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In a decisive victory for the Plaintiffs in class actions against the three Canadian leading tobacco companies1, the Québec Superior Court ordered the Defendants to pay more than 15 billion dollars in moral damages2 and punitive damages. There were more than 253 hearing days3 and 16 years of proceedings. THE ACTIONS In February 2005, Justice Pierre Jasmin authorized two class actions against JTI-Macdonald (JTM), Imperial Tobacco (ITL) and Rothmans, Benson & Hedges (RBH). The first class represented by Cécilia Létourneau, was instituted on behalf of 918,000 smokers addicted to cigarettes. They claimed $5 000 per member as moral damages and $5 000 as punitive damages. The other class action introduced by the Conseil québécois sur le tabac et la santé (CQTS), and more widely known as the Blais case, was instituted on behalf of nearly 100,000 smokers and ex-smokers who had developed lung and throat cancer or emphysema. The amount claimed was of $100,000 in moral damages and $5,000 in punitive damages per class member. The Plaintiffs had waived any right to make individual claims for compensatory damages. The two class actions, spanning between 1950 and 19984, were joined for trial. THE JUDGEMENT In a 276 pages decision, Justice Brian Riordan ruled that the Companies had knowledge of the harm caused by smoking, deliberately withheld critical information and knowingly made false and misleading public statements. The Court reviewed the conduct of each Company and found as follows: The Companies manufactured and sold a product which was hazardous and harmful to the health of the consumers. The Companies had knowledge of the risks and dangers associated with the use of its product. The Companies trivialized the risks and dangers of smoking and failed to disclose information on the subject during the entire duration of the class proceedings. Beginning in 1962, the Companies conspired to prevent users of their products from becoming aware of the inherent hazards of such use. The Companies interfered with the right to life, personal security and inviolability of the Class Members, intentionally, prioritizing profit over health. FAULT The Companies were found to have engaged in serious misconduct under the Civil Code of Québec, the Consumer Protection Act (CPA) and the Charter of Human Rights and Freedoms, thus incurring liability for moral and punitive damages. The Court found that the companies: Contravened their general duty not to cause injury to another person5. Contravened the duty of a manufacturer to inform its customers of the risks and hazards involved in using its products6. Unlawfully interfered with a right under the Quebec Charter7. Engaged in a prohibited practice under the CPA8. PARTIAL EXONERATION Knowledge by a consumer of a product’s defect and its continuous use can release the manufacturer of its liability9. However, Justice Riordan specified that in the case of products hazardous to the physical well-being of the consumers, the test to assess public knowledge is more “stringent” and requires higher standards. Despite warnings on tobacco packages since 1972, such statements were found to be incomplete and insufficient by the Court. The Court determined that, as of January 1, 1980, consumers knew or should have known the risk of contracting tobacco related diseases10, and, as of March 1, 1996, of the risks of becoming addicted to tobacco. Therefore, members who started and continued after these periods11 committed a contributory fault. The Court apportioned 80% of the liability after the above dates to the Companies and 20% to the members. CAUSATION The Court concluded that faults committed by the Companies caused members to smoke. Justice Riordan favoured the “it-stands-to-reason” test stating that the presence of other external factors leading to smoking did not have the effect of discharging the Companies from their liability. It was found that presumptions were not required to eliminate all other possibilities insofar as the Plaintiffs had shown that the Companies’ faults led in a logical, direct and immediate way to the members’ smoking. With respect to the Blais case, Justice Riordan agreed that epidemiological evidence is sufficient to prove individual causation of tobacco related disease. He however specified that this evidence is permitted because of the application of article 15 of the Tobacco-Related Damages and Health Care Costs Recovery Act12 which allows causation to be proved “on the sole basis of statistical information”. DAMAGES The Court orders collective recovery (aggregate damages) if the evidence allows for an assessment of the total amount of members’ claims with sufficient accuracy13. For the Letourneau case, despite the fact that the three components of liability were found to be present, the Court did not allocate moral damages because the evidence did not allow for sufficient accuracy among class members as to the nature and degree of such damages. For the Blais case, the Court awarded solidary moral damages in the amount of $6,858,864,00014. The respective liability of the Defendants was established to be 67% for ITL, 20% for RBH and 13% for JTM. In addition, The Court found that all three companies had engaged in a reprehensible conduct which warranted an award of punitive damages against them under both the Quebec Charter and the CPA. In light of the parties’ conduct and their ability to pay, the judge ordered the Defendants to pay $1,31 billion in punitive damages15 to the members of the two classes based on one year of before-tax profits for each Defendant. It should be noted that in Quebec, in cases of collective recovery where individual liquidation is ordered, the Court has discretion to not return the unclaimed portion to the Defendants. It disposes of the unpaid funds taking into consideration the interest of the members16. The balance is usually allocated as a Cy-Près donation to non-profit organizations whose activities are related to the interests of the class members. INITIAL DEPOSIT A judgement ordering a collective recovery of claims orders the debtor either to deposit the established amount, or to carry out a determined reparatory measure, or both. In order to ensure that the victims would be compensated and suspecting that the Companies would not remain in business if they deposited the full amount, the Court fixed an initial deposit of $1 billion. Should these amounts be insufficient, the judge reserved the right for the Plaintiffs to request additional sums. PROVISIONAL EXECUTION NOTWITHSTANDING APPEAL Considering the exceptional nature of this case, the Court approved the plaintiffs request for a partial provisional execution of the damages awarded. The judge pointed out that the case had begun 17 years ago and that an appeal could take up to 6 years. Meanwhile, since smoking affects the physical well-being of consumers, it was deemed to be in the interest of justice that they be compensated as soon as possible. Therefore the judge ordered provisional execution in the next 60 days, regardless of an appeal, of an amount equal to its initial deposit for moral damages in addition to both condemnations of punitive damages representing more than $1 billion. The judge will decide at some later date how to distribute these funds. CONCLUSION The defendants have already issued statements announcing their intention to appeal the decision and ask the Court of Appeal to set aside the provisional execution order. It should be noted that at least seven similar class actions are ongoing in Canada as well as 10 healthcare cost recovery lawsuits. The amount claimed in many of these cases exceeds even the amount awarded by the Québec Superior Court. This is the first class action case in which class members obtain an award in a tobacco case in Canada. Certification for a similar class action in Ontario was dismissed in 2004 in the Caputo case17. It remains to be seen how all these cases will play out and how they will eventually relate to each other. SUMMARY TABLES OF DAMAGES AWARDED18 COMPANY MORAL DAMAGES BLAIS PUNITIVE DAMAGES BLAIS PUNITIVE DAMAGES LÉTOURNEAU ITL $670,000,000 $30,000 $72,500,000 RBH $200,000,000 $30,000 $46,000,000 JTM $130,000,000 $30,000 $12,500,000   MORAL DAMAGES LIABILITY Blais Member who started smoking before January 1, 1976 Companies – 100% Blais Member who started smoking from January 1, 1976 Companies – 80% / Member 20% Létourneau Member who started smoking before March 1, 1992 Companies – 100% Létourneau Member who started smoking as of March 1, 1992 Companies – 80% / Member 20%   PUNITIVE DAMAGES LIABILITY Blais claim accruing before November 20, 1995 Prescribed Létourneau claim accruing before September 30, 1995 Companies – 100% Blais claim accruing as of November 20, 1995 Companies – 100% Létourneau claim as of September 30, 1995 Companies – 100%   _________________________________________ 1 Létourneau v. JTI-MacDonald Corp. (C.S., 2015-05-27), 2015 QCCS 2382. 2 Commonly referred to as non-pecuniary damages. 3 The trial stage began on March 12, 2012 and ended on December 11, 2014. 4 Date on which the motions for authorization were served. 5 Art. 1457, Civil Code of Québec. 6 Art 1468 and following of the CCQ. 7 Art 1 and 49 of the Charter of human rights and freedoms. 8 Art 219 and 228 of the Consumer Protection Act. 9 Art. 1473 CCQ. 10 Lung and throat cancer or emphysema. 11 The Court ruled that it takes approximately 4 years to become dependent to smoking. Therefore Blais Class Members who started to smoking after January 1, 1976 and Letourneau Class members who started smoking after March 1, 1992 and that continued smoking after theses dates must share liability. 12 Art. 15 Tobacco-Related Damages and Health Care Costs Recovery Act ch.R-2.2.0.0.1 (Qc) of 2009; In an action brought on a collective basis, proof of causation between alleged facts (...) may be established on the sole basis of statistical information or information derived from epidemiological, sociological or any other relevant studies, including information derived from a sampling (...). 13 Art. 1031 CCQ. 14 Once interest and the additional indemnity of the Civil Code are added, this sum increases to $15,500,000,000. 15 The judge decided that the circumstances justified that 90% of the total punitive damages go to Blais members and 10% to Létourneau members. Considering the amount allocated for moral damages in the Blais file, the Court made a symbolic award and ordered each company to pay $30,000 in punitive damages which represents one dollar for each Canadian death this industry causes every year. 16 Art 1036 CCP. 17 Caputo v. Imperial Tobacco Ltd., 2004 24753 (ON SC). 18 Tables 910 and 1113 of the decision.

