On April 19, 2012, the Québec Court of Appeal (the Court) rendered the first decision on misleading advertising since the ruling of the Supreme Court of Canada (the SCC) in Richard v. Time Inc. In Perreault v. McNeil PDI Inc., the Court clarified the rules for awarding punitive damages in consumer law and reiterated that an applicant seeking authorization to institute a class action must prove a personal cause of action.
On October 12, 2007, the appellant applied for authorization to institute a class action against various manufacturers of drugs for the relief of cold and cough symptoms in children.
The appellant had administered such drugs to her young children and stated that she never noticed any adverse side effects. However, the action is based on what she describes as the possibility that such products might be harmful.
In particular, she alleges that the drug companies made misleading statements regarding the dangerousness and efficacy of their drugs. Her allegations were based on a misinterpretation of some documentation.
In October 2007, in response to notices issued by the U.S. Food and Drug Administration, the respondents withdrew Dimetapp®, Tylenol® and Benylin® for infants from the market. Their objective with this voluntary withdrawal was to reduce the potential risks of overdose in young children. It was never alleged that these products were dangerous. They also added the following statement to their product labels "Not to be given to children under two years of age."
During the same period, Health Canada published a press release in which it raised concerns regarding the adverse side effects of certain cold and cough medicines administered to children under two years of age, including the risk of fatal overdose. It is that press release that seems to have been the basis of the action brought by the appellant.
Authorization was denied in the Superior Court of Québec, on the grounds of insufficient colour of right and because the appellant lacked the requisite interest to act as the representative of the group. On appeal, the appellant claims only reimbursement of the cost of the drugs and punitive damages, thus abandoning her claim for compensatory damages.
First, the Court assessed the existence of a sufficient cause of action within the meaning of article 1003 (b) of the Code of Civil Procedure (C.C.P.).
In this instance, the appellant admits that no damages were sustained by her personally or by her children. Despite this, she claims sufficient interest to institute the action as a consumer seeking the punishment for a practice prohibited by the Consumer Protection Act (the CPA). The Court dismissed that argument based on the principles laid down by the SCC in Richard v. Time.
Thus, at the outset, the Court agreed that the consumer benefits from an irrefutable presumption of prejudice where a manufacturer breaches one of its obligations under the CPA. It also held that evidence of a practice prohibited by the CPA gives rise to a presumption of fraud. However, these presumptions do not relieve the appellant of the burden of proving that the respondents made misleading statements.
It is therefore necessary to clearly identify the elements of the alleged fraud. In this instance, the Court was of the view that the evidence did not warrant a finding that the respondents made misleading statements regarding the efficacy or safety of their products.
On the issue of punitive damages, the Court noted that the breach of an obligation under the CPA does not automatically result in such damages being awarded. Again, it must be shown that the merchant's attitude displays a clear disregard for the consumer. The evidence in this case did not indicate that the conduct of the respondents constituted a deliberate, malicious and/or vexatious breach, or that their conduct was characterized by recklessness, ignorance or gross negligence.
Furthermore, the appellant neglected to include the drug manufactured by McNeil PDI Inc. that she had purchased in the list of products covered by the class action. The Court stated that therein lies the issue of legal interest and held that the appellant failed to show that she had sufficient interest to institute an action against the respondents.
Secondly, the Court considered the appellant's ability to ensure proper representation of the potential members. The Court noted that the appellant did not conduct any serious research among health professionals before bringing the action. Nor did she consult or even attempt to identify other potential members. Given such minimal efforts, the Court refused to ascribe the status of representative to the appellant.
Given that the appellant's motion did not satisfy the tests of article 1003 (b) and (d) of the C.C.P., the Court dismissed the appeal and upheld the trial judgment.
In this decision, the Court of Appeal clarified the principles applicable to class actions for misleading advertising and ended many controversies surrounding this issue.
The Court reiterated the importance of demonstrating a valid cause of action. Despite the various presumptions provided for in the CPA, a consumer must nevertheless prove that the respondent engaged in a prohibited practice.
Furthermore, the breach of an obligation under the CPA does not automatically result in a condemnation to pay punitive damages. The awarding of such damages is discretionary and requires proof of reprehensible conduct on the part of the respondent.
Lastly, while case law generally favours a liberal approach regarding the selection of a representative, it must nevertheless be shown that the applicant has made a minimal attempt to identify other potential members of the class.
Blakes successfully represented respondents McNeil PDI Inc. and Johnson & Johnson Inc., in continuance for McNeil PDI Inc., in connection with these proceedings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.