Historically, class action defendants have been able to delay delivery of a class action statement of defence until there’s a decision on certification.
But a ruling by Justice Paul Perell of the Superior Court of Justice in the recent case of Pennyfeather v. Timminco Ltd. may change all that. Perell’s ruling followed on an order requiring the plaintiffs to deliver particulars before certification.
Plaintiff’s counsel Won Kim of Toronto’s Kim Orr Barristers Professional Corp. had argued that particulars should be ordered only where defendants require them to plead.
Given the convention that defendants don’t have to deliver a statement of defence at this stage, Kim reasoned, particulars shouldn’t be ordered.
Kim also argued that particulars were premature because leave under the Ontario Securities Act was necessary with respect to certain secondary-market claims and the defence couldn’t be delivered until that issue was determined.
As Perell saw it, that reasoning was flawed. In his opinion, it was preferable that pleadings be closed before the certification motion.
“All the causes of action that are pleaded have the potential to be tried, not just the ones that are certified for the common issues trial,” Perell wrote.
“The non-certified causes of action are not struck out of the plaintiff’s pleading. The defendant pleads to the original statement of claim and not some truncated version of it.”
Once pleadings were closed, a certification order was made, and a litigation plan was filed, the common issues trial would follow. But that wasn’t necessarily the end of the matter as trials or procedures on individual issues such as damages might follow.
“All of this is based on the original statement of claim, which may or may not have to be augmented by pleadings and discoveries in the individual issue trials, if there are any,” Perell wrote.
It was, therefore, not premature for the plaintiffs to deliver particulars before certification. But it was also appropriate that the defendants deliver a statement of defence after the particulars had been delivered and any other challenges to the statement of claim were resolved.
As for the fact that leave was required for the statutory claim, all parties could amend their pleadings if leave was granted.
According to Kim, Pennyfeather significantly affects the procedural landscape of class actions.
“The case has changed the playbook,” he says.
“The decision lengthens the pre-certification process and requires defendants to challenge causes of action in advance of certification because they can’t very well plead to a cause of action and then argue it isn’t a proper basis for a lawsuit.”
Alan D’Silva of Stikeman Elliott LLP, who represented the defendants, says getting the particulars was the key element for his clients.
“What it meant is that we finally got some details of the vague but serious allegations against us. The court deemed it appropriate that we deliver a defence after receiving the particulars.”
In fact, D’Silva maintains that if the plaintiffs had offered to settle the motion by delivering particulars on condition that a defence be filed thereafter, he would have agreed to do so.
“We were always indifferent to the timing for delivery of the defence,” he says.
The custom of delaying delivery of the statement of defence originates with the decision of Justice Warren Winkler (now chief justice of Ontario) in the 1996 case of Mangan v. Inco Ltd.
Winkler rejected Inco’s argument that defendants had an absolute right to delay delivery of the defence until after the certification motion but agreed that trial judges had a broad discretion to approve such a timeline.
Although Winkler went on to say that the statement of defence wouldn’t be required for determination of the certification motion, he observed — in Inco and subsequent decisions — that “it may be in a defendant’s interest” to deliver a statement of defence before the certification motion.
“Most counsel see early delivery of the statement of defence as a good thing,” D’Silva says.
In fact, lawyers who support the reasoning in Pennyfeather note that delivery of the statement of defence before certification means all parties will have an opportunity to resolve or attack dubious or unclear claims before embarking on a costly and lengthy process.
In particular, they maintain that delivering all of the pleadings may obviate the need to determine the substantive adequacy of pleadings on the certification motion itself; limit or focus the argument about common issues; and shed light on whether a common issues trial was the preferable way to deal with the case.