Under s. 225.4 of the QSA, the criteria for prior authorization
to institute an action in damages are two-fold: the action must be
filed in good faith and there must be "a reasonable
possibility that it will be resolved in favour of the
While the Supreme Court agreed with the Quebec Court of Appeal
that the "reasonable possibility" criterion sets out a
higher standard than the general threshold for the authorization of
a class action under art. 1003 of the Code of Civil
Procedure, the Supreme Court held that the threshold had not
been met in this case.
The Secondary Market Proposed Class Action
In 2010, Respondent sought authorization to bring a class action
for damages against Theratechnologies Inc. claiming that it had
breached its disclosure obligations regarding the potential side
effects of a drug awaiting FDA approval. Theratechnologies Inc.
regularly informed its shareholders, including respondent, of the
results of its clinical trials measuring the safety and efficacy of
the drug. When questions issued by the FDA regarding the drug were
publicized by stock quotation enterprises, the price of
Theratechnologies' shares dropped. Respondent claimed that the
FDA's questions amounted to a material change in
Theratechnologies' business, operations or capital, triggering
timely disclosure obligations under s. 73 QSA.
A "Realistic Chance" that the Action Will
In Theratechnologies Inc. v. 121851 Canada
Inc., the Supreme Court held that the threshold set out in
s. 225.4 QSA requires that there be "a reasonable or realistic
chance that the action will succeed". According to the Supreme
Court, a case with a realistic chance of success requires the
claimant to offer both a plausible analysis of the applicable
legislative provisions and some credible evidence in support of the
claim. The authorization stage under s. 225.4 QSA must not proceed
as a mini-trial – a full analysis of the evidence is
unnecessary at this stage. However, there must be sufficient
evidence to persuade the court that there is a realistic chance
that the action will be resolved in the claimant's favour.
In this case, the respondent was unable to point to any evidence
that could qualify as a change in appellant's operations,
capital or business as described in s. 5.3 QSA. Because the
evidence did not credibly point to a material change that could
have triggered appellant's disclosure obligations, the Supreme
Court held that there was no reasonable possibility that
respondent's action could succeed.
As the application of s. 225.4 QSA is still novel, it remains to
be seen how courts will apply the Supreme Court's
interpretation of the "reasonable possibility" criterion.
However, we expect that the courts will continue to strike a
balance between allowing investors to pursue claims under s. 225.4
in appropriate cases and preventing unmeritorious litigation.
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.
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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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