Court of Appeal Characterizes "Opt Out" of Class Proceedings as a Substantive Right

October 14, 2021

Written By Ranjan Agarwal, Douglas Fenton and Geoffrey Davis

Class action proceedings are routinely characterized as "procedural" in nature. However, that framing obscures the fact that class actions—and interim proceedings within class actions—have very real consequences for class members' substantive legal rights.

In Johnson v Ontario, the Court of Appeal for Ontario held that the motion judge's decision not to extend the time period for a class member to opt out of the class proceedings was a final order, rather than an interlocutory order, and thus properly appealable to the Court of Appeal. Central to the Court of Appeal's reasoning was the observation that substantive and procedural rights are symbiotic, and that, ultimately, the decision not to extend the opt-out period affected the class member's substantive rights.

Background

The plaintiff was an inmate at Elgin Middlesex Detention Centre. In December 2016, following a drug overdose, he developed a medical condition that ultimately left him permanently disabled. In late 2018, he brought a negligence claim against Ontario and several other defendants on the basis that the delay he had experienced in receiving treatment had contributed to his disability.

Unbeknownst to the appellant, at the time he started his claim, two class actions had already been certified on behalf of inmates at the Elgin Middlesex Detention Centre. The class definition captured inmates who had been incarcerated between January 1, 2010, and May 2017, which made the plaintiff a class member. Any class member that wished to opt out of the class actions to pursue their claim individually had to do so by June 2018.

The uncontested evidence was that the plaintiff was unaware of the class actions—or the opt-out deadline—when he started his claim. While the class actions followed a standard notice process to alert class members of their rights, that process failed to bring the class actions, and the opt-out deadline, to the plaintiff's attention.

The plaintiff moved for an extension of time to opt out of the class proceeding, so he could pursue his claim individually. The motion judge refused to grant the extension, effectively ending the plaintiff's claim. He appealed.

Opt-Out: Procedural or Substantive?

Ontario moved to quash the appeal on the basis that the motion judge's decision was interlocutory order, rather than a final order, and the appeal was properly to the Divisional Court, not the Court of Appeal.

The distinction between a final order and interlocutory order is complex, but the basic concept is that a final order must deal with the "substantive merits as opposed to mere procedural rights" such that the order "finally disposes of the rights of the parties." Ontario's argument from this basic principle was straightforward: the Class Proceedings Act is an "entirely procedural statute" such that any right created under it is also procedural in nature. This argument favoured characterizing the motion judge's decision as an interlocutory rather than final order.

The Court of Appeal rejected this argument and dismissed Ontario's motion to quash the appeal. It noted that although substantive and procedural rights are often distinguished in litigation terms, they are in fact symbiotic. As a result, is not always possible or advisable to distinguish one form of right from another.

Here, the plaintiff had lost a substantive right of significant importance (i.e., the ability to pursue his civil action) when the motion judge denied his motion for an extension of time to opt out of the proceeding. The Court of Appeal tied its analysis to the overarching objective of class actions of enhancing access to justice and promoting behavioural modification. The Court recognized the importance of the right of potential litigants to pursue a claim outside a certified class. In the plaintiff's case, the class proceeding would foreclose his ability to direct his own litigation and, ultimately, obtain meaningful recovery.

Key Points

The Court of Appeal's decision in Johnson v Ontario does not deal with the merits of the plaintiff's appeal, which will be determined at a later date. That said, several observations arise from the Court's decision.

1. The decision clarifies that an order refusing to extend an opt-out period is a final order, properly appealable to the Court of Appeal. However, the Court of Appeal's analysis in arriving at this conclusion may be of more general application, and suggests that other decisions in class actions previously considered interlocutory might properly be characterized as final. Class action litigants and their lawyers will need to continue to carefully evaluate the proper appeal routes before launching an appeal.
2. The decision pushes back on the "received wisdom" that class actions are entirely procedural devices and acknowledges the very real consequence that superficially procedural decisions can have on class members' substantive rights. The recognition that class proceedings cannot be treated as purely "procedural" devices may acquire new prominence in other areas of class action practice.
3. A key challenge for both class counsel and defendant's counsel is providing effective notice to all class members of the proceedings and the potential impact on their rights. While not at issue on the motion to quash, the fact that the plaintiff did not receive effective notice of the opt-out period will be a core issue on his appeal. Since the decision to opt out of a class proceeding has now been expressly recognized as a substantive right—with a potential right of appeal to the Court of Appeal—this decision may require even greater efforts by parties to design effective notice regimes.

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