to the policy. Mr. Davis alleges that this was an unauthorized deduction violating the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”). According to Mr. Davis’ affidavit filed as part of the certification motion record, throughout his employment, there was no mention or explanation about the policy.

[6] A statement of defence was served on December 3, 2021.

[7] On September 10, 2021, I was assigned to case manage the action. The plaintiff’s certification motion was served on the defendants on September 17, 2021. On October 5, 2021, the defendants advised the plaintiff that they were considering a motion for summary judgement. On October 29, 2021, counsel for the defendants confirmed they had instructions and intended to bring the motion prior to the certification motion.

[8] On November 2, 2021, counsel for the defendants wrote to me on behalf of all parties and advised that the defendants intended to move for summary judgment and would be seeking to have that motion heard prior to the certification motion pursuant to s. 4.1 of the CPA. In that correspondence, counsel set out a proposed timetable for the hearing of the pre-certification summary judgment motion. This issue was also discussed at a case conference conducted on November 3, 2021. On November 5, 2021, counsel for the defendants wrote to me and advised that the parties could not agree on the sequencing of the motions and requested a date for a motion to determine the issue. The sequencing motion was heard on December 15, 2021.

[9] The defendants included a proposed notice of motion for the summary judgment motion in their sequencing motion materials. They have not yet served a motion record.

[10] No dates are currently scheduled for either motion.

2. The Statutory Framework

[11] On December 9, 2019, the Attorney General introduced Bill 161, Smarter and Stronger Justice Act, 2020. Included in the omnibus legislative reforms were proposed changes to the CPA, which had not seen significant amendments since it was originally introduced. The amendments came into effect on October 1, 2020. One of the amendments, under s. 4.1, encourages the use of preliminary motions that would resolve the proceeding, narrow the issues to be determined, or reduce the evidence to be adduced. Section 4.1, which now governs the sequencing of pre-certification motions, states as follows:

Early Resolution of Issues

4.1 If, before the hearing of the motion for certification, a motion is made under the rules of court that may dispose of the proceeding in whole or in part or narrow the issues to be determined or the evidence to be adduced in the proceeding, that motion shall be heard and disposed of before the motion for certification, unless the court orders that the two motions be heard together.

[12] Prior to the amendments, s. 12 of the CPA governed when a party sought to have a motion heard prior to the certification motion. Section 12 gives the court the discretion to decide the sequencing of such motions based on what is appropriate to ensure the fair and expeditious determination of a class proceeding. Section 12 states as follows:

Court may determine conduct of proceeding

12 The court, on its own initiative or on the motion of a party or class member, may make any order it considers appropriate respecting the conduct of a proceeding under this Act to ensure its fair and expeditious determination and, for the purpose, may impose such terms on the parties as it considers appropriate.

[13] In Canon v. Funds for Canada Foundation, 2010 ONSC 146, at para. 15, Strathy J., as he then was, set out a list of factors to consider when deciding if a motion should be heard prior to a certification motion pursuant to s. 12. These factors are:

(a) Whether the motion will dispose of the entire proceeding or substantially narrow the issues to be determined;

(b) The likelihood of delays and costs;

(c) Whether the outcome of the motion will promote settlement;

(d) Whether the motion would give rise to interlocutory appeals and delays that would affect certification;

(e) Interest of economy and fairness and efficient determination; and

(f) Generally, whether scheduling the motion in advance of certification would promote the “fair and efficient determination” of the proceeding (CPA, s. 12).

[14] There has been one decision released with respect to the interpretation of s. 4.1 of the CPA. In Dufault v. Toronto Dominion Bank, 2020 ONSC 6223, Belobaba J. reviewed the reasons for the proposed amendment, including the work of the Law Commission of Ontario in its July 2019 final report, “Class Actions: Objectives, Experiences and Reforms”, and comments by the Attorney-General Doug Downey in a speech to the provincial legislature regarding the amendments.

[15] Belobaba J. concluded that the legislative intent is clear with respect to enacting s. 4.1. He found that the defendant now has a presumptive right to have certain motions heard prior to a certification motion. That presumption can be displaced by the plaintiff if the court is persuaded that there is an overarching and good reason for the two motions to be heard together: Dufault, at para. 7. He noted that there remains a residual discretion with the court to order the two motions be heard at the same time.

