Why does a class action settlement need court approval in Ontario?

Under Ontario's Class Proceedings Act, 1992, a class action settlement generally requires court approval before it becomes binding, because most class members aren't individually before the court monitoring the negotiation the way a party in an ordinary lawsuit would be. Without this safeguard, there's a real risk that class counsel and the defendant could reach a deal that's convenient for both of them, perhaps generous legal fees for counsel and a manageable payout for the defendant, without the settlement actually being fair or adequate for the class members it's supposed to benefit.

When reviewing a proposed settlement, a court generally considers whether it's fair, reasonable, and in the best interests of the class as a whole, looking at factors like the strength of the case, the risks and likely costs of continuing to trial, and how the settlement compares to what the class might realistically achieve by continuing to litigate. Class members are generally given notice of the proposed settlement and an opportunity to raise concerns or objections before the court decides whether to approve it. This court oversight exists specifically because the usual protection of having your own lawyer negotiate directly on your behalf doesn't apply the same way in a class proceeding.