January 10, 2020

Save It for Certification: The Court’s Answer to the Question of Which Jurisdiction Wore it Better

Two proposed class actions. Two law firms. Two provinces. One set of facts. Which action will reign supreme? In DALI 675 Pension Fund v SNC Lavalin, the class actions version of “who wore it better”, Justice Belobaba addressed the question of whether a parallel class action proceeding commenced in a separate province constitutes an abuse of process. His answer? Just a healthy dose of competition.

In February 2019, a plaintiff represented by one law firm commenced a national class action in Quebec against SNC-Lavalin, alleging securities misrepresentations in the secondary market. In June 2019, a plaintiff represented by a different law firm commenced a national class action in Ontario against SNC-Lavalin based on the same set of facts.

Prior to the hearing of the certification motion in Ontario, the plaintiff in Quebec, together with the defendant, brought a motion to stay the Ontario action as a duplicative proceeding and therefore an abuse of process. The defendant added that parallel and overlapping class actions would be a waste of time and resources, and cause it to suffer prejudice.

The motion was heard by Justice Belobaba, who reasoned that there was no abuse of process per se in a parallel proceeding. Rather, the core question in addressing whether a parallel proceeding constitutes an abuse of process is: “can it be shown that the impugned parallel action is a duplicative action that was filed for no legitimate purpose?” If the answer is no, the question of preferable jurisdiction is best left to certification.

Justice Belobaba did not find the fact that different counsel had filed the second proceeding to be determinative, as a result of his concern that one law firm could solicit another law firm to act as a “beard” (likely the first time Justice Belobaba has had the opportunity to use this expression in a class actions decision):

The fact that different plaintiffs or different counsel filed the parallel proceedings cannot be determinative. It would not make good legal sense to allow multi-jurisdiction filings to escape scrutiny for abuse of process simply because class counsel was able to persuade another class member to be the representative plaintiff in its parallel action, or worse, another law firm to act as a “beard”.

In addressing the case at hand, Justice Belobaba found that the Ontario class proceeding was not filed “for no good reason”. He held that the fact that the Quebec action was filed first was not determinative, particularly given that the initial pleading filed in Quebec was much shorter and less detailed than the Ontario pleading. Although the Quebec pleading was later amended (after the Ontario pleading was filed), the Ontario action cannot become duplicative as a result of the Quebec pleading having been amended. The Ontario pleading must be examined at the time it was filed.

In response to the defendant’s pleas about prejudice, Justice Belobaba held that cost is not a sufficient reason to grant a stay of a duplicative action, nor was there evidence that the proceeding would be costly, or that costs could not be reduced through cooperation between the law firms.

Ultimately, aside from cases involving true abuse of process, Justice Belobaba concluded that it is better to decide preferability at certification, when the court has a more complete record. At that point, the benefit of information about the results of the leave and certification motions in Quebec and Ontario would allow the court to fashion an outcome that would truly be in the best interests of the national class. With early disqualification off the table, let the beauty contest begin!

Justice Belobaba’s desire to wait until certification is understandable. However, the effect will be to increase costs as a result of different plaintiffs running duplicative actions. Just as carriage motions within a single province are meant to be resolved in advance of certification, so too is there a good argument that motions to resolve the issue of competing national classes should be heard before embarking on a process of duplicate certification motions.