Co-author: Estelle Hjertaas
In the recent case of Lorraine v. Petro Canada 2013 QCCA 332, the Quebec Court of Appeal refused to authorize a proposed class action based on alleged inaccuracies in the measurement of gasoline, leading to inflated prices at gas pumps.
The proposed class action is based on statistics compiled by Measurement Canada, which is a federal organization responsible for the integrity and accuracy of measurement in the marketplace. In conducting gas pump inspections from 1999 to 2007, Measurement Canada found a number of errors in the accuracy of the measurement of the delivery of gasoline from the pumps. Under the Weights and Measures Act(R.S.C., 1985, c. W-6), the authorized margin of error is 0.5%, which is equivalent to a difference of 100 millilitres on 20 litres. According to the results of the inspections, 8% of inspected pumps had an error – 6% to the detriment of the consumer, and 2% to the detriment of the seller. The Ottawa Citizen concluded that mistakes were unfavourable to consumers 74% of the time.
Based on this information, on May 21, 2008, Alexandre Lorrain requested authorization to begin a class action and to be designated as representative. The class action targets the errors made by the respondents or people operating gas stations under their banner with regard to the calibration of gas pumps. The group that Mr. Lorrain aims to represent is all physical persons and individual businesses, and all legal persons with less than 50 employees in Quebec who, since January 1, 1999, purchased gas from one of the defective pumps and suffered damages accordingly. The requested damages are the excess paid by consumers for the purchase of gasoline during the affected period.
On July 27, 2011, the Superior Court of Quebec refused to authorize the class action. That decision was appealed on August 26, 2011.
The Court of Appeal upheld the Superior Court’s decision and refused to authorize the class action. In doing so, the Court of Appeal considered four main issues:
1. Did the judge err in setting out the general principles applicable to the authorization of a class action?
The Court of Appeal found that the judge made no error in this regard. Article 4.2 of the Code of Civil Procedure (CPC), which states that “the parties must ensure that the proceedings they choose are proportionate, in terms of costs and time required, to the nature and ultimate purpose of the action or application and to the complexity of the dispute”, does not have the effect of importing from other provinces the principle that the judge can refuse to certify a class action if it is not the most appropriate means of bringing the case. However, the principle of proportionality under article 4.2 does apply to class actions, as it does to all other cases under the CPC.
The existence of a serious right or issue is also an appropriate consideration.1
2. Did the judge err in the application of paragraph 1003 b) (“Facts alleged seem to justify the conclusions sought”) of the Code of Civil Procedure?
While the Court of Appeal identified two errors by the lower court, which were (1) preferring some expert witnesses despite not having heard any of them testify and (2) determining that the data from Measurement Canada was not reliable, it agreed with the lower court that the requirement under paragraph 1003(b) that the “facts alleged seem to justify the conclusions sought” was not met.
While the appellants argued that the statistical evidence gathered by Measurement Canada demonstrated that some consumers had been overcharged, and thereby prejudiced, the Superior Court noted that there was an absence of any direct evidence of prejudice to the designated persons. None of the designated persons were able to show receipts or other evidence that they had purchased gasoline from one of the affected pumps.
While the appellants further argued that, given time, they would be able to show a direct prejudice,2 this argument flies in the face of the proportionality rule under article 4.2 of the CPC. If the designated persons were launching an individual action, they would have to prove that they had suffered a prejudice – the same must apply for a class action.
3. Did the judge err in the application of paragraph 1003 a) (“Identical, similar or related questions of law”) of the Code of Civil Procedure?
As found by the lower court, there was an absence of identical, similar or related questions of law with regard to the prejudice suffered by each member of the group. The level of damages could vary infinitely within the affected class, as one member may have had only one transaction with an affected gas pump and another may have had many. This is doubly so since each transaction may also vary with regard to the level of error at the pump. Combined with the difficulty of proving damages, it is clear that the criteria are not met.
4. Did the judge err in the application of paragraph 1003 d) (“the member to whom the court intends to ascribe the status of representative is in a position to represent the members adequately”) of the Code of Civil Procedure?
On this point, the Court found that a person with a weak claim could not adequately represent the whole group, as the representative’s claim is the basis for the court to analyze the case, and a class action is not intended as a method to circumvent principles of civil law: there must be a fault, a damage, and a casual relationship between the two.3
In addition to the failure to demonstrate a direct and personal prejudice affecting the designated persons, there are also factors that lead the lower court to question the seriousness and openness of the process to represent the members of the group.
This decision represents a forceful rejection of an increasing trend of attempts to establish proof of harm in class actions through the use of statistical evidence. If similar reasoning is applied elsewhere in Canada, it appears it will not be enough for class counsel to establish that, based on a statistical analysis, someone MUST have suffered harm as a result of the alleged wrong. Rather, it must be established, through direct evidence, that someone DID in fact suffer such harm.