Court File and Parties
COURT FILE NO.: CV-20-00642921 DATE: 20230531 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: SURENDRARAJ NAVARATNARAJAH, Plaintiff – and – FSB GROUP LTD., FSB INSURANCE LTD. and FSB COMMERCIAL LTD., Defendants
BEFORE: Justice E.M. Morgan
COUNSEL: Andrew Monkhouse and Alexandra Monkhouse, for the Plaintiff Stephen Gleave and Richelle Pollard, for the Defendants
HEARD: April 27, 2023
DECERTIFICATION MOTION
1Can a procedural regime designed to foster access to justice become a vehicle for denial of justice?
I. The mass opt-out
2On August 11, 2021, I issued my ruling certifying this action under section 5 of the Class Proceedings Act, 1992, SO 1992, c. 6 (“CPA”): Navartnarajah v. FSB Group Ltd., 2021 ONSC 5418. But matters have developed since then.
3Defendants’ counsel submit that the situation has changed such that it now appears that the conditions for certification are no longer met. The Defendants have brought a motion under section 10(1) of the CPA to decertify the action.
4The Statement of Claim alleges that that certain of the Defendants’ sales agents, called “producers”, have, since 2004, been misclassified. The Plaintiff claims that the producers were in reality employees but have been treated as independent contractors. While most of the elements of certification as set out in section 5(1) of the CPA were readily met by the claim – i.e. there was a definable class, a number of common issues were identified, there appeared to be a suitable representative plaintiff with a workable litigation plan, etc. – the rationale for pursuing a class action at all was always a matter of debate.
5It was the Defendants’ view that the putative class members financially benefitted from being independent contractors. In arguing their case, Defendants’ counsel predicted that there would be numerous opt-outs from the class if the action were to be certified.
6In my reasons for decision on certification, I summarized the Defendants’ argument. I indicated that although at that stage it was not determinative, the fact that the remedy sought in the class action may not be seen as beneficial by some potential class members did raise issues of preferable procedure under section 5(1)(d) of the CPA. I ended that portion of the discussion with something of a warning about the class action procedure being misused, or misapplied, in this way:
27It is the preferable procedure requirement that poses most squarely the Defendants’ overarching opposition to certification of this as a class action – that is, the very nature of the claim is a detriment to all but a small portion of the class who, perhaps like the current Plaintiff, were only independent contractors for a relatively short period of time…
28As [Defendants’ counsel] explain it, the current arrangement in which producers are independent contractors is to the financial advantage of most of the producers. If the Plaintiff wins his case and he and the entire class of producers are found to have been employees all along and thus are entitled to vacation pay and overtime pay, they may also be liable for back taxes. After all, independent contractors enjoy a variety business deductions and other tax advantages that employees do not enjoy.
29Further, if the producers all turn out to have been employees of the Defendants, the Defendants themselves may bring claims to the value of each producer’s book of business making this asset untransferable. I do not put these issues forward in order to pre-judge whether Defendants’ counsel is right or wrong in making these arguments, but I do point out that there is a risk that the producers may get more than they ask for and may not like it. What Defendants’ counsel’s argument suggests is that at some point, the majority of class members may find that their financial interest was hijacked by the claim rather than advanced by the claim.
7The negative possibility that was embedded in this claim all along has come true. As Defendants’ counsel put it in his submissions on decertification, the putative class members have voted with their feet.
8Of the 69 identified “producers” who have been considered independent contractors by the Defendant, 66 have opted out of the action. Of the remaining three, one cannot be located, and one is deceased and her estate representatives have indicated that they wish to sell her portfolio back to the Defendants. That transaction, however, has effectively been blocked by class counsel, who object to the Defendants dealing with any class member.
9In terms of the estate’s negotiation with the Defendants, I would also add that the litigation itself threatens to undermine the ownership, and thus the saleability, of any portfolio. The action seeks to declare on a class-wide basis that all of the producers have been employees all along, as a result of which they may not own their portfolios after all. Accordingly, any purchase and sale of a portfolio will have to wait until the class action is resolved.
II. The request for further production
10That leaves the representative Plaintiff as the only real class member. Considering that he is the last man standing, he and his counsel are fighting surprisingly hard to keep the class action alive. They have cross-examined the president of the Defendant companies, Paul Brown, grilling him on how he identified the producers, whether the identified producers are really all of them, and seeking more and more documentary proof beyond the expected and, to me, satisfactory documentary proof that has already been produced by the Defendants.