[16] At para. 10, Belobaba J. described what he considered to be two good reasons for denying a defendant’s request for a pre-certification motion as follows:

(i) the defendant’s motion does not raise any genuinely arguable issues that can dispose of all or part of the litigation and appears to be a delay tactic; or

(ii) the defendant’s motion does not raise genuinely arguable issues that can narrow or dispose of all or part of the litigation but the existing or proposed dates for the certification motion and the summary judgment motion are sufficiently close that it makes sense to hear the two motions together.

[17] In a footnote, Belobaba J. commented that he would be hard-pressed to schedule an earlier summary judgment motion when, for example, a certification record has already been filed and the certification motion would be heard only a few months later. In that case, Belobaba J. said he would direct that the motions be heard together.

[18] Belobaba J. concluded that as the summary judgment motion raised genuinely arguable issues that could narrow or dispose of all or part of the litigation and as the certification motion had not yet been scheduled, the summary judgment motion would be head prior to the certification motion.

[19] Counsel for the plaintiff referred to the decision of Perell J. in Strathdee v. Johnson & Johnson Inc., 2021 ONSC 7557. That decision also involved a request for a pre-certification motion by the defendants. Although it was governed by the CPA prior to the amendments, Perell J. commented that his decision to order the two motions be heard together would not have been different had the case been governed by s. 4.1. His view was that this new section would likely not change anything other that the “rhetorical temperature of the case management conference to schedule motions”: at para 25.

3. The Position of the Parties

[20] The defendants argue that the reasoning in Dufault ought to be followed. They argue that despite the comments made by Perell J. in Strathdee, which I consider to be obiter, this amendment to the CPA signifies a culture shift, such that a motion that could dispose of the proceeding in whole or in part or narrow the issues shall presumptively be heard prior to the certification motion.

[21] The defendants argue that if they are successful on their motion and if it is heard prior to the certification motion, the parties and the court will save time and resources in unnecessary litigation. If it is not successful in the motion, the defendants argue that it may promote settlement.

[22] The plaintiff argues that s. 4.1 cannot be read in isolation and that s. 12 must still be considered, together with the Canon factors. The plaintiff also argues that as a summary judgment motion has not been served or filed, s. 4.1 does not apply as a motion has not been “made”. Therefore, I must apply s. 12 and the Canon factors to determine the sequencing of the motions. Applying those factors, the plaintiff argues its certification motion ought to proceed first, or at the same time as the summary judgment motion.

[23] In the event I find that Dufault applies, the plaintiff argues that as his certification motion has been filed, it is likely that the certification motion will be heard only a few months after the summary judgment motion and, as Belobaba J. commented in footnote 8 of Dufault, the motions should be heard together.

4. Does Dufault apply?

[24] In my view, judicial comity compels me to follow the decision in Dufault. As noted by Strathy J., as he then was, in R v. Scarlett, 2013 ONSC 562, at para. 43, the decisions of judges of coordinate jurisdiction should be followed in the absence of cogent reasons to depart from them. In following Re Hansard Spruce Mills Ltd, [1954] 4 D.L.R. 590 (S.C.), Strathy J. concluded that a judgment should be followed unless it is plainly wrong.

[25] While Perell J. and Belobaba J. appear to have different views on the interpretation of s. 4.1, I note that Perell J.’s comments were obiter, as he was dealing with the prior legislation. Conversely, in Dufault, Belobaba J. was dealing with the amendments to the CPA, and he considered both the legislative history and intent of s. 4.1.

[26] At para. 8 in Dufault, Belobaba J. noted that the last 11 words of s. 4.1 preserve judicial discretion regarding sequencing motions. He found that some judges might conclude that all the “good reasons” that judges have used in the past to deny pre-certification motions, such as the added costs and delay of injecting a new appeal opportunity or the need to discourage “litigation by installment”, are still available in the face of the amendment. This appears to be the view of Perell J. in Strathdee.

[27] Belobaba J. rejected this view and found that the first 58 words of s. 4.1 suggest a strong legislative signal that early motions that can narrow issues or dispose of a case should presumptively be heard before certification. He noted that the Attorney General would have been aware of the additional costs and delays with hearing such pre-certification motions but nonetheless concluded that the benefits outweighed the costs.

[28] In my view, Belobaba J.’s interpretation of s. 4.1, while keeping the door open to the exercise of judicial discretion, signals that such discretion should be exercised narrowly. The two examples he describes at para. 10 in Dufault, of what constitutes good reasons for the plaintiff can rebut the presumption of pre-certification summary judgment proceeding first, are far more restrictive than what the court considered under s. 12 and the Canon factors.

