Sun‑Rype Products Ltd. v. Archer Daniels Midland Company

Sun‑Rype Products Ltd. v. Archer Daniels Midland Company
Collection
Supreme Court Judgments
Date
2013-10-31
Neutral citation
2013 SCC 58
Report
[2013] 3 SCR 545
Case number
34283
Judges
McLachlin, Beverley; LeBel, Louis; Fish, Morris J.; Abella, Rosalie Silberman; Rothstein, Marshall; Cromwell, Thomas Albert; Moldaver, Michael J.; Karakatsanis, Andromache; Wagner, Richard
On appeal from
British Columbia
Subjects
Civil procedure
Notes
SCC Case Information: 34283
Decision Content
SUPREME COURT OF CANADA
Citation: Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2013 SCC 58, [2013] 3 S.C.R. 545
Date: 20131031
Docket: 34283
Between:
Sun-Rype Products Ltd. and Wendy Weberg
Appellants/Respondents on cross-appeal
and
Archer Daniels Midland Company, Cargill, Incorporated,
Cerestar USA, Inc., formerly known as American Maize-Products Company,
Corn Products International, Inc., Bestfoods, Inc., formerly known as CPC International, Inc., ADM Agri-Industries Company, Cargill Limited, Casco Inc. and Unilever PLC doing business as Unilever Bestfoods North America
Respondents/Appellants on cross-appeal
- and -
Attorney General of Canada and Canadian Chamber of Commerce
Interveners
Coram: McLachlin C.J. and LeBel, Fish, Abella, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner JJ.
Reasons for Judgment:
(paras. 1 to 80)
Dissenting Reasons:
(paras. 81 to 122)
Rothstein J. (McLachlin C.J. and LeBel, Fish, Abella, Moldaver and Wagner JJ. concurring)
Karakatsanis J. (Cromwell J. concurring)
Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2013 SCC 58, [2013] 3 S.C.R. 545
Sun‑Rype Products Ltd. and
Wendy Weberg Appellants/Respondents on cross‑appeal
v.
Archer Daniels Midland Company,
Cargill, Incorporated,
Cerestar USA, Inc., formerly known as American Maize‑Products Company,
Corn Products International, Inc.,
Bestfoods, Inc., formerly known as CPC International, Inc.,
ADM Agri‑Industries Company,
Cargill Limited,
Casco Inc. and
Unilever PLC doing business as
Unilever Bestfoods North America Respondents/Appellants on cross-appeal
and
Attorney General of Canada and
Canadian Chamber of Commerce Interveners
Indexed as: Sun‑Rype Products Ltd. v. Archer Daniels Midland Company
2013 SCC 58
File No.: 34283.
2012: October 17; 2013: October 31.
Present: McLachlin C.J. and LeBel, Fish, Abella, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner JJ.
on appeal from the court of appeal for british columbia
Civil procedure — Class actions — Certification — Direct and indirect purchasers — Plaintiffs allege that defendants fixed price of high-fructose corn syrup and overcharged direct purchasers and overcharge was passed on to indirect purchasers — Whether indirect purchasers have right to bring action against alleged overcharger — Whether inclusion of indirect and direct purchasers in proposed class warrants dismissing action — Whether case meets certification requirement of having an identifiable class of indirect purchasers — Whether direct purchasers have cause of action in constructive trust — Class Proceedings Act, R.S.B.C. 1996, c. 50, s. 4(1).
The appellants, direct and indirect purchasers, brought a class action alleging that the respondents engaged in an illegal conspiracy to fix the price of high-fructose corn syrup (“HFCS”) resulting in harm to manufacturers, wholesalers, retailers and consumers. HFCS is a sweetener used in various food products, including soft drinks and baked goods. The respondents are the leading producers of HFCS in North America. On the application for certification, it was determined that the pleadings disclosed causes of action for the direct purchasers in constructive trust and for the indirect purchasers under s. 36 of the Competition Act , in tort and in restitution. The action was certified. On appeal, the majority of the court allowed the appeal with respect to the indirect purchasers and held that it was “plain and obvious” that indirect purchasers did not have a cause of action. The appeal with respect to direct purchasers was dismissed. The matter was remitted to the British Columbia Supreme Court to reconsider the certification of the action of the direct purchasers alone. In this Court, the appellants challenge the decision that the indirect purchasers have no cause of action. On cross-appeal, the respondents request dismissal of the direct purchasers’ claim in constructive trust.
