The History of Cy-Près Awards
The cy-près doctrine was developed in the English courts of equity. It first arose when dealing with charitable trusts. The doctrine has a french name which translated means “so near/so close” or “as near as may be”. The tool was used where a charitable trust had become illegal, impossible or impractical to perform. The court then used the doctrine to modify or amend the trust as near as possible within the original intentions of the testator.
Its use in class proceedings began in the United States. The mechanism then allowed surplus monies within the settlement pool to be used for purposes of promoting the interests of the class members. The remedy appeared to have been the most practical solution in cases where reverting the surplus monies to the defence would defeat the purpose of the action, and the amount was not large enough to warrant the cost of distributing the monies among the class.
Cy-Près in Ontario Class Actions
The doctrine is alive and viable in Ontario. The purpose of a cy-près distribution is to indirectly compensate class members through a benefit that approaches, as nearly as possible, the very purpose of the class action. Generally, the funds will be donated to a charitable or public interest organization deemed to be in line with the purposes behind the original action. In benefiting the class, at least indirectly, the cy-près distribution provides access to justice and expenditure at the expense of the defendant.
In considering whether to approve a settlement, the court should have regard to the objectives of access to justice for class members and behaviour modification of the defendant as factors in considering whether or not to approve a particular cy-près award.
It is not generally available where a direct distribution to the class members is possible. Where, in all the circumstances, it is impractical to distribute the remainder of a settlement to individual class members, the court may approve a cy-près distribution to credible organizations or institutions whose services or programs would benefit class members.
The court will also expect class counsel to make a recommendation as to the most appropriate donee of the surplus after consulting with the class members.
Plaintiffs’ Interests Should Come First
Cy-près awards are not accepted without criticism. The focus of academic criticism is about the transparency and rationale of cy-près awards.
In Managing Class Action Litigation: A Pocket Guide for Judges (3rd ed), American legal authorities Barbara J. Rothstein & Thomas E. Willging have the following suggestions for judges of any jurisdiction considering approval of a cy-près distribution:
Cy près relief must come as close as possible to the objective of the case and the interests of the class members. Question whether the class members might feasibly obtain a personal benefit. Look for evidence that proof of individual claims would be burdensome or that the distribution of damages would be costly. If individual recoveries do not seem feasible, examine the proximity or distance between the cy près recipient’s interests or activities and the particular interests and claims of the class members. When cy près relief consists of distributing products to charitable organizations or others, press for information about whether the products in question have retained their face value or might be out-of-date, duplicative, or of marginal value.
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