Aggregate Damages: Why Courts Should Embrace the “Potential Liability” Test

By Oksana Romanov, JD with Distinction (2023), Lincoln Alexander School of Law, TMU

In Memory of the Honourable Justice Edward P. Belobaba

This May 4, 2023, the legal community lost one of the extraordinary Canadian class action jurists, the Honourable Justice Edward P. Belobaba. Although common law keeps moving relentlessly forward from precedent to precedent, and class proceedings are no exception, some older decisions deserve a look back. Justice Belobaba’s endorsement of the expansive approach to awarding aggregate damages in Ramdath v George Brown College [Ramdath] is one of those exceptions.

Below I outline two competing approaches – the expansive and restrictive one – to awarding aggregate damages under section 24 of the Class Proceedings Act [CPA] and the most recent trend in awarding aggregate damages. I conclude that courts should revisit the “potential liability” test set out in Markson v MBNA Canada Bank [Markson] because it reflects a flexible and access to justice-oriented approach to interpreting s. 24 of the CPA.

Aggregate Damages as a Procedural Tool

In Ontario, aggregate damage awards are available in class proceedings when individual assessment of each class member’s damages is not necessary. Aggregate damages are essentially a form of rough justice. Once the defendant’s liability is established, class members are entitled to monetary relief or aggregate damages on a class-wide basis if section 24 of the CPA is met. Individual class members’ damages are not precisely quantified, but they are awarded a reasonable share of the defendant’s overall liability to the class as a whole. This remedy is an essential procedural tool for achieving judicial economy. The alternative – individual assessments of each class member’s damages – may be so time-consuming and expensive that their access to substantive justice is rendered illusory.

Section 24 of the Class Proceedings Act

Section 24 outlines three requirements that the representative plaintiff must meet to make aggregate damages available at the common issues trial. The first step of the analysis is not difficult to meet; s. 24(1)(a) requires that some “monetary relief is claimed on behalf of some or all class members.” The second and third conditions are more demanding. Under s. 24(1)(b), “no questions of fact or law other than those relating to the assessment of monetary relief remain to be determined” and under s. 24(1)(c), “the aggregate or a part of the defendant’s liability to some or all class members can reasonably be determined without proof by individual class members.”

Evolution of Aggregate Damages

The first award of aggregate damages was made in 2014. In Ramdath, Justice Belobaba emphasized the unique importance of this remedy. In His Honour’s words, “[a]ggregate damages are essential to the continuing viability of the class action. […] Aggregate damage awards should be more the norm, than the exception. Otherwise, the potential of the class action for enhancing access to justice will not be realized” (Ramdath at para. 1). Nine years later, have aggregate damages become the norm?

Over the years, the Court’s approach to awarding monetary damages on an aggregate basis has evolved: from an expansive approach in Markson, a case involving a bank’s criminal interest rate on cash advances, to scaling down in Fulawka v Bank of Nova Scotia [Fulawka], an overtime pay class action.

In Markson, Justice Rosenberg provided an expansive interpretation of s. 24 of the CPA. In this case, MBNA Canada Bank (the “Bank”) recorded the interest rate on cash advances in such a way that it was only possible to establish whether the Bank breached the Criminal Code by reviewing millions of transactions manually. The Bank thus argued that aggregate damages could not be awarded since the second condition of s. 24 – that no questions of fact or law remained to establish liability – had not been met. Justice Rosenberg held, however, that where there was a “reasonable likelihood” that the defendant’s “potential liability” can be established on a class-wide basis, aggregate damages were available. Specifically, if the plaintiff could prove that the Bank’s manner of administering cash advances violated the Criminal Code,  “potential liability” to the class would be established.  A global damage amount could be calculated, and section 24 could then be used to distribute the aggregate sum to class members. While this result may lead to over-compensating some class members and under-compensating others, “that is exactly the result contemplated by s. 24(2) and (3)” (para. 49) because it would be impractical and inefficient to review each class member’s transactions to calculate their damages more accurately.

On a policy level, the Court was concerned with holding large institutions to account when they have profited illegally from millions of small transactions. A class action was “the only viable procedure for remedying the alleged wrong and calling the alleged wrongdoer to account” (para. 5, citing Canadian Shopping Centres Inc. v Dutton at para. 29). Further, “[a]s a matter of public policy, a criminal should not be permitted to keep the proceeds of his crime” (para. 75, citing Garland v Consumers’ Gas Co. at para. 57). Therefore, to avoid both impracticality and arriving at an unconscionable result for consumers, Justice Rosenberg resorted to determining the Bank’s liability on an aggregate basis.

By contrast, in Fulawka, then-Chief Justice Winkler interpreted Markson to mean that s. 24(1)(b) requires the representative plaintiff to prove causation between the defendant and each class member as a pre-condition to awarding aggregate damages. If monetary liability is contingent on proof from individual class members as to the quantum of monetary relief owed to them, then aggregate damages cannot be awarded. The Court read Markson narrowly, concluding that aggregate damages were only available there because the information needed to assess damages was in the defendant’s own transactional records. Further, the Court in Fulawka held that statistical sampling could not be used to determine global liability. Several years later, in Singh v. RBC Insurance Agency Ltd. [Singh], a vacation and public holiday pay class action, the Court found that there was a basis in fact to establish a “reasonable likelihood” at the certification stage that s. 24(1) of the CPA would be satisfied, giving the nod to the “potential liability” test used in Markson. Justice Glustein dismissed the defendant’s objection that damages could not be assessed in the aggregate because class members’ entitlement to vacation pay had to be calculated individually, based on their variable compensation level (paras 174-84). Justice Glustein found that these calculations could be made using the defendant’s own payroll records, and thus individual inquiries were not needed. However, Justice Glustein confirmed that the appropriateness of aggregate damage awards was up to the common issues judge to determine and “only if liability is established” (para. 180). 

What’s Next?

An expansive interpretation of s. 24 of the CPA best meets the three main goals of class actions. The decision in Singh is a step in the right direction when certifying aggregate damages. A return to Markson’s more flexible and purposive approach to awarding aggregate damages ensures that defendants cannot escape liability just because their record-keeping is poor or they engaged in millions of small but illegal transactions.

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