Held (Cromwell and Karakatsanis JJ. dissenting on the appeal): The appeal should be dismissed and the cross‑appeal allowed.
Per McLachlin C.J. and LeBel, Fish, Abella, Rothstein, Moldaver and Wagner JJ.: Having decided in Pro‑Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, [2013] 3 S.C.R. 477, that indirect purchasers have the right to bring an action, a question in this case is whether the additional challenges that arise where the class is made up of indirect and direct purchasers are sufficient to warrant dismissing the action. The inclusion of indirect and direct purchasers in the proposed class does not produce difficulties that would warrant dismissing the action. Where indirect and direct purchasers are included in the same class and the evidence of the experts at the trial of the common issues will determine the aggregate amount of the overcharge, there will be no double or multiple recovery. The court also possesses the power to modify settlement and damage awards in accordance with awards already received in other jurisdictions if the respondents are able to satisfy it that double recovery may occur.
Assuming all facts pleaded to be true, a plaintiff satisfies the requirement that the pleadings disclose a cause of action unless it is plain and obvious that the claim cannot succeed. In relation to the causes of action in restitution for the indirect purchasers, the requirement that there be a direct relationship between the defendant and the plaintiff for a claim in unjust enrichment is not settled. Case law does not appear to necessarily foreclose a claim where the relationship between the parties is indirect. It is not plain and obvious that a claim in unjust enrichment should fail at the certification stage on this ground alone. As to the recognition of passed-on losses — the injury suffered by indirect purchasers is recognized at law as is their right to bring actions to recover for those losses. No insurmountable problem is created by allowing the claims in restitution to be brought. Nor is it plain and obvious that a cause of action for the indirect purchasers under s. 36 of the Competition Act cannot succeed and this cause of action should therefore not be struck out.
A court must certify a proceeding if, among other requirements, there is an identifiable class of two or more persons. The difficulty lies where there is insufficient evidence to show some basis in fact that two or more persons will be able to determine if they are in fact a member of the class. Allowing a class proceeding to go forward without identifying two or more persons who will be able to demonstrate that they have suffered a loss at the hands of the alleged overchargers subverts the purpose of class proceedings, which is to provide a more efficient means of recovery for plaintiffs who have suffered harm but for whom it would be impractical or unaffordable to bring a claim individually. Here, there is no basis in fact to demonstrate that the information necessary to determine class membership is possessed by any of the putative class members. The appellants have not introduced evidence to establish some basis in fact that at least two class members could prove they purchased a product actually containing HFCS during the class period and were therefore identifiable members of the class. The problem in this case lies in the fact that indirect purchasers, even knowing the names of the products affected, will not be able to know whether the particular item that they purchased did in fact contain HFCS. While there may have been indirect purchasers who were harmed by the alleged price‑fixing, they cannot self‑identify using the proposed definition. The foundation upon which an individual action could be built must be equally present in the class action setting. That foundation is lacking here. In the end, given the finding that an identifiable class cannot be established for the indirect purchasers, the class action as it relates to the indirect purchasers cannot be certified.
With respect to the one cause of action remaining to the direct purchasers, it is determined that the cause of action in constructive trust should fail. Neither the requirement of a proprietary nexus nor the requirement that the constructive trust be imposed only where a monetary remedy was found to be inadequate were met in this case and as such it is plain and obvious that the direct purchaser claim in constructive trust has no chance of succeeding.
Per Cromwell and Karakatsanis JJ. (dissenting on the appeal): In this case, there is some basis in fact to find an identifiable class of two or more persons that includes indirect purchasers.
The requirement that the class be identifiable does not include the requirement that individual members be capable of proving individual loss. The Class Proceedings Act (“CPA”) is designed to permit a means of recovery for the benefit of the class as a whole, without proof of individual loss, even where it is difficult to establish class membership. Thus, if no individual seeks an individual remedy, it will not be necessary to prove individual loss. Such class actions permit the disgorgement of unlawful gains and serve not only the purposes of enhanced access to justice and judicial economy, but also the broader purpose of behaviour modification. Further, the aggregate damages provisions in the CPA are tools which are intended to permit access to justice and behaviour modification in cases where liability to the class has been proven but individual membership in the class is difficult or impossible to determine. The legislation explicitly contemplates difficulties or, in some cases, impossibility in self-identification. Such difficulties have not been considered fatal to authorizations under the CPA provided that there is some basis in fact that the class exists. The criteria for membership must be clearly defined — not the ability of a given individual to prove that they meet the criteria. Whether claimants can prove their claim for an individual remedy is a separate issue that need not be resolved at the certification stage.
