G.M. (Canada) v. Naken

G.M. (Canada) v. Naken
Collection
Supreme Court Judgments
Date
1983-02-08
Report
[1983] 1 SCR 72
Case number
15512
Judges
Laskin, Bora; Dickson, Robert George Brian; Beetz, Jean; Estey, Willard Zebedee; McIntyre, William Rogers
On appeal from
Ontario
Subjects
Action
Decision Content
Supreme Court of Canada
G.M. (Canada) v. Naken, [1983] 1 S.C.R. 72
Date: 1983-02-08
General Motors of Canada Limited (Defendant-Respondent) Appellant;
and
Helen Naken, Stephen Cranson, William J. Pearce and Roberto Bandiera suing on behalf of themselves and suing on behalf of all other persons who have purchased new 1971 and 1972 Firenza motor vehicles in Ontario (Plaintiffs-Appellants) Respondents;
and
Vauxhall Motors Limited Defendant.
File No.: 15512.
1982: March 25; 1983: February 8.
Present: Laskin C.J. and Dickson, Beetz, Estey and McIntyre JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Practice—Class action—Application to strike out—Action on behalf of Firenza buyers—Car allegedly defective—Breach of warranty and of representation—Reliance on warranties made in advertisements and in partly written contract made with each class member—Action seeking $1,000 for each member in class—Whether or not reasonable cause of action—Supreme Court of Ontario Rules of Practice, Rules 75 and 126.
Respondents sought to bring a class action, under Rule 75, suing on their own behalf and on behalf of all persons who bought 1971 or 1972 Firenzas and who, at the date of the writ, had not sold or otherwise disposed of the vehicle. The action was for breach of warranty and breach of representation; the prayer for relief sought $1,000 for each member of the class. Responding to demands for particulars, respondents (plaintiffs) stated that 4,602 persons had bought new Firenzas in Ontario in 1971 and the number of cars sold or other‑side disposed of at the date of the writ was unknown. A number of mechanical defaults were alleged. The warranties were allegedly made in partly oral and partly written contracts, G.M.’s published materials, or newspaper advertisements. The present proceedings originated in appellant’s (defendant’s) application to strike out, which was dismissed at Weekly Court but allowed on appeal to the Divisional Court. The Court of Appeal dismissed the appeal from the Divisional Court’s order, but allowed the statement of claim to be amended to restrict the class to those who had relied on G.M.’s advertisements or printed material. G.M.’s application for additional argument relating to the amended statement of claim was dismissed. The only issue was the proper interpretation and application of Rule 75.
Held: The appeal should be allowed.
Respondent’s action cannot be properly conducted within Rule 75 by standardizing or placing a flat limit on individual damages and limiting the class to owners who responded to and relied on appellant’s advertisements. The rule required plaintiffs and those they sought to represent to have the same interest but did not define “same interest”. The interest need not relate the same physical object, such as the same car. Yet, it was not enough that the group share a “similar interest” in the sense that they had varying contractual arrangements with appellant giving rise to different but similar claims in contract relating to the same model of car. Rule 75 was not intended to impose a new and distinct method of proceeding upon the generally established pattern of procedure for, if it had been, extensive provisions would have been created to support the innovation. Here, respondents proposed that: 1) the trial judge would decide if named plaintiffs had a cause of action sounding in damages against the defendant, 2) if any of them had entered a unilateral contract, the Court could direct a reference to the master to determine who qualified for inclusions in the class and 3) the trial judge would compute the total damages and award judgment after receiving the master’s report. The current rules do not address the problems presented by this approach—assessing damages arising from many different situations; costs, especially with respect to non-parties; access to pre-trial procedures by non-parties or by parties against non-parties or applying pre-hearing procedures to a reference; the effect of the class action on a non-party’s own right of action; the effect of the Statute of Limitations. Rule 75 is totally inadequate for employment as the base from which to launch an action as complex and uncertain as this one.
