In July 2013, we reported on the decision rendered by the Quebec
Court of Appeal in Theratechnologies, in which the Court
ruled, for the first time, on the principles applicable to the
authorization of a class action based on the secondary market
liability provisions of the Quebec Securities Act.
On February 20, 2014, the Supreme Court of Canada granted the
application for leave to appeal filed by Theratechnologies Inc.
Accordingly, the Supreme Court will, in due course, weigh in on the
principles relating to the authorization of a class action based on
the secondary market liability regime provided under the
By way of background, on July 17, 2013, the Court of Appeal
dismissed the appeal from the judgment of the Quebec Superior Court
authorizing a shareholder of Theratechnologies Inc., a public
corporation listed on the Toronto Stock Exchange, to bring an
action for damages under section 225.4 of the Securities
Act by way of a class action. In its motion for authorization,
the shareholder claimed that Theratechnologies Inc. had failed to
disclose a material change as a reporting issuer and that such
failure had resulted in damage.
The Court of Appeal pointed out that while a judgment granting a
motion for authorization to institute a class action can not be
appealed as provided under the Code of Civil Procedure,
the same was not true of a judgment authorizing an action under the
relevant provisions of the Securities Act, which also
requires prior authorization.
The Court of Appeal went on to affirm the trial judgment,
holding that in the circumstances the test set out in the
Securities Act had been met. Drawing on, amongst other
things, case law from other Canadian provinces with similar
regimes, the Court of Appeal noted that the requirement to obtain
authorization before bringing an action under section 225.4 of the
Securities Act was merely a filtering mechanism.
The Court of Appeal held that the "reasonable possibility
of success at trial" test provided under section 225.4 of the
Securities Act was more demanding than the colour of right
test under the Code of Civil Procedure, but less demanding
than the preponderance of evidence test applicable to the merits of
It will be interesting to see what approach the Supreme Court of
Canada will take on these questions of considerable importance for
public corporations in Canada.
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