Spotlight on Québec law: Securities class actions

Sylvie Rodrigue (00:05): Hi everyone! I'm here with my partner Christopher Richter and today we're pleased to give a brief snapshot of some of the most interesting developments that we've been seeing in securities class actions in Québec. Chris, a lot of these have been in the context of multijurisdictional cases or claims overlapping with other cases filed outside of Québec. Why do you think that is and what is the impact for Québec counsel?

Christopher Richter (00:29): Hi Sylvie. That's certainly right. When the defendant has its head office in Québec and is an issuer here, then jurisdiction is clear for the Québec courts. But in a lot of cases, the defendant is based somewhere else, which explains why overlapping claims are filed outside of Québec. There's been some interesting case law recently that secondary market actions should be heard in the place where the shares were actually traded, and that usually means where the stock exchange is located, so often Toronto or New York.

The courts in those places will have jurisdiction to hear the claims of all of the security holders