Assessing Access to Justice in Class Actions: AIC Limited v Fischer

Introduction

In order for a class action to be certified, a judge must be satisfied that a class action is the “preferable” way of bringing the claims as against other alternatives. In Hollick v Toronto (City), [2001] 3 SCR 158, McLachlin CJ wrote that this preferability analysis must focus on the three “advantages” of class actions: behaviour modification, judicial economy, and access to justice. In AIC Limited v Fischer, [2013] 3 SCR 949 [Fischer, SCC], the Supreme Court of Canada developed the meaning of access to justice in this context.

Facts

The Ontario Securities Commission (“OSC”) investigated five mutual fund managers for “market timing” practices that had allegedly caused losses to the fund’s investors. The fund managers reached an agreement with the OSC, and paid a multi-million dollar settlement to the investors. The settlement did not prohibit further ligation. Subsequently, the investors sought certification of a class action to recoup additional losses from the fund managers for the same conduct that the OSC investigated. Three of the fund managers settled their stake in the investor class action, leaving two fund managers as defendants in this action.

It was agreed that the OSC proceeding had achieved the goals of behaviour modification and judicial economy, as the OSC probe penalized the behaviour of the fund managers without imposing a cost on the court or plaintiffs. Thus, the only question before the courts was whether the OSC investigation provided a sufficient level of access to justice to the investors.

Lower Courts

The motion judge declined certification. He agreed with the defendants’ argument that the “court should not second-guess the access to justice provided by the OSC” (Fischer v IG Investment, 2010 ONSC 296 para 256).

The Divisional Court disagreed. The court focused on the substantive result of the OSC proceeding, finding that the settlement did not provide “full, or at the very least substantially full, recovery” (Fischer v IG Investment Management Ltd, 2011 ONSC 292 para 8). The investors were allegedly owed additional damages, and these could be recouped through the class action.

The Ontario Court of Appeal upheld the Divisional Court’s result, but focused its reasons on the procedure followed by the OSC. As the proceeding was regulatory, not compensatory, and the investors were not given participatory rights in the proceeding, the investors received inadequate access to justice.

SCC Reasons

Writing for the unanimous court, Cromwell J upheld the result below, but for different reasons. In his judgment, Cromwell J provided guidance on the scope and criteria to consider when assessing and comparing access to justice on certification.

Cromwell J wrote that access to justice in the class actions context must contain both procedural and substantive components. The procedural component asks whether the applicants were afforded a fair process, and the substantive component asks whether the claimants will receive “a just and effective remedy” (Fischer, SCC, para 24). Cromwell J crafted five questions that the court must consider to determine which procedure is preferable to address these barriers to access to justice.

On the facts of this case, Cromwell J found that substantive and procedural barriers remained at the conclusion of the OSC proceeding. Substantively, the investors’ claims were too small to pursue individually, and there was some basis in fact demonstrating that a large recovery could still be obtained if the plaintiffs succeeded at trial. Procedurally, barriers remained given the regulatory nature of the OSC proceeding, the lack of participatory rights afforded to the investors, and the absence of information detailing how the OSC settlements were calculated.

Consequently, Cromwell J found that the OSC proceeding was not preferable and dismissed the appeal.

Analysis

Regulatory Proceedings Not Necessarily a Shield from Class Actions

Cromwell J’s decision affirms that a regulatory proceeding into specific conduct does not necessarily preclude the certification of a parallel class action aimed at the impugned conduct. Cromwell J found that the motion judge erred in principle by deferring to the access to justice provided by the OSC. Rather, “it was precisely his role [the motion judge] to compare and evaluate, within the limited scope of the certification motion, the access to justice provided by the two proceedings” (para 62).

Cromwell J admitted that court procedures are not necessarily the “gold standard” for dispute resolution (para 37). However, a regulatory process will only be “preferable” to a class action if it addresses the plaintiff class’ substantive and procedural barriers as well as, or more effectively than, a class action.

Cromwell J’s decision should not be interpreted as an unqualified endorsement of a mixed public and private response to market enforcement. The Court has simply endorsed multiple responses to harmful market activity where access to justice concerns are not fully addressed by regulatory responses. Regulatory proceedings can overcome access to justice barriers if they are appropriately designed to provide those affected with procedural rights and an opportunity to achieve a fair result.

Evidentiary Burdens & Projected Recovery

Consistent with the Court’s decisions in the Microsoft class action trilogy, Cromwell J reaffirmed the low “some basis in fact” evidentiary standard on a certification motion. Given this limited evidentiary standard, Cromwell J criticized the Divisional Court’s approach. He wrote that certification is not the proper occasion to determine whether the plaintiff class has received “full, or at the very least substantially full, recovery.”

Yet, despite his criticism, Cromwell J’s conclusions were similar to those of the Divisional Court. Cromwell J’s approach only differed in the discourse he employed to describe the remaining substantive access to justice barriers. Rather than describe the expected level of recovery at the resolution of a trial, Cromwell J held that substantive barriers to justice remained. In support, Cromwell J cited the motion judge’s finding that there was some basis in fact to conclude that a substantial recovery could be recouped upon success at trial.

Thus, courts should not describe the recovery expected at the conclusion of a class action on a certification motion. This is premature. Instead, certification judges should describe and assess the substantive barriers to access to justice, which can include whether there is some basis in fact to show that alternative procedures may provide inadequate compensation.

The Court’s linguistic aerobics in explaining this issue leave the analysis somewhat unclear.  Further guidance may be needed to explain the scope of the access to justice inquiry in relation to the damages sought by a plaintiff class.

A More Ambitious Articulation of Access to Justice

Cromwell J’s articulation of access to justice in the class actions context is more ambitious than that of the lower courts. The Divisional Court focused on the OSC’s substantive result, whereas the Ontario Court of Appeal focused on the procedural deficiencies of the OSC hearing. Cromwell J blended these focal points and concluded that access to justice is a contextual concept that includes both substance and procedure. As Cromwell J wrote, “[a]ccess to justice requires access to just results, not simply to process for its own sake” (para 56). The Court should be applauded for its broad and progressive view of access to justice.

However, this articulation of access to justice may lead to some analytical confusion. Cromwell J wrote that though the substantive and procedural components of access to justice are heavily interconnected, they can be considered separately for convenience. Although Cromwell J tried to avoid dichotomizing access to justice, it becomes tempting to silo substance from procedure. After all, Cromwell J considered substance and procedure separately when applying his framework to the facts of this case.

A binary view of access to justice threatens a contextual approach, and marginalizes the interconnections between process and substance. Courts must ensure that the contextual and holistic framework of access to justice set out in Fischer does not devolve into a categorical one.