Here, the record contained an evidentiary basis to establish the existence of the class and to show that the members of the class suffered harm. It may never be necessary or legally required to identify individual class members. The CPA, while primarily a procedural statute, also creates a remedy that recognizes that damages to the class as a whole can be proven, even when proof of individual members’ damages is impractical, and that is available even if those who are not members of the class can benefit. The statute should be construed generously to give life to its purpose of encouraging judicial economy and access to justice and modifying the behaviour of wrongdoers.
Even though it is not necessary at the certification stage to show that individual class members could stand alone as plaintiffs, this record contains a sufficient evidentiary basis to establish the existence of an identifiable class of two or more persons. Direct purchasers of HFCS used it extensively in products that were sold widely to retailers and to consumers. Given the nature of a price-fixing case, loss flows directly from the purchase of HFCS, or in the case of indirect purchasers, products containing HFCS. Claimants will not have to prove definitively that they purchased a particular product that contained HFCS. It will be sufficient if the trial judge is satisfied, upon expert or other evidence, that an individual claimant probably purchased a product containing it. The requirement that there be an evidentiary foundation — or some basis in fact — to support the certification criteria does not include a preliminary merits test and does not require the plaintiffs to indicate the evidence upon which they will prove these claims. The question at the certification stage is not whether the claim is likely to succeed, but whether the suit is appropriately prosecuted as a class action. The appellants in this case have tendered evidence which establishes some basis in fact to show that the proposed class is identifiable and that individual class members may be able to establish individual loss on a balance of probabilities. Individual claimants, including indirect purchasers, would be able to self-identify as potential plaintiffs based on knowledge of the products in which HFCS is known to have been commonly used.
Cases Cited
By Rothstein J.
Applied: Pro‑Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, [2013] 3 S.C.R. xxx, rev’g 2011 BCCA 186, 304 B.C.A.C. 90; referred to: Pro‑Sys Consultants Ltd. v. Infineon Technologies AG, 2009 BCCA 503, 98 B.C.L.R. (4th) 272; Option consommateurs v. Infineon Technologies AG, 2011 QCCA 2116 (CanLII), aff’d 2013 SCC 59, [2013] 3 S.C.R. 600; Kingstreet Investments Ltd. v. New Brunswick (Finance), 2007 SCC 1, [2007] 1 S.C.R. 3; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959; Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 S.C.R. 261; Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158; Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762; Tracy (Guardian ad litem of) v. Instaloans Financial Solutions Centres (B.C.) Ltd., 2010 BCCA 357, 320 D.L.R. (4th) 577; Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269; Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572; VitaPharm Canada Ltd. v. F. Hoffmann‑LaRoche Ltd. (2002), 20 C.P.C. (5th) 351; Fairhurst v. Anglo American PLC, 2012 BCCA 257, 35 B.C.L.R. (5th) 45; British Columbia v. Imperial Tobacco Canada Ltd., 2006 BCCA 398, 56 B.C.L.R. (4th) 263; Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534; Lau v. Bayview Landmark Inc. (1999), 40 C.P.C. (4th) 301; Bywater v. Toronto Transit Commission (1998), 27 C.P.C. (4th) 172; Sauer v. Canada (Agriculture), 2008 CanLII 43774; Taub v. Manufacturers Life Insurance Co. (1998), 40 O.R. (3d) 379.
By Karakatsanis J. (dissenting on the appeal)
Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534; Lau v. Bayview Landmark Inc. (1999), 40 C.P.C. (4th) 301; Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158; Pro‑Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, [2013] 3 S.C.R. 477; Steele v. Toyota Canada Inc., 2011 BCCA 98, 14 B.C.L.R. (5th) 271; Risorto v. State Farm Mutual Automobile Insurance Co. (2007), 38 C.P.C. (6th) 373; Sauer v. Canada (Agriculture), 2008 CanLII 43774; Gilbert v. Canadian Imperial Bank of Commerce (2004), 3 C.P.C. (6th) 35; Cassano v. Toronto‑Dominion Bank (2009), 98 O.R. (3d) 543; Ford v. F. Hoffmann‑La Roche Ltd. (2005), 74 O.R. (3d) 758; Alfresh Beverages Canada Corp. v. Hoechst AG (2002), 16 C.P.C. (5th) 301; MacKinnon v. National Money Mart Co., 2006 BCCA 148, 265 D.L.R. (4th) 214.
