506 THE ADVOCATE
VOL. 79 PART 4 JULY 2021
whether notice should be given to absent class members to ameliorate
potential prejudice arising from discontinuance of the proceeding.6 A “class
proceeding” under the CPA is defined as a proceeding that has been certified
as such.7 Thus, on the face of the CPA, court approval is not required
for a pre-certification settlement or discontinuance in our province. This
definition sets B.C. apart from the jurisdictions across Canada that require
court approval of any settlement, discontinuance or abandonment of a class
proceeding even before certification.8
The rationale for requiring court approval of class action settlements
focuses on protecting the rights of absent class members and the integrity
of the class action regime. The requirement both deters plaintiffs and class
counsel from abusing the class action procedure with meritless claims and
provides members of the class an opportunity to ameliorate any adverse
effects from the discontinuance of the proceeding.9 Court approval of settlements
ensures the representative plaintiff is not settling for improper or
inadequate reasons, such as “lucrative side deals or other considerations
which might contribute to a representative plaintiff deciding to ‘cash in the
chips’ and settle”.10
There is no principled reason for hinging the requirement for court
approval of class action settlements on the stage of proceedings reached. In
most cases, whether the settlement is pre-certification or post-certification,
the effect on class members is the same.11 An action commenced under
class proceedings legislation is not simply an individual action until certification
is granted. Rather, “the proceeding changes from an intended class
proceeding, which was commenced as such, to a ‘certified’ class proceeding
which will then be conducted accordingly with respect to its continuation”.12
In its 1982 Report on Class Actions, Ontario’s Law Reform Commission
specifically identified the need to apply court approval provisions to settlements
before certification.13 Restricting the application of those provisions
to the post-certification stage was thought to foster the formulation of
“secret settlements” and result in the parties placing an undue premium on
early settlements as a means of avoiding the requirement for court approval
and notice to absent class members.14 The requirement for court approval
of settlements is thought to address the concern that class proceedings may
be used to extort unjust settlements from defendants or to “produce compromises
unfair to class members, either because the representative plaintiff
has settled with the defendant for a premium on his or her own claim,
thereafter discontinuing the class action, or because the class lawyer has
settled in a manner designed to maximize legal fees at the expense of the
recovery … available to class members”.15