This publication was authored by Luc Thibaudeau, former partner of Lavery and now judge in the Civil Division of the Court of Québec, District of Longueuil. On September 19, 2014, the Supreme Court of Canada issued its ruling in the so called “banks’ cases”1, in the context of which consumers instituted class actions to recover the conversion fees charged on credit card transactions in foreign currencies by many institutions issuing such cards. The plaintiffs were maintaining that these charges were contravening the Consumer Protection Act (Quebec) (the “CPA”).  In these decisions, the Supreme Court had to rule, among other things, on the following issues:   1) The necessity for class representatives in class actions to have a direct cause of action against each defendant in order to have the required standing to sue all of them; 2) Whether the CPA applies to banks in view of The Constitution Act, 1867; 3) The right of the class members to obtain the reimbursement of the conversion fees they had paid and, in the case of some of the banks, the payment of punitive damages. As to the first question, the Court decided that the class representatives had the standing to sue all the banks, noting that the Code of Civil Procedure (Quebec) (the “CCP”) allows the exercise of a class action even where the representative does not have a direct cause of action against or a legal relationship with each defendant where the remedy allows for getting a similar result in the case of each defendant. As to the second question, the Court examined whether sections 12 and 272 of the CPA, which apply to the disclosure of the charges in question and set out the possible remedies in the event these obligations are not complied with, impair the federal jurisdiction over banks. The Court was of the view that a disclosure requirement for certain charges ancillary to one type of consumer credit neither impairs nor significantly trammels the manner in which Parliament’s legislative jurisdiction over bank lending can be exercised. Accordingly, since the Court concluded that the banks had in fact contravened the provisions of the CPA and that such law applied to them in this respect, it decided that the class members should be granted a reduction of their obligations equal to the conversion fees charged during the period when they were not disclosed in accordance with the CPA. Lastly, the Court ordered some of the defendant banks to pay punitive damages to class members since, in its view, they contravened the CPA for many years without explanation, likening this behavior to a lax, passive or ignorant attitude in respect of consumer rights and their own obligations, or to a behavior tantamount to ignorance, carelessness or serious negligence. Lavery will shortly publish a more detailed analysis of these three decisions, which will certainly have a significant impact on consumer law and the application of some principles which apply to class actions as a procedural vehicle. _________________________________________ 1 Bank of Montreal v. Marcotte, 2014 SCC 55, Amex Bank of Canada v. Adams, 2014 SCC 56, and Marcotte v. Fédération des caisses Desjardins du Québec, 2014 SCC 57 

On February 20, 2014, the Supreme Court of Canada allowed the motion for leave to appeal the judgment of the Court of Appeal of Québec rendered in the case of Theratechnologies inc. v. 121851 Canada Inc.1. In this unanimous judgment, the Court of Appeal decided that a judgment authorizing a class action based on section 225.3 of the Securities Act (Quebec)2 may be appealed, contrary to the current rules under the Code of Civil Procedure (hereinafter, the “CCP”), which does not authorize the appeal of a judgment allowing a motion to institute a class action.More details on this judgment of the Court of Appeal are available in our newsletter In Fact and In Law Express entitled “An unprecedented decision of the Court of Appeal: a judgment authorizing a class action under the SA may be appealed” authored by Sophie de Saussure, Josianne Beaudry and Jean-Philippe Lincourt.The upcoming judgment of the Supreme Court of Canada will be all the more interesting since the Act to establish the new Code of Civil Procedure was assented to on February 21, 2014 and makes some changes respecting class actions, including that to allow the appeal with leave of a judgment allowing a motion to institute a class action. Lavery will shortly publish a bulletin discussing these modifications.________________________________1 2013 QCCA 1256. 2 R.S.Q., c. V-1.1.

On February 20, 2014, the Quebec National Assembly passed Bill 28, An Act to establish the new Code of Civil Procedure.This is a watershed moment in a process that began in 2003 and was the subject of a review by the Minister of Justice in 2006. Notably, promoting cooperation by the parties on the conduct of proceedings and increasing reliance on case management conferences are meant to improve access to justice.In a brief filed in 20111, the Quebec Bar underscored that high costs and long delays constituted significant barriers to justice in many cases.It goes without saying that class actions constitute a preferred measure for accessing justice and an effective way to enforce one’s rights, particularly for small claims, as they are both effective and efficient.In this new interation of the Code of Civil Procedure (C.C.P.), the Special rules for class actions are found in Book VI, title III, articles 571 to 604. They will replace current articles 999 through 1051 C.C.P.Here is an overview.THE CLASS ACTION (ARTICLE 571 C.C.P.)Looking to the English moniker, the legislator has opted for the name “action collective”. The Bar had suggested that it would be better to retain the current notion of “recours collectif” because it is known to the public and will yield more results in web searches. We share this opinion and are also of the view that keeping the name would have ensured consistency, as it is very familiar to both the public and practitioners and has been in use since 1978.CLASS MEMBERS: THE “NO MORE THAN 50 EMPLOYEES” RULE IS GONEAmong the significant new features, the new article 571 C.C.P. does away with the condition found in article 999 C.C.P. whereunder a legal person established for a private interest, partnership or association may only be a member of a class if at all times during the 12-month period preceding the motion for authorization, it had no more than 50 employees.“ 571. A class action is a procedural means enabling a person who is a member of a class of persons to sue, without a mandate, on behalf of all the members of the class and to represent the class.In addition to natural persons, legal persons established for a private interest, partnerships and associations or other groups not endowed with juridical personality may be members of the class.A legal person established for a private interest, a partnership or an association or another group not endowed with juridical personality may, even without being a member of a class, ask to represent the class if the director, partner or member designated by that entity is a member of the class on behalf of which the entity is seeking to institute a class action, and the designee’s interest is related to the purposes for which the entity was constituted.”Quebec is currently the only Canadian jurisdiction which prevents businesses with more than 50 employees from being part of a class action, thereby depriving them of the opportunity to exercise their rights in this way. This is unfortunate, particularly in respect of claims based on section 36 of the Competition Act alleging anti-competitive practices or in the area of securities class actions. In the past, since they were barred from instituting class actions, some small and medium-sized businesses and cooperatives had to choose between filing their own proceedings or joining a class action outside Quebec.The new Code will allow a legal person established for a private interest, a partnership or an association to be a class representative on the sole condition that it be a member of the class. In addition, even if it isn’t a class member, it will be allowed to act as a representative if one of its directors, partners or a member it designates is a class member and the designee’s interest is related to the purposes for which the legal person, partnership or association was constituted. This is how a consumer advocate such as Option Consommateur can bring a class action to enforce the Consumer Protection Act. All it needs is a designated person who states his or her personal cause of action against the respondent, as article 1048 C.C.P. currently requires.MULTI-JURISDICTIONAL CLASS ACTIONS (ARTICLE 577 C.P.C.)Another new feature: the legislator deemed it useful to make rules for multi-jurisdictional class actions, which involve an often complex assortment of overlapping claims that are sometimes concurrent and, on other occasions, filed by the same law firm in more than one Canadian jurisdiction. They often involve the same parties, cause and object, which can lead to a situation of international lis pendens, not to mention the risk of contradictory judgments.