Statutes and Regulations Cited
Class Proceedings Act, R.S.B.C. 1996, c. 50, ss. 4(1), 29, 31(1), 34.
Competition Act, R.S.C. 1985, c. C‑34, ss. 36 , Part VI.
Authors Cited
Blynn, Daniel. “Cy Pres Distributions: Ethics & Reform” (2012), 25 Geo. J. Legal Ethics 435.
Eizenga, Michael A., et al. Class Actions Law and Practice, 2nd ed. Markham, Ont.: LexisNexis, 2009 (loose‑leaf updated May 2013, release 22).
Maddaugh, Peter D., and John D. McCamus. The Law of Restitution, vol. I. Toronto: Canada Law Book, 2013 (loose‑leaf updated May 2013, release 10).
APPEAL and CROSS‑APPEAL from a judgment of the British Columbia Court of Appeal (Donald, Lowry and Frankel JJ.A.), 2011 BCCA 187, 305 B.C.A.C. 55, 515 W.A.C. 55, 331 D.L.R. (4th) 631, [2011] B.C.J. No. 689 (QL), 2011 CarswellBC 931, setting aside a decision of Rice J., 2010 BCSC 922, [2010] B.C.J. No. 1308 (QL), 2010 CarswellBC 1749. Appeal dismissed, Cromwell and Karakatsanis JJ. dissenting. Cross‑appeal allowed.
J. J. Camp, Q.C., Reidar Mogerman, Melina Buckley and Michael Sobkin, for the appellants/respondents on cross‑appeal.
D. Michael Brown, Gregory J. Nash and David K. Yule, for the respondents/appellants on cross‑appeal Archer Daniels Midland Company and ADM Agri‑Industries Company.
J. Kenneth McEwan, Q.C., and Eileen M. Patel, for the respondents/ appellants on cross‑appeal Cargill, Incorporated, Cerestar USA, Inc., formerly known as American Maize-Products Company and Cargill Limited.
Stephen R. Schachter, Q.C., Geoffrey B. Gomery, Q.C., and Peter R. Senkpiel, for the respondents/appellants on cross‑appeal Corn Products International, Inc., Bestfoods, Inc., formerly known as CPC International, Inc., Casco Inc. and Unilever PLC doing business as Unilever Bestfoods North America.
John S. Tyhurst, for the intervener the Attorney General of Canada.
Davit D. Akman and Adam Fanaki, for the intervener the Canadian Chamber of Commerce.
TABLE OF CONTENTS
Paragraph
Reasons of Rothstein J.
I. Introduction.
II. Background.
III. Summary of the Proceedings Below..
A. Commencement of the Action.
B. Pre-certification Motion to Strike.
C. Certification Proceedings in the British Columbia Supreme Court
D........ Appeal of the Certification to the British Columbia Court of Appeal
IV. Analysis.
A. Indirect Purchaser Actions (the “Passing On” Issue)
(1) Double or Multiple Recovery as Between Indirect and Direct Purchasers.
(2) Over-Recovery as Between Jurisdictions.
(3) Restitutionary Law Principles.
(4) Deterrence and Compensation.
B........ The Certification of the Class Action.
(1) Do the Pleadings Disclose a Cause of Action?.
(a) Restitution — Indirect Purchasers.
(b) Constructive Trust — Direct Purchasers.
(c) Section 36 of the Competition Act — Indirect Purchasers.
(i) Passed-On Losses Recognized at Law
(ii) Jurisdiction Over Extraterritorial Conduct
(2) Are There Common Issues?.
(3) Is There an Identifiable Class?.
(4) Conclusion on Identifiable Class.
V. Conclusion.
Reasons of Karakatsanis J.
I. Overview..
II. Class Requirements — General Principles.
III. Application to This Case.
A. The Record and Position of the Parties.
B. Class Identification Does Not Require That Individual Class Members Can Prove Individual Loss.
C. Some Basis in Fact to Show That Individuals Could Prove Personal Loss/Class Members Are Identifiable.
IV. Conclusion.
APPENDIX: Common Issues Certified by Rice J.
