A new chapter for novel claims in class proceedings

Last year, the Supreme Court of Canada signalled an important shift in how courts should approach motions to strike pleadings based on novel causes of action (i.e., claims that are unprecedented or innovative). In Atlantic Lottery Corp. Inc. v. Babstock,^[1] the Supreme Court struck all claims underlying a proposed class action about fraud and problem gambling (Osler’s earlier summary of the case is available here). Notably, the Court held that a plaintiff’s claim will not survive a motion to strike simply because it is novel. In keeping with the Supreme Court’s guidance in this regard, recent jurisprudence suggests that Canadian courts are increasingly willing to entertain requests by class action defendants to dismiss - at an early stage of the proceedings - legally dubious claims advanced against them.

Motions to strike and the certification of class proceedings

A motion to strike allows the court to strike portion of a statement of claim that does not disclose a reasonable cause of action. Similarly, on a motion to certify class proceedings, the court will consider, among other things, whether the claim underlying the class proceeding discloses a reasonable cause of action. In this respect, the test to be applied under both a motion to strike and a class certification motion are the same.^[2] The question is whether it is plain and obvious, assuming the facts pleaded to be true, that each of the plaintiffs’ pleaded claims disclose no reasonable cause of action.

Novelty and motions to strike in Atlantic Lottery

Novel causes of action often pose a difficult question for courts hearing motions to strike or to certify class proceedings, because a claim may be unprecedented in the common law, but may nonetheless have merit because the common law evolves through incremental applications of established precedent to new fact scenarios. As a result, it is well established that a court should not strike a claim merely because it is novel.^[3]

However, this principle has led plaintiffs to occasionally rest the viability of their claim on the notion that their cause of action was novel, regardless of how legally suspect it may have been. This poses a significant challenge for class action defendants, because they are sometimes forced to either defend dubious legal claims at trial, with all the time and resources which that requires, or settle a claim that has no real merit in law.

In Atlantic Lottery, the Court provided helpful clarification which may alleviate the challenges posed to courts and defendants by novel causes of action. The Court held that a claim will not survive an application to strike simply because it is novel.^[4] Just as novelty is not a reason to strike a claim, neither is it a reason to allow one to proceed. Accordingly, the Supreme Court confirmed that motion courts are empowered to use the motion to strike or certification motion as a forum to decide the legal viability of novel causes of action and courts may resolve complex questions of law and policy in order to do so.^[5]

The Court found support for its decision in the felt need for a culture shift in civil justice to give litigants timely and affordable access to the justice system.^[6] The Court said this culture shift means that courts should resolve legal disputes promptly, rather than referring them to a full trial, where possible.^[7] This includes resolving questions of law posed by novel causes of action by striking claims that have no reasonable chance of success.^[8]

Are courts picking up on the new approach?

In the Fall of 2020, three separate courts were faced with motions strike concerning a similar novel legal issue of whether government climate policy is subject to judicial review for compliance with the Constitution. In a decision that was argued just before Atlantic Lottery was decided, the Ontario Superior Court dismissed a motion strike, relying heavily on the basis that the plaintiff’s claims for Constitutional relief were novel.^[9] However, in two separate judgments decided after Atlantic Lottery’s release, courts faced with similar novel claims followed the approach in Atlantic Lottery and dismissed the causes of action as unfounded in law.^[10]

The trio of court decisions illustrates the contrast in approaches pre- and post-Atlantic Lottery. Overall, this development presents an encouraging tool for class action defendants to seek to have unmeritorious claims dismissed at an earlier stage of the proceedings.