“ 577. The court cannot refuse to authorize a class action on the sole grounds that the class members are part of a multi-jurisdictional class action already under way outside Québec.If asked to decline jurisdiction, to stay an application for authorization to institute a class action or to stay a class action, the court is required to have regard for the protection of the rights and interests of Québec residents.If a multi-jurisdictional class action has been instituted outside Québec, the court, in order to protect the rights and interests of class members resident in Québec, may disallow the discontinuance of an application for authorization, or authorize another plaintiff or representative plaintiff to institute a class action involving the same subject matter and the same class if it is convinced that the class members’ interests would thus be better served.”In principle, a Quebec court cannot deny an application for a class action for the sole reason that members of the class are involved in a class action pending outside Quebec. That is consistent with the approach generally taken by Quebec courts.The legislator now sets out criteria the court must take into account prior to making a decision, thus linking up with articles 3135 and 3137 of the Civil Code of Québec (C.C.Q.), which set out the private international law rules respecting jurisdiction and lis pendens.In addition, the court is required to take into consideration the protection of the rights and interests of Quebec residents if and when it is asked to decline jurisdiction or suspend a motion for authorization to institute a class action in Quebec. This new requirement of article 577 C.C.P. is intended to further circumscribe the discretion of the judge dealing with a motion to stay.It is apparent that the legislator wishes to favour proximity justice by causing a judge from Quebec to rule on the rights of class members who are Quebec residents, all the more so when such rights involve the application of public interest rules in fields such as insurance law, labour law and consumer law. In fact, the legislator wants to avoid a situation where a judge from another jurisdiction would rule on the rights of Quebec residents subject to such legislation and grouped in a subclass, which may be the case if a Quebec class action were stayed in favour of proceedings conducted elsewhere in Canada.Judges of the Quebec Superior Court already enjoy broad discretion in this regard. They may even, under certain circumstances, deny a motion to stay the Quebec proceedings if they are of the view that the interests of the Quebec members, even in an international lis pendens situation, will be better served if the motion is denied. This was recently the case in Choquette c. Atlantic Power Corporation.2Similarly, per article 577, parag. 3 C.C.P., the court will grant a motion for the discontinuance of an application for authorization filed in Quebec (to make way for proceedings instituted elsewhere) only if it is convinced that the interests of Quebec residents who are members of the class will be better served thereby. Note that such discretion already exists since current article 1016 C.C.P. provides that the representative cannot discontinue the class action without permission from the court.The Quebec Bar expressed doubt regarding the need for C.C.P. article 577 and the usefulness of adopting rules on multi-jurisdictional class actions. It noted that the court now has all the powers it needs to suspend review of a motion for authorization, particularly pursuant to the international private law rules found in C.C.P. articles 3076 and following. But the legislator obviously wishes to more clearly circumscribe the discretion of the judge, who will henceforth not be allowed to grant a motion to stay a class action brought in Quebec or the discontinuance thereof unless it is demonstrated that such an application is not contrary to the interests of justice and that the interests of the Quebec members will be better served if the class action is allowed to proceed in a jurisdiction other than Quebec.RIGHT OF APPEAL AT THE AUTHORIZATION STAGE (ARTICLE 578 C.C.P.)Current article 1010 C.C.P. prevents a respondent from appealing a judgment authorizing a class action, while the applicant may appeal as of right a judgment dismissing its application. This is a major irritant for respondents, particularly since they used to have a right of appeal and it was taken away in 1982.For many years the Quebec Bar expressed the wish that respondents be given the right to apply for leave to appeal from judgments authorizing the institution of a class action, such applications to be subject to the rules governing appeals from interlocutory judgments. This wish has now been granted.Although the right of appeal remains asymmetric, this new rule will promote equitable access to the Court of Appeal to any party having an issue to be decided which is important and of interest.“ 578. A judgment authorizing a class action may be appealed only with leave of a judge of the Court of Appeal. A judgment denying authorization may be appealed as of right by the applicant or, with leave of a judge of the Court of Appeal, by a member of the class on whose behalf the application for authorization was filed.The appeal is heard and decided by preference.”This appeal upon leave will allow better screening of class actions since respondents will be in a position to make their case to the Court of Appeal as to why the proceedings are doomed to fail. The position of the Court of Appeal will thus be known sooner, without having to go to trial on the merits as is currently the case, which may translate into savings on judicial resources. This will also allow for greater harmonization with the class action legislation of the other Canadian provinces, particularly that of Ontario, where the same rule applies, that is, an appeal upon leave3, and that of British Columbia, where there is an appeal as of right for both parties4.We believe that the reinstatement of the right to appeal for the respondent is unlikely to hinder the legislator’s objective of timeliness, all the more so since article 578 C.C.P. provides that the appeal, if authorized, must be heard and decided by preference. The argument whereunder granting the respondent the right to appeal upon leave will slow down class actions is weakened when one considers that in Quebec, class actions are automatically referred to case management by a Superior Court judge, which practically eliminates any risk of things getting bogged down.INDEMNITY TO THE REPRESENTATIVE PLAINTIFF (ARTICLE 593 C.C.P.)In ruling on the merits of a class action or an application for approval of a settlement, the court will award the representative plaintiff, if successful, an indemnity for disbursements, legal costs and his or her lawyer’s professional fees out of the amount recovered collectively and before payment of individual claims. If the action is dismissed, the rules applicable to the party losing the case apply. Therefore, in theory, the representative bears the expenses and the fees of his or her legal counsel. In reality, though, the representative is generally not charged anything by the law firm acting on behalf of the group. When the action is funded by the Class Action Assistance Fund, the fund covers payment of court costs in accordance with the usual rules governing cost awards.“ 593. The court may award the representative plaintiff an indemnity for disbursements and an amount to cover legal costs and the lawyer’s professional fee. Both are payable out of the amount recovered collectively or before payment of individual claims.In the interests of the class members, the court assesses whether the fee charged by the representative plaintiff’s lawyer is reasonable; if the fee is not reasonable, the court may determine it.Regardless of whether the Class Action Assistance Fund provided assistance to the representative plaintiff, the court hears the Fund before ruling on the legal costs and the fee. The court considers whether or not the Fund guaranteed payment of all or any portion of the legal costs or the fee.”Article 593 C.C.P. is inspired by case law and current practice. The legislator now expressly provides that the representative, if successful, is entitled to the reimbursement of the professional fees of the lawyer who represented him or her, the court having to ensure that such fees are reasonable and set the amount. This new provision will also allow the representative to receive financial compensation in recognition of time spent and efforts made in the conduct of the class action for the benefit of all members. It thus formalizes a common practice, especially in out-of-court settlements, of paying a sometimes rather substantial amount to the representative, with such indemnity having to be approved by the court. With article 593 C.C.P., the legislator has silenced the protestations of the Class Action Assistance Fund, which regularly intervened in settlement hearings to object to the representative receiving any form of monetary compensation.CONCLUSIONThese amendments clarify the rules of the game for class actions by codifying current practice and making significant innovations, such as opening the door to appeals upon leave from judgments granting motions for authorization to institute a class action, thereby eliminating what was considered by some to be a major breach of procedural fairness.The main conditions for instituting a class action, currently set out in article 1002 C.C.P., will now be found in C.C.P. article 574 and on the whole they remain the same. The same is true of conditions for authorization, which will henceforth be found in subparagraphs 1 through 4 of C.C.P. article 574.The Quebec Bar would have liked to see the legislator further condition the possibility of presenting relevant evidence at the authorization stage pursuant to current article 1002 C.C.P. or recognize agreements entered into between the parties in this respect, but this provision has not been modified by section 574 C.C.P. The choice has been made not to intervene in view of the fact that case law is now sufficiently established as to the criteria justifying the presentation of relevant evidence at the authorization stage.The reform does not make fundamental changes to the ground rules for class actions, but it codifies certain practices and approaches while making the Quebec class action regime a little more attractive in the face of a growing number of multi-jurisdictional class actions involving Quebec residents. That is a good thing.The new Code of Civil Procedure is expected to come into force in the fall of 2015._________________________________________1 Brief of the Quebec Bar on the Draft Bill instituting the new Code of Civil Procedure.2 2013 Q.C.C.S. 6617.3 Section 30(2) of the Class Proceedings Act, 1992, S.O. 1992, c. 6. 4 Section 36(1)(a) R.S.B.C.1996 c. 50.

