Class Actions to Remedy Mass Consumer Wrongs: Repugnant Solution or Controllable Genie? The Canadian Experience

Penn State International Law Review Volume 27 Number 3 Penn State International Law Review Article 19 5-1-2009 Class Actions to Remedy Mass Consumer Wrongs: Repugnant Solution or Controllable Genie? The Canadian Experience Jacob Ziegel Follow this and additional works at: http://elibrary.law.psu.edu/psilr Part of the International Law Commons Recommended Citation Ziegel, Jacob (2009) "Class Actions to Remedy Mass Consumer Wrongs: Repugnant Solution or Controllable Genie? The Canadian Experience," Penn State International Law Review: Vol. 27: No. 3, Article 19. Available at: http://elibrary.law.psu.edu/psilr/vol27/iss3/19 This Article is brought to you for free and open access by Penn State Law eLibrary. It has been accepted for inclusion in Penn State International Law Review by an authorized administrator of Penn State Law eLibrary. For more information, please contact . Class Actions to Remedy Mass Consumer Wrongs: Repugnant Solution or Controllable Genie? The Canadian Experience Jacob Ziegel* I. NATURE OF PROBLEM From a Canadian perspective, by far the most important and pressing problem facing postindustrial societies is not the adoption of more consumer legislation but the non- or negligible enforcement of existing laws. The problem is bad enough when it is experienced by consumers with individual grievances, but it grows exponentially when the wrong affects not just a handful of consumers but thousands of consumers. Drawing on the Canadian experience, examples abound all around us: false advertising, collusive price fixing, harmful drugs and therapeutic devices, usurious interest rates, unlawful banking charges, "vanishing premiums" in life insurance contracts, inflated prices for automobile repairs, and other consumer services. 1I. GOVERNMENTS AS PART OF THE PROBLEM, NOT THE SOLUTION In Canada (and the same is surely true of other countries in the Western hemisphere), there is no shortage of federal and provincial consumer legislation. Much of it has been adopted over the past forty years. Only rarely is the legislation accompanied by machinery for its effective enforcement. Between 1960 and 1980, the federal government in Canada and many of its provinces established new ministries and new * Professor of Law Emeritus, University of Toronto. This short paper was presented at the biennial conference of the International Academy of Commercial and Consumer held in Bamberg, Germany, on August 1-3, 2008. This paper also retraces, and updates, ground covered by me in an earlier publication. See Jacob Ziegel, Consumer Class Actions in Canada and the Class Action Remedy, in LIBER AMICORUM BERND STAUDER, DROIT DE LA CONSOMMATION/KONSUMENTENRECHT/CONSUMER LAW 587 (Luc Thevenoz & Norbert Reich eds., Schulthess 2006). PENN STATE INTERNATIONAL LAW REVIEW [Vol. 27:3,4 agencies whose ostensible purpose was to promote consumer interests and to protect consumers against market abuses and wrongful practices. Regrettably, these initiatives only had a short shelf life and, with modest exceptions, the new ministries were later quietly closed down or merged into other much larger government departments.1 The federal and provincial governments were able to perform this vanishing trick because consumers, as a pressure group, are notoriously unorganized and, unlike most other economic interest groups, rarely wield significant political power. As a result-and again I speak largely from a Canadian perspective-the consumer is left largely to his or her own devices. Litigation in Canada is, for the most part, enormously expensive and time consuming. Actions in Small Claims Courts, while provided for under provincial law and not requiring the retention of lawyers, nevertheless demand much patience and effort. Most consumers do not find it worthwhile to expend the energy necessary to obtain redress for smaller claims but prefer to take their lumps and learn from experience. Various government agencies-federal, provincial, municipal-may have the power to intervene but, for the most part, their resources, too, are very limited and rarely extend to ensuring mass relief for consumers adversely affected by the wrongful conduct. Hence the question posed at the beginning of this paper. The question is whether a solution can be wrought that addresses in scope and effectiveness the magnitude of the problem where the wrong affects a plurality of consumers. All developed societies have had to confront this dilemma, and most still do. However, there is little consensus about the right solution, even among members of the same legal family and with similar economies. This paper concerns one of the much debated and most controversial of the alternatives, the class action solution, which has now been adopted in legislative form by all the provinces in Canada, with the exception of Prince Edward Island, and by the federal government in the form of amendments to the rules of procedure of the Federal Court of Canada. By class action I mean a representative action brought by one or more plaintiffs on behalf of themselves and all other 1. Cf COMMERCIAL AND CONSUMER SALES TRANSACTIONS: CASES, TEXT AND MATERIALS 16-17 (Jacob S. Ziegel & Anthony J. Duggan eds., 4th ed. 2002) ("If it is accurate to describe the 1960s and 1970s as the golden age of postwar consumerism, it seems equally safe to predict that historians will record the 80s as largely a period of consolidation and retrenchment and, in several provinces, even a period of dismemberment of programs already in place.... [E]ven in its heyday there was often more form than substance to governmental commitment to consumer protection."). 2009] CLASS ACTIONS TO REMEDY MASS CONSUMER WRONGS 881 members of the class seeking relief for a wrong alleged to have been committed against them by the defendant. 2 III. COMMON LAW BACKGROUND In common law jurisdictions, the class action remedy (then known as a 'representative action') was actually developed by the English Courts of Equity long before it also became available in the common law courts. However, because Equity's remedial powers were limited to cases where the Equity courts had jurisdiction, so was the scope of the representative action. The future must have looked promising when the common law courts and courts of equity were fused in England in 1873 and all the royal courts of justice were endowed with a full panoply of remedies, including the power to award damages. However, any expectations for an enlarged role for the representative action were quickly dashed as it transpired that the post1873 courts had little sympathy for representative actions in which the gist of the claim was for damages. In particular, in a leading case, Markt & Co v. Knight Steamship Co. Ltd., the English Court of Appeal held that a representative action could not be brought in a claim for damages based on breach of contract because the damages had to be separately assessed for each member of the class. 3 In 19 (...truncated)