Recent court decisions in Ontario and Quebec on class-action lawsuits concerning financial transactions indicate the climate for such suits is diverging in Canada’s two most populous provinces.

Two major class-action cases against banks have been certified in Ontario over the past year, while judges in Quebec have dismissed three others. And with Ontario courts warming to class actions in the wake of new legal amendments, lawyers say some cases may migrate to Ontario from British Columbia, the province in which class-action plaintiffs have traditionally fared best.

“There is definitely something afoot in Ontario,” says Shaun Finn, a partner with McCarthy Tétrault LLP in Montreal and co-author of a new book entitled Defending Class Actions in Canada. “Quebec seems to be heading in the opposite direction.”

Finn points to the Ontario Court of Appeal’s certification of two cases — both regarding allegedly improper credit card fees — against TD Bank Financial Group and Ottawa-based MBNA Canada Bank. In both, the Supreme Court of Canada has declined to hear appeals of the certification orders.

In Quebec, judges are taking “a harder look” at the merits of class-action cases before authorizing them to proceed, Finn says. As of 2005, Quebec courts have snuffed attempts to mount class actions against Aéroports de Montréal, Novopharm Ltd., Agropur Coopérative and Pharmascience Inc. as part of what Finn describes as a pattern of imposing “rigorous and conservative” tests on plaintiffs’ claims.

For further evidence that class actions in Quebec and Ontario are moving in different directions, Finn points to litigation in both provinces concerning arbitration clauses in consumer contracts with Dell Canada Inc., which resulted in an Ontario decision repudiating the clauses and a Quebec decision upholding them. This has left lawyers elsewhere in the country scratching their heads.

“The picture is evolving very quickly,” says Ray Wagner, a lawyer with Halifax law firm Wagners, who is arguing the Nova Scotia component of a national class-action case concerning interest rates against National Money Mart Co. He notes that every province now has proclaimed class-action legislation.

Adrian Lang, a lawyer in Toronto with Stikeman Elliott LLP who defends banks, pharmaceutical companies and insurance companies facing class actions, agrees that the certification of the cases against TD and MBNA — and the SCC’s decision not to allow appeals on those decisions — suggests the climate is changing in Ontario.

Lang says both cases indicate that plaintiffs in Ontario may be able to employ methods to aggregate damages permitted in amendments to the Ontario Securities Act introduced in 2006, a key development that could propel more such cases in Ontario.

“One area in which courts have, in the past, found that class actions are not preferable is when damages cannot be aggregated,” Lang says. But, in both the TD and MBNA cases, the plaintiffs were permitted to submit estimates of aggregate damages, even though the true extent of the damages stemming from allegedly improper fees levied on massive numbers of credit card transactions over a period of many years would have been extremely difficult and expensive to quantify precisely.

The MBNA case, in particular, “sets out a statistical method to determine damages,” Lang says. She believes plaintiffs will be eager to modify this method in other cases in the future.

Although Lang believes the MBNA case went “one step too far” in facilitating plaintiffs’ need for creative tools to develop estimates of aggregate damages, she believes the court’s decision to permit plaintiffs to use new methods to aggregate damages indicates that class actions are becoming easier to certify in Ontario.

This means more settlements are inevitable, Lang says: “Defendants are faced with overwhelmingly large numbers for damages. In most cases, certification is the last step before settlement.”

The TD case offers a vivid example of the kinds of damage figures bandied about in such cases. “We are suing on the basis of an assessment of damages of more than $400 million,” says plaintiffs’ counsel Harvey Strosberg of Sutts Strosberg LLP in Windsor, Ont. A similar case against Toronto-based CIBC ultimately resulted in a $16.5-million settlement.

At TD, senior manager of external communications Kelly Hechler says that the Ontario court decision is a “certification only” and “not a determination on the issue.

“TD is confident that our method of handling foreign currency transactions has been transparent,” Hechler says, “and both lawful and fair to our clients in every respect. We plan to defend our position vigorously.”

@page_break@As for Strosberg’s estimate of damages, Hechler says: “As with any situation, that is under judicial review. It would be inappropriate to provide comments at this time.”