On January 16, 2014, the Supreme Court of Canada1 affirmed the Court of Appeal of Québec2 judgment which authorized the class action brought against Vivendi Canada Inc. (“Vivendi”). This important decision confirms, among other things, that the rules for authorizing class actions in Quebec are more liberal than those in the common law provinces.THE FACTSSeagram Ltd. (“Seagram”), which was established in 1857, is a producer of wine and spirits. Its head office and principal place of business are in Montreal.In 1977, Seagram set up a supplemental health insurance plan for its management and non-unionized employees (the “Plan”). The Plan covers eligible employees both while employed and after they retire.In 1985, Seagram unilaterally amended the terms of the Plan, adding a clause pursuant to which it reserved its right to modify or suspend the Plan at any time.In December 2000, Vivendi S.A. acquired Seagram, which had over 700 employees at the time.In December 2001, Seagram’s assets relating to the production of wine and spirits were sold to Pernod Ricard and Diageo, and Seagram ultimately became Vivendi.In September 2008, Vivendi advised the retirees and beneficiaries that it would be making several amendments to the Plan which would take effect on January 1, 2009 (the “Amendments”):  the annual deductible retirees and beneficiaries had to pay would be substantially increased; only prescription drugs on the list of drugs for the province of residence of retirees or beneficiaries would henceforth be reimbursed; a lifetime maximum of $15,000 for all coverage under the Plan would be introduced whereas there was none before.In 2009, Michel Dell’Aniello applied to the Superior Court of Québec for authorization to institute a class action and asked it to ascribe to him the status of representative of the following persons:“[TRANSLATION] All retired officers and employees of the former Seagram Company Limited who are eligible for post-retirement medical care under Vivendi Canada Inc.’s health care plan (“Plan”) and eligible dependents within the meaning of the Plan (“beneficiaries”), as well as, with regard to the damages claimed, the successors of any such officers, employees or beneficiaries who have died since January 1, 2009.” In his action, Mr. Dell’Aniello sought, among other things, a declaration that Vivendi illegally amended the Plan, and to have the Amendments cancelled and the Plan reinstated as it was before the Amendments. The proposed class includes some 250 retirees or surviving spouses of retirees who worked in six provinces—134 in Quebec, 82 in Ontario, 3 in Alberta, 16 in British Columbia, 2 in Saskatchewan and 13 in Manitoba.THE SUPERIOR COURT OF QUÉBEC DECISION3On August 3, 2010, the Superior Court of Québec dismissed Mr. Dell’Aniello’s motion for authorization to institute a class action. Contrary to what Vivendi had argued, Justice Mayer held that, pursuant to article 3148 (3) C.C.Q., Quebec authorities have jurisdiction to hear the action provided the class action is authorized. He found, among other things, that it is easier and more convenient to institute the class action in Quebec since over half the potential group members, i.e. 53.7%, live in Quebec.However, the judge refused to authorize the class action, finding that it was a range of individual recourses and that the requirement that there be similar or related questions of law or fact set out in article 1003 a) C.C.P. was not met. In his view, the class action is therefore not the most appropriate procedural vehicle. He was of the opinion that if the action was authorized, the judge would have to conduct a detailed review of a multitude of individual circumstances, which would constitute a multitude of mini-trials. Because the right to insurance benefits crystallizes at the time of retirement, the intention of the parties with respect to the vesting of rights must be determined as of that time. Hence, the contract together with the communications between the employer and each class member must be examined to determine whether any rights have vested.The judge also examined the situation of certain subgroups of retirees and beneficiaries and said that their right to post-retirement insurance benefits did not crystallize, since the unilateral amendment clause added in 1985 is inconsistent with an intention to confer a vested right.Lastly, the judge added that the diversity of the legislative schemes applicable to individual claims, which stems from the fact that the retirees had worked in six different provinces, shows the lack of homogeneity of the proposed group and supported a refusal to authorize the class action.THE COURT OF APPEAL OF QUÉBEC DECISION2On February 29, 2012, the Court of Appeal of Québec quashed the judgment in first instance and authorized Mr. Dell’Aniello to institute a class action. Justice Léger, writing for the Court, held that at the authorization stage, the court’s analysis must be limited to whether there is a prima facie case. According to the Court of Appeal, the motion judge ruled on the merits of the case in determining that the right of certain retirees and beneficiaries to post-retirement insurance benefits had not crystallized. This showed that he conducted an in-depth analysis of individual questions rather than a preliminary analysis. The Court of Appeal was of the opinion that the authorization stage is a mere screening mechanism and that, accordingly, the motion judge overstepped the bounds of this function.After examining the applicable criteria and the allegations in Mr. Dell’Aniello’s motion, the Court of Appeal held that there was in fact a common question at the heart of the class action, namely the validity or legality of the Amendments made to the Plan. The Court held:[Translation] “[64] In this particular context, I believe that the main question at issue is whether the 2009 Amendments, which apply to all members of the Class, are valid or lawful. That issue can obviously be broken down in turn into specific questions which together constitute the following related questions which the appellant has identified in this motion for authorization. Accordingly, if the analysis is based on the questions actually at issue rather than on factual differences that are not relevant at the preliminary stage, it is inappropriate to create subgroups in order to decide the motion.” The Court added that the multitude of legal principles which could apply to each group member was not the core of the dispute but involved the existence of vested rights.The Court of Appeal held that the common question raised in Mr. Dell’Aniello’s application for authorization to institute a class action is related for all the group members and that the subsequent questions the Court will have to decide if the action is authorized cannot be examined at the authorization stage.THE SUPREME COURT OF CANADA DECISION1The Court affirmed the Court of Appeal judgment and held that the Superior Court judge should have authorized the class action pursuant to the criteria set forth in article 1003 C.C.P.Firstly, the Court of Appeal was justified in intervening and amending the authorization judgment. It is not up to the authorization judge to rule on the merits of the case. By acting as he did, the motion judge committed an error in assessing the relatedness criterion of article 1003 a) C.C.P.For a question to be common in a class action, success for one member of the class does not necessarily have to lead to success for all the members. However, success for one member must not result in failure for another.Thus, and particularly in Quebec, the relatedness requirement set out in the Code of Civil Procedure must be interpreted liberally. The Supreme Court warns against importing common law principles into the analysis of the tests set out in the Code of Civil Procedure and states:“[52] Second, if art. 1003(a) is compared with the legislation of the common law provinces, it can be seen that the wording used to establish the commonality requirement is different in the latter. For example, the requirement is expressed in broader and more flexible terms in Quebec’s C.C.P. than in Ontario’s legislation, which requires the existence not merely of similar or related questions, but of “common issues”: Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1)(c). Moreover, the wording of the Ontario statute is used in the legislation of all the other common law provinces of Canada that have legislated with respect to class actions: Class Proceedings Act, S.A. 2003, c. C 16.5, s. 5(1)(c); Class Proceedings Act, R.S.B.C. 1996, c. 50, s. 4(1)(c); The Class Actions Act, S.S. 2001, c. C 12.01, s. 6(1)(c); Class Proceedings Act, C.C.S.M. c. C130, s. 4(c); Class Proceedings Act, S.N.S. 2007, c. 28, s. 7(1)(c); Class Proceedings Act, R.S.N.B. 2011, c. 125, s. 6(1)(c); Class Actions Act, S.N.L. 2001, c. C 18.1, s. 5(1)(c).”(emphasis added)and further on:“[57] Thus, the Quebec approach to authorization is more flexible than the one taken in the common law provinces, although the latter provinces do generally subscribe to an interpretation that is favourable to the class action. The Quebec approach is also more flexible than the current approach in the United States: Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). As Professor Lafond says, [TRANSLATION] “Quebec procedure surpasses in this regard the procedure of the other Canadian provinces, and of England and the United States, which struggle with the rigid concepts of 'same interest' or 'common interest', and of 'predominance of the common issues'”: Le recours collectif comme voie d’accès à la justice pour les consommateurs, at p. 408.”In short, authorization judges should not place undue emphasis on the fact that several individual questions might have to be analyzed. Instead, they should ask themselves whether the person who wishes to bring a class action has established the presence of an identical, similar or related question that can serve to advance the resolution of all the class members’ claims and that could ultimately have an effect on the outcome of the case.According to the Supreme Court, the diversity of the legislative schemes that could apply to the individual claims also does not constitute a sufficient basis for refusing to authorize the class action.The Supreme Court also points out that the principle of proportionality set out in article 4.2 C.C.P. is not a separate fifth criterion to be considered in assessing the authorization of a class action. Although the principle of proportionality may be used in assessing each of the criterion of article 1003 C.C.P., they are exhaustive. Where the authorization judge is of the opinion that the four criteria of article 1003 C.C.P. are met, he must authorize the class action without asking whether it is the most appropriate procedural vehicle.The Supreme Court therefore held that the questions raised in Mr. Dell’Aniello’s motion are sufficiently related and similar to justify a class action.CONCLUSIONThis decision reminds us firstly that the conditions for authorizing a class action are more liberal in Quebec than elsewhere in Canada, as the Supreme Court also recently noted in Infineon4. Although decisions involving the commonality requirement rendered by common law courts may sometimes be used as a guide, they must be analyzed with caution. In the United States, the courts apply the concept of the predominance of the common issues. In Quebec, it need only be shown that there is a common issue which is relevant and significant enough for all the class members, as the Court of Appeal pointed out in Suroît5. Furthermore, in our opinion, some class actions which raise intrinsically individual questions (such as misrepresentation in contractual matters) should not meet the requirements for authorizing an action.________________________________1 Vivendi Canada Inc. v. Dell’Aniello, 2014 SCC 1, LeBel, Abella, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner, JJ. (reasons drafted by LeBel and Wagner, JJ.). 2 Dell’Aniello v. Vivendi Canda Inc., 2012 QCCA 384 (Jacques Chamberland, André Rochon and Jacques A. Léger, JJ.). 3 Dell’Aniello v. Vivendi Canada Inc., 2012 QCCS 3416 (Paul Mayer, J.). 4 Infineon Technologies A.G. v. Option consommateurs, 2013 CSC 59. 5 Collectif de défense des droits de la Montérégie (CDDM) v. Centre hospitalier régional du Suroît du Centre de santé et de services sociaux du Suroît, 2011 QCCA 826.