11Mr. Brown deposed in his affidavit and confirmed in his cross-examination that he has provided class counsel with the name of every producer/independent contractor in the Defendants’ records. He has also produced to class counsel a complete data printout from the Defendants’ corporate data management system, Power Broker, showing the insurance policies and associated commissions earned by each of the producers going back to the commencement of the class period in 2004.
12Mr. Brown confirmed in his testimony that Power Broker is the one and only data management system that the Defendants have used since prior to 2004, and that it has stored all of the Defendants’ records. As an undertaking given at cross-examination, he has also confirmed the dates of the Power Broker search and has provided a printout showing the functionality of Power Broker and the parameters of the search conducted by the Defendants when compiling the class list. There has been no suggestion that Power Broker is somehow faulty.
13It is difficult to understand why the matter remains so contentious, but it does. Following the cross-examination, Plaintiff’s counsel moved to adjourn the decertification motion until such time as the Defendants produced the following items refused on Mr. Brown’s cross-examination:
(a) all T4As that the Defendants provided to the CRA during the class period and to request the documents from CRA in the event the Defendants do not have the documents;
(b) invitations sent to producers to any producer meetings which occurred during the class period;
(c) all users of Power Broker cross referenced with the name of the producers during the class period;
(d) commission statements for all producers during the class period;
(e) all documents submitted to the Registered Insurance Brokers of Ontario (“RIBO”), which is the regulator of the insurance brokerage industry with respect to the licensing of producers during the class period; and
(f) emails that anyone at the organization has sent relating to the termination of a producer working at the Defendants.
14With the greatest of respect, this post-cross-examination request for production could be a poster child for the proportionality rule. The Defendants are obliged to inform the Plaintiff of the independent contractor producers so that class counsel can appropriately contact all potential class members. They have done that. The Defendants are not obliged to provide mountains of extra corporate and employee data just to re-confirm what they have already confirmed, all for the sake of litigation that no one but the Plaintiff seems to want to pursue.
15Moreover, the Defendants are not required to invade the privacy of the producers by delivering the tax filings, commission statements, and regulatory documents of individuals who have all opted not to join the class. Class counsel are not the lawyers for the producers, virtually all opted out, and so they are not asking for their clients’ own documents.
16For that matter, the Plaintiff and class counsel are not entitled to employee data of non-independent contractor producers, either. They do not fall within the class definition and they have a right not to have their information and documentation shared in this way. The Defendants have supplied the information that class counsel needs to identify class members; any more would be an unwarranted intrusion on the Defendants and on the individuals whose information they would be disclosing.
17The Plaintiff has put himself forward as a representative of the class. He does not, however, own the putative class members. They have opted not to join him, and he has no right to further inspect their affairs. The demand for further production is above and beyond anything to which the Plaintiff is entitled, either in his personal or his representative capacity.
III. Abuse of process
18Defendants’ counsel also submit that the Plaintiff’s very attempt to take issue with the class list after the optout deadline has closed amounts to an abuse of process. They advise that the cross-examination of Mr. Brown that took place on March 15, 2023 – some 11 months after the opt-out deadline of April 3, 2022 – was the first time that the Plaintiff went on record to allege concerns with the class list. In Defendants’ counsel’s view, this is an indication that the Plaintiff is making a desperate attempt to grasp at straws in order to salvage something of his certified class action.
19Defendants’ counsel are right that all of this was supposed to have been canvassed prior to the April 3, 2022 deadline. The Ontario Court of Appeal has specifically recognized the importance of the opt-out deadline as a measure of finality in class actions: Johnson v. Ontario, 2022 ONCA 725, at para 51:
The deadline for opting out promotes certainty in the class proceeding … Were there no [opt out] deadline, or if it could be flouted, cavalierly ignored, or strategically treated as an invitation to ‘wait and see’, these matters would be an uncertain and moving target, to the potential prejudice of those with carriage of the class proceeding who must make decisions as to how to conduct it on behalf of the participating class members, and to defendants in deciding how to respond to it.