[29] I agree with Belobaba J.’s interpretation of s. 4.1 that the court’s discretion is now much more restricted in determining whether a pre-certification motion ought to be heard. Section 4.1 clearly reflects new legislative priorities to ensure that class actions move expeditiously through the system and to dismiss those that lack merit before the parties expend scarce and unnecessary resources at certification.

[30] Counsel for the plaintiff referred to several decisions where the court found that certification motions should proceed first, or at the same time as a summary judgment motion. Those cases were all decided prior to the amendments and therefore provide little assistance in the interpretation of s. 4.1 of the CPA.

[31] Plaintiff’s counsel also made very cogent submissions with respect to why the Canon factors and the exercise of much broader judicial discretion should still be considered in the event I find that s. 4.1 applies. For example, the plaintiff raised several arguments with respect to why the motions should be heard at the same time including that this summary judgment motion is only binding on the representative plaintiff, concerns with potential appeals of the summary judgment decision thus causing further delays and concerns with cost consequences to the representative plaintiff. In my view, given the legislative intent in enacting s. 4.1, these issues would have been considered when the legislation was drafted, and a determination made that the benefits of pre-certification proceeding first outweighed these costs.

[32] There were no submissions that Belobaba J. was plainly wrong. I therefore find no reason to depart from his findings regarding the interpretation and application of s. 4.1 of the CPA.

5. Does s. 4.1 apply?

[33] The plaintiff also argues that s. 4.1 only applies if a “motion is made under the rules”. As a summary judgment motion record has not been served or filed, the plaintiff argues that a motion has not yet “been made” and therefore s. 4.1 does not apply. The plaintiff argues that if s. 4.1 does not apply, then I should consider s. 12 of the CPA and the Canon factors in determining the sequencing of these motions.

[34] The context and timing of this motion should be considered. First, this matter has been moving very quickly. Before even serving a statement of defence, within three weeks of being served with the certification motion, the defendants indicated that they may be bringing a summary judgment motion. Three weeks later, counsel confirmed that they had instructions to do so. At the initial case management conference, this was the issue that was canvassed. When the parties could not reach an agreement, the sequencing motion was scheduled and within their material, the defendants included a detailed notice of motion setting out the specific grounds for seeking summary judgment.

[35] In my view, while a summary judgment motion has not been filed or served, the plaintiff has been aware since shortly after service of his certification motion that the defendants would be bringing a summary judgment motion and that the first issue the court would have to address was the timing of the motions. The plaintiff did not oppose the hearing of this motion for direction on the sequencing of the motions on the basis that a summary judgment motion has not been made.

[36] This is not meant to promote in all cases that a summary judgement motion should not be served prior to the sequencing motion. Based on the circumstances in this matter, I am satisfied that the summary judgment is not being used as a tool to delay the litigation. In my view, it is meant to engage the merits of the litigation at an early stage. This may have the benefits of narrowing the size of the putative class and/or resolve or narrow the issues to be determined as part of the class action.

[37] The plaintiff argues that as his certification motion is the only motion before the court, it should proceed to a hearing without the delays that will occur if the summary judgment is heard first, particularly as there is no summary judgment motion before the court. I would find that argument more persuasive, however, if a date had been set for the certification motion. In Dufault, while no certification motion was filed, at para 11, Belobaba J. specifically found that as the summary judgment motion raised arguable issues that may dispose of all or part of the litigation or narrow the issues, and as the certification motion had not yet been scheduled, there was no good reason to deny the defendant’s request.

[38] In my view, had the certification motion been scheduled in this matter, that would have constituted a good reason for me to exercise my discretion and order the summary judgement proceed at the same time.

6. Would the Summary Judgment Resolve or Narrow the Issues?

[39] I will now consider whether the proposed summary judgement motion raises genuinely arguable issues that could narrow or dispose of all or part of the litigation. While the defendants have not filed a complete motion record, they have filed a detailed notice of motion as part of this sequencing motion. I am satisfied that based on that material, I can assess if the summary judgment motion could dispose of or narrow the issues. I do not have to determine if it will but only if it could.

[40] Mr. Davis claims that the defendants made deductions from his final pay that were unauthorized and violate the provisions of the ESA. According to the defendants, in 2011, before Mr. Davis was hired by TPIC, the policy was introduced. Pursuant to the policy, Mr. Davis was advanced vacation days before they were earned. The defendants claim that the policy and documents explaining the policy were made available to Mr. Davis and, as such, he knew or ought to have known of the policy.