Although lawyers such as Lang and Finn, who specialize in defending corporations facing class actions, view developments favouring certification of class actions in Ontario with anxiety, plaintiffs’ lawyers such as Strosberg are pleased.

“It’s nice to see that the courts are beginning to recognize aggregate damages,” says plaintiffs’ lawyer Joel Rochon of Rochon Genova LLP in Toronto.

Rochon hopes Ontario’s changing class-action climate will help propel a case he and a consortium of lawyers launched in 2006 against mutual fund giants AGF Funds Inc., AIC Ltd., IG Investment Management Ltd., CI Mutual Funds Inc. and Franklin Templeton Investments Corp. concerning alleged market-timing practices.

Although the defendants have already paid almost $200 million in settlements following investigations by the Ontario Securities Commission, Rochon argues that those settlements represent “only about 50¢ on the dollar” for damages to mutual fund investors.

“There haven’t been class actions against the mutual fund companies before. This case will clarify their fiduciary obligations,” Rochon says. “We’re set to move forward toward certification by the end of 2008.”

In the meantime, Rochon says, a recently certified class-action lawsuit against Atlas Cold Storage Holdings Inc. will provide further evidence in terms of the direction that Ontario class-action jurisprudence is heading. The defendants in this case are charged with defrauding investors of $350 million through allegedly false financial reporting.

Rochon and Strosberg both point to settlements of cross-border class actions against Toronto-based Nortel Networks Corp. and Menu Foods Income Fund of Streetsville, Ont., to elaborate further on the class-action climate in Ontario. The two lawyers believe both cases demonstrate that corporations now see Canada as part of a unified North American legal arena in which settlements forged in the U.S. will prevail north of the border as well.

“Nortel is important, from a multinational perspective, because Canadian and American shareholders were treated equally,” says Rochon, who notes that at the time the class action against Nortel began, Ontario had yet to introduce “fraud on the markets” legislation similar to U.S. laws, which are now emulated in the Ontario Securities Act.

“This was the largest multinational settlement in Canadian history,” he adds.

Strosberg says the proposed settlement of a class action against pet-food manufacturer Menu Foods also suggests that corporations now view Canada as part of a unitary North American legal arena.

On April 1, Menu Foods advised the U.S. District Court for the District of New Jersey that it had reached a cross-border settlement in principle through mediation.

“What we’re seeing is that North America is not just a free trade zone,” Strosberg says. “All of the corporations deal with it as a unitary market now. Smart companies want to deal with all their problems at the same time.”

In B.C., which adopted class-actions legislation in 1996, lawyers say the certification of the TD and MBNA class actions changes everything. “Ontario has snapped into alignment with B.C.,” says Ward Branch of Branch MacMaster in Vancouver. He says that tools to quantify aggregate damages introduced into B.C. law gave that province “a seven-year head start.”

Those tools first were employed in Scott v. TD Waterhouse Investor Services (Canada) Inc., a case with 28,000 plaintiffs that was certified in 2002 and settled nationally in 2005. It has engendered a series of lawsuits against brokerages regarding allegedly improper fees. A similar case against Merrill Lynch Canada Inc. is now underway.

“The B.C. legislation directs the courts to make claims simplification possible; and it tells judges they have discretion to facilitate this,” Branch says. “That gives you all you need.”

The B.C. law also stipulates that costs are not payable by plaintiffs in class actions, which Branch describes as “a fair rule that allows plaintiffs access to justice.” In Ontario, plaintiffs can be held liable for costs; the Supreme Court recently upheld an award of costs against a plaintiff in the Danier Leather Inc. case.

Proposed amendments to B.C. law aimed at facilitating class actions in the financial services sector were withdrawn, says J.J. Camp, a lawyer with Camp Fiorante Matthews in Vancouver: “We told the government the proposed constraints on liabilities were too severe.”

In his view, the amendments would have put B.C. ahead of the rest of the country for plaintiff’s rights. “The only real way we can get engaged in B.C. now,” he says. “is through working with Ontario lawyers.” IE