The largest Canadian Constitutional class-action suit in currently under scrutiny.

Background

Following M. v. H (1999), the Canada Pension Plan (1985) (CPP) was amended in 2000 to include survivor benefits for same-sex couples to comply with equality provisions under s. 15 of the Charter,

Section 15.

1. Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.
2. Subsection (1) does not preclude any law, program or activity that has as its object the amelioration of conditions of disadvantaged individuals or groups including those that are disadvantaged because of race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

Hislop v. Canada

However, gay activists challenged the CPP further on the following grounds in Hislop v. Canada (2007) in the largest constitutional class-action in Canada:

1. 1. S. 44(1.1) of the CPP, eligibility was limited to same‑sex partners whose “spouse” died on or after January 1, 1998. Benefits were not retroactive to April 17, 1985, when s. 15(1) came into force, or the date of death of the “spouse”, whichever occurred later.

      Limitation

      *(1.1) In the case of a common-law partner who was not, immediately before the coming into force of this subsection, a person described in subparagraph (a)(ii) of the definition “spouse” in subsection 2(1) as that definition read at that time, no survivor’s pension shall be paid under paragraph (1)(d) unless the common-law partner became a survivor on or after January 1, 1998.

      * [Note: Subsection 44(1.1) in force July 31, 2000, see SI/2000-76.]

2. S. 72(1) limited survivor’s arrears benefits to no more than 12 months prior to the time of application, and under S.72(2), precluded payments to same-sex xurvivors before July 2001.
   

   Commencement of pension

   72. (1) Subject to subsection (2) and section 62, where payment of a survivor’s pension is approved, the pension is payable for each month commencing with the month following (a) the month in which the contributor died, in the case of a survivor who at the time of the death of the contributor had reached thirty-five years of age or was a survivor with dependent children, (b) the month in which the survivor became a survivor who, not having reached sixty-five years of age, is disabled, in the case of a survivor other than a survivor described in paragraph (a), or (c) the month in which the survivor reached sixty-five years of age, in the case of a survivor other than a survivor described in paragraph (a) or (b), but in no case earlier than the twelfth month preceding the month following the month in which the application was received.

   Limitation

   *(2) In the case of a survivor who was the contributor’s common-law partner and was not, immediately before the coming into force of this subsection, a person described in subparagraph (a)(ii) of the definition “spouse” in subsection 2(1) as that definition read at that time, no survivor’s pension may be paid for any month before the month in which this subsection comes into force. * [Note: Subsection 72(2) in force July 31, 2000, see SI/2000-76.] R.S., 1985, c. C-8, s. 72; 2000, c. 12, ss. 54, 64.

   1. S. 60(2) limits the rights of estates of survivors from benefits if the application is not made within 12 months of death.

      Application for benefit by estate, etc.

      60. (2) Notwithstanding anything in this Act, but subject to subsections (2.1) and (2.2), an application for a benefit, other than a death benefit, that would have been payable in respect of a month to a deceased person who, prior to the person’s death, would have been entitled on approval of an application to payment of that benefit under this Act may be approved in respect of that month only if it is made within 12 months after the death of that person by the estate, the representative or heir of that person or by any person that may be prescribed by regulation.

The Ontario Superior Court of Justice ruled, affirmed by the Supreme Court of Canada, that ss. 44(1.1) and 72(2) violated reasonable limits of s. 15(1) of the Charter and struck down, and exemptions were granted under ss. 60(2) and 72(1), even though they did not infringe on s. 15(1).

Douglas Elliot of Roy Elliott Kim O’Connor LLP (REKO), counsel for the plaintiffs explained the importance of the case,

With Schachter [v. Canada] and Doucet-Boudreau [v. Nova Scotia (Minister of Education)], I believe that Hislop will complete the trilogy of the three great constitutional remedy cases

Payment Ruling

On Feb. 9, 2008, a retainer agreement for the class-action approved of four years ago by the Ontario court has been challenged, which could result in the loss of millions of dollars in legal fees.

Kirk Baert, a Toronto civil litigation lawyer commented on the potential fallout of class-actions,

The result here isn’t fair. This is not a case where the lawyers were getting a windfall. They took the case to trial after many years; they had to go through two levels of (appeal) courts. It was very well done, to the benefit of a lot of people, and involved an important social issue.

It was the law firms’ work and skill and effort that generated the money flowing from the Canada Pension Plan in the first place.

Members to the class-action, such as Lothar Zeterberg of Vancouver, seemed to agree,

Nobody works for free. They (class action lawyers) spent time and money and all the rest of it doing this, so they should be compensated. No question about that.

But these types of pleas were not considered convincing by the court,

[65] I am not persuaded that this result will deter future class actions or frustrate the access to justice principles embodied in the CPA. While I am sympathetic to PCG’s position and the possible difficulties it will face in collecting the fees it deserves, it also seems prudent to suggest that future class counsel confirm that the s. 32(3) charge is available and not negated by other legislation such as s. 65 of the CPP.

Future of Class-Actions in Canada

The new big thing in law might be class action suits brought by shareholders, technically against themselves.

Securities class actions have risen enormously beyond anyone’s expectations, characterized by an astonishing increase of 300 per cent in settlement sizes.

A report by Cornerstone Research last year found that a number of mega-settlements were responsible for the growth. But they do not anticipate this to be repeated in the following year.

Other Clouds on the Horizon

An October 12, 2007 decision on another class-action landmark case against Danier Leather Inc. has raised other concerns.

The case found that a proper closing was not conducted in 1998 by two senior officers who should have realized that forecasted results were not achievable, and shareholders sued in a class-action by Lerners LLP.

Jean M. Fraser, Mark DesLauriers, Donald C. Ross and Douglas R. Marshall of Osler LLP indicated in 2004 the initial consequences of the case, which included:

• due diligence investigation for prospectus
• forecasts can be a material fact
• prospectus amendments
• minimizing date of closing
• private placements of securities

But the more recent ruling on costs, which had been deferred, had even farther reaching consequences.

The court awarded costs in the class-action against unsuccessful plaintiffs. This is also likely have a deterring effect on the number of class-actions in the future.

Expert Opinion

To gather some more ideas on this area of legal practice, we consulted some experts in the field.

Mikio Miyawaki, Partner and Chair of the M&A Practice Group at Bond, Schoeneck & King, PLLC said,

[S]ome very prominent practitoners have recently gone to prison for paying kickbacks to plaintiffs… I wonder what kind of impact the case would have.

Michael E. Clark, a partner at Hamel Bowers & Clark LLP in Houston, Texas, said,

The Stanford Securities Class Action Clearinghouse, along with Cornerstone Research, actively tracks this information and trends. It’s a wonderful resource. As you may expect, there has been a large number of filings of late related to the subprime market collapse. I know that this is the theory du jour and has engulfed large, well-heeled companies (or some that used to be like Bear Stearns).

But not everyone agreed.

Richard Cassidy, partner at Hoff Curtis in Vermont, said,

I suspect that the hayday of securities class-actions has passed.

Some of our other contacts reminded us that Cornerstone is a defense oriented organization, whose primary clients are large defence firms. Similarly, Stanford Clearinghouse is allegedly run by a professor at Stanford that testifies exclusively for defence firms.

Class-actions were also projected to grow as a litigation strategy in the future. Economies of scale can be realized by dealing with class-action suits, rather than repeated, subsequent suits, which can be costly. However, this can be an advantage to some defendants who may prefer to deal with an initial class-action up front, such as tobacco companies.