Duke of Bedford v. Ellis, [1901] A.C. 1; Markt & Co., Limited v. Knight Steamship Company, Limited, [1910] 2 K.B. 1021; May v. Wheaton (1917), 41 O.L.R. 369; Farnham v. Fingold, [1973] 2 O.R. 132; Cobbold v. Time Canada Ltd. (1976), 13 O.R. 567; Seafarers International Union of Canada v. Lawrence (1979), 24 O.R. (2d) 257; Stephenson v. Air Canada (1979), 26 O.R. (2d) 369; Shaw v. Real Estate Board of Greater Vancouver, [1973] 4 W.W.R. 391; Vasquez v. Superior Court of San Joaquin County, 484 P. 2d 964 (1971); Alberta Pork Producers’ Marketing Board v. Swift Canadian Co. Ltd. (1981), 129 D.L.R. (3d) 411, considered; Beeching v. Lloyd, 3 Drew. 227; Thomson v. Victoria Mutual Fire Insurance Co. (1881), 29 Gr. 56; Drohan v. Sangamo Co. Ltd., [1972] 3 O.R. 399; Bowen v. MacMillan (1921), 21 O.W.N. 23; Shields, v. Mayor, [1953] O.W.N. 5; Taff Vale Railway Co. v. Amalgamated Society of Railway Servants, [1901] A.C. 426; Chastain v. British Columbia Hydro and Power Authority, [1973] 2 W.W.R. 481; Alden v. Gaglardi (1970), 15 D.L.R. (3d) 380; Altman v. Manhattan Savings Bank, 83 Cal.App.3d 761 (1978); D’Amico v. Sitmar Cruises, Inc., 109 Cal.App.3d 323 (1980); Eisen v. Carlisle, 417 U.S. 156 (1974); Cartt v. Superior Court of Los Angeles County, 50 Cal.App.3d 960 (1975); Carlill v. Carbolic Smoke Ball Company, [1893] 1 Q.B. 256; Cahoon v. Franks, [1967] S.C.R. 455; Cox v. Robert Simpson Co. Ltd., [1973] 1 O.R. (2d) 333; American Pipe and Construction Co v. Utah, 414 U.S. 538 (1974), referred to.
APPEAL from a judgment of the Ontario Court of Appeal (1979), 92 D.L.R. (3d) 100, 21 O.R. (2d) 780, dismissing an appeal (while allowing an amended statement of claim) from a judgment of the Divisional Court allowing an appeal from the judgment of Osler J. dismissing an application to strike out the statement of claim. Appeal allowed.
Douglas K. Laidlaw, Q.C., and Ronald Slaght, for the appellant.
Vernon I. Balaban and Jeffery S. Lyons, Q.C., for the respondents. The judgment of the Court was delivered by
ESTEY J.—The respondents (plaintiffs) seek to avail themselves of a provision in the Rules of Practice of the Supreme Court of Ontario to bring a class action against the appellant (defendant) for damages suffered as the result of the purchase of certain automobiles. The virtue and benefit of the institution of the class action is not here on trial; only the availability of that kind of proceeding in the circumstances of this case. Neither is this issue to be resolved on the basis of weighing the advantages of the representative action for the plaintiff and the disadvantages of such an action for the defendant (although a study of these factors may assist in the process) but rather on the basis of the correct interpretation of this rule of court and its application to the circumstances of the parties to this action.
This appeal finds its origins in an action commenced in a class action or representative class action by four individuals suing for themselves and on behalf of others forming a class described in the pleadings. The endorsement in the writ of summons states:
The Plaintiffs claim is for damages in the amount of $5,000,000.00 for breach of warranty and for breach of representation with respect to the sale of 1971 and 1972 Firenza Motor Vehicles in the Province of Ontario. The Plaintiffs further claim the sum of $1,000.00 for costs.
The immediate origin of these proceedings is in an application by the defendant under Rule 126 to strike out the statement of claim as disclosing no reasonable cause of action. While the record does not include this notice of motion, nevertheless the formal order issued by the judge of first instance sitting in Weekly Court, Toronto states:
Upon motion…by…the defendant [appellant]… for an order striking out the statement of claim herein and dismissing the action…
In an application for these purposes under Rule 126 the Court assumes the statement of claim to have been proven for the purpose of determining the issue raised in the application.