[41] Pursuant to the policy, TPIC could recover any overpayment in relation to vacation time taken but not earned as of the date of termination, as reflected in the employee’s negative vacation bank, from an employee’s final pay. The defendants claim that effective August 2017, with the introduction of a new human resource management system platform, each pay statement showed the employee’s negative vacation bank balance.

[42] The parties agree that there are two Employment Standards Officer’s decisions that considered the defendants’ policy. A 2019 decision found in favour of the defendant while the 2020 decision was decided in favour of the employee.

[43] The defendants’ position is that their proposed summary judgment motion raises the following three threshold issues:

(a) Whether Mr. Davis’ claims are statute barred, as they were discovered or were reasonably discovered by Mr. Davis by no later than June 2018;

(b) Whether TPIC’s recovery of the overpayment to Mr. Davis in relation to vacation time taken in excess of his accrued vacation entitlement constitutes a deduction from wages pursuant to s. 13 of the ESA; and

(c) If TPIC’s recovery of the overpayment to Mr. Davis constituted a deduction from wages pursuant to s. 13 of the ESA, whether the deduction of the overpayment form Mr. Davis’ final pay statement was authorized by the term of Mr. Davis’ employment with TPIC and therefore compliant with s. 13 of the ESA, as TPIC had written authorization to make the deduction.

[44] According to the defendants, my finding on the limitation period, whether in favour of the defendants or plaintiff, will provide guidance with respect to what claims can go forward. The defendants argue that even if the finding on the limitation period only impacts some of the putative class members, it will have the effect of narrowing the issues.

[45] According to the defendants, the second two grounds for the summary judgment motion are the subject of the two conflicting decisions from Employment Standards Officers. These issues, they argue, go to the merits of the action and a determination one way or the other of these issues will also provide guidance.

[46] While a finding on the summary judgment motion does not bind the class, as I will be hearing both that motion and the certification motion, there is no risk of conflicting decisions. Belobaba J. made this observation at para. 18 in Dufault, where he noted that the summary judgment motion will only bind the plaintiff and not all putative class members. He noted that the judge who makes the findings in the summary judgment motion will also decide the certification and will “almost invariably apply the same findings.”

[47] According to the plaintiff, the summary judgment motion does not deal with his claim for unjust enrichment and punitive damages. The defendants’ motion is therefore for partial summary judgment, which courts are reluctant to grant for a variety of reasons.

[48] The wording of s. 4.1 is instructive. It refers to disposing of a proceeding, “in whole or part or narrow the issues to be determined or the evidence to be adduced.” It is specifically contemplated, therefore, that the motion, such as a summary judgment motion, may not resolve all issues, but that is not the test. The motion need only narrow the issues for the presumption that it be heard first to apply. The fact that the summary judgment does not address all claims advanced in the statement of claim is not a basis to reject the presumption that it be heard prior to a certification motion.

[49] The plaintiff argues that the limitation period argument based on discoverability will be an individualized finding that only applies to Mr. Davis, as it is based on when he knew or ought to have known. It will therefore have no bearing on any other putative class member and would not dispose of or narrow the issue. While there is some merit in that argument, it is also possible that there could be objective findings on the summary judgment motion as it relates to Mr. Davis that may have a more general application to other putative class members.

[50] The second two threshold issues raised in the notice of motion may have a more general application to the putative class members, as it deals with the classification of the payment and whether it is a deduction from wages pursuant to s. 13 of the ESA. These two issues raised by the defendants deal with what the plaintiff refers to as systemic deductions from wages at page seven of his statement of claim. The plaintiff alleges that there is an issue with the systemic lack of written authorization for these amounts being deducted from wages.

[51] In my view, a determination of these latter two issues raised by the defendants may result in a finding that could have a more general application to the putative class members, as will a determination of what type of authorization is required from the employee to comply with s. 13 of the ESA. Furthermore, a finding on these issues will be instructive as it may assist in resolving the current conflicting cases from Employment Standards Officers.

[52] I agree with the defendants that if it is or is not successful in their motion, it will either narrow the issues, provide some guidance, or promote settlement. While the finding will not be binding

[53] Accordingly, I find that the summary judgment motion will be heard prior to the certification.

L. Shaw J. Released: March 31, 2022