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Court Declines to Certify Class Action against Parent Corporations of Alleged Tortfeasors

By Erin Crochetière

In David v. Loblaw[1] the Ontario Superior Court partially certified a class action against retailers and producers of packaged bread. One of the issues addressed by the Court was whether the plaintiffs’ claims against parent corporations of the bread producers met the requirements for certification.


The plaintiffs claim that the defendants were party to a price fixing conspiracy to manipulate the bread markets and accrue $5 billion in unjust profits. The price fixing allegedly impacted sales, loyalty programs, sales rebates, and had an indirect effect on sales and pricing effects on competitors’ sales. The claim also alleges that the conspiracy had a larger reverberating effect on the wider economy.

The defendants included producers and retailers of packaged bread products as well as various parent companies of the producers and retailers.

The proposed plaintiff class was million or tens of millions of consumers, including purchasers of packaged bread, as well as “umbrella purchasers,” those who bought products on which the alleged price fixing had a knock-off, or indirect, effect.

The Test for Certification

Justice Morgan described the test for certification pursuant to s. 5 of the Class Proceedings Act 1996, SO 1996, c. 6 as follows:

The Supreme Court of Canada made it clear in Hollick v. Toronto (City),[2] that the analysis under this section is a procedural one. It is not required for the Plaintiffs to demonstrate at the certification stage that the case will succeed on the merits. That said, certification follows a well-established analytic process that requires a plaintiff to pass a number of significant hurdles. As the Divisional Court has put it, “a certification motion is an important screening mechanism for claims that ‘…are not appropriate for class actions’” [citations omitted]

Justice Morgan further noted that, overall, the evidentiary standard that applies to certification is much less stringent than the balance of probabilities standard and that the certification question does not inquire into the strength of the overall action, but only the evidentiary basis for the claim. Generally, the certification question asks whether there is some basis in fact which establishes each of the individual certification requirements.

With respect to certification of causes of action, the Court stated that the threshold is relatively low, and the test is similar to the analysis under Rule 21 motions; the claim should be struck only if it is “plain and obvious” that it contains no reasonable cause of action or that the action cannot succeed.[3]

With respect to the claims against the producer and retailer defendants, the Court found that these causes of action met the requirements for certification.

With respect to the claims against the parent and shareholder companies of the producer and retailer defendants, the Court noted that the statement of claim did not provide sufficient detail of the parent companies’ direct involvement in the conspiracy.

The Court stated that, in the context of claims for conspiracy, a plaintiff must plead specific acts of conspiracy against each defendant and that:

A recitation of a series of events coupled with an assertion that they were intended to injure is insufficient, and it is not appropriate to lump some or all of the Defendants together into a general allegation that they conspired to injure the Plaintiff. If the Plaintiff does not, at the time of pleading have knowledge of the facts necessary to support the cause of action, then it is inappropriate to make the allegations in the statement of claim”.[4]

The plaintiffs also argued that, based on the parent-subsidiary relationship between the parent companies and the producers of bread, the parents were involved in the price fixing conspiracy. However, the claim did not outline any active steps the parents allegedly took in furtherance of this conspiracy.

Further, and importantly, the claim provided no basis for disregarding the principle of corporate separateness.

The Court noted that the principle of corporate separateness remains a foundational principle of corporate law[5] but that an exception to this principle exists where “the corporate form is being abused to the point that the corporation is not truly a separate corporation.” While the pleading claimed that the parents exercised “dominion and control” over their subsidiaries, it did not provide material facts on which to support this assertion. Further, the plaintiff failed to plead any material facts that could in any way support that the subsidiary companies were not true separate corporations.[6]

As a result, the Court held that the pleadings against the parent/shareholder defendants did not support any of the causes of action plead including the statutory causes of action under the Competition Act, conspiracy, unjust enrichment, and constructive trust.

With respect to the common issues, the Court declined to certify the claims related to products that did not directly compete with packaged bread (the umbrella purchasers) and limited the common issues to issue relevant only to the direct and indirect purchasers of packaged bread.

Key Takeaways

The Court in David v. Loblaws, confirms that the principle of corporate separateness remains the law in Ontario. The Court also confirmed that the test for certification is similar to the test applied on Rule 21 motions.

Accordingly, to succeed on a certification motion as against the parent corporation of a tortfeasor, the plaintiff must have established a reasonable cause of action against the parent company. This in turn requires the plaintiff to have plead specific facts that support an exception to the corporate separateness rule.

[1] 2021 ONSC 7331.

[2] 2001 SCC 68 at paras 16, 28-9.

[3] Cloud v Canada (Attorney General)73 OR (3d) 401, (ONCA) at para 41.

[4] Mancinelli v. Royal Bank of Canada2020 ONSC 1646, at para 142.

[5] Yaiguaje v Chevron Corporation2018 ONCA 472, at paras 57 and 70.

[6] David v. Loblaw, at paras 37-40.