The statement of claim filed by the four plaintiffs describes the class as follows:
1. The Plaintiffs Helen Naken, Stephen Cranson, William J. Pearce and Roberto Bandiera all reside in the Municipality of Metropolitan Toronto and sue on their own behalf and on behalf of all persons who purchased new 1971 or 1972 Firenza motor vehicles in Ontario and who at the date of the Writ had not sold or otherwise disposed of the vehicle and shall hereinafter be referred to as “the class”.
The gist of the action is revealed in paragraph 9 of the claim which states:
9. Because of this breach of warranty, the value of each and every 1971 and 1972 Firenza motor vehicle has depreciated in the re-sale market.
With reference to the warranty the plaintiffs pleaded:
8. The warranty given to each Plaintiff and to each member of the class was breached in that unusually large numbers of 1971 and 1972 Firenza motor vehicles were not of merchantable quality, were not reasonably fit for use as a motor vehicle, and were not “durable”, “tough” and “reliable”.
10. As a consequence, the re-sale value of each such Firenza motor vehicle is approximately $1,000.00 less than the re-sale value of a motor vehicle of comparable age, size and purchase price on the market.
The prayer for relief is simply a request for $1,000 for “each plaintiff and each member of the class”.
In response to demands for particulars by the defendant, the plaintiffs stated:
(a) 4602 persons purchased new 1971 and 1972 vehicles in Ontario;
(b) the exact number of those who had sold or disposed of their vehicle at the date of the writ (July 13, 1973) is unknown; (c) the defects in the Firenza were alleged to include such matters as steering mechanism, braking, fuel line leakage, transmission breakdown, faulty universal joint in the drive shaft, etc.; and,
(d) the warranties mentioned in the statement of claim “are contained in contracts… [which]…were partly oral and partly written. The warranties…were expressly made in printed material distributed by the Defendant…and contained in newspaper advertisements placed by the said Defendant in Ontario”.
Osler J. in Weekly Court dismissed the application to strike out the statement of claim as he would have allowed the action to proceed. In response to an application by the appellant for leave to appeal to the Divisional Court, Hughes J. granted leave under Rule 499 and in doing so again referred to the application as being one to strike out the statement of claim and dismiss the action. Hughes J. indicated that the type of amendment proposed by Buckley L.J. in the Markt case, infra, may be a solution in these proceedings. Rule 499 requires that the judge “hearing the application... [have] good reason to doubt the correctness of the decision”. Accordingly, appeal was taken by the appellant to the Divisional Court. The Divisional Court allowed the appeal, struck out the statement of claim and dismissed the action. The Court of Appeal dismissed the appeal from the order of the Divisional Court but allowed the respondents thirty days to file an amended statement of claim whereby the description of the class to be represented by the respondents would “include only those purchasers of 1971 and 1972 Firenzas who saw the printed materials or published advertisements of General Motors and as a result, purchased a new Firenza from a dealer.” Application was then made by the appellant for additional argument on the issue of the permitted amendment to the statement of claim. This application was dismissed. Thus the several courts below are evenly divided on whether or not this action conforms to the requirements of Rule 75 of the Rules of Practice of the Supreme Court of Ontario.
The only issue raised in this proceeding turns around the proper interpretation and application of Rule 75 which reads as follows:
75. Where there are numerous persons having the same interest, one or more may sue or be sued or may be authorized by the court to defend on behalf of, or for the benefit of, all.
This rule has counterparts in the other provinces, some being identical in terminology and some having subtle differences as in the case of Alberta Rule 42 which reads as follows:
42. When numerous persons have a common interest in the subject of an intended action, one or more of those persons may sue or be sued or may be authorized by the Court to defend on behalf of or for the benefit of all.