Facts and judicial historyThe Supreme Court of Canada has rendered a decision which is likely to generate a lot of commentary in the Canadian class action scene. On December 12, 2013, the Court issued a ruling in the case of AIC Limited v. Fischer1 (hereinafter 'Fischer'), now frequently referred to as the 'market timing decision'. While the issue of market timing has given rise to class actions in several Canadian provinces, the case in question originated in Ontario, and the Court's unanimous decision2 was based on the applicable class action rules in Ontario, as set out in that province's Class Proceedings Act, 1992 (the 'C.P.A.').3In this decision, the Supreme Court ultimately gives the green light to the certification of a class action instituted by numerous investors, represented by Mr. Fischer, against two mutual fund managers (AIC Limited and CI Mutual Funds Inc.), who engaged in market timing. This practice consists of attempting to predict the direction of the market based on short-term economic indicators and making purchase and sale decisions of securities based on these predictions. It is a risky practice which can be prejudicial to the long-term value of investments.The primary interest of this decision is the Court's holding on the so-called 'preferable procedure', or preferability, criterion. According to this criterion, the court must assess whether, in the circumstances of the specific case, the certification of a class action is 'preferable' to other means for the members of the proposed class to obtain redress. In other words, the court must determine whether a class action is the preferable procedure to resolve the common issues.In Fischer, the Court decided that the class action could proceed even though the mutual fund managers involved in the proceeding had already concluded a settlement agreement with the Ontario Securities Commission to reimburse the investors for a certain percentage of their losses as a result of the said market timing activities. This settlement agreement was concluded in the context of a parallel regulatory proceeding to which the investors who were members of the class in the proposed class action were not parties.The Court therefore held that this parallel regulatory proceeding was not a preferable procedure capable of barring the certification of the class action, which was nevertheless the preferable procedure for resolving the common issues.The judge at first instance,4 noting that the members of the proposed class had already received monetary compensation, refused to certify the class action because he found that, under the circumstances, it was not the preferable procedure within the meaning of section 5(1)(d) of the C.P.A.This decision was appealed to the Ontario Divisional Court5 which allowed the appeal, overturning the first judge's decision. The Ontario Court of Appeal,6 in turn, dismissed the subsequent appeal, agreeing with the outcome in the Divisional Court, but for different reasons.For its part, the Divisional Court would have certified the class action based on a comparison of the amount of the compensation paid as a result of the regulatory proceeding with the amount of the damages claimed in the proposed class action. By virtue of this comparison, the Court concluded that the class members would still be able to recover a substantial amount in the class-action proceeding and, therefore, that the proceeding before the OSC could not be regarded as preferable to the proposed class action.While the Ontario Court of Appeal confirmed this conclusion of the Divisional Court, it based its decision on a comparison between the class action and the regulatory proceeding — the procedural rights afforded the proposed class members in the class action stood in contrast to their limited ability to participate in the regulatory proceeding. It therefore held that the analysis followed by the court in determining whether a class action is the preferable procedure in a given case must include a component which addresses the procedural rights afforded to the members of the proposed class.The Supreme Court of Canada's decision and the importance of the access to justice criterionIt is important to note that the Supreme Court (whose reasons were delivered by Justice Cromwell) agreed with the reasons of the lower appeal courts, but proposed a new method of analysis for deciding the preferable procedure criterion. Observing that section 5(1)(d) of the C.P.A. requires the court to conduct a comparative analysis between two or more potential recourses, the Supreme Court established the following test, in five steps, for doing so:1) What are the barriers to access to justice?2) What is the potential of the class proceedings to address those barriers?3) What are the alternatives to class proceedings?4) To what extent do the alternatives address the relevant barriers?5) How do the two proceedings compare?The Court added that the central concept of this analysis is access to justice, which has two fundamental components relating to justice, a substantive dimension and a procedural dimension: [24] There is no doubt that access to justice is an important goal of class proceedings. But what is access to justice in this context? It has two dimensions, which are interconnected. One focuses on process and is concerned with whether the claimants have access to a fair process to resolve their claims. The other focuses on substance — the results to be obtained — and is concerned with whether the claimants will receive a just and effective remedy for their claims if established. They are interconnected because in many cases defects of process will raise doubts as to the substantive outcome and defects of substance may point to concerns with the process. As the Honourable Frank Iacobucci put it, “access to justice must contain both a procedural and a substantive component. I find it difficult to accept that providing injured parties with a process to pursue their claims can be divorced from ensuring that the ultimate remedy arising from the process provides substantive justice where warranted”: “What Is Access to Justice in the Context of Class Actions?”, in J. Kalajdzic, ed., Accessing Justice: Appraising Class Actions Ten Years After Dutton, Hollick & Rumley (2011), 17, at p. 20. While it may be analytically convenient to look at process and substance considerations separately, this must not be done at the expense of an overall assessment of the access to justice implications of the proposed class action.After conducting the five-step analysis which it proposed in this case, the Court, as noted above, found that the proceeding before the OSC was not the preferable procedure, and upheld the decisions of the lower appeal courts. Accordingly, the class action proposed by the investors was certified.Conclusion and impact on class actions in Quebec and CanadaThis decision will, in our view, have a significant impact on class action litigation in Canada. Until now, defence attorneys have sometimes successfully pleaded that the certification of a class action was barred because there was a chance that the members could obtain redress through another proceeding. The argument that the goals of the class action — access to justice, judicial economy, and behavior modification — could be achieved otherwise than by resorting to the courts of law was a seductive one, and a significant number of class actions were previously dismissed on this basis at the certification stage.However, the odds are that the effect of this judgment of the Supreme Court will be to facilitate the certification of class actions notwithstanding that regulatory proceedings may be possible, or even where the respondents have set up a voluntary settlement process to address specific problems faced by their clients, if the representative can show that those other proceedings do not fully resolve the matter.It should be noted that no criterion similar to the preferability criterion exists in the Quebec legislation. Nevertheless, it will be interesting to see whether the Fischer case has a limited or more substantial impact on the class-action law in Quebec. The Quebec courts could choose to base themselves on this decision in assessing the criteria for authorization of class actions. If so, in our view, they would likely do so by reminding us of the importance of the concept of access to justice and the fact that it is unquestionably one of the pillars underlying the creation of the class action procedure in 1978.________________________________1 2013 SCC 69.2 The Court's decision was written by Justice Cromwell (and concurred in by Chief Justice McLachlin and Justices LeBel, Rothstein, Moldaver, Karakatsanis and Wagner).3 S.O. 1992, c. 6, and specifically section 5(1)(d).4 Justice Perell of the Ontario Superior Court of Justice.5 Ontario Superior Court of Justice, Divisional Court, 2011 ONSC 292 (Justice Molloy, Justices Swinton and Herman concurring).6 2012 ONCA 47 (Chief Justice Winkler, Justices Epstein and Pardu (ad hoc) concurring).

