Supreme Court Of Canada Clarifies Requirements For Certification Of Class Actions

The Supreme Court of Canada released reasons for judgment in three cases on October 31, 2013: Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 ("Pro-Sys") and Sun-Rype Products Ltd. v. Archer Daniels Midland, 2013 SCC 58 ("Sun-Rype"), both cases on appeal from the British Columbia Court of Appeal, and Infineon Technologies AG v. Option consommateurs, 2013 SCC 59 ("Infineon"), on appeal from the Quebec Court of Appeal.

All three cases required the Supreme Court to consider the law on the certification of class actions and in particular, the law surrounding the composition of classes.

Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57

In Pro-Sys, a class action proceeding was brought by Pro-Sys Consultants Ltd. in which it was alleged that the defendant, Microsoft Corporation ("Microsoft"), overcharged for its operating systems and applications software. The proposed class was comprised of the ultimate consumers of Microsoft's products, who acquired the products from retailers. The ultimate consumers are also known as "indirect purchasers" because they have no direct commercial relationship with Microsoft.

The British Columbia Supreme Court initially certified the class in Pro-Sys, but that decision was subsequently overturned by the British Columbia Court of Appeal.

The main issue that the Supreme Court was tasked with deciding was the viability of the indirect purchasers' claims against Microsoft. The first requirement for certification of a proposed class under the Class Proceedings Act, R.S.B.C. 1996, c. 50 (the "CPA") is that the pleadings disclose a cause of action. The British Columbia Court of Appeal found that the indirect purchasers had no cause of action against Microsoft, and therefore found that there was no basis for certifying the proposed class.

The Court of Appeal's decision in this regard was based almost solely on the rejection of what is known as the "passing on defence" in Canadian jurisprudence. The passing on defence has been put forth by manufacturers at the top of distribution chains who have been accused of overcharging for products. As part of the defence, manufacturers allege that since parties that purchase overcharged products from them pass on those overcharges further down the distribution chain, those purchasers have not suffered a loss. In simple terms, if a manufacturer sells a product to a distributor for $10 that should cost $5, and the distributor then sells that product to a...