On February 20, 2014, the Supreme Court of Canada granted leave to appeal from the first decision from the Québec Court of
Appeal on the statutory secondary market liability regime adopted
in 2007, pursuant to a reform of the Quebec Securities Act, R.S.Q.
c. V-1.1 ("QSA").
Under the QSA, Theratechnologies inc. ("Thera") is a
reporting issuer which must comply with continuous disclosure
obligations. In 2009, Thera filed an application to the Food and
Drug Administration ("FDA") to commercialize a major drug
called Tesamoreline. In the course of the approval process, on May
25, 2010, the FDA published on its website information compiled at
that time in the approval process. This lead to some financial
analytics companies (Bloomberg, Thomson, etc.) to publicly share
their concerns about potential risks based on their reading of the
information published by the FDA. The market reacted intensely to
the news released; Thera's stock was heavily traded and lost
58% of its value. Thera's stock was the object of a cease
trading order on May 27. When trading resumed on the following
days, and after Thera confirmed that the FDA had approved
Tesamoreline as a new drug, the stock regained its value.
The claimant, 121851 Canada Inc. ("121Can"), sold its
stock for a total loss of $271,752. 121Can claims that Thera failed
to disclose on a timely basis a material change, i.e. the questions
raised by the FDA during the drug approval process, and that this
failure resulted in damage.
Québec Court of Appeal's Decision
The Court of Appeal decision is significant in two respects.
First, it held that a judgment authorizing an action under s.
225.4 QSA can be appealed with leave of the Court of Appeal. The
court declined to apply article 1010 of the Québec Code of
Civil Procedure ("CCP"), which states that a judgment
authorizing a class action cannot be appealed. Accordingly, an
appeal lies from a judgment authorizing a secondary market claim
under the QSA with leave of the Court of Appeal even if the claim
arises in the context of a proposed class action.
Second, the Court of Appeal attempted to clarify the test
applicable to authorization of a claim under the QSA. The test is
set out in section 225.4 of the QSA, which reads as follows:
« 225.4. No action for damages may be brought under this
division without the prior authorization of the court.
The request for authorization must state the facts giving rise
to the action. It must be filed together with the projected
statement of claim and be notified by bailiff to the parties
concerned, with a notice of at least 10 days of the date of
The court grants authorization if it deems that the action is
in good faith and there is a reasonable possibility that it will be
resolved in favour of the plaintiff. »
The Quebec Court of Appeal specified that a claimant under the
QSA must present sufficient evidence to establish a
"reasonable possibility of success", which criteria is
more stringent than the "colour of right" filtration
mechanism for class actions in general. It stated that the
purpose of that "reasonable possibility of success" aims
at minimizing the risks of pursuing meritless and opportunistic
However, the Court insisted that a possibility of success is not
tantamount to a probability or preponderance of proof. The burden
is therefore situated between the simple burden of proving
"colour of right" and the balance of probabilities.
Issue to be Debated before the Supreme Court
According to the Supreme Court judgment on leave, the question
that is going to be debated in Supreme Court is the following:
"Whether the Court of Appeal erred in stating that mere
fact of raising serious arguments about material change in company,
without slightest analysis of evidence, was sufficient to establish
reasonable chance of success."
The Supreme Court is likely to use this opportunity to better
discuss the application of the authorization test set out in the
QSA. It will be interesting to see whether the Supreme Court will
better clarify the differences between this test and the one
applicable to class actions at the authorization stage.
Perhaps the Supreme Court will use this opportunity to clarify
the role of evidence at this stage (e.g. how evidence is submitted
and considered), notably where the authorization process under the
QSA coincide with that applicable to class actions.
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
J.J. v. C.C., is an interesting case in which the court held that an automotive garage owes a duty to minor children to secure the vehicles on the premises by locking the cars and safely storing the car keys...
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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