B.C. Supreme Court Rejects Certification of Proposed REDMA Class Action

Posted by Ron Skolrood on October 10, 2012

In June 2012, my colleague, Craig Ferris wrote about the B.C. Court of Appeal decision in 229 Burrard Residential Limited Partnership v. Essolat where the Court endorsed a strict application of the terms of the B.C. Real Estate Development Marketing Act (“REDMA”).  There, the Court set aside a pre-construction sales contract and ordered the return of the purchase deposit by reason of the developer’s failure to file an Amended Disclosure Statement advising of a delay in the anticipated completion of the project. 

Building on that decision, the Plaintiff in Lee v. Georgia Properties Partnership, 2012 BCSC 1484 applied to certify an action as a class proceeding under the B.C. Class Proceedings Act on behalf of all persons who purchased a pre-construction unit in the private residences at the Hotel Georgia prior to May 22, 2012.  As in the 229 Burrard case, the action is based on a failure of the developer to file an Amended Disclosure Statement.  The Defendant began marketing strata lots in the Hotel Georgia project in September 2007.  The original Disclosure Statement for the development indicated a construction completion date of December 2011.  Construction of the development did not in fact complete in December 2011 and the Defendant did not file an Amendment to the Disclosure Statement until May 22, 2012, one business day after the Plaintiff commenced the proceeding.  Construction is anticipated to complete on October 31, 2012. 

The Plaintiff argued that the case was appropriate for a class proceeding in that there is a single common issue based upon a statutory scheme (REDMA) that is determinative of the parties’ rights.  Moreover, he argued that there is a clearly identifiable class comprised of all persons who signed purchase agreements prior to the date on which the Amended Disclosure Statement was filed.  The evidence indicated that there are 96 purchasers in the proposed class.

The test for certifying a proposed class proceeding is set out in section 4(1) of the Class Proceeding Act as follows:

(a)       The pleadings must disclose a cause of action;

(b)       There must be an identifiable class of two or more persons;

(c)        The claims of the class members must raise common issues;

(d)       A class proceeding is the preferable procedure for the fair and efficient resolution of the common issues; and

(e)       There is an appropriate representative plaintiff.

The Judge, Mr. Justice Savage, assessed the Plaintiff’s claim in light of these factors and declined to certify the proceeding.  He accepted that the Plaintiff had advanced a proper cause of action based upon a breach of REDMA however he rejected the argument that there was an identifiable class of two or more persons.  He did so because there was no evidence before the Court of any other purchaser that had complained about the failure of the developer to file an Amended Disclosure Statement or that had come forward and indicated a desire to get out of the purchase contract based upon the delay in completion.  In his view, the only claim that had been advanced was that of the Plaintiff and there were no other claims that would support the certification of the action as a class proceeding.  For similar reasons, he held that there were no common issues raised as between class members and that a class proceeding is not the preferable procedure. 

One other factor relevant to the Judge’s finding was the fact that there was evidence that units in the development were in short supply and the developer had produced a purchaser who apparently was willing to take an assignment of the Plaintiff’s contract.  It was therefore not apparent to the Judge that the Plaintiff had suffered any loss or that he would even proceed with the action.

The decision in Lee suggests that while REDMA generally may favour the position of purchasers, as found by the Court of Appeal in 229 Burrard, a class action may not be the most effective vehicle for advancing claims based upon delayed completion unless there is compelling evidence that a significant number of purchasers desire relief from their contractual obligations.  Absent such evidence, it will be left to individual purchasers to pursue their remedies on their won.

Is the Future Class Proceedings? - TELUS' Mandatory ADR Agreement is Unenforceable

Posted by Craig Ferris on March 21, 2011

Class proceedings are a powerful tool for consumers and lawyers.  In practical terms, class proceedings allow otherwise uneconomic claims to be brought and often create large monetary exposure to Defendants.  This occurs through aggregation.  If a class proceeding is “certified”, it will “aggregate” all of the claims of a “class” of claimants into one claim.  Where one claimant may have chosen not to file a claim for $10 because it was uneconomic, a certified class proceeding aggregates potentially of thousands of people with $10 claims into one court action.  An uneconomic lawsuit has just become a lucrative lawsuit.

Potential defendants have attempted numerous strategies to minimize the risk of class proceedings.  One strategy has been to insert clauses in consumer contracts requiring the consumer to participate in mediation or arbitration and/or to waive his or her ability to bring or participate in a class proceeding.  These types of agreements have been tested in the United States with varying results.  In Canada, the Supreme Court of Canada had not spoken directly on this issue until now.

On March 18, 2011, a strongly divided Supreme Court of Canada released its decision in Michelle Seidel v. TELUS Communications Inc, 2011 SCC 15.  In a 5 to 4 decision, Mr. Justice Binnie, writing for the majority, found that a clause in a TELUS standard form agreement that required mandatory mediation and arbitration, and which barred class proceedings, was not effective to prohibit a claimant from pursuing a statutory remedy pursuant to the British Columbia Business Practice and Consumer Protection Act (the “BPCPA”).  It was also not effective to prohibit a Claimant from seeking certification of such a claim pursuant to the British Columbia Class Proceedings Act.

The majority decision found that the BPCPA was consumer protection legislation which allowed a claimant under section 172 to bring a claim to enforce consumer protection standards and, specifically, prohibited a consumer from waiving the rights granted under that legislation.  Accordingly, to the extent TELUS’ clause restricted the consumer’s right to file such a claim in court, the clause was invalid.  In addition, the class action waiver was not severable from the mandatory mediation/arbitration clause and, as a result, was also unenforceable.  This decision therefore allowed the Claimant to continue the application for certification of the claim as a class proceeding.

Is the future now one of more class proceedings and less alternative dispute resolution?  While this decision was consumer friendly, in that it interpreted the clause in question and the consumer protection legislation broadly in favour of the consumer, the decision was also very particular to the legislation in question.  The majority also wrote that it was ultimately the choice of the legislature to determine whether arbitration/mediation clauses are to be restricted and they also allowed a mandatory stay of the court proceedings in favour of arbitration for other claims that were not found to have the same statutory protection.  There are clearly more arguments of this type to come and it may be too early to tell how friendly the future will be for agreements requiring alternate dispute resolution and restricting class proceedings.