Dolden Class Action Newsletter - October 2023 - Dolden Wallace Folick LLPDolden Wallace Folick LLP

October 17, 2023

Dolden Class Action Newsletter – October 2023

The Overarching Defect of No Compensable Loss

By Christopher Stribopoulos and Elka Dadmand, Dolden Toronto
Email: [email protected] and [email protected]

In KW v. Accor Management Canada Inc., 2023 BCSC 1149, the Supreme Court of British Columbia refused to certify a cyber-breach class action because the plaintiffs’ Notice of Civil Claim (the “NOCC”) failed to disclose a cause of action required by s. 4(1)(a) of the Class Proceedings Act, RSBC 1996, c.50 (the “CPA”).

Factual Matrix

The representative plaintiffs sought to certify a class action stemming from a “spear phishing” or “social engineering” cyberattack. A malicious third party duped an employee of the Willow Stream Spa at the Fairmont Empress Hotel in Victoria, British Columbia, to disclose the login information for the database that housed the spa clients’ personal information (the “Data Breach”). The defendant, Accor Management Canada Inc. (“Accor”), operated the Empress Hotel, including the Spa.

The Causes of Action

The plaintiffs alleged that Accor’s conduct was negligent and gave rise to a breach of contract, breach of fiduciary duty, breach of confidence and unjust enrichment. In turn, Accor argued that the plaintiffs failed to plead the material facts necessary to establish the causes of action the plaintiffs sought to argue. Justice V. Jackson agreed with Accor that the NOCC suffered from an overarching defect, namely that there was no claim for compensable loss.

The Dismissal of Each Cause of Action

Justice Jackson concluded that each cause of action alleged by the plaintiffs was bound to fail.

There was no breach of confidence because the personal information of the plaintiffs was not “misused” by Accor, to whom the information was communicated. There was also no “wilful” intent by Accor to disclose the plaintiffs’ personal information, required to establish a breach of privacy. There was no recognized fiduciary duty in the context of a spa-client relationship. The presence of a contract provided for the enrichment of Accor and was a juristic reason. The plaintiffs had not framed their claim as a nominal damages case for it to be a breach of contract claim.

For the claim in negligence, the type of damage influenced the analysis. Canadian tort law does not recognize damages for risk of future harm. Psychological upset was not a compensable personal injury. Possible “heightened” anxiety for a few months, and “some” anxiety thereafter, was inadequate to ground an action in negligence. Damages for lost time and inconvenience did not meet the threshold of “serious and prolonged” to rise above the ordinary annoyance that a person living in society may experience.

Takeaway

The Court will not certify a class action where there is no compensable claim for damages. Although the merits of the claim are not the focus of the inquiry at the certification stage, the pleadings must still disclose a compensable cause of action.

Pre-Certification Document Disclosure: BC Court of Appeal Re-Affirms Limited Disclosure Obligations

By Christine Galea and Jacqueline Riccobene, Dolden Toronto
Email: [email protected] and [email protected]

The British Columbia Court of Appeal’s recent decision in Mentor Worldwide LLC v. Bosco, 2023 BCCA 127 [“Bosco”] re-affirmed the general rule that pre-certification production of documents will only be ordered where it is necessary to inform the Court on issues relevant to certification. In this proposed medical negligence class action, the Court rejected the defendants’ request for disclosure of the proposed representative plaintiffs’ medical records prior to certification.

Factual Matrix

The plaintiffs commenced this proposed class action on behalf of Canadians who received Mentor breast implants since October 19, 2006. The plaintiffs alleged defects in the breast implants and that the defendants failed to warn users about the associated risks, including anaplastic large cell lymphoma, connective tissue disease and autoimmune/inflammatory syndrome induced by adjuvants or breast implant illness.

Procedural History

In response to the certification application, the defendants retained an expert plastic surgeon to address causation and commonality. As the expert sought to review the medical history of each proposed representative plaintiff, the defendants requested pre-certification production of their medical records, which was refused by the plaintiffs.

The Court dismissed the defendants’ application. Medical records were not necessary to inform the certification hearing, and evidence of the medical history of the plaintiffs would result in premature consideration of the merits of their claims.

Pre-Certification Document Disclosure: The General Rule

The concern arising from document discovery prior to certification is the delay and expense that would arise from broad discovery rights, leading to potentially onerous, extensive and/or intrusive discovery obligations before the case is even certified as a class action. To avoid bogging down the certification process, the Courts will usually only order production of documents prior to certification where it is necessary to inform the certification process.

Several principles have emerged from the British Columbia case law:

there is limited scope for document production prior to a certification hearing;
any application for pre-certification production must focus on the certification criteria;
the onus is on the applicant to show that document production is necessary to inform the Court’s assessment of the certification criteria; and
the onus cannot be discharged by bare assertions that documents may be relevant to the certification criteria – the applicant must precisely explain how the requested documents will inform the issues on certification.

The general rule has been applied to pre-certification applications for production of a plaintiff’s medical records. Production is ordered only where the defendant demonstrates that it is necessary to inform the Court at the certification hearing, and it will only be the exceptional case where such production is warranted.

Importantly, principles of proportionality and fairness to the parties may also be at play – the question of whether production should be ordered is contextual and fact-specific.

Court of Appeal’s Decision Re-Affirms the General Rule

The BC Court of Appeal dismissed the appeal. Other than the medical records produced by the plaintiffs to show they had received the Mentor breast implants, additional medical records were not necessary to inform the class definition, common issues or suitability requirements for certification.

In Ontario, the test for pre-certification disclosure of medical records has been articulated as “relevance” to the issues on certification, and also as “necessary to inform the certification process”. The BC Court of Appeal did not see any principled difference between the two. The approach in Ontario, as in British Columbia, is to view requests for pre-certification document production through the lens of the certification criteria, with due concern for the risk of allowing what is meant to be a purely procedural application to become enmeshed with a premature consideration of the merits. The Courts in Saskatchewan and Alberta have taken a consistent approach.

Notably, a Court is not automatically obliged to order production of plaintiff medical records simply because medical history of a plaintiff is described in the certification application materials. Again, the test for pre-certification production is that it is necessary to inform the certification process, not that the content of the records is referenced in a certification application.

Takeaway

The Bosco decision serves as a reminder that the certification stage is not concerned with the merits of the claim. Parties to a proposed class action should remain cognizant that medical records and other typical “discovery” documents of a party will not be producible prior to certification unless relevant to the procedural requirements for certification. This general rule will be applicable in most provinces, including Ontario, British Columbia, Alberta and Saskatchewan.