The Province of Quebec in the Code of Civil Procedure has adopted a comprehensive provision for the bringing and for the conduct of representative actions. Vide Book 9, Title Two, Articles 1002 to 1051 wherein detailed provision is made for notice to persons to be affected, costs, and other matters. The application of the class action is limited under the Code to instances where members raise “identical, similar or related questions of law or fact”. In other jurisdictions, as for example in the United States Federal Courts, extensive rules have been adopted which deal with such matters as costs and the right to elect not to be represented. California, as some of the authorities indicate, has enacted a comprehensive statute covering representative actions.
It is common in dealing with actions of this type to refer to them as “class actions”. This is an ambiguous term embracing as it does derivative actions, with which we are here not concerned, and representative actions by persons having the same interest in the subject of the litigation which is brought under the leadership of one or more repre- sentatives. It is with this type of action that we are here concerned and to which I will refer for simplicity as a “class action”.
Rule 75 was taken from the Rules of the Supreme Court of the United Kingdom where Order XVI, rule 9 read:
9. Where there are numerous persons having the same interest in one cause or matter, one or more of such persons may sue or be sued, or may be authorized by the Court or a Judge to defend in such cause or matter, on behalf or for the benefit of all persons so interested.
It is to be noted that the only difference is the inclusion of the expression “in one cause or matter” relating to the “same interest” which the plaintiffs and those in the class to be represented must demonstrate. This rule came before the House of Lords in the Duke of Bedford v. Ellis, [1901] A.C. 1, where it was found that a representative action can be brought by persons asserting a common right under a statute. The defendant in that case was the owner of a market said to be regulated by a statute, and the plaintiffs were farmers who were said to have been given certain rights of market under the same statute. Lord Macnaghten stated at p. 8:
Given a common interest and a common grievance, a representative suit was in order if the relief sought was in its nature beneficial to all whom the plaintiff proposed to represent.
This rule, which had its origin in the practice in the Court of Chancery was, in the view of Lord Macnaghten (at p. 10), “…a simple rule resting merely upon convenience.” A preliminary demonstration of eligibility within the class did not raise a difficulty which made the rule of convenience impractical, and in any event, the Court concluded that the growers whom the plaintiffs sought to represent were a group who came within the contemplation of the rule. The general qualification for a representative plaintiff in the view of Lord Macnaghten, at p. 7, was not diminished or destroyed by the fact that such nominal plaintiffs may have been wronged in their individual capacity:
If the persons named as plaintiffs are members of a class having a common interest, and if the alleged rights of the class are being denied or ignored, it does not matter in the least that the nominal plaintiffs may have been wronged or inconvenienced in their individual capacity. They are none the better for that and none the worse. They would be competent representatives of the class if they had never been near the Duke; they are not incompetent because they may have been turned out of the market. In considering whether a representative action is maintainable, you have to consider what is common to the class, not what differentiates the cases of individual members.
Lord Shand concluded at p. 16 that the plaintiffs:
...all ask the same remedy, which it is unnecessary to specify further than to say they all claim to have a declaratory decree by the Court which shall give effect to their statutory privileges the same in the case of each of them, as growers of fruit, flowers and vegetables, and an injunction to restrain the appellant from doing any act contrary to such declaratory decree. There is thus one cause or matter only in which all of the plaintiffs have an interest, and in which other “growers” have the same interest, as disclosed in the record, that matter being the disregard by the defendant of their statutory privileges, for which accordingly one and the same remedy in the form of the different heads of claim is asked.
It should be observed that in that case a subsidiary question arose as to the individual claims to refund of excessive charges by the owner of the market to the growers. The Court found that such a subsidiary claim did not have the effect of destroying the entitlement of the class or group to bring an action on Rule 9. In the end, Lord Shand found that the sole test to be applied is that of “the same interest” in one cause or matter. That is the same test under Rule 75 and I do not believe that the absence of the words “cause or matter” has any effect on the meaning of the rule.