On October 31, 2013, the Supreme Court rendered three judgments with respect to class actions at the authorization or certification stage, one from the Province of Quebec1 and the other two from the Province of British Columbia.2In all three cases, the facts raised issues with respect to the price fixing of consumer products in contravention of the Competition Act,3 notably through a conspiracy. The class representatives sought to institute class actions against the persons or companies allegedly responsible for the price fixing, which raised the price of these products, on behalf of members of the class of persons who directly or indirectly purchased the products. Among other things, the three actions alleged the civil fault of the defendant companies.In the Infineon Technologies case ('Infineon'), the manufacturers of dynamic random-access memory microchips (“DRAM”), which allow information to be electronically stored and rapidly retrieved for use in a wide range of electronic devices, were alleged to have taken part in an international conspiracy to fix the price of the product, resulting in an increase in the purchase price. In the Pro-Sys Consultants Ltd. case ('Pro-Sys'), Microsoft was alleged to have engaged in unlawful conduct by overcharging for its operating systems and applications software. And in the Sun-Rype Products Ltd. case ('Sun-Rype'), manufacturers of food products allegedly engaged in an illegal conspiracy to fix the price of high fructose corn syrup used in various food products, including, for example, soft drinks.The three decisions raised the issue as to whether indirect purchasers of the products, hence, customers who did not purchase the product directly from the alleged overchargers, but who purchased it indirectly from a party further down the chain of distribution, could institute proceedings directly against the person alleged to have fixed the price. The Court’s reasons in answer to this question were rendered in the Pro-Sys matter and applied in the other two cases. In so doing, the Supreme Court resolved a judicial controversy over the rights and recourses of indirect purchasers in similar circumstances.In Sun-Rype, the Court dealt with the question as to whether a class of persons consisting both of purchasers who acquired the product directly from the party allegedly responsible for the price fixing, and of indirect purchasers, constituted an identifiable class.Finally, in Infineon, the Court dealt with the issue of the jurisdiction of the Quebec courts to authorize the bringing of a class action in the context where a product was purchased on the Internet or “online” from a company which manufactures and conducts business outside the province, such as a distance contract.Indirect Purchasers’ Right of Action: The Pro-Sys CaseIn reasons delivered by Justice Rothstein, the Court concluded that indirect purchasers could bring an action to recover losses which they suffered in purchasing a product whose price had allegedly been increased illegally. Justice Rothstein dismissed the argument pursuant to which only direct purchasers, who may have subsequently transferred the additional costs to subsequent purchasers, had a right of action. The risk of multiple recovery and the complexities of the evidence which the representatives of the class would have to adduce did not constitute sufficient reasons to stand in the way of allowing indirect purchasers to make their case against those responsible for the price fixing. Moreover, according to Justice Rothstein, the deterrence function of the Competition Act was not impaired by the actions of indirect purchasers.The Supreme Court of Canada therefore distinguished its position from that of the Supreme Court of the United States,4 which concluded that indirect purchasers had no cause of action against those responsible for the price fixing. According to Justice Rothstein, the refusal by a number of state level courts to follow the federal precedent, and the more recent doctrinal discussions in support of authorizing the right of action of indirect purchasers against the perpetrator of the illegal price fixing, favors the position of allowing the indirect purchasers’ right of action.After reviewing the criteria for certification, the Supreme Court concluded that they had all been met, and therefore granted the certification of the action as a class proceeding.Direct and Indirect Purchasers as Class Members: The Sun-Rype CaseIn a judgment for the majority, Justice Rothstein5 concluded that a class made up of indirect and direct purchasers met the requirement for an identifiable class. Although certain members of the class might not have been able to prove a direct individual loss, the proposed class did not give rise to sufficient difficulties that would have warranted dismissing the action.However, in this case, the Court concluded that the criteria for certification had not been met. Based on the evidence, it was impossible for indirect purchasers to prove they had purchased a product containing high fructose corn syrup, and it was therefore impossible to prove they had suffered a loss. The Court found that there was therefore no factual basis to determine the class membership of indirect purchasers. According to Justice Rothstein, the Appellants had not met the relatively low evidentiary burden to adduce evidence to establish some basis in fact that at least two class members could be identified.In the dissenting opinion written by Justice Karakatsanis and concurred in by Justice Cromwell, Justice Karakatsanis came to the conclusion that the facts as alleged provided a sufficient evidentiary basis to reach a finding that there was “an identifiable class of two or more persons”.According to the dissent, evidentiary difficulties should not stand in the way of certification.Jurisdiction of the Quebec Courts: The Infineon CaseIn Infineon, the Petitioner, Option consommateurs, sought authorization to institute a class action against the manufacturers of DRAM chips used in various electronic devices, including personal computers. The designated class representative purchased her computer online by credit card from a company operating exclusively outside Quebec and which had no place of business in Quebec. Option consommateurs alleged that the price-fixing conspiracy artificially inflated prices of DRAM and products containing DRAM sold in Quebec. The manufacturers argued that the Quebec courts lacked jurisdiction because the contract was formed outside Quebec and none of the alleged faults, including the conspiracy, was committed in Quebec.The Supreme Court acknowledged that the challenge to Quebec’s jurisdiction could properly be raised and dealt with at the outset of a proceeding for the authorization of a class action. Even if a Quebec court concludes that it has jurisdiction, the issue may still be raised again at a later stage of the proceeding because the judgment rendered at this stage is only an interlocutory decision.Relying on article 3148 of the Civil Code of Quebec, Justices LeBel and Wagner, in an unanimous decision by the Court, concluded that the Quebec courts had jurisdiction. According to them, the alleged economic damage suffered by the purchasers of the products consisted of a higher price resulting from the conspiracy and constituted a sufficient connection with the Province of Quebec to ground jurisdiction. In other words, since the pecuniary loss was suffered in Quebec, this gave the Quebec courts jurisdiction. Moreover, the contract at issue was a “distance contract”, as defined by the Consumer Protection Act,6 which provides that it is deemed to be entered into at the address of the consumer, which, in this case, was in Quebec.Finally, Justices LeBel and Wagner concluded that the criteria for the authorization of a class action set out in article 1003 of the Code of Civil Procedure ('C.C.P.') had been met. They reiterated that, at this preliminary procedural stage, the criteria for the authorization of a class action must be interpreted and applied broadly, and that the burden is one of demonstration and not of proof. The Court noted that, in Quebec, the burden at the authorization stage is less onerous than at the certification stage in other Canadian jurisdictions. Thus, the Court highlighted that, in other Canadian jurisdictions, indirect purchasers would have to show that their claim has a sufficient basis in fact, and would have to produce expert testimony demonstrating an aggregate loss. To impose such a burden would be inconsistent with the requirements of article 1003 C.C.P. The class action was therefore authorized.ConclusionThese three judgments will certainly facilitate the authorization of class actions by direct and indirect purchasers. Moreover, consumers who purchase products over the Internet from the comfort of their homes may have a right of action against the persons that are alleged to have increased the prices. In the context of purchases in Quebec, where the economic damages are suffered in Quebec, consumers, and the associations who represent them, will in all likelihood resort to launching class action proceedings in Quebec, even where the vendor or manufacturer is located outside Quebec._________________________________________1 Infineon Technologies AG v. Option consommateurs, 2013 SCC 59.2 Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 and Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2013 SCC 58.3 R.S.C., 1985, c. C-34.4 Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).5 With Chief Justice McLachlin and Justices LeBel, Fish, Abella, Moldaver and Wagner.6 R.S.Q., c. P-40.1.

INTRODUCTIONOn July 17, 2013, the Court of Appeal issued an unprecedented judgment in Quebec in the case of Theratechnologies inc. v. 121851 Canada inc.1 Justice Clément Gascon, writing for the court, held, in a unanimous decision, that a judgment having authorized a class action for damages under section 225.4 of the Securities Act (Quebec)2 (hereinafter the “S.A.”) can be appealed despite the rule laid down in the Code of Civil Procedure (Quebec) (hereinafter the “C.C.P.”) to the effect that judgments authorizing the institution of a class action are unappealable.FACTS UNDERLYING THE DISPUTEIn this case, 121851 Canada Inc. (hereinafter “121CAN”) accused Theratechnologies, a corporation listed on the Toronto Stock Exchange, and its officers (hereinafter collectively “Thera”) of failing to disclose a “material change” through the publication of a press release, which Thera was required to do on the basis of its status as a reporting issuer under the S.A. and its related continuous disclosure obligations under sections 73 S.A. and 7.1 of the Regulation 51-102 respecting continuous disclosure obligations.3 Since 121CAN had held 190,000 common shares of Theratechnologies, it applied for an authorization to institute a class action.PROCEEDINGS IN THE SUPERIOR COURTIn the Superior Court of Quebec, 121CAN filed a motion for authorization to institute a class action based only on the provisions of the C.C.P. Thera then filed an application for dismissal on the ground that the prior authorization required under subparagraph 1 of section 225.4 S.A. had not been obtained. Indeed, since Bill 194 came into force, a specific civil remedy has been available allowing secondary market investors to bring an action in damages for verbal or written misrepresentation or the failure of the issuer to comply with its disclosure obligations.At the hearing on the motion for dismissal filed by Thera, Justice Marc André Blanchard of the Superior Court authorized an amendment which allowed 121CAN to add a second motion for authorization under sections 225.4 and following of the S.A.5Both motions were heard at a joint hearing at the end of which Justice Blanchard allowed both motions and authorized a class action for damages.6THE JUDGMENT OF THE COURT OF APPEALIn the Court of Appeal, acknowledging that the authorization under article 1003 C.C.P. could not be appealed since such an appeal is clearly prohibited by the second paragraph of article 1010 C.C.P., Thera applied for leave to appeal the authorization granted under section 225.4 S.A., arguing that such an appeal exists under the S.A.Leave for appeal is normally dealt with by a single judge, but on account of the unprecedented nature of the issue, it was referred to a full panel of the Court.7In a unanimous decision drafted by Justice Gascon, the Court of Appeal allowed the motion for leave to appeal filed by Thera, and then dismissed the appeal. In this bulletin, we will mainly consider the issue of leave to appeal an authorization judgment under section 225.4 S.A., rather than the reasons underlying the dismissal of the appeal on the merits.Leave to appeal - Decision of Justice GasconAs the basis for his analysis and decision on the issue, Justice Gascon reviewed in detail the context of the adoption of the liability regime implemented through the introduction of Bill 19 and sections 225.2 and following of the S.A. and the purpose of this new remedy.Historically, to prevail in an action in damages under the S.A., the plaintiff was required to prove a fault, a loss and causation, as in any civil liability action. However, in the specific context of the financial markets, these requirements constituted nearly insurmountable barriers for investors, who had to demonstrate that they had relied on [translation] “false information or the failure to disclose a material change for the purchase of the security and that the change in the market price of the security resulted from the false declaration or the failure to disclose”.8 These requirements also made it very difficult to institute a class action because the facts having led to each of the investments by the members of the class could be different.It was in this context that the Allen Committee of the Toronto Stock Exchange published a report in 1997 which proposed the creation of a specific liability regime for breaches of the statutory continuous disclosure requirements. The recommendations in this report formed the basis for the adoption of Bill 19.Justice Gascon assessed this new liability regime in the following terms:[Translation][62] The purpose of the remedy is to contribute to improving the quantity and quality of the information disclosed on the market; it serves first as a deterrent, then as a means of compensating victims.