Court of Appeal for Ontario Confirms Test for Extending Period to Opt Out of Class Proceedings

The Court of Appeal for Ontario (Court) has confirmed the test for granting an extension to opt out of a class proceeding after the court-ordered deadline has elapsed. The Court has also confirmed that such deadline will rarely be extended where a judgment has been rendered or a settlement has been reached.

BACKGROUND

In Johnson v. Ontario, the representative class members commenced proposed class proceedings against the respondent Her Majesty the Queen in Right of Ontario (Ontario) on behalf of all persons who were incarcerated at the Elgin-Middlesex Detention Centre (EMDC) between 2010 and 2017.

Having certified the action, on March 22, 2018, the court approved a notice plan to inform class members of the proceedings and how to opt out by completing and returning an opt-out form to class counsel by June 20, 2018 (Notice Plan). The Notice Plan contemplated for notice to be published in two local newspapers, posted on class counsel’s website, and sent by regular mail to the last known address of each class member.

The appellant was an inmate at EMDC within the class period. He was transferred to federal custody in August 2017, where he remained until 2019. Class counsel mailed the notice to the appellant at his last known address, where he resided with his father before he was incarcerated. Although the appellant was in touch with his father by telephone in the time surrounding the mailing of the notice, he denied receiving or seeing any of the notices, or knowing about the class proceeding at any time before the opt-out deadline.

On April 27, 2020, the appellant commenced an individual action against Ontario and employees of EMDC, among other defendants. In June 2020, he learned of the class action upon receiving a letter from Ontario stating that his action overlapped with the class action. Ontario asked that the appellant discontinue the individual action against Ontario and its employees.

The appellant brought a motion in the Ontario Superior Court of Justice for an extension of time to opt out of the class action. The motion judge noted the appellant’s concession that the jurisdiction to extend the opt-out period is rarely exercised and dismissed the appellant’s request, effectively terminating the individual action. The appellant appealed the decision.

COURT OF APPEAL DECISION

Justice Benjamin Zarnett, writing for a unanimous Court, allowed the appeal, set aside the order of the motion judge and made an order extending the time within which the appellant may opt out of the class action. In so doing, the Court confirmed that the “excusable neglect/no prejudice” test articulated by the Ontario Superior Court in Young v. London Life Insurance Co., [2002] O.J. No. 5971, is to be applied on a motion to extend the time to opt out.

This test, derived from a case decided under the United States Federal Rules of Civil Procedure, requires that such extensions be granted only where:

1. the delay in opting out is due to excusable neglect – in good faith and with a reasonable basis; and
2. the court has considered whether any prejudice will accrue from permitting the late opt out to participating class members, the defendant, or the integrity of the process.

The Court reasoned that this test balances, on the one hand, the importance of the right to opt out, which is fundamental to a class member and to the integrity of the class proceedings scheme as a whole, and, on the other, the importance of complying with a court-ordered deadline.

The Court concluded that the excusable neglect prong of the test was met because the appellant was incarcerated when the notice was published, and the mailed notice was sent to an address at which he was not physically present and which he did not return to during the opt-out period. In addition, there was no assertion of any delay in requesting an extension of time to opt out after the appellant became aware of the class proceeding.

Importantly, the Court rejected the possibility that compliance with an adequate notice plan is dispositive of the excusable neglect issue, and further held that the appellant was not required to prove under this prong of the test that he would have opted out based on what he knew at the opt-out deadline. The Court held that the appellant’s evidence that he likely would not have opted out by the deadline had he known of the class proceedings or that he did not know of the existence of his cause of action until after the expiry of the deadline were irrelevant.

With regard to the prejudice prong of the test, the Court reasoned that there was no evidence of any judgment or settlement of the class proceeding, or steps in that direction that might have been taken in reliance on the appellant being a participating class member or the number of opt outs. Class counsel did not oppose the appeal, and Ontario did not point to any prejudice it would suffer. On the other hand, the Court stated that had the appellant moved to extend the time for opting out after judgment or settlement, his request would most likely have been denied on the basis of prejudice.

IMPLICATIONS

The deadline for opting out promotes certainty and predictability in the class proceeding. Going forward, this case raises the prospect of potential class members successfully extending the opt-out deadline at any time before judgment or before significant steps towards settlement have been taken. On the other hand, this decision affirms that courts will not lightly extend the opt-out period after a judgment or settlement of the class proceeding, and will not allow class members to rely on this more relaxed test to extend the opt-out period as part of a litigation strategy or as part of a wait-and-see approach.

For more information, please contact:

Robin Linley                +1-416-863-3047
 Naiara Toker              +1-416-863-2612

or any member of our Litigation & Dispute Resolution group.