The Court of Appeal of England was concerned with Rule 9 in Markt & Co., Limited v. Knight Steamship Company, Limited, [1910] 2 K.B. 1021, where the factual circumstances more nearly approach those here before the Court. A number of shippers had contracted, apparently through bills of lading and perhaps other documents, with a shipowner for the shipment of goods from England to Japan. Upon loss of the cargo following the sinking of the ship by the Russian Navy during the Russo-Japanese war, the plaintiffs, on behalf of themselves and all other owners of the cargo, brought action against the shipowner “for damages for breach of contract”. The Court (Buckley L.J. dissenting) found that shippers of goods did not have “the same interest” within the meaning of Rule 9. Vaughan Williams L.J. was concerned at pp. 1029-30 with the fact that:
...the contracts…manifestly might differ much in their form, and as to the exceptions, and probably would vary somewhat according to the nature of the goods shipped… It may be that some of the shippers were innocent of such shipping of contraband goods. All sorts of facts and all sorts of exceptions may defeat the right of individual shippers. The case of each shipper must to my mind depend upon its own merits.
In relying upon an earlier decision, Beeching v. Lloyd, 3 Drew. 227, His Lordship concluded at p. 1032 that:
…where there is a common purpose a plaintiff may sue in a representative capacity even though each party to the common purpose will have individually to shew that he personally was induced by the fraud alleged to do the act in respect of which relief is claimed on his behalf.
Nevertheless, he concluded that the plaintiffs might be left to enforce their own rights but could not proceed under the rule in the form of a representative action. It is interesting to note that in the final analysis, reliance is placed upon the conclusion that:
There is no common statutory right as there was in Duke of Bedford v. Ellis, [[1901] A.C. 1], nor any common fund in course of formation as there was in Beeching v. Lloyd, [3 Drew. 227]. [p. 1032] The fund there referred to, in Beeching v. Lloyd, supra, was established by the plaintiffs and other persons intending to invest as shareholders in a company under formation, and the action was directed at the recovery of the respective deposits in this fund by the plaintiffs and all other intended investors.
Fletcher Moulton L.J. concurred in the dismissal of the representative action but appears, at pp. 1040-41, to have put this disposition largely on the ground that the relief sought was damages:
Damages are personal only. To my mind no representative action can lie where the sole relief sought is damages, because they have to be proved separately in the case of each plaintiff, and therefore the possibility of representation ceases.
In reaching this conclusion he did reiterate, however, at p. 1040, some of the thoughts quoted above with reference to the judgment of Vaughan Williams L.J.:
The proper domain of a representative action is where there are like rights against a common fund, or where a class of people have a community of interest in some subject‑matter. Here there is nothing of the kind. The defendants have made separate contracts which may or may not be identical in form with different persons. And that is all. To my mind it is impossible to say that mere identity of form of a contract or similarity in the circumstances under which it has to be performed satisfies the language of r. 9. It is entirely contrary to the spirit of our judicial procedure to allow one person to interfere with another man’s contract where he has no common interest. And to hold that by any procedure a third person can create an estoppel in respect of a contract to which he is not a party merely because he is desirous of litigating his own rights under a contract similar in form, but having no relation whatever to the subject-matter of the other contract, is in my opinion at variance with our whole system of procedure and is certainly not within the language of r. 9.
The majority, by their Lordships different lines of reasoning, concluded at pp. 1041-42 that the authorities emphasize: …the necessity that there should be a common fund against which the parties represented have claims if the procedure of a representative action is to be used.
In dissent, Buckley L.J. proposed an order permitting the plaintiffs to reframe the endorsement on the writ so as to describe a class limited to those shippers who did not ship contraband on the defendant’s boat.
The predecessor to Rule 75 first appeared in the 1881 Rules as Rule 98. The only difference between the present rule and the form in which it first appeared is that after the words “same interest” the rule of 1881 contained the words “in one action”; and again the words “in such action” are inserted after the words “authorized by the court to defend”. These words are in lieu of the words “in one cause or matter” which appeared, as we have seen, in the English rule when it was Order XVI, rule 9. The footnote to the 1881 Ontario rule states: “This is the same as the English rule”. The rule was reproduced in the rules of 1888 as Rule 315 without any alteration. Finally, in 1897 the rule appeared in its present form as Rule 200 without any explanation for the deletion of the words “in such action”. The rule in 1913 became number 75, and has continued unamended in that form to the present time.
