‘Phoenix’ litigation: can a class action dismissed for delay be resurrected?

A growing number of proposed class actions have been dismissed for delay since a new provision of the Ontario Class Proceedings Act (CPA) was introduced in 2020. In their wake, a question has emerged: can a class action dismissed for delay be re-filed by a different representative plaintiff? Lower court judges have disagreed on the answer in non-binding obiter comments. Recently, the Court of Appeal for Ontario weighed in for the first time on a case dealing with section 29.1, providing some insight on this question.

Background

Section 29.1 provides that a court shall dismiss a proposed class action for delay if the plaintiff has not taken certain steps within one year of filing. The provision was added to the CPA in 2020, as part of a wave of amendments aimed at managing slow-moving class proceedings.

Lower court commentary on abuse of process 

In Tataryn v. Diamond & Diamond LLP, 2023 ONSC 6165, the court dismissed a proposed class action for delay. The plaintiffs had requested a “Phoenix” order, dismissing the action but granting leave to commence a new one. The court declined, noting that this would contradict the policy goals of section 29.1, which include reducing the economic toll of slow-moving class actions, and mitigating the cost of defending them.^[1] In the court’s view: “[S]ection 29.1 would not address the problem it set out to address if a plaintiff can bring an action, delay it until it gets dismissed under s. 29.1, and then just start a new action as if nothing had happened.”^[2]

The judge also made obiter comments regarding abuse of process. He observed that the Court of Appeal has indicated that, under some circumstances, resurrecting an identical case after a dismissal for delay may be an abuse of process under the Rules of Civil Procedure.^[3]

These comments contrast with obiter commentary in Bourque v. Insight Productions, 2022 ONSC 174 and other cases. In Bourque, another judge indicated that the consequence of dismissal under section 29.1 was “not onerous”, because the action can simply be refiled by a different plaintiff.^[4]

Appellate guidance on section 29.1

The recent appellate decision in Martin v. Wright Medical Technology Canada Ltd., 2024 ONCA 1, provides some insight on the uncertainty regarding the ability to re-file. Martin concerned two proposed actions filed in 2014, related to similar subject matter. In one of the actions (the First Action), class counsel had taken an appropriate section 29.1 step. In the other (the Second Action), a section 29.1 step had not been taken and the defendants signalled their intent to seek dismissal for delay.

However, the motions judge permitted the plaintiffs to discontinue the Second Action with prejudice, and amend the First Action to add the causes of action and defendants from the Second Action. He ordered that the combined action would proceed under the amended CPA, relying on the case management powers conferred by section 12 of the CPA.^[5]

The Court of Appeal held that it was incorrect to combine the two actions and have them proceed under the amended CPA. The Court reiterated the “bright line” to be drawn between actions commenced before and after the amendments, pursuant to the transition provisions of the CPA.^[6] The First Action, which was commenced under the old CPA and had met the requirements of section 29.1, was to proceed under the old CPA. The Court also confirmed that a judge’s case management powers cannot override mandatory provisions of the CPA — including the certification criteria and dismissal for delay.^[7]

The Court concluded that the only option was for the First Action to proceed under the old CPA, alongside a “re-constituted or re-filed” version of the Second Action, to be commenced under the amended CPA.^[8] Accordingly, the Court’s reasoning is premised on the possibility that the discontinued Second Action could be re-filed. The Court described it as “common ground” that a new action could be commenced under the amended CPA after dismissal under section 29.1,^[9] and noted that the plaintiffs in the discontinued Second Action would be “entitled to ‘refile’”.^[10] It appears that an abuse of process argument was either not raised or not explicitly addressed by the Court.

Takeaways

The Court of Appeal’s analysis in Martin indicates that “Phoenix” class actions may be permissible. However, this result would not sit comfortably with the concerns expressed in Tataryn and the policy goals of section 29.1. It also raises the question of whether there is a limit on the number of times a proceeding that is dismissed for delay can be re-filed.

Ultimately, abuse of process is a discretionary remedy grounded in the court’s inherent jurisdiction to prevent the misuse of its processes, and requires a consideration of specific facts and context — which should include the purpose and requirements of mandatory dismissal for delay under the CPA. The appellate court was not required to address this question, and it remains to be seen how this issue would ultimately be resolved, if and when it directly arises.