In Asselin v. Desjardins Cabinet de services financiers inc. the Quebec Court of Appeal authorized a class action against two Desjardins investment entities relating to two under-performing investment funds. The appeal court's decision continues its pattern of reversing Quebec Superior Court decisions that have refused to authorize class actions. In so doing, the Quebec Court of Appeal may have further lowered the threshold at the authorization stage.
The proposed class action relates to allegedly under-performing securities marketed by Desjardins Financial Services Firm and Desjardins Global Assets Management. Two of the investment funds were allegedly marketed as very secure and low risk products but, in actuality, are allegeded to have been highly leveraged, resulting in the liquidation of a significant part of the assets needed to produce returns. As a result, class members are alleged to have received no return on their investment for up to seven years.
The Court of Appeal's may further lower the bar for the authorization of class actions by inviting judges to be flexible, to consider the substance of the allegations over its form and to "read between the lines" of the plaintiff's allegations. In the reasons, the Court of Appeal noted that in order to avoid class actions monopolizing an already large share of court resources, judges should consider whether the allegations meet a prima facie case and therefore avoid an in-depth analysis of the merits of potential grounds of defense.
The Court of Appeal also may have raised the threshold for class action defendants to submit relevant evidence to resist authorization. The Court of Appeal criticized the lower court judge for permitting the parties to present a fairly substantial evidentiary record at the authorization stage as it led to a more detailed analysis than was appropriate at the authorization stage.
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