The concept of the representative action came into being in the Court of Chancery (the Markt & Co., Limited case, supra, at p. 1021) and was a part of court practice in the Chancery Courts in Ontario before the rules of the common law courts, including Rule 75, were applicable to proceedings in Chancery (Thomson v. Victoria Mutual Fire Insurance Co. (1881), 29 Gr. 56).
Rule 75 came before the courts of Ontario in 1917 in May v. Wheaton (1917), 41 O.L.R. 369. Riddell J. issued an order that the plaintiff, in an action to set aside bequests made under a will, “shall in this action represent the said next of kin and persons who would be so benefited”, pointing out in so doing that Rule 75 has no reference to relationship, etc. as between the plaintiff and others “but solely to interest in the result of the action”. He went on to say at p. 371:
Of course, the object of requiring all parties interested to be joined in the action is to prevent another action where the same issues will be raised: the intention is, that all having identically the same interest shall be bound in one action and one judgment…
There was there a “fund” or common asset of finite proportions determinable without a series of individual damage or other assessment proceedings. There may, of course, be some hearing, with or without evidence, to determine proportionate interests as between claimants on the common fund, but this is a process quite separate and distinct in character from the hearing to determine the finite common fund or asset sought to be recovered in toto by a representative action for the class as a whole.
The application of the rule was taken up in the Ontario courts much later by Grant J. when he said in Drohan v. Sangamo Co. Ltd., [1972] 3 O.R. 399, at p. 402:
The words “persons having the same interest” have been defined as referring not to a relationship but solely to an interest in the result of the action…
That interest is more than merely a like or similar interest, and must be a common interest in the sense that all persons represented will gain some relief though possibly in different proportions and perhaps in different degrees:…
citing as authority May v. Wheaton, supra, and other later cases.
As early as 1921 the Ontario High Court decided that members of a trade union could proceed under Rule 75 to recover lost wages and damages from members of another trade union for conspiracy. The Court allowed the action to proceed as: “The damages claimed in this action were general damages to the class, arising out of wrongs alleged to have been done to the class as a class” (Bowen v. MacMillan (1921), 21 O.W.N. 23, at p. 25 per Ferguson J.A.); but the same Court refused to extend the rule to an action to enforce the separate contracts of tenants made with a common landlord in Shields v. Mayor, [1953] O.W.N. 5.
The Court of Appeal of Ontario in Farnham v. Fingold, [1973] 2 O.R. 132, speaking through Jessup J.A., turned its attention to the recoverability of damages under Rule 75 in the light of the remarks of Fletcher Moulton L.J. in Markt & Co., Ltd., supra. After referring to the broad concept to be brought to the interpretation of Ontario Rule 75 suggested in the remarks of Lord Lindley in Taff Vale Railway Co. v. Amalgamated Society of Railway Servants, [1901] A.C. 426, at p. 443, Jessup J.A. observed at p. 136:
Rule 75 should be applied to particular cases to produce an expeditious but just result. Thus, where the members of a class have damages that must be separately assessed, it would be unjust to permit them to be claimed in a class action because the defendant would be deprived of individual discoveries, and, in the event of success, would have recourse for costs only against the named plaintiff although his costs were increased by multiple separate claims.
In the Farnham case the action arose because a premium above market price was paid by the defendant to the majority stockholders but not to the minority stockholders in the attempt by the defendant to acquire control of the subject corporation. While this action was derivative, the Court concerned itself with the meaning of Rule 75 as regards part of the claims. The judgment continued at pp. 136-37:
However, in the present case it is clear from both the respondent’s argument and factum, although not from the pleading, that the only damages alleged by the plaintiff to have been sustained by the class he represents, including damage for conspiracy, is the gross premium above market price received by the controlling shareholders on the sale of their shares to Stanton Pipes Limited and that the individual entitlement of members of the class is simply to a pro rata share of such gross premium.
