Ontario Court of Appeal Confirms Test for Extension of Time to Opt Out of Class Action

  • November 17, 2022
  • Sarah Armstrong & Carolyn Flanagan

On October 24, 2022, the Ontario Court of Appeal released Johnson v Ontario, 2022 ONCA 725, confirming the test governing judicial discretion to extend the time for a class member to opt out of a class action. A class member that seeks to opt out late must now show two things: (1) “excusable neglect” in failing to comply with the opt-out deadline, and (2) that the extension will not prejudice the class, the defendant, or the administration of justice.

Johnson concerned a consolidated class action brought on behalf of all persons incarcerated at the Elgin-Middlesex Detention Centre during a defined period. The action alleges negligence and Charter violations in the operation and management of the centre. The appellant, Donald Parker, failed to provide class counsel with an opt-out form by the prescribed deadline. He then commenced an individual action that overlapped with the consolidated class action.

Mr. Parker moved for an extension of time to opt out, arguing that he was not made aware of the consolidated class action until after beginning his own proceeding. At first instance, the Ontario Superior Court of Justice denied the motion, and in September 2021 the Ontario Court of Appeal held that this decision involved a substantive right and was therefore a final order for the purposes of Mr. Parker’s appeal rights.[1]

In its decision on the merits, the Court of Appeal confirmed that the power to extend a class member’s time to opt out flows from section 12 of the Class Proceedings Act, 1992, which enables the court to make “any order it considers appropriate respecting the conduct of a proceeding” under that legislation.

The Court of Appeal observed that no appellate authority in Ontario had yet settled the question of the applicable test for the exercise of this power. However, the court referred with approval to a test articulated in Young v. London Life Insurance Co.,[2] a single-paragraph decision from 2002, neither widely reported nor cited. In Young, Justice Winkler, prior to his appointment to the Court of Appeal, declined to extend the time to opt out on the basis that there was no “excusable neglect” and that there was prejudice. Justice Winkler referred to an American authority, Re PaineWebber Limited Partnerships Litigation,[3] as the basis for this test.

The Court of Appeal in Johnson approved of this approach and held that the “excusable neglect/no prejudice” test applies on a motion to extend the time to opt out of a class action in Ontario. It also affirmed that “excusable neglect” amounts to good faith and a reasonable basis for non-compliance with the opt-out deadline.

In consideration of these principles, the court allowed Mr. Parker’s appeal. It concluded that, while a motion for an extension of time is not the forum to relitigate the adequacy of a notice plan, neither does the adequacy of such a plan dispose of a motion to extend time to opt out. It further concluded that Mr. Parker did not have to prove he would have opted out at the appropriate time, had the notices come to his attention. Rather, the question was whether his delay was the result of excusable neglect. The court noted Mr. Parker’s evidence that he had been incarcerated while the short form of notice was published, and so could not have seen it, and that the long form of notice had been sent to an address that he did not attend during the opt-out period. No responding party identified any prejudice, including to the integrity of the judicial process or the administration of justice.

The Johnson decision brings welcome clarity to class action participants facing late opt-out issues. Of significance to class action defendants, the “excusable neglect/no prejudice” test does not favour opt-out rights over a defendant’s interest in litigation certainty. The Court of Appeal stressed that the “excusable neglect/no prejudice” test is one that “balances the important role the right to opt out plays in the class proceedings scheme with the importance properly attributed to court-imposed deadlines.” Consequently, the test is not a liberal one. As the court recognized, section 9 of the Class Proceedings Act, 1992 provides for opt-out rights “within the time specified in the certification order” —  an “open-ended” test for late opt outs would “rewrite that legislative choice.” The court confirmed that court-imposed deadlines promote certainty in class proceedings and are the basis around which class counsel and defendants make decisions.

Significantly, the test as phrased by the Court of Appeal is that of “no” prejudice to the class, the defendant, or the administration of justice. A judgment or settlement may be binding on class members who did not actually receive the notice, as long as an adequate notice plan was followed.  Here, the Court of Appeal commented that, had Mr. Parker moved to extend the time for opting out after judgement or settlement, his request would most likely have been denied on the basis of prejudice. However, the court also suggested that “steps” taken toward judgment or settlement in reliance on a settled class may also constitute prejudice. Further, where a class member “flouts,” “cavalierly ignore[s],” or adopts a strategic “wait and see” attitude, this may also prejudice the integrity of the proceeding and the administration of justice.

Finally, in affirming the analysis in Young, the Court of Appeal must also be taken as affirming Justice Winkler’s holding that an extension “should only be granted in the rarest circumstances where the [excusable neglect/no prejudice] test is met.”[4] This reflects the reality that prejudice to class action defendants will often arise when a class member seeks to opt out late

 

[1] Johnson v Ontario, 2021 ONCA 650

[2] [2002] O.J. No. 5971 (QL)

[3] 147 F. (3d) 132 (2d Cir. 1998)

[4] Young v London Life Insurance Co., [2002] O.J. No. 5971 (QL) at para 1

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