By Lauren Tzogas
For many years now, judges have approved the payment of settlement money to cy près recipients when it is impractical or uneconomical to pay the settlement funds directly to class members. These recipients are usually charitable or non-profit organizations, university research initiatives or the Class Proceedings Fund (“CPF”).
Cy près distributions can be controversial because instead of subdividing money between existing class members to benefit them directly, and return them to their pre-harm financial position, class members’ money is distributed to organizations that do not necessarily identify with the class or their cause. The term cy près means “as close to” which means that there should be some logical connection between the entity that receives the settlement funds and class members.
Bill 161, the Smarter and Stronger Justice Act, 2020, amended the Class Proceedings Act, 1992, to explicitly recognize the court’s power to order that all or part of an unclaimed settlement be distributed on a cy près basis. Specifically, new sections 27.2 (1) and (2) indicate that the court may award a fixed or residual cy près distribution when it is not possible to compensate class members, while section 27.2 (3) (a) (b) indicates to whom that cy près award may be distributed. These unclaimed settlement funds may be awarded to a registered charity, non-profit organization or, by default, Legal Aid Ontario. Although the Law Commission of Ontario had recommended that the Legislature amend the Act to codify the authority of the courts to award cy près damages in appropriate cases, neither the Law Commission nor any stakeholder involved in its Class Action Project had recommended that Legal Aid be designated as a default recipient.
While funding Legal Aid furthers the objective of access to justice, particularly in criminal cases, it does nothing to advance the cause of class actions. Legal Aid Ontario does not assist with class action cases, it focuses on individual issues and addresses different substantive areas: criminal law (54%), family law (26%) and immigration and refugee law (15%). Class actions, on the other hand, deal strictly with civil matters and benefit more than one person as an identifiable class by definition must have two or more people. In addition, the courts have been careful to ensure that cy près money benefits more than a local organization; directing money to one province’s legal aid budget may not be appropriate for a national class action.
Courts have consistently held that a cy près award should directly benefit the class members who launched the action in the first place in order to provide them with some form of recompense. These awards should go to credible organizations that “serve the objectives of the particular case and the interests of the class members ” as they can be quite substantial; between 2001 and 2012, sixty-five cy près awards were distributed, ranging from $17,000 to $28 million. However, when cy près awards do not even indirectly benefit the class members whose money is being given away, access to justice is turned on its head. Awarding cy près money to Legal Aid Ontario, therefore, may very well be contrary to the principles for a proper cy près payment that have been established by decades of case law.
A review of cy près provisions for other provinces reveals that British Columbia also legislated a default recipient for such awards. British Columbia’s Bill 57, Attorney General Statutes Amendment Act, 2018, directs that 50% of any cy près distribution be given to the Law Foundation of British Columbia. No other province has offset its obligations to fund legal aid with class action settlement monies.
If a default provision was needed, the Class Proceedings Fund would have been a better choice than Legal Aid. Many meritorious class actions are not launched as class counsel fear adverse cost awards. Without CPF funding, fewer cases are brought forward, leaving the conduct of corporate defendants to go unanswered. Class actions are intended to overcome financial barriers to justice, yet they have themselves become prohibitively costly to prosecute; the SCC described class actions as the “sport of kings in the sense that only kings or equivalent can afford it.” It is for this reason that class counsel turns to the CPF for financial assistance. The CPF has funded 10% of all Ontario class actions, 30% of which have gone on to trial. Many CPF supported cases have raised novel legal issues, such as electronic publishing rights, and have altered the regulatory landscape with regard to bank and payday loan disclosure practices.
Four decades ago, the Ontario Law Reform Commission rejected the idea of funding class actions with Legal Aid funds. With the most recent amendment to the Class Proceedings Act, the Ontario government has decreed that class actions should fund Legal Aid.