[63] So to balance strengths, the new remedy establishes a presumption in favour of the investor: when the security is acquired or transferred concurrently to a misrepresentation or failure to disclose a material change, the fluctuation in the value of the security is presumed to be attributable to this fault. The investor is therefore freed of a heavy burden, that is, to demonstrate that he relied on the false information or the failure to disclose a material change and that the variation of the price of the security is the result of such information or omission.[64] In return, to avoid abuse, an authorization mechanism for investors’ remedies is instituted to weed out remedies instituted in bad faith and which do not offer a reasonable possibility of success.(our emphasis)Considering that in no case the silence of the law constitutes a denial of the right to appeal and that furthermore, neither the Allen report nor the parliamentary debate preceding the adoption of Bill 19 discussed such a prohibition, he concluded that the legislator voluntarily chose not to prohibit the right to appeal in section 225.4 S.A. Considering then that the portion of the judgment having authorized the action in damages as being an interlocutory judgment, Justice Gascon, for the Court, was of the view that the general principles governing the right to appeal, as set out in articles 29 and 511 C.C.P. had to be applied in the circumstances to decide on the issue and that, accordingly, the judgment was appealable upon leave. The Court therefore agreed with Thera’s position.Reminding in passing that the remedy under section 225.4 S.A. may be exercised both as an individual remedy and a class action, the Court granted to Thera leave to appeal.Comments In this judgment, the Court of Appeal clearly establishes a distinction between the rules applicable to the regime of authorization to institute a class action under articles 999 and following C.C.P. and those applicable under the special liability regime brought about by the amendments to the S.A. made under Bill 19. In fact, despite the joint hearing of these two applications for authorization, the Court of Appeal refused the analogy suggested by 121CAN whereby the two applications had to be dealt with in the same way and, accordingly, that the Court should refuse leave to appeal the portion of judgment authorizing the exercise of an action in damages. Although the Court acknowledged that the procedural vehicle of a class action is often the most appropriate in such circumstances for the investors, it insisted on the purposes of these two mechanisms which it deems to be specific and separate:[translation][69] It follows that the purpose of the authorization mechanism under sec. 225.4 S.A. is different from that under the Code of Civil Procedure provisions dealing with class actions. While the purpose of the latter is to ensure the quality of the legal syllogism proposed trough a burden of demonstration and not evidence, the purpose of the former is to weed out opportunistic remedies where good faith is lacking and where the proof of the fault is not “reasonably established.”In the case under review, the parties found themselves in a situation where, without access to the specific regime under the S.A., they would have been deprived of the Court of Appeal clarifications on issues directly related to the authorization of the class action.This case illustrates the fact that the Court of Appeal could validly play the role of “gate keeper” which would be entrusted to it if the appeal of an authorization judgment was possible upon leave.We are also of the view that such a right to appeal would restore a balance between the forces present by putting an end to this procedural asymmetry.In this respect, it is useful to mention that the Quebec Bar issued a favourable recommendation for this avenue as part of the consultation on the reform of the Code of Civil Procedure (Bill 28) in a context where such a right to appeal would be in line with the rules governing the appeal of interlocutory judgments.Lastly, although the Theratechnologies may rightly be considered as a particular case, we also wonder about the practical consequences of such a decision in the future. For example, what about a situation where the authorization of the class action would be granted under the C.C.P. without this judgment being appealable, even where the Court of Appeal would be of the view that there is no reasonable possibility for the plaintiff to be successful under the S.A.?_________________________________________ 1 2013 QCCA 1256.2 R.S.Q., c. V-1.1.3 R.R.Q, c V-1.1, r. 24, (Securities).4 This Bill has been incorporated into the S.A. on November 9, 2007 as sections 225.2 to 236.1 S.A. under the title “Civil Actions”.5 See 121851 Canada inc. v. Theratechnologies inc., 2010 QCCS 6021.6 121851 Canada inc. v. Theratechnologies inc., 2012 QCCS 699.7 Par. [32] of the judgment.8 See 2013 QCCA 1256, supra note 1, at par. 58.

Although non-compliance with the Consumer Protection Act (the “CPA”) is generally sanctioned by the nullity of the CPA non-compliant clauses, or of the contract in its entirety, in cases involving written notices of forfeiture of the benefit of the term, the courts have sometimes decided to maintain the validity of the non-compliant notices if they were not prejudicial to the consumer’s rights. The following two judgment support this view.CAISSE POPULAIRE DESJARDINS DU PORTAGE JUDGMENTIn a recent Court of Québec judgment, Caisse Populaire Desjardins du Portage v. Létourneau1, the Court dismissed the defendant’s plea which sought to annul the notice of forfeiture of the benefit of the term because the statements of account attached to the said notice did not detail all of the information prescribed by the Regulation respecting the application of the CPA (the “Regulation”). Contrary to the requirements of subsections 67(e) and 67(f) of the Regulation, the statements of account in question did not clearly indicate the balance of net capital remaining after each sum of money paid into the defendant’s account, nor the portion thereof used to pay the net capital and the portion used to pay credit charges.Having sent two notices of forfeiture of the benefit of the term and waited the requisite thirty (30) days for the forfeiture to occur, the Caisse sued the defendant for the reimbursement of two personal loans on which the defendant failed to make monthly instalments.At trial, the defendant admitted owing payments on the loans, however she submitted that the notices were invalid because the statements of account did not include all of the information required by the Regulation. Therefore, she argued that the forfeiture of the benefit of the term had not occurred and she was only liable to pay the plaintiff the lapsed instalments, rather than the balance of the loans.The Caisse admitted that the statements of account did not respect the form prescribed by the Regulation, but argued that the information omitted was not material and should not invalidate the notices.The Court noted that the purpose of the statement of account attached to the notice of forfeiture of the benefit of the term is to inform the consumer of the amount owing so that he may, within thirty (30) days of the receipt of such notice, remedy the default by paying the stated amount to the merchant. In this case, the Court sided with the Caisse, agreeing that the notices and the attached statements of account contained the information required for the defendant to ascertain and remedy its default. Citing another Court of Québec judgment in the case of Banque de Montréal v. Bujold2, rendered in 2009, the Court reminded us that the CPA was adopted in order to protect consumers from illegal practices of merchants, but it should not enable consumers to plead trivial and immaterial non-compliance with the law in order to avoid their obligations.BUJOLD JUDGMENTIn the Bujold case, the plaintiff bank sued the defendant for the balance due under the instalment sales contract signed for the purchase of a used vehicle. Similarly to the judgment summarized above, the defendant submitted to the court that the notice of forfeiture of the benefit of the term did not respect subsections 67(e) and 67(f) of the Regulation and should therefore be annulled. The defendant, however, also submitted that the credit contract itself should be annulled due to the bank’s failure to adequately investigate his financial situation, and the fact that it was obvious that the defendant had no use for the purchased vehicle. In its judgment, the Court noted that the CPA is meant to protect vulnerable consumers, but should not be abused by them to obtain the nullity of clauses or contracts that are otherwise valid. The Court admitted that it could annul the notice of forfeiture of the benefit of the term based on the defendant’s submissions, but such a decision would be contrary to the best interests of justice because it would inevitably result in a new notice being issued by the plaintiff, causing additional delays and possibly further contestation by the defendant.On the issue of the nullity of the consumer contract itself, the Court questioned the good faith of the defendant, Bujold, because he made multiple flagrantly incorrect statements on the bank’s credit application form, including a false declaration of employment and revenue and false details regarding hypothecary loan payments, and blatantly neglected to declare several outstanding personal loans. Yet, the defendant did not hesitate to sign at the bottom of the credit application form, certifying that all the information provided to the bank was true and correct.In light of these circumstances, the Court found that the bank was not negligent in its duty to investigate the plaintiff’s financial background prior to granting the credit. According to the Court, the real reasons which explained why the defendant obtained a loan to purchase a vehicle he did not need were the defendant’s own misrepresentations and his general lack of business acumen. Moreover, the Court criticized the defendant’s reprehensible conduct, holding that this conduct estopped the defendant from arguing the deficiencies in the notices before the Court. For these reasons, the Court upheld the validity of both the credit contract as well as the notice of forfeiture of the benefit of the term and ordered the defendant to pay the outstanding debt to the plaintiff.COMMENTSMerchants should not view the courts in these cases as being generally lenient toward non-compliance with consumer protection legislation. However, these cases are a reminder that a merchant’s rights should not be undermined on the basis of technicalities or trivial and immaterial non-compliance that does not prejudice the consumer.While it is difficult to generalize from these cases, the courts have at least given some flexibility to merchants in cases in which their notices of forfeiture of the benefit of the term are deficient where the accompanying statements of account fail to clearly indicate the balance of net capital remaining and the portion thereof used to pay the credit charges. The real criterion seems to be whether the defendant was able to ascertain and remedy its default.The Bujold judgment also provides some guidance on the extent of the merchants’ duty to investigate the degree of the consumer’s consent in accordance with the criteria under section 9 of the CPA (namely, the condition of the parties, the circumstances in which the contract was entered into and the benefits arising from the contract for the consumer). According to case law, the consumer’s personal circumstances should be considered and verified by the merchant prior to entering into a binding contract with the consumer. In carrying out such verifications, a merchant may rely on the (apparently true) representations made by the consumer._________________________________________ 1. Caisse Populaire Desjardins du Portage v. Létourneau, 250-22-002775-125 (C.Q.). 2. Banque de Montréal v. Bujold, 2009 QCCQ 5530.