1
4
6
6
7
8
10
13
16
17
21
22
24
28
31
33
39
42
42
44
48
52
77
80
81
89
92
92
96
110
121
The judgment of McLachlin C.J. and LeBel, Fish, Abella, Rothstein, Moldaver and Wagner JJ. was delivered by
Rothstein J. —
I. Introduction
[1] In price-fixing cases, indirect purchasers are customers who did not purchase a product directly from the alleged price-fixers/overchargers but who purchased it indirectly from a party further down the chain of distribution. Those who say indirect purchasers should not be able to bring actions against their alleged overchargers cite complexities in tracing the overcharge, risks of double or multiple recovery and failure to deter anti-competitive behaviour as reasons why they should not be permitted in Canada. These were some of the issues before the Court in the companion case of Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, [2013] 3 S.C.R. 477 (“Pro-Sys”). In that case, a proposed indirect purchaser class action, those arguments were found to be insufficient bases upon which to deny indirect purchasers the right to bring an action against the alleged overcharger.
[2] In this case, both the indirect and direct purchasers are class members. Having decided in Pro-Sys that indirect purchasers have the right to bring an action, a question in this case is whether the additional challenges that arise where the class is made up of indirect and direct purchasers are sufficient to warrant dismissing the action. If the Court finds that the action may proceed, it must then consider whether the class action should have been certified by the applications judge.
[3] For the reasons that follow, I would find that the inclusion of indirect and direct purchasers in the proposed class does not produce difficulties that would warrant dismissing the action. However, I find this case cannot meet the certification requirements because there is not an identifiable class of indirect purchasers as required for certification under the British Columbia Class Proceedings Act, R.S.B.C. 1996, c. 50 (“CPA”). I would dismiss the appeal on that basis. The case of the direct purchasers, which is restricted to constructive trust, is dismissed as I find there is no cause of action. The cross-appeal is therefore allowed.
II. Background
[4] Sun-Rype Products Ltd., a juice manufacturer, is the direct purchaser representative plaintiff and Wendy Bredin (formerly Wendy Weberg) is the indirect purchaser representative plaintiff in this action. The representative plaintiffs (referred to collectively as the “appellants”), brought the class action pursuant to the CPA. They allege that Archer Daniels Midland Company and ADM Agri-Industries Company (the “ADM respondents”), Cargill, Incorporated, Cerestar USA, Inc., formerly known as American Maize-Products Company, and Cargill Limited (the “Cargill respondents”), and Corn Products International, Inc., Bestfoods, Inc., formerly known as CPC International, Inc., Casco Inc. and Unilever PLC doing business as Unilever Bestfoods North America (the “Casco respondents”) (collectively, the “respondents”), engaged in an illegal conspiracy to fix the price of high-fructose corn syrup (“HFCS”) resulting in harm to manufacturers, wholesalers, retailers and consumers.
[5] HFCS is a sweetener used in various food products, including soft drinks and baked goods. The respondents are the leading producers of HFCS in North America. The appellants claim that between January 1, 1988 and June 30, 1995, the respondents engaged in an “intentional, secret and illegal conspiracy to fix the price of HFCS”, which allowed them to charge the class members more for HFCS than they would have charged but for the alleged illegal conduct (A.F., at paras. 9 and 11).
III. Summary of the Proceedings Below
A. Commencement of the Action
[6] The appellants commenced this class action in June 2005 on behalf of “all persons resident in British Columbia and elsewhere in Canada who purchased HFCS or products containing HFCS manufactured by the [respondents] (collectively, the ‘class’) from January 1, 1988 to June 30, 1995 (the ‘Class Period’)” (2010 BCSC 922 (CanLII), at para. 2). It alleged the following causes of action (ibid., at para. 27):
a) contravention of s. 45(1) of Part VI of the Competition Act giving rise to a right of damages under s. 36(1) of that Act;
b) tortious conspiracy and intentional interference with economic interests;
c) unjust enrichment, waiver of tort and constructive trust; and
d) punitive damages.
B. Pre-certification Motion to Strike
[7] The respondents brought a pre-certification motion to strike the appellants’ claims on the basis that they were statute-barred. In an order dated May 10, 2007, the motions judge only allowed the claim for a remedial constructive trust because it was subject to a longer (10-year) limitation period than the other claims (2007 BCSC 640, 72 B.C.L.R. (4th) 163). The respondents appealed the order to the British Columbia Court of Appeal (“B.C.C.A.”) and the appellants cross-appealed (2008 BCCA 278, 81 B.C.L.R. (4th) 199). The result was that the B.C.C.A. found that the direct purchaser representative plaintiff, Sun-Rype, could maintain only its cause of action in remedial constructive trust and that all of its claims for damages, including damages under the Competition Act, R.S.C. 1985, c. C-34 , were statute-barred. As to the indirect purchaser representative plaintiff, Wendy Bredin, the B.C.C.A. found that she could maintain all of her causes of action because the limitation period on her claims did not begin until “she received the telephone call from her lawyer advising her of the proposed class action” (para. 138).