The distinguishing characteristic of this claim, which in the view of the Court of Appeal brings it within Rule 75, is described as follows (per Jessup J.A., at p. 137):
However, such gross premium can be fairly simply and readily established and without the evidence of the individual members of the class, whose separate entitlements will be established in proceedings subsequent to trial, to which the defendants need not be parties. In the result, on the facts of this case I would not dismiss the action simply because it sounds in damages.
The High Court of Ontario turned its attention to the question of individual contracts in a representative action under Rule 75 when Stark J. in Cobbold v. Time Canada Ltd. (1976), 13 O.R. 567, determined that claims for damages, which in essence were simply claims for the continued supply of a magazine under a contract, were not damages of a class or type which would disentitle the plaintiff from invoking Rule 75 (p. 569); and the fact that all plaintiffs had individual, separate subscription contracts with the defendant did not by itself disentitle the plaintiffs from proceeding by way of a representative action. Stark J. observed at p. 569:
...a class action is appropriate if it can be shown that success for the plaintiff means success for the other members of the class, especially where the same measure of success applies equally to all.
The Ontario Court of Appeal considered the element of a standard measure of damages in a representative action in Seafarers International Union of Canada v. Lawrence (1979), 24 O.R. (2d) 257. This case concerned in part a derivative action with which we are not here concerned, but in the course of its disposition the Court of Appeal had occasion to discuss the ambit of Rule 75. In reaching its conclusion that Rule 75 did not apply in the case of a damage action for recovery in defamation, MacKinnon A.C.J.O. observed at p. 262, with reference to Rule 75:
As appears from Rule 75 and the authorities under it, for a representative action to be properly formed, there must be a “common interest” of the named plaintiff and those he claims to represent. If he wins, all win, because all have been injured as members of the class, and there is no separate defence available against some members of the class and not others.
His Lordship then adverted to the possibility that defences may be different as between defendants in such an action, and consequently the differing measure of damages together with the varying defences combine to destroy the commonality of interest requisite in founding a representative action (vide p. 264). The most recent discussion of the rule in the Ontario courts appears to be that found in Stephenson v. Air Canada (1979), 26 O.R. (2d) 369, where Southey J. found inappropriate to the rule a claim on behalf of all persons who had bought discount rate tickets from the defendant prior to a strike against the defendant’s airline which made performance of the ticket contract impossible. The claim was set aside as being unacceptable under this rule because the contracts were not identical and because the damages would require a separate calculation in each instance. His Lordship commented at pp. 370-71:
More important, however, it is apparent that the damages suffered by each member of the class would have depended not only on the cost of the ticket for the flight in question, but also on the extent of the inconvenience suffered by the ticket purchaser as a result of being unable to take the Air Canada flight.
…
There is no common fund or property as in Farnham et al. v. Fingold et al., [supra]…
The courts in British Columbia have had occasion to consider a rule identical with the former United Kingdom rule, O. 16, r. 9 supra. A class action was permitted where the remedy sought was a declaration of lack of authority for a public utility to demand security deposits from customers as a condition of service. Vide Chastain v. British Columbia Hydro and Power Authority, [1973] 2 W.W.R. 481, at p. 490; Alden v. Gaglardi (1970), 15 D.L.R. (3d), 380. In a later case, Shaw v. Real Estate Board of Greater Vancouver, [1973] 4 W.W.R. 391, the majority of the Court of Appeal of British Columbia found appropriate to a representative action, claims by member real estate salesmen against the Real Estate Board for distribution of a fund accumulated without authority by the Board from commissions earned on real estate sales. The plaintiff and all other member agents of the Board claimed a declaration of entitlement and the amount of individual participation of members of the class in the fund. The variations in the pecuniary entitlement of the claimant members was not a disqualification as a representative action under the rule. Bull J.A., for the majority, stated at p. 395:
...a class action is appropriate where, if the plaintiff wins, the other persons he purports to represent win too, and if he, because of that success, becomes entitled to relief whether or not in a fund or property, the others also become likewise entitled to that relief, having regard, always, for different quantitative participations.
