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Panel overturns decision to stay global class action

Focus on Victory for access to justice, says lawyer
|Written By Michael McKiernan
Panel overturns decision to stay global class action
Alexandra Teodorescu says the potential financial gains to class from the addition of absent foreign claimants will be tempered in many cases by the procedural burdens they bring with them.

The Court of Appeal for Ontario struck a blow for access to justice when it allowed a global class action to proceed here, despite the fact it involves absent foreign claimants, according to one of the lawyers spearheading the claim.   

In Airia Brands Inc. v. Air Canada, a unanimous three-judge panel of the province’s top court overturned a motion judge’s decision to stay the action as it related to the absent foreign claimants, ruling that Ontario could assume jurisdiction over them, even without assurances that the court’s final disposition would be recognized abroad. 

Linda Visser, a partner in the class actions practice group at Siskinds LLP in London, Ont., acts for the plaintiffs, a group of businesses alleging price fixing in the air freight shipping industry by a number of major airlines.

“It’s very important from an access to justice point of view for class members to be able to bring a claim in Canada, since we are one of only a handful of countries that allows class actions,” she says. “Without some form of collective redress, it’s virtually impossible for parties in those countries to pursue a claim because it’s so expensive. 

“The initial decision created some uncertainty in the law with regard to the possibility of an international class, so we were very pleased that the appeal court has clarified matters,” Visser adds.  

But defence-side lawyers say that allowing claims to proceed on behalf of plaintiffs who have not consented and may not even be aware of an action unfairly exposes defendants to the possibility of double recovery. They are pinning their hopes to a leave application currently before the Supreme Court of Canada that could yet result in the nation’s top court weighing in on the issue. 

“It does raise fundamental issues of fairness,” says Chris Naudie, co-chairman of the class actions defence practice group at Osler Hoskin and Harcourt LLP. “It’s not clear why an Ontario court would want to adjudicate the claim of an absent foreign claimant if, ultimately, it may not be enforceable in their home jurisdiction. 

“It’s questionable whether it serves the objectives of the Class Proceedings Act, but I would expect that we will see more cases like this, which certainly raises the financial stakes for defendants,” adds Naudie, who was not involved in the appeal court case.

The matter has its roots in the years between 2000 and 2006, when the plaintiffs allege that a group of airlines, including Air Canada and British Airways PLC, conspired to fix air freight prices for shipments in and out of Canada by manipulating supply or boosting the cost of fuel and security charges. 

However, the class action ran into trouble when the defendants challenged the court’s jurisdiction over class members located outside Canada who entered into contracts outside the country. 

In August 2015, Ontario Superior Court Justice Lynne Leitch sided with the defendants, ruling that Ontario could not assume jurisdiction over the absent foreign claimants because they neither had any presence in the province nor had they consented to the claim proceeding here. 

“The potential for the multiplicity of further actions by absent foreign claimants is inconsistent with the objectives of class proceedings and contrary to the principles of order and fairness,” Leitch wrote, adding that the principle of comity would also be offended by asserting jurisdiction in light of her conclusion that “the court can not reasonably expect that its judgment will be recognized in foreign countries.”

However, the appeal court panel ruled that Leith erred in her failure to apply the “real and substantial connection” test laid out by the Supreme Court in its 2012 decision Club Resorts Ltd. v. Van Breda to the jurisdiction question. The court then set its own three-part framework, establishing that jurisdiction may be asserted over absent foreign claimants when:

•   there is a real and substantial connection between the subject matter of the action and Ontario, and jurisdiction exists over the representative plaintiff and defendants;

•   there are common issues between the claims of the representative plaintiff and the absent foreign claimants;

•   procedural safeguards of adequacy of representation and notice, as well as the right to opt out, are provided.

“In my view, this framework provides the necessary safeguards to establish that jurisdiction properly exists and ensures the protection of the values of order and fairness,” Appeal Court Justice Sarah Pepall wrote on behalf of the panel, before going on to find that the foreign claimants in the air cargo case met the test for jurisdiction. 

Despite their disappointment, those on the defence side of the bar admit they saw the appeal court reversal coming. 

“I thought Justice Leitch’s approach was a rational and logical way to deal with absent foreign claimants,” says Ranjan Agarwal, a partner in the Toronto office of Bennett Jones LLP, noting that most of the case law involving the “real and substantial connection” test relates to defendants, rather than plaintiffs. 

“On the other hand, I wasn’t surprised that the Court of Appeal didn’t want to stray too far from the existing test for defendants and apply a different one to plaintiffs,” he adds.

Still, Agarwal says the unique circumstances presented by class actions justifies a final word from the Supreme Court.  

“It’s too bad if they don’t take the case, because if you poll members of the bar, you’ll find there is desperation for the Supreme Court to finally offer a comprehensive take on the multitude of jurisdictional issues that have vexed multi-jurisdictional class actions,” he says.

“It’s an interesting issue that has hallmarks of going up to the Supreme Court,” says Naudie, who also has his fingers crossed. “Jurisdiction is a core issue and more and more claims are including foreign class members with Canadian proceedings.” 

If the Supreme Court denies leave to appeal, Alexandra Teodorescu, a litigator with Toronto firm Blaney McMurtry LLP, says defence lawyers can console themselves with the fact that the appeal court judgment provides a road map for future cases to follow.

“It simplifies the framework and lets everyone know what they can expect going forward,” she says. 

In addition, Teodorescu says the potential financial gains to class from the addition of absent foreign claimants will be tempered in many cases by the procedural burdens they bring with them. 

“There is a heavy onus on plaintiffs’ counsel to get out notices, which can be an expensive and time-consuming process,” she says. For example, the appeal court judgment notes that, following a settlement with some of the defendants in the air cargo case, the plaintiffs spent more than $5 million to effect notice to 310,000 people in 140 countries.  

If the appeal court decision stands, Agarwal says, defendant lawyers will need to warn their clients about the risk of double recovery in countries that will not recognize any judgment that results in an Ontario action.

“It’s an open question as to how companies will respond to that risk,” he says.

By making common issues a part of the test for jurisdiction over absent foreign claimants, Agarwal says, the appeal court may have also created evidentiary issues for defendants.

“It can take lot of money and resources to marshal evidence that narrows and addresses common issues earlier in the proceedings, which may be too much for some defendants to bear,” he explains. “But I’ve learned over the last 15 years that our clients are very good at responding to risk factors. To the extent that this presents a new one, they will find a way to respond. 

“Only time will tell how important a decision it is,” Agarwal adds.

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