C. Certification Proceedings in the British Columbia Supreme Court, 2010 BCSC 922 (CanLII)
[8] The British Columbia Supreme Court (“B.C.S.C.”) dealt with the appellants’ application for certification by its decision dated June 30, 2010. As to the issue of whether indirect purchasers could bring actions against their alleged overchargers, Rice J. found that it was “not plain and obvious” that indirect purchaser claims were unavailable as a matter of law in Canada (para. 58).
[9] Rice J. then addressed the requirement under s. 4(1)(a) of the CPA that the pleadings disclose a cause of action. Excluding the portions of the claim struck by the pre-certification decision on the limitation periods, Rice J. found that the pleadings disclosed causes of action for the direct purchasers in constructive trust and for the indirect purchasers under s. 36 of the Competition Act , in tort and in restitution. Rice J. also found that the remaining certification requirements, namely (i) whether there were common issues; (ii) whether there was an identifiable class; (iii) whether the class action was the preferable procedure; and (iv) whether Sun-Rype and Wendy Bredin could adequately represent the class, were met. He certified the action identifying common issues relating to the indirect purchasers’ claims seeking statutory, common law and equitable damages and restitution based on allegations that the respondents engaged in an international and unlawful conspiracy to fix the price of HFCS during the class period. The common issues certified by Rice J. are listed in the appendix to these reasons.
D. Appeal of the Certification to the British Columbia Court of Appeal, 2011 BCCA 187, 305 B.C.A.C. 55
[10] The majority of the B.C.C.A. (per Lowry J.A., Frankel J.A. concurring) held that it was “plain and obvious” that indirect purchasers did not have a cause of action (para. 97). The majority reached this conclusion for the same reasons as in its decision in Pro-Sys Consultants Ltd. v. Microsoft Corp., 2011 BCCA 186, 304 B.C.A.C. 90: it held that the rejection of the passing-on defence in Canada carried as its necessary corollary a corresponding rejection of the offensive use of passing on in the form of an indirect purchaser action. The majority found Canadian law “to be consistent with American federal law as established by the Supreme Court of the United States in Hanover Shoe . . . and Illinois Brick” (Pro-Sys (C.A.), at para. 74).
[11] With respect to the indirect purchasers, the majority allowed the appeal and found that the pleadings did not disclose a cause of action on their part (para. 98). However, with respect to direct purchasers, the majority found that the appeal should be dismissed (para. 74). The B.C.C.A. set aside the certification order of Rice J. and remitted the matter to the B.C.S.C. to reconsider the certification of the action of the direct purchasers alone.
[12] Donald J.A., dissenting, as he did in Pro-Sys, would have found that indirect purchaser actions were permitted as a matter of law in Canada and would have certified the action for both direct and indirect purchasers, finding that all of the requirements in s. 4(1) of the CPA were met.
IV. Analysis
[13] This appeal was brought concurrently with the appeal in the companion case of Pro-Sys. Counsel for the appellants are the same in both cases, and the appellants in this case rely heavily on the appellants’ submissions in Pro-Sys to support their arguments. In view of the significant overlap in issues, these reasons will frequently refer to the reasons in Pro-Sys.
[14] In this Court, the three groups of respondents filed separate factums. However, each adopts the pleadings of the others in the appeal and the cross-appeal. In the appeal, the respondents argue first and foremost that indirect purchasers do not have a cause of action. They also argue that the class action should be decertified in respect of the indirect purchasers because the class is not identifiable as required by s. 4(1)(b) of the CPA. On the cross-appeal, the respondents request dismissal of the direct purchasers’ claim in constructive trust on the grounds that the elements required to establish a constructive trust are not present. They also seek decertification of the class action on the basis that Rice J. applied the wrong standard of proof in his analysis of the certification requirements.
[15] As indicated, I am unable to find an identifiable class as it relates to the indirect purchasers and would dismiss the appeal on that basis. Nonetheless, for completeness, the various arguments presented in this case are assessed below. I turn first to the indirect purchaser question and then consider the arguments pertaining to the certification of the class action.