He went on to conclude on the facts that there was a “common fund” against which all claimants in varying amounts could claim. McFarlane J.A., in dissent, would have applied Markt, supra, and struck out the order converting the action into representative form.
It is helpful in the application of the Ontario rule to this action to examine briefly the rules and legislation adopted elsewhere for this type of proceeding. The United States Federal Court Rule 23 providing for class actions was extensively revised in 1966 and now provides in part:
(a) Prerequisites to a class action.
One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class. The rule goes on to provide additional prerequisites to a representative order. The Court must find that:
…the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.
The rights of the members of the class are protected by notice requirements:
…the court shall direct to the members of the class the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice shall advise each member that (A) the court will exclude him from the class if he so requests by a specified date; (B) the judgment, whether favorable or not, will include all members who do not request exclusion; and (C) any member who does not request exclusion may, if he desires, enter an appearance through his counsel.
During the course of the action the Court may require further advisory notices to class members and in particular may direct the representatives to afford members of the class:
…the opportunity…to signify whether they consider the representation fair and adequate, to intervene and present claims or defenses, or otherwise to come into the action…
Finally, the rule directs:
A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs.
This rule has been adopted for state courts by a number of states, and a few states have enacted the Uniform Class Actions Act prepared by the National Conference of Commissioners on Uniform State Laws. Amongst its detailed provisions may be found the authorization for the Court to determine the appropriate monetary relief to which the entire class is entitled and to make a distribution order or plan, including a provision for any residual unclaimed moneys to be paid over to the state and not to be retained by or returned to the defendant.
California followed neither course but adopted a course which combines the Ontario position, in a general sense, and the position of those states and jurisdictions which have adopted rather detailed provisions for the conduct of the representative action. The California Code of Civil Procedure, Rule 382 is expressed in even broader terms than the Ontario Rule 75:
If the consent of any one who should have been joined as plaintiff cannot be obtained, he may be made a defendant, the reason thereof being stated in the complaint; and when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.
This rule has been in effect for over one hundred years but in 1971 the state legislature enacted as part of the California Code of Civil Procedure a statute expressly dealing with the institution of class actions. This statute and related parts of the California Code of Civil Procedure adopt a detailed plan for the institution, conduct and disposition of such actions. Even before this statute law became operative, the Supreme Court of California in Vasquez v. Superior Court of San Joaquin County, 484 P. 2d 964 (1971), adopted a rather restrictive view of Rule 382 taken by itself:
…we concluded that two requirements must be met to sustain a class action. The first is existence of an ascertainable class, and the second is a well-defined community of interest in the questions of law and fact involved.
(4) As to the necessity for an ascertainable class, the right of each individual to recover may not be based on a separate set of facts applicable only to him.
(5) The requirement of a community of interest does not depend upon an identical recovery, and the fact that each member of the class must prove his separate claim to a portion of any recovery by the class is only one factor to be considered in determining whether a class action is proper. The mere fact that separate transactions are involved does not of itself preclude a finding of the requisite community of interest so long as every member of the alleged class would not be required to litigate numerous and substantial questions to determine his individual right to recover subsequent to the rendering of any class judgment which determined in plaintiffs’ favor whatever questions were common to the class.
(6) Substantial benefits both to the litigants and to the court should be found before the imposition of a judgment binding on absent parties can be justified, and the determination of the question whether a class action is appropriate will depend upon whether the common questions are sufficiently pervasive to permit adjudication in a class action rather than in a multiplicity of suits, [per Mosk J. at p. 969]
In that case the Court did not reject the application to proceed in representative form, at least at the pleading stage:
...because we cannot assume that plaintiffs will be unable to establish their allegations without the separate testimony of each class member; at least they must be afforded the opportunity to show that they can prove their allegations on a common basis. [per Mosk J. at pp. 971-72]
The Court, in construing and applying Rule 382, went even further in