On July 17, 2013, the Quebec Court of Appeal upheld a Quebec
Superior Court judgment authorizing a shareholder of TSX-listed
Theratechnologies Inc. to institute an action for damages by way of
a class action under Section 225.4 of the Securities
Act.1 It was the Court of Appeal's first
ruling on Quebec's secondary market liability regime since the
regime was adopted in 2007.
In 2010, a shareholder of Theratechnologies Inc. filed a motion
for authorization to institute, by way of a class action, an action
for damages against Theratechnologies Inc. based on the secondary
market liability provisions of the Quebec Securities Act.
The shareholder claimed, among other things, that Theratechnologies
Inc. had failed to disclose a material change as a reporting issuer
and the failure had resulted in damage.
In 2012, the Superior Court granted the motion. It held that the
test for authorization to institute a class action was different
from the test for authorization to bring an action under the
secondary market liability provisions of the Securities
Act. It found that, in this particular case, both tests were
met, and thus authorized the action against Theratechnologies
Court of Appeal's decision3
Theratechnologies Inc. appealed the decision. However, the
shareholder contested the appeal on the grounds that under the
Code of Civil Procedure, no appeal lies from a judgment
allowing a motion for authorization to institute a class action.
The Court of Appeal pointed out that while a judgment authorizing
the institution of a class action cannot be appealed, a judgment
authorizing an action under the secondary market liability regime
The Court of Appeal also confirmed the Superior Court's
decision to authorize the recourse against Theratechnologies Inc.
Drawing on case law from other Canadian provinces with similar
regimes, the Court of Appeal held that the requirement to obtain
authorization before instituting a class action under Section 225.4
of the Securities Act was merely a filtering
The Court of Appeal stated that the "reasonable possibility
of success at trial" test set out in Section 225.4 of the
Securities Act is more demanding than the colour of right
test, but less demanding than the preponderance of evidence test.
The court is therefore not bound to carry out a comprehensive,
in-depth analysis of the evidence presented, including the proposed
grounds of defence.
Applying these criteria, the Court of Appeal found that the
shareholder had adequately discharged its burden of proof and that
its action had a reasonable chance of success. A trial will
therefore take place to determine Theratechnologies Inc.'s
liability, if any.
This is an interesting decision on two fronts. It is the first
Court of Appeal decision to deal with the secondary market
liability regime set out in Quebec's Securities Act.
In addition, the Court of Appeal drew on case law from courts of
other Canadian provinces and, therefore, the development in Quebec
of the action provided for in Section 225.4 of the Securities
Act is likely to be influenced by that case law.
1 RSQ, c V-1.1.
2 2012 QCCS 699.
3 2013 QCCA 1256.
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In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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