Canada: Statutory Secondary Market Misrepresentation Claims: Quebec Court Of Appeal’s First Decision

In its recent decision in Theratechnologies Inc. v. 121851 Canada Inc., the Quebec Court of Appeal considered, for the first time, whether a right of appeal from a Superior Court decision granting leave to pursue secondary market misrepresentation claims pursuant to article 225.4 of the Quebec Securities Act (QSA) exists in the context of a class proceeding. In addition, the Court of Appeal elaborated on the criteria for leave set out in the QSA.

Background to the Decision

The plaintiff, 121851 Canada Inc. (121), claimed that the defendants, Theratechnologies Inc. (Thera) had failed to comply with continuous disclosure obligations pursuant to the QSA. 121 alleged to have suffered a loss of C$271,000 as a result of Thera's deficient public disclosures.

The plaintiff sought certification of a class proceeding against Thera and also the CEO and chairman of the board of directors of the corporation, which included a claim pursuant to the provisions of the QSA that impose civil liability for misrepresentations or omissions affecting the price of securities on secondary markets.

Accordingly, two aspects of the action pursued by 121 required authorization from the court. The plaintiff sought certification of the action pursuant to Article 1003 of the Quebec Code of Civil Procedure and also required leave of the court to pursue a claim for misrepresentation on the secondary market pursuant to Article 225.4 of the QSA. The leave test set out in Article 225.4 requires a plaintiff to demonstrate that the action is brought in good faith and that there is a reasonable possibility that it will be resolved in favour of the plaintiff.

The motions judge granted certification and leave to pursue the statutory secondary market misrepresentation claims pursuant to the QSA. The defendants appealed both aspects of the decision.

Appealing from the Leave Decision – More than a Mere Matter of Procedure

In Quebec, an order granting certification of a class proceeding is not subject to appeal. However, there is no express prohibition in the QSA on an appeal from a decision granting leave to commence an action under Article 225.4.

The Court of Appeal made a clear distinction and concluded that the decision of the motions judge regarding leave to pursue secondary market misrepresentation claims pursuant to Article 225.4 of the QSA could be appealed (subject to leave). There was no basis not to follow the general rules governing appeals as set out in the Code of Civil Procedure.

After considering the policy objectives underlying Article 225.4, the Court of Appeal concluded that the leave requirement, in the context of a statutory secondary market claim, differs in significant ways from a motion for certification. While Article 225.4 of the QSA aims to promote access to justice for shareholders who allege to have been harmed by the failure of a public issuer or other defendants to comply with disclosure obligations, the legislative intent of the leave requirement is to screen out frivolous or opportunistic cases (often referred to as "strike suits") at a preliminary stage to avoid subjecting defendants to the costs and expenses of unmeritorious litigation. In keeping with this legislative objective and the interests of justice, the Court of Appeal concluded that an appeal of the leave decision should be available.

Thus, in the context of a proposed class proceeding brought in conjunction with an application for leave to pursue claims pursuant to Article 225.4 of the QSA, defendants may be able to appeal the leave decision, but not certification.

The Court of Appeal went on to grant leave to appeal to the defendants and to consider the merits of the appeal.

The Test for Granting Leave Pursuant to Article 225.4

In articulating the criteria for granting leave to pursue a statutory secondary market claim, the Court of Appeal reviewed jurisprudence from Ontario and British Columbia that considered the leave test. The court concluded that [translation]: "if the requirement to show the reasonable possibility of resolution in favour of the plaintiff is more onerous than the simple requirement to demonstrate 'colour of right' [as would be the onus for establishing certification in Quebec], it is nonetheless less onerous than the balance of probabilities." Accordingly, while the leave test is not a determination of the merits, there must be real and sufficient evidence to demonstrate the reasonable possibility of the plaintiff's success.


Notably, like the Court of Appeal for British Columbia's recent decision in Round v. MacDonald Dettwiler and Associates Ltd., (Round), the Quebec Court of Appeal emphasized that the level of scrutiny that a court should bring to an analysis of the plaintiff's motion for leave to commence an action under the statutory secondary market liability regimes is higher than that applied to a motion for certification. This raises questions as to whether courts in these provinces may apply a higher standard of review than the "low bar" being employed by courts in Ontario. Like the Round decision, it also raises the possibility that the courts in different provinces will come to interpret practically identical secondary market liability provisions in divergent ways in light of the distinct procedural and substantive legal contexts of each jurisdiction.

Further, the determination that a decision granting leave to pursue statutory secondary market claims may be appealed in the context of a class proceeding is an important development in Quebec class action law.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.