- The Second Opinion: Class Actions, Constitutional Questions and Determining the “Preferable Proceeding”
- June 6, 2013
- Law Firm: McCarthy Tétrault LLP - Toronto Office
In Precision Contractors Ltd v Government of Saskatchewan, 2013 SKCA 57, the Court of Appeal found that a common issue of constitutional validity did not, in and of itself, make a class action not the “preferable proceeding”.
The Court of Appeal held that there was no absolute rule that a class action was perforce ill-suited to a claim for a declaration that a provincial taxing enactment was unconstitutional. In addition, the Court of Appeal noted the certification judge’s next step, bifurcating the proceedings by conditionally adjourning the certification application pending the determination of the constitutional issue in a separate declaratory proceeding outside the framework of The Class Actions Act, SS 2001, c C-12.01 (the “Act”), would create procedural and substantive inequities.
Precision Contractors Ltd. (“PC”) applied to have a proposed action certified as a class action pursuant to the Act. At issue was the constitutional validity of provincial legislation and/or regulations imposing provincial sales tax on construction vehicles and equipment brought into Saskatchewan from Alberta for temporary use in PC’s business.
The certification judge identified three common issues, the first of which was whether sections of the Provincial Sales Tax Regulations, RRS c E-3 Reg 1 ultra vires the legislative or regulatory powers of the Province of Saskatchewan.
The Act sets out five requirements that must be met in order for a class action to be certified. The certification judge ruled that the first three requirements for class certification were met, but then found that a class action was not the preferable procedure-the fourth requirement for certification-for addressing the constitutional validity of the legislation.
In coming to this conclusion, the certification judge relied upon the decisions from the Supreme Court of Canada in Guimond v. Québec (Attorney General), 1996 CanLII 175 (SCC), and Marcotte v. Longueuil (City), 2009 SCC 43 in holding that it was “generally undesirable” to pursue a class action to obtain a declaration of constitutional validity.
As a result, the certification judge reasoned that PC should commence a judicial review application to determine the constitutional issue with leave to bring the certification application back after the constitutional question had been determined so the remaining common issues could potentially be certified.
The Court of Appeal found that the certification judge had erred in his reading of Guimond. While acknowledging that the Supreme Court had said that “...it is not necessary to pursue a class action to obtain a declaration of constitutional invalidity and therefore, that it is generally undesirable to do so...”, the Court of Appeal noted that this was said in obiter dictum. The Court of Appeal held that Guimond could not be viewed as unequivocally standing for the general proposition that class actions as such are perforce ill-suited to the resolution of litigation seeking a declaration that an enactment is unconstitutional.
The Court of Appeal also reviewed the certification judge’s analysis of the Supreme Court’s decision in Marcotte, a case dealing with an allegation that a municipal property tax by-law was ultra vires the enabling legislation. In Québec, a class action procedure is not available to challenge the validity of a municipal by-law. The reason for this is that a declaration of nullity obtained by an individual ratepayer in an individual proceeding is binding on all ratepayers.
The plaintiffs in Marcotte appealed to the Supreme Court of Canada. Five members of the Court were of the opinion the appeal should be dismissed, whereas four were of the view it should be allowed. The Court of Appeal, noting that the case was of “considerable complexity”, held that much of the decision was tied into the Québec Code of Civil Procedure and held that it was of limited application in Saskatchewan.
However, the Court of Appeal felt that Marcotte had some instructive value and found, contrary to the view of the certification judge, that it did not support the notion that a class action in and of itself was unsuited to a claim for a declaration declaring a provincial taxing enactment to be unconstitutional.
After determining that a class action was not the preferable procedure, the certification judge did not dismiss the certification application but rather adjourned the certification motion until the constitutional question had been addressed with leave to bring it back to address the remaining issues.
The Court of Appeal found that this was not appropriate for a number of reasons. The bifurcation of the proceedings would likely increase costs and require more by the way of judicial resources than by having all three common issues determined and dealt with at the same time and in the same process. A common proceeding would also ensure that all class members are treated fairly and have adequate notice of all aspects of the litigation. It would also treat PC fairly and not require it to launch a separate proceeding outside the framework of the Act that would expose it to costs.
As a result, the appeal was allowed although the Court of Appeal declined the appellant’s request to certify the class action in that court. The case was remitted to the certification judge to conclude the certification hearing.