February 15, 2022
Dolden Wallace Folick’s Class Action Newsletter – February 2022
Default Judgment and Class Action Certification in Hyp3r
Severs v. Hyp3R Inc., 2021 BCSC 2261 (“Hyp3R”) is one of the latest decisions on the test for certification of a class action. In Hyp3R, the British Columbia Supreme Court considered the implication of default judgment on the certification application and award of damages.
The representative plaintiff brought an application for certification of a class action proceeding against Hyp3R Inc. (“Hyp3R”). Hyp3R described itself as a “location-based marketing platform.” The plaintiff alleged that Hyp3R collected, retained and exploited Instagram users’ personal information without notice or consent and in breach of Instagram’s policies, contrary to the Privacy Act, R.S.S. 1978, c. P-24 (in four provinces) as well as the tort of intrusion upon seclusion (in the remaining provinces and territories).
Proceeding In Default
The application for certification was unusual in that Hyp3R had not responded to the notice of civil claim, and the plaintiff obtained default judgment. On the instruction of the Court, the plaintiff served Hyp3R with the notice of the certification application despite Hyp3R being disentitled to notice by virtue of the default judgment.
The Court concluded that it was appropriate to proceed with the certification despite the default judgement. The Court stated that the failure of an un-cooperative defendant to participate in a class proceeding should not defeat or limit the ability of the Court to deal with an otherwise legitimate claim. Although not strictly necessary, service of the notice of application further brought home to the defendant the fact that the plaintiff sought certification of the proceeding as a class action.
The Certification Application
Having resolved the issue of default judgment, the Court considered the five-part test for certification set out in section 4 of the Class Proceedings Act, R.S.B.C. 1996, c. 50, s. 4. The Court certified the class action.
The Court concluded that the pleadings disclosed a cause of action. The cause of action in British Columbia, Saskatchewan, Manitoba, and Newfoundland and Labrador was breach of privacy pursuant to those provinces’ privacy acts. The remaining common law jurisdictions did not have a comparable privacy act. The common law tort of intrusion upon seclusion was available in those jurisdictions.
The Court further concluded that there was an identifiable class comprised of Instagram users with public profiles during the material times. The claim of the class members raised common issues of privacy and intrusion upon seclusion. The test for intrusion upon seclusion was premised on similar legal tests to the statutory tort. The class proceeding was the preferable procedure for the fair and efficient resolution of the common issues, and there was an appropriate representative plaintiff.
Judgment on Common Issues and Assessment of Damages
Having failed to file a defence, the Court deemed Hyp3R to have admitted the allegations of fact in the notice of civil claim. The Court further concluded that the class members were entitled to damages without individual proof of loss, based on the statutory provisions of the provinces’ respective privacy acts and the common law tort of intrusion upon seclusion. The Court proceeded to make an aggregate award of monetary relief despite there being no proof of actual loss of the plaintiffs. Because there was some suggestion that Hyp3R was impecunious, the Court postponed giving notice to class members of the award of damages until more was known about the extent of recovery.
The case reinforces the importance of filing a defence in a class proceeding. The Courts are loath to dismiss an application for certification because of a defendant’s attempt to defeat or limit an otherwise legitimate claim. Once noted in default, a defendant is deemed to admit the allegations in the claim.
The Courts can, and will, rely on deemed admission to award damages, even if there is no evidence of loss.
Trend Update on Pre-Certification Defence Pleadings in Class Actions
Historically, going back to the 1990s, the usual practice in class proceedings was that a defendant would not be required to deliver defence pleadings prior to the certification hearing. The reasoning was based on the likelihood that the statement of claim would be reformulated as a result of the certification decision and that defence pleadings would be of little utility prior to certification.
In the 2011 and 2012 decisions of the Ontario Superior Court of Justice in Pennyfeather v Timminco Ltd, 2011 ONSC and Smith v Sino-Forest Corp, 2012 ONSC 1924, Justice Perell expressed that it was generally desirable for defence pleadings to be filed prior to the certification hearing. Since that time, the case law on the issue has gone both ways. In some provinces the deferral of defence pleadings until after certification has been more common than others.
Recently, in Langevin v. Aurora Cannabis Inc., 2021 ABQB 887 (“Langevin”) the Court of Queen’s Bench of Alberta denied the defendants’ request for an order deferring their obligation under Rule 3.31 of the Alberta Rules of Court to file their defence pleadings until after the certification hearing.
The Court in Langevin reinforced the principles that guide the decision-maker, as set out in Poundmaker Cree Nation v. Canada, 2017 FCC 477 (para. 30):
a) The decision is discretionary;
b) That discretion should balance flexibility with efficiency and fairness;
c) The burden of justifying the deferral of the defence lies on the defendant; and
d) Factors to consider may include:
i. the helpfulness of the statement of defence to the certification process;
ii. the cost and time involved in filing defences;
iii. the nature and complexity of the matter; and
iv. any prejudice to the plaintiff if defences are not filed in advance of the certification motion.
In addressing the argument that it is the “usual practice” for defence pleadings to be filed after the certification hearing, the Court in Langevin rejected the automatic acceptance of a “trend” or “usual practice” and emphasized that the discretion of the case management judge is primary.
In coming to its determination that pre-certification defence pleadings be filed, some of the factors considered in Langevin were:
a) completed pleadings would assist the Court in preparing for the certification hearing and, in particular, in analyzing whether the statement of claim disclosed a cause of action;
b) defence pleadings would inform the Court on what is material and relevant for the purposes of
cross-examinations on affidavits;
c) the benefits of completed pleadings outweighed the amount of work involved for the defendants in having to formulate and draft their defences; and
d) deferring defence pleadings wouldn’t necessarily obviate future amendments to the pleadings in this particular action.
In British Columbia, a recent decision was rendered in Shaver v. Mallinckrodt Canada ULC, 2021 BCSC 404 (“Shaver”) addressing the issue of whether defence pleadings should be deferred until after the plaintiffs filed their certification materials. Here, while the Court did not accede to the submission that defence pleadings be deferred, it did not require strict compliance with the timelines for filing defence pleadings under the Rules of Court on the basis that the parties had “a lot of matters to deal with within a compressed amount of time”.
The Court in Shaver recognized that the case law in British Columbia has evolved away from the historical practice of delaying the filing of defence pleadings. Based on the specific circumstances of each case, there must be a “good reason” for the deferral of defence pleadings. If there is a good reason, it must be weighed against the advantages of having a complete set of pleadings to inform the certification hearing.
In recent years, the historical common practice of deferring delivery of defence pleadings until after the certification hearing has become less “common”, albeit in some provinces more than others. The Courts are increasingly emphasizing the advantages of closing pleadings prior to certification. Ultimately, it is a determination that will be based on the particular circumstances of each case and upon the discretion of the case management judge.
Defendants should not automatically presume that their defence pleadings will be deferred because it is or was the “common practice”. Rather, defendants must have a “good reason” for the Court to ignore the usual required timelines for delivery of defence pleadings. Defendants should also keep in mind that the burden will rest on them to establish that defence pleadings ought not to be required in accordance with the applicable Rules.
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