A. Indirect Purchaser Actions (the “Passing On” Issue)
[16] The appellants largely adopt the submissions of Pro-Sys Consultants Ltd. on the passing-on issue. As the offensive use of passing on has been analysed in the reasons in Pro-Sys, it is unnecessary to repeat it in its entirety here. I add only the following to address the differences that arise with regard to passing on where indirect purchasers and direct purchasers are part of the same class.
(1) Double or Multiple Recovery as Between Indirect and Direct Purchasers
[17] The respondents argue that the “fundamental difficulty with the case of the indirect purchasers is that they seek recovery of amounts to which the direct purchasers have a valid claim, such that, to recognize the claim of the indirect purchasers would be to recognize an overlapping claim to the same amount and the prospect of double recovery” (Cargill factum, at para. 54). They argue that, because the passing-on defence has been rejected in Canada, the direct purchasers are entitled to 100 percent of the amount of the overcharge. Consequently they say that indirect purchasers “make a duplicative and overlapping claim to an overcharge to which the direct purchasers are entitled based on settled principles” (para. 61).
[18] For the reasons given in the Pro-Sys appeal, this argument is insufficient to deny indirect purchasers the right to be included in the class action. I agree with Rice J. that, by including both direct and indirect purchasers in the class and by using economic methodologies to ascertain the aggregate amount of the loss, there will be no over-recovery from the respondents (B.C.S.C., at para. 53).
[19] In this case, the appellants seek recovery of a defined sum equal to the aggregate of the overcharge. Where indirect and direct purchasers are included in the same class and the evidence of the experts at the trial of the common issues will determine the aggregate amount of the overcharge, there will be no double or multiple recovery. Recovery is limited to that aggregate amount, no matter how it is ultimately shared by the direct and indirect purchasers. This was the view of the B.C.C.A. in Pro-Sys Consultants Ltd. v. Infineon Technologies AG, 2009 BCCA 503, 98 B.C.L.R. (4th) 272 (“Infineon”), at para. 78, and of the Quebec Court of Appeal in Option consommateurs v. Infineon Technologies AG, 2011 QCCA 2116 (CanLII), at para. 114. The appeal of the latter decision was heard together with Pro-Sys and this case. See Infineon Technologies AG v. Option consommateurs, 2013 SCC 59, [2013] 3 S.C.R. 600.
[20] To the extent that there is conflict between the class members as to how the aggregate amount is to be distributed upon the awarding of a settlement or upon a successful action, this is not a concern of the respondents and is not a basis for denying indirect purchasers the right to be included in the class action.
(2) Over-Recovery as Between Jurisdictions
[21] In addition to concern of double recovery as between indirect and direct purchasers, the respondents also express concerns of over-recovery arising from actions in the U.S. Specifically, the respondents state that in the U.S., direct purchasers of HFCS have already reached a settlement with the respondents for the entire overcharge. They claim that if the rights of the indirect purchasers to bring an action are recognized in Canada, this will create “overlapping claims to the same loss between direct purchasers in the U.S. and indirect purchasers in British Columbia” (Cargill factum, at para. 71). As stated in the Pro-Sys reasons, the court is equipped to deal with these risks. The court possesses the power to modify settlement and damage awards in accordance with awards already received by plaintiffs in other jurisdictions if the respondents are able to satisfy it that double recovery may occur. If the respondents adduce relevant evidence, the court will be able to ensure that double recovery does not occur.
(3) Restitutionary Law Principles
[22] The majority of the B.C.C.A. rejected the offensive use of passing on based on the theory that once the passing-on defence is rejected, the direct purchasers would be entitled to the whole amount by which they were overcharged:
. . . I am unable to see why the [direct purchasers] would not as a matter of law be entitled to the whole of the amount they overpaid regardless of any amount that may have been passed on to the [indirect purchasers] in the same way they would if they were the only plaintiffs in the action. Anything less would serve to disadvantage them because of the nature of the proceedings such that they would be deprived of what they would legally be entitled to recover. [para. 84]
[23] I would agree that absent an action by indirect purchasers or absent the inclusion of indirect purchasers in the action, the direct purchasers would be able to recover the entire amount of the overcharge because the overcharger would be unable to invoke the passing-on defence. However, this is not the same as saying the direct purchasers are entitled to the entire amount of the overcharge. The disgorgement of amounts obtained through wrongdoing is one of the fundamental principles of restitutionary law (P. D. Maddaugh and J. D. McCamus, The Law of Restitution (loose-leaf ed.), vol. I, at p. 3-1). Restitutionary law is “a tool of corrective justice” that seeks to take money away from the party who has unjustly taken it and return it to the party who unjustly lost it (Kingstreet Investments Ltd. v. New Brunswick (Finance), 2007 SCC 1, [2007] 1 S.C.R. 3, at paras. 32 and 47). While a defendant cannot invoke the passing-on defence, the direct purchasers cannot deny that they have passed on the overcharge to the indirect purchasers. Where indirect purchasers are able to demonstrate that overcharges were passed on to them, they are entitled to claim those overcharges.
