THE BIZOP NEWS

Walter Olson writes, over at the Point of Law blog, that:

"Unfortunately, they say, Canada's relatively new class action format is abnormally liberal on the key issue of class certification standards, which is likely to open especially wide dangers for abuse.

At this early stage, the scope for such abuse is still seriously narrowed by Canada's loser-pays rule and severe restrictions on contingency fees, but abuses did not develop overnight in the United States, either."

Walter has not read the Ontario Court of Appeal's decision in Cassano v. The Toronto-Dominion Bank, 2007 ONCA 781 (CanLII), or he would be even more horrified.

The Court of Appeal allowed a certification of a class action in which the underlying cause of action was a breach of contract between the TD Bank and its customers. But the breach was a failure to disclose how certain fees would work.

There was allegedly no disclosure about the fees that TD charged its Visa cardholders for foreign currency transactions during the putative class periods and that two of these, a "conversion fee" and an "issuer fee".

The motions Judge, Justice Cullity, analyzed the cause of action this way.

"[52] Two competing methods of applying these principles to the facts of this case were advanced by counsel. In Mr Pape's submission, the fees would not have been charged if the contract had been performed and it followed that the measure of damages was simply the amount of the fees. The submission can I think be accurately described as the linchpin of the plaintiff's case for certification. It provides the basis for the submission that an aggregate award of damages was possible and the lack of any provision in the proposed litigation plan for a determination of losses, and an assessment of damages.

[53] The opposing theory was that the alleged breach of contract on which the plaintiff relies consisted not of charging the fees but of doing this without disclosure. Accordingly, in the submission of defendant's counsel, the measure of compensatory, or expectation, damages would be the amount that would place cardholders in the same situation as if disclosure had been made. As there was no reason to suppose that their reaction and future use of the cards would have been identical, a determination of whether losses had been incurred and, if so, the quantum of damages could only be made on an individual basis.

[54] No authorities were cited on either side that assist in choosing between these alternative methods of determining the value of the Bank's promised performance of the contract. I have found the discussion by Professor Waddams, op. cit., (3rd edition, 1997), at paras 13.260 - 13.410 to be helpful and, in principle, I believe that the submissions of defendant's counsel were correct."

The Court of Appeal disagreed and allowed the cause of action on using section 24 of the Class Action Proceedings Act.

"[44] As in Markson, in this case, condition (a) presents no difficulty. Monetary relief is claimed on behalf of the class.

[45] In my view, there is a "reasonable likelihood" that condition (c) would also be satisfied. For the reasons given above, establishing the extent of TD's liability does not require making individual inquiries of cardholders to determine what they would have done if they had known of the fees.

Rather, the aggregate of TD's liability may reasonably be expected to be capable of proof by resort to TD's records of the amount of fee income it collected during the relevant time frame.

[46] To date, counsel for TD have refused to provide such a figure or confirm whether one exists. On an answer to a question taken under advisement on the cross-examination of the TD's representative, Mr. Geoffrey Butler, - "[t]o advise of the fees earned on foreign exchange transactions by the bank during the period from 1968 going forward" - counsel for TD stated that this amount is "[n]ot relevant. TD will not argue that the fees collected are less than the amount to prosecute the litigation." This non-response does not provide an evidentiary basis for concluding that the aggregate of the defendant's liability cannot be assessed without proof by individual class members."

This represents a further lowering of the threshold of liability - and since virtually all franchise class actions are a combination of breach of contract with a failure to disclose material facts, class action franchisees are going to get certified.

What would have been preferable for both the motions judge and the Court of Appeal to have addressed whether if there was deemed reliance, whether recourse to section 24 was possible. As it stands, this comes dangerously close to defining the liability to the class by reference to what the aggregate damages might be - in absences of a well thought theory of liability to the individuals in the class.