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Ontario Court of Appeal applies foreign law, dismisses cross-border class action

class action

On December 21, 2018, the Ontario Court of Appeal released its decision in Das v George Weston Limited (“Das”), a proposed class action relating to the collapse of an industrial building in Bangladesh. The action was brought against several Loblaws entities (collectively, “Loblaws”) and Bureau Veritas Limited (“Bureau Veritas”), a consulting company retained by Loblaws to audit and inspect its offshore suppliers’ factories.

The Court upheld the decision of the motions judge dismissing the plaintiffs’ action. It found that Bangladeshi law applied to the plaintiffs’ claims and that under that law the claims disclosed no reasonable cause of action. This case demonstrates how crucial a finding on the applicable law can be at the early stages of cross-border class proceedings.

Background

In 2013, Rana Plaza building, an industrial building in Savar, Bangladesh, collapsed as a result of apparent structural flaws. The collapse killed and injured thousands of people, many of whom were allegedly making clothing for Joe Fresh Apparel Canada Inc., a brand owned by Loblaws. These workers were employed by manufacturers to which certain of Loblaws’ direct suppliers outsourced its work.

In 2015, several putative representative plaintiffs commenced a proposed Ontario class action against Loblaws and Bureau Veritas on behalf of all individuals who were in Rana Plaza at the time of its collapse, as well as their family members. The substance of the plaintiffs’ claims was that Loblaws had a duty to protect the safety of all individuals who worked in the Rana Plaza and breached that duty by, among other things, failing to instruct Bureau Veritas to inspect the structural integrity of the building and failing to require the local manufacturers to ensure safe working conditions existed. The plaintiffs brought a motion to certify their action as a class proceeding. In response, the defendants moved under Rule 21 to dismiss the action, seeking declarations that the plaintiffs’ claims were time-barred and incapable of success under Bangladeshi law.

The motions judge, Justice Perell, decided the plaintiffs’ certification motion and the defendants’ Rule 21 motions contemporaneously. He declined to certify the action as a class proceeding and dismissed the plaintiffs’ action altogether. First, Justice Perell applied choice of law principles and found that Bangladeshi law applied to the plaintiffs’ claims. He then reviewed the evidence of several experts on Bangladeshi and English law and concluded that: (i) the claims of all putative class members who were not minors at the time of the collapse were time-barred; and (ii) the claims of all putative class members disclosed no reasonable cause of action. The plaintiffs appealed. 

Choice of law

The Court of Appeal upheld Justice Perell’s key finding that Bangladeshi law applied to the plaintiffs’ claims. The Court ruled that a cause of action in tort only “crystalizes” once some party is injured. Therefore, because the plaintiffs’ injuries were caused by a building collapse in Bangladesh, the tort crystalized in Bangladesh, and the applicable law or lex loci delicti was the law of Bangladesh. The Court saw no reason to exercise its discretion to decline to apply Bangladeshi law. It was not convinced that the potential application of Sharia law or the unavailability of punitive damages would work an injustice on the facts of the case.

Having found that Bangladeshi law applied to the plaintiffs’ claims, the Court reviewed the evidence of foreign law experts in order to assess the viability of the claims under Bangladeshi law.

Expired limitations period

First, the Court analyzed the application of Bangladesh’s Limitation Act, 1908 to the action and determined that the claims of most of the proposed plaintiffs were out of time. Under the Limitation Act, 1908, a one-year limitation period applies to claims relating to wrongful death and personal injury. Since the plaintiffs commenced their action outside this one-year limitation period, the claims of all the proposed class members, other than those who were minors at the time of the building collapse, were time-barred.

No reasonable cause of action

Second, the Court considered the defendants’ assertion that it was plain and obvious that the plaintiffs’ claims raised no reasonable causes of action under Bangladeshi law. It accepted the defendants’ position and dismissed the action in its entirety.

The Court found that the plaintiffs’ claims, grounded in negligence and vicarious liability, were novel under Bangladeshi law. It further concluded that Bangladeshi courts, looking to persuasive English and Indian jurisprudence, could not be expected to expand their law so far as to render the plaintiffs’ claims viable. Crucial to the Court’s determination were the facts that Loblaws had no direct control over, or relationship with, the local manufacturers, and that Bureau Veritas’s mandate did not include auditing the structural integrity of Loblaws’ suppliers’ facilities.

In its reasons, the Court emphasized that its findings as to the legal viability of the plaintiffs’ claims should not be taken “as minimizing… the gravity” of the losses which flowed from the Rana Plaza collapse. It also explained that, given the absence “of a legally compelling factual scenario”, it was not in a position to weigh the policy factors for and against imposing a duty on Canadian companies conducting business in Bangladesh. 

Adverse costs award reduced on appeal

Though the plaintiffs were unsuccessful on their substantive appeal, the Law Foundation of Ontario (“LFO”), which funded the plaintiffs’ action through the administration of the Class Proceedings Fund, was successful in appealing Justice Perell’s costs award.

At first instance, Justice Perell ordered the plaintiffs, and therefore the LFO, to pay the costs of the defendants on a partial indemnity basis. He fixed total costs at over $2.3 million. The LFO sought and was granted leave to appeal this award to the Court of Appeal.

On appeal, the Court of Appeal reduced Justice Perell’s costs award by 30%. The Court found that Justice Perell failed to give effect to s. 31(1) of the Class Proceedings Act which provides that when awarding costs, courts may consider whether a class proceeding involved a matter of public interest. The Court of Appeal found that the plaintiffs’ action was in the public interest because it promoted access to justice for the proposed class. Neither the fact that the plaintiffs were allegedly motivated by monetary compensation rather than public policy, nor the fact that the plaintiffs’ claims were “framed in intemperate language” and contained extraneous and unsubstantiated allegations undermined the public interest nature of the action. 

Implications

Das serves as a reminder to defense counsel to raise and prepare to argue choice of law issues at an early stage in cross-border class proceedings. Counsel should endeavour to review the law of all potentially governing jurisdictions and should consider tendering expert foreign law evidence prior to certification. Taking a proactive approach to choice of law issues can help courts narrow issues in complex cross-border class actions and can even result in the complete dismissal of an action, as was the case in Das.

Several unique considerations arise when defending class actions involving transnational elements. Though the bulk of recent jurisprudence in this context has been focused on jurisdictional concerns, Das shows that choice of law is another important, and potentially determinative, consideration.

By Craig Lockwood and Elie Farkas, Osler

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