(4) Deterrence and Compensation
[24] As part of their argument that indirect purchaser actions should not be allowed, the respondents make much of the fact that in many other price-fixing cases in Canada, awards to indirect purchasers have been disbursed in the form of cy-près payments because the amounts in question were so small as to make identification of and distribution to each individual class member impractical. They claim that cy-près distributions do not advance the deterrence objective of the Canadian competition laws because any deterrence function could be achieved to an equal extent by a claim made solely by direct purchasers. They also argue that because the award would be distributed to a not-for-profit entity in place of the class members, the compensation goal of the Canadian competition laws is also frustrated.
[25] There is merit to these arguments; however, the precedent for cy-près distribution is well established (see M. A. Eizenga et al., Class Actions Law and Practice (loose-leaf), at § 9.19). While cy-près distributions may not appeal to some on a policy basis, this method of distributing settlement proceeds or damage awards is contemplated by the CPA, at s. 34(1):
34 (1) The court may order that all or any part of an award under this Division that has not been distributed within a time set by the court be applied in any manner that may reasonably be expected to benefit class or subclass members, even though the order does not provide for monetary relief to individual class or subclass members.
[26] It is also a method the courts have used in indirect purchaser price-fixing cases, as demonstrated by the respondents’ summary of nine cases in which distribution of the settlement funds was made on a cy-près basis. And, while its very name, meaning “as near as possible”, implies that it is not the ideal mode of distribution, it allows the court to disburse the money to an appropriate substitute for the class members themselves (see D. Blynn, “Cy Pres Distributions: Ethics & Reform” (2012), 25 Geo. J. Legal Ethics 435, at p. 435).
[27] As such, while the compensation objective is not furthered by a cy-près distribution, it cannot be said that deterrence is reduced by the possibility that a settlement will eventually be distributed in that manner. These factors do not preclude indirect purchasers from bringing an action or from being included in the class.
B. The Certification of the Class Action
[28] Having determined that indirect purchasers may pursue actions against their alleged overchargers, the issue is now whether this action should be certified. The analysis of the certification requirements was carried out by the applications judge, Rice J., but was not addressed by the majority of the B.C.C.A. The majority of the B.C.C.A. disposed of the action based solely on its finding that passing on could not be used offensively to allow indirect purchasers to bring an action.
[29] The requirements for certification under the CPA are set forth in s. 4(1):
4 (1) The court must certify a proceeding as a class proceeding on an application under section 2 or 3 if all of the following requirements are met:
(a) the pleadings disclose a cause of action;
(b) there is an identifiable class of 2 or more persons;
(c) the claims of the class members raise common issues, whether or not those common issues predominate over issues affecting only individual members;
(d) a class proceeding would be the preferable procedure for the fair and efficient resolution of the common issues;
(e) there is a representative plaintiff who
(i) would fairly and adequately represent the interests of the class,
(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and
(iii) does not have, on the common issues, an interest that is in conflict with the interests of other class members.
[30] The respondents contest only three of the certification criteria. The first is whether the pleadings disclose a cause of action as required under s. 4(1)(a). They argue that the remaining cause of action of the direct purchasers in constructive trust should be struck and that the indirect purchaser causes of action in restitution and under s. 36 of the Competition Act should fail. They do not contest the indirect purchasers’ causes of action in tort. Second, they say that the requirement under s. 4(1)(c) that the claims raise common issues is not met. Third, they argue that the class is not identifiable as it relates to the indirect purchasers as required under s. 4(1)(b).
(1) Do the Pleadings Disclose a Cause of Action?
[31] Section 4(1)(a) of the CPA requires that the pleadings disclose a cause of action. This requirement is judged on the standard of proof applied in Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at p. 980, namely that a plaintiff satisfies this requirement unless, assuming all facts plead