Fridays With Rogers Partners

At this morning’s muffin meeting by videoconference, we discussed a decision regarding the limitation period for third party claims and a decision involving approval of the discontinuance of a class action.

Third Party Claim Commenced Too Late

Ankita Abraham addressed the case of London Transit Commission v. Eaton Industries (Canada) Company, 2020 ONSC 1413, a summary judgment motion to dismiss a third party claim on the basis that it is statute-barred by the Limitations Act, 2002.

The action arose out of a pollution liability case. On April 30, 2013, the plaintiff in the main action commenced a claim against two nearby property owners for environmental contamination of the soil owned by the plaintiff.

The defendants were formally served on May 22, 2013. Close to three years later, on March 16, 2016, one of the defendants, London Transit Commission (“the defendant”), issued a third party claim against the former owner of the defendant’s property, Eaton Industries Company (“the third party”).

The third party brought a summary judgment motion to dismiss the third party claim on the basis that it is statute-barred as the claim was discoverable by February 2012, or at the latest, by January 2014.

In February 2012, the plaintiff’s lawyer had advised the defendant of the claim and had also provided several environmental reports to support its claim. Some of these reports had identified the third party’s previous operations on the defendant’s property to be the possible source of the contamination.

In January 2014, the defendant served its statement of defence, counterclaim and crossclaim. The defendant’s pleading alleged that the former owner of its property had caused the contamination.

The defendant argued that it did not have actual knowledge or evidence of actual contamination of its property until late December 2014 at the earliest, and therefore, its claim was not discoverable prior to that time. The defendant also argued that it only acquired actual knowledge of the alleged contamination in March 2015, when its own environmental consultant had delivered a report.

Justice Mitchell disagreed, and, upon review of all the relevant evidence, found that the defendant had actual knowledge of the matters with respect to the claim against the third party for contribution and indemnity by no later than May 22, 2013, the date on which the plaintiff served its statement of claim on the defendant.

Her Honour further noted that the defendant did not act with the due diligence required of a reasonable person with its abilities and in its circumstances. She indicated that a reasonable person “is required to systematically gather information, explore, probe, research, inspect, interview, inquire, study, find, appraise or analyse the available facts.”

Justice Mitchell found that the defendant chose not to be proactive, by not immediately conducting its own investigation, and instead chose “to be willfully blind to the information provided” by the plaintiff.

The defendant, as such, failed to rebut the presumption under section 18 of the Limitations Act, which requires a claim for contribution and indemnity to be commenced within two years of a party being served with a claim.

As a result, Justice Mitchel granted the summary judgment and dismissed the third party claim.

Discontinuance of Class Action Approved

Micah Pirk O’Connell discussed the case of Kouyoumjian v. Johnson & Johnson, 2020 ONSC 1948. This was a motion pursuant to the Class Proceedings Act, 1992, to discontinue a proposed class action where the plaintiffs and defendants entered into a settlement agreement. The case is emblematic of a well thought out and ultimately accepted discontinuance proposal.

The proposed settlement endeavoured to settle some, but not all, of the putative class members’ claims. Those putative class members whose claims were not settled in their entirety would receive third party beneficiary benefits and a process for further settlement or the bringing of individual claims should they wish to pursue them.

The class action was related to pelvic mesh implants known as transvaginal mesh manufactured and sold by Johnson & Johnson Inc. The mesh was installed surgically and was used to treat pelvic organ prolapse and stress urinary incontinence in women.

The use of the mesh for some resulted in serious and sometimes life threatening complications, many necessitating further surgery to correct. As of September 2019, class counsel was aware of over 1,000 putative class members with potential claims against the defendants.

Two similar class actions were launched as against Boston Scientific Ltd. and Bard Canada.

Cross-border settlement negotiations followed, including a detailed investigation into individual claims in order to reach a global settlement amount. Meanwhile, the action against Boston Scientific was certified.

As a result of the settlement talks, the within action was proposed to be discontinued. Pursuant to the Class Proceedings Act, 1992, a discontinuance requires court approval. Class counsel also sought approval of their fee, which was part of the settlement agreement.

The settlement agreement included, among others, the following terms:

• The parties agree to discontinue the proposed class action.
• The parties agree to a global settlement amount.
• The settlement contains provisions to address further claims of those who come forward within the settlement program period.
• The settlement funds will be allocated by class counsel in proportion to the individual damages suffered. The distribution will be determined using the compensation and distribution protocol from Harper v. American Systems Canada Inc. (2019 ONSC 5723).
• The defendants will pay costs in the amount of $1,085,000.00, all inclusive, for class counsel fees, disbursements, and expenses.
• The proposed Notice of Discontinuance is drafted to (a) alert putative class members of the fact of the settlement and discontinuance; (b) to inform class members how to obtain more information about the discontinuance; (c) to inform them of the recommencement of the running of the limitation period; and (d) to inform them of the process and deadline for making a claim during the settlement period.

The test for approving a discontinuance is different from the test for settlement approval. A discontinuance of a class action does not have to be beneficial or in the best interests of the putative class members; whereas, a settlement must, in all circumstances, be fair, reasonable, and in the best interests of the class.

In this case, the test for a discontinuance was met. It stands as an exemplary circumstance where the concerns of the court, particularly as a guardian for class members and putative class members, were addressed systematically. This allowed Justice Perell to grant the discontinuance, as no prejudice would befall any of the parties, defendants included.