In Sharp v. Royal Mutual Funds Inc., 2021 BCCA 307, the defendant, Royal Mutual Funds (“RMFI”), was the mutual funds subsidiary of RBC. It was the principal distributor of funds offered by RBC Global Asset Management Inc. (“RBC GAM”), the fund manager for RBC mutual funds. Previously, RMFI was found guilty of paying higher commissions to sales representatives to promote particular mutual funds. This policy violated securities laws, and, as a result, RMFI paid a fine of over $1 million to the Ontario Securities Commission.
The central claim of the proposed class was that RMFI, in engaging in these unauthorized practices, breached its contractual and other obligations to members of the proposed class.
Justice Francis dismissed the application to certify the action as a class proceeding, and she determined that the various causes of action advanced by the appellants, except for their claim for breach of contract, were bound to fail on their pleadings.
The British Columbia Court of Appeal confirmed that the requirement under s. 4(1)(a) of the CPA —that the pleadings disclose a cause of action—must be assessed by means of the same test that would apply to a motion to strike (para 26).
Voith J.A. approved of the chamber judge’s understanding of the requirements imposed by Atlantic Lottery Corp Inc. v. Babstock, 2020 SCC 19. Specifically, the plaintiffs must establish that the remedies they seek are available to them, assuming the truth of their pleadings, for the specific causes of action they have pleaded (para 28).
Voith J.A. concluded that there was no error in the chambers judge’s analysis of the various causes of action alleged (para 101).
Voith J.A. summarized the legal principles on causation as follows: first, proof of causation is an essential requirement in a claim for compensatory damages for breach of contract. Second, the issue of causation is distinct from the issue of the quantification of loss. Third, causation is a question of fact that must be addressed before turning to the issue of quantifying any loss (para 124).
The Court concluded that a class action for the breach of contract cause of action was not the preferable procedure. The chambers judge found this because numerous individual issues would need to be determined before any of the proposed class members could be found to be entitled to any of the outcomes they seek. The appellants raised a highly individualized claim that was simply not amenable to class determination (para 194). Voith J.A. concluded that the appellants had not raised a basis to interfere with the chambers judge’s reasons.