20Defendants’ counsel submit, and I agree, that by waiting until cross-examination on this motion to take issue with the accuracy of the class list, the Plaintiff is trying to revisit an issue that was determined 11 months previously. There was more than enough time for class counsel to raise any concerns with the completeness of the class list prior to the opt-out deadline, but no such issue was raised. Indeed, counsel met with me in a case conference on March 21, 2022 – well after the class list was provided to class counsel – and no issue regarding its accuracy was brought up.
21In my view, Defendants’ counsel are correct in identifying this entire line of attack by the Plaintiff as a form of abuse of process.
22The timing issue, however, is almost beside the point. The fact is that there is no merit in the Plaintiff’s objections to the completeness of the class list.
23Not only does the Plaintiff seek more than he deserves to see in his demand for further production, but he has put forward no cogent ground for doing so. Class counsel has not pointed to any new facts or evidence indicating that the class list is deficient. Their concern, as they have explained it, is essentially based on the difference between Mr. Brown’s initial statement in his affidavit estimating the number of independent contractors engaged by the Defendants and the number of class members on the list ultimately produced by the Defendants.
24Frankly, I see no reason for this skepticism. Mr. Brown stated in his affidavit that he thought there were “approximately 85” producers. He expressly described his number as an estimate.
25That the president of a corporate group of the Defendants’ size does not know by heart the precise number of independent salespeople with whom his company deals should come as no surprise. Once Mr. Brown verified the number on the Power Broker system, it turned out that there were exactly 69 producers. Class counsel remains skeptical, but they have provided no reason to doubt the data management system’s number of employees except that it is different from Mr. Brown’s initial estimate.
26There is no evidence that Power Broker is in any way defective or that it has provided incomplete information. The Defendants’ information management program produced the kind of uncontroverted list of independent contractors that one would expect of a digitized record keeping system long in place by an employer.
27The one other matter raised by class counsel as “new evidence” is that a search of the Registered Insurance Brokers of Ontario (“RIBO”) database has turned up a number of names of insurance brokers working for the Defendants that did not appear on the Defendants’ class list. The Plaintiff contends that this indicates a failure to produce information about potential class members; class counsel have provided those names to the Defendants with a demand for more information.
28The Defendants have answered this by explaining that the individuals in question are their employees who also happen to be registered with RIBO as brokers. Those individuals’ names were not on the class list because they are already classified as employees of the Defendants. They therefore have no part in the current action and are not class members. The class, of course, is composed of persons who claim to want to be employees but who have not been so classified. The Defendants need not, and should not, deliver to class counsel the employment records of people who are classified as employees just to show that they are non-class members.
29The Divisional Court recognized in Risorto v. State Farm Mutual Automobile Insurance Co. (2009), 70 C.P.C. (6th) 390, at para. 41, that “it is difficult to conceive of an interlocutory proceeding in which the parties would better understand the need to put their best foot forward…[than] in certification proceedings”. Given the late, and meritless, objections to the class list provided by the Defendants, there are no grounds to re-open it. The parties have put their best foot forward, and I can consider the record as it presently stands.
30The doctrine of abuse of process has been brought to bear on situations where “allowing [a step in the litigation] to proceed would nonetheless violate such principles as judicial economy, consistency, finality and the integrity of the administration of justice”: Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 SCR 77, at para. 36. That approach is apt here. The class list has been produced by the Defendants, the opt-out date has long passed, and re-opening the matter would be contrary to foundational principles that govern the litigation process and make it workable.
IV. Preferable procedure
31Under Section 10(1) of the CPA, the Court can decertify a class proceeding if it is shown that any of the criteria for certification set out in subsections 5(1) and (2) of the CPA are no longer satisfied. Defendants’ counsel point out that this includes situations in which a class action ceases to be the preferable procedure as required by subsection 5(1)(d) of the CPA. In that regard, decertification can take place if the moving party demonstrates that continuing as a class proceeding no longer advances its three most identifiable goals: access to justice, judicial economy, and behavioral modification: AIC Limited v. Fischer, 2013 SCC 69, [2013] 3 SCR 949, at para 22.
32Given that there is really only one, and at most up to three class members, judicial economy is not particularly fostered by this matter remaining a class proceeding. To the contrary, the one (or perhaps three) individual plaintiffs can proceed with actions at their own pace, without the cumbersome diversion of a common issues trial. I observe that the records produced here indicate that the three remaining class members all have claims that appear to fall within the monetary jurisdiction of Small Claims Court.
33Likewise, given that the Defendants have provided the class list, and that virtually all of its potential members have opted to stay with the present arrangement, there is no pressing call here for behaviour modification. The representative Plaintiff may be the only one dissatisfied with the Defendants’ classification of him, due entirely to reasons sui generis to his own employment history – he was, uniquely, a dual sales employee and independent producer for a six month period. No modification of the Defendants’ behaviour will improve on the matters at issue for the rest of the class.
34As for access to justice, in most cases the analytic focus is on the ‘access’ component of that phrase. For example, in Abdool v. Anaheim Management Ltd., the Divisional Court observed that certification fosters access when it brings together individual claims which would otherwise be economically unfeasible to pursue. Flipping that thought on its head, certification can be denied when it fails to fulfill the preferable procedure criterion. That is the circumstances here, where the evidence now fails to show that it would be uneconomical for the plaintiff and remaining class members, if any, to pursue individual claims.
35Accordingly, where individual claims are economically viable – either in Superior Court or Small Claims Court – certification is often not the preferred procedure: Lavier v. Mytravel Canada Holidays Inc., at para 72 (SCJ). There is nothing in the present record to indicate that the very few claims by class members who have not opted out cannot viably be pursued on an individual basis.
36There will be no denial of access if the action is decertified. Probably one, and no more than two or three, Small Claims Court cases, with all of the simplified and economically streamlined procedures that that process entails, will suffice to determine the case of anyone who wants it to be determined.
37If the class action now has nothing more to do with access, it has little to do with justice either. Some 66 of the 69 producers have opted out of the class action not because they have a better way of accessing a remedy – none of them have brought individual claims and there is no other viable procedure to consider. Rather, it is because, for reasons of their own, they have determined that the Plaintiff’s claim is not in their interest and does not do them justice.
38As indicated in paragraphs 27-29 of my reasons for decision in certification, quoted in full above, the producers get substantial economic and tax advantages from their independent contractor status. These advantages would be undermined, potentially to the point of economic ruin for the producers, if the Plaintiff had his way and their status was changed on a class-wide basis to employees.
39I am not certain, for example, that CRA would distinguish between class members and opt-outs in assessing their tax status. They would be alerted to the issue and would likely apply uniform principles to all producers. Likewise, the question of ownership of each producer’s portfolio of business could be opened up in a way that threatens the independent contractors’ property rights regardless of their opt-out status.
40The Plaintiff appears to be uniquely situated as someone who was only a part-time independent contractor for a short amount of time. He has little to lose in shedding that status from his work history, and may gain some employment benefits in the process. But more to the point, if he succeeds in sustaining the certified status of this action in the face of 66 opt-outs plus one deceased and one missing person, he may find himself at the forefront of a phantom class.
41Considering the fact that there has been a mass opt-out, continued certification will effectively allow the representative Plaintiff to hijack justice for the vast majority of the putative class. A determination regarding employment on a “class-wide” basis, even if the class is nearly empty, will have tax and property implications on all of the producers, regardless of the fact that none of them other than the Plaintiff wanted that determination to be made.
42Of 69 identified independent contractor producers, the Plaintiff is the only one who wants to have his status declared changed; and yet, he and his counsel have fought hard to pursue just that goal even after it has become crystal clear that the class at large want nothing to do with this claim. One has to ask oneself why.
43It is self-evident that if this action is not decertified, the Plaintiff will potentially be in a position to negotiate a “class-wide” settlement in which only he and his counsel will benefit. That is not what one would call access to justice. Indeed, it may be its opposite; it may work an injustice to the rest of the putative class that has opted out.
44Continuing this case as a class action may well produce something of a payout for the Plaintiff. It will not get the deceased class member what her estate administrators want – that is, it will not purchase her entire portfolio of business – and the one other possible class member cannot be found.
45What is virtually certain is that continuing this case as a class action would generate more legal fees than necessary, especially considering that the alternative is a Small Claims action. That result negates the notion that a class proceeding is the preferable procedure, and creates a situation that is contrary to any rationale I can think of for an action to remain certified.
V. Disposition
46The action is hereby decertified.
VI. Costs
47The parties may make written submissions on costs. I would ask Defendants’ counsel to send my assistant by email short submissions within two weeks of today, and for Plaintiff’s counsel to send my assistant equally short submissions within two weeks thereafter.
Date: May 31, 2023 Morgan J.