The decision of the Court of Appeal in the La Capitale case has been expected since February 2012 when the Superior Court dismissed the class action taken against an insurer who, with the consent of the policyholder, had unilaterally modified the waiver of premiums clause in a group insurance contact.1To better understand the context, please refer to our newsletter in June 2012 following the Superior Court judgment.THE FACTSTwo suits were brought against La Capitale by Plaintiffs Tremblay and Beaver, both public sector employees; they were authorized to institute a class action and represent class members covered by the group insurance contract who were or had been disabled since 1996 and from whom the waiver of premiums benefit had been withdrawn by a modification to the insurance contract. The group consisted of approximately 1,200 members.The Plaintiffs became disabled in 1996 and 1997, respectively, and are still disabled. They claim the right to have their premiums waived under their group insurance contract until the age of 65, as long as they remain disabled.When he became disabled in 1996, Mr. Tremblay belonged to a bargaining unit covered by the collective agreements signed with the FTQ. The long-term care centre for which he worked terminated his employment in 2000 due to his disability. In 2005, his bargaining unit became disaffiliated with the FTQ and in June 2006 the insurer notified him that insurance coverage was withdrawn because his union was no longer affiliated with the FTQ.Mr. Beaver’s situation is somewhat different. He was employed by a school board when he became disabled in 1997 and he still retains an employment relationship with it. His insurer notified him in November 2007 that under a new provision of the insurance contract, it could cease granting the waiver of premiums after 36 months of benefits. Because he had benefited from the waiver since 1997, the insurer claimed it was justified in ending it.Plaintiffs Tremblay and Beaver’s claims were joined together for hearing and they claimed, on behalf of the members of the class, that their right to the waiver of premiums be restored.All the contracts entered into between the times of their respective disabilities and the modifications that deprived them of the waiver of premiums for sickness insurance and dental care, which came into force in 2001, contained a clause entitled Modifications to the Policy [Translation], which reads as follows:“The policyholder may, at all times, after agreement with the Insurer, make changes to the contract regarding the categories of eligible persons, the extent of protection and the sharing of costs between the categories of insured persons. Such changes shall then apply to all insured parties, whether active, disabled or retired.” [Translation] (Our underlining)THE SUPERIOR COURT JUDGMENTThe Superior Court concluded that given the power granted to the contracting parties, i.e. the policyholders (a group of numerous associations representing the insureds) as well as the insurer, they could negotiate modifications to the contract because a specific clause authorized them to do so. Thus, the clause terminating the waiver of premiums was valid without the agreement of the individual insureds.The Superior Court added that the waiver is not a benefit recognized in the insurance policy, but rather a provision found in the section on payment of premiums, which confirms that the waiver of premiums is not one of the insured benefits.Although the facts in dispute and the number of parties involved make this a complex case, the real question in dispute is whether the policyholder and the insurer had the right to unilaterally modify the group insurance contract.THE COURT OF APPEAL DECISIONThe Appellants repeated all of their arguments. They claimed that “disability” and the waiver of premiums attached to it at the beginning of their respective disabilities was an insured risk. This right to the waiver crystallized when their disabilities arose and the modification made to the group policy on January 1, 2001 was not valid. Lastly, they claimed that the insurer had committed a fault that engaged its liability.The Court, in a decision written by Justice Thibault, first traced the history of the successive contracts and the provisions of the Civil Code that apply to them.It noted that the contract in force on March 1, 1991 provided for not only a waiver of premiums in cases of disability, but also a clause authorizing modifications to the contract upon agreement between the insurer and the Committee (policyholder) and those modifications apply to all insureds, whether they are active, disabled or retired.The contract in force since January 1, 1997 provided for a waiver of premiums in cases of disability, but it ceased at 65 yearsof age or when the insured no longer fulfilled the conditions of insurability. The clause giving the policyholder and the insurer the power to modify the contract was similar.The contract in force since January 1, 2001 added as a cause of cessation of the waiver of premiums privilege the date on which the Committee confirms cessation of the employees group’s membership in the union, which is the policyholder, or cessation of the member’s membership in the employees group. The 65 years of age limit and the clause permitting modification of the contract remained similar.On January 1, 2008, an endorsement was added to the contract from 2001 and it provided that, in addition to the causes described above, the sickness insurance and dental care plans ceased at the date of the end of the employment relationship or 36 months after the date of the commencement of the participant’s disability.The Court of Appeal confirmed that the benefits that the insurer must pay under the sickness and dental care coverages do not depend on the occurrence of a disability; they are not linked to disability.As for the waiver of premiums that is tied to the occurrence of disability, it is not a coverage to which the insurer has committed itself because the insurer has not taken on responsibility for it, but instead it is shared between the participants. This benefit results from the policyholder’s decision to transfer to the active participants the premiums that the disabled participants are not required to pay.Then the Court considered the argument concerning the “crystallization” of the Appellants’ rights at the times of their respective disabilities, because it is important for the insurers to know whether or not the successive contracts are distinct contracts, although the Court judged this issue to be secondary considering the fact that the contract from 1997 contains a preamble stating that it is a consolidation of the contract and endorsements in force since 1991.The contract applicable at the time of the occurrence of the disability of each of the Appellants was the one from 1997. Although it was replaced by the contract from 2001 and modified by the endorsement of 2008, all the modifications were made at the request of the policyholder because the active employees expressed their dissatisfaction with the high cost of the premiums paid for the plan. At that time, the policyholder’s insurance advisor had informed it that the waiver of premiums benefit until 65 years of age was very generous and that most plans limited the waiver period to three years.Given that all of the contracts that had been in force since the Appellants’ disabilities authorized the policyholder and the insurer to modify them by agreement and that they provided that the modifications applied to all the insureds irrespective of their status, no right could “crystallize” at the dates of disability. However, it was agreed that the Appellants continued to have the benefit of the life insurance with a waiver of premiums.Lastly, the Appellants argued that article 2405 C.C.Q. required that the modification putting an end to the contract in the event of a change in the union’s allegiance be brought to their attention. The Court rejected that argument; the group insurance contract is based on the definition of a given group for the benefit of which it is negotiated. The policyholder has authority from this group to negotiate and could agree on a modification concerning the categories of eligible persons. The Court accepted the views expressed by author Michel Gilbert stating that article 2405 C.C.Q. “can apply only to individual insurance because one cannot expect that participants come forward concerning a modification in which they are not involved.” [Translation]CONCLUSIONThe modification clauses are valid and any change, addition or withdrawal of a coverage or privilege can be invoked against all of the active, disabled or retired insureds, without them having to be notified about it, if the bilateral agreement procedure is respected.The Plaintiffs have 60 days to apply for leave to appeal to the Supreme Court._________________________________________   1 2012 QCCS 746.

This publication was authored by Luc Thibaudeau, former partner of Lavery and now judge in the Civil Division of the Court of Québec, District of Longueuil. The title of this newsletter gives a good summary of the explanatory notes that serve as an introduction to Bill 14, entitled An Act to amend the Charter of the French language, the Charter of human rights and freedoms and other legislative provisions (the “Bill”). The legislator is concerned that English is being used systematically in certain workplaces. The Bill was tabled on December 5, 2012 and the proposed amendments are designed to reaffirm the primacy of French as the official and common language of Quebec.

This publication was authored by Luc Thibaudeau, former partner of Lavery and now judge in the Civil Division of the Court of Québec, District of Longueuil. Lavery keeps a close eye on developments in consumer law. Its leading-edge expertise in the retail trade and class actions has been pointed out many times by people involved in the field. Lavery is committed to keeping the business community informed about this issue by regularly publishing bulletins dealing with case law and legislative developments that could affect, influence and even change business practices. This bulletin discusses a recent Court of Québec decision concerning the liability of a credit card holder in the event of the theft of his card as well as the legislative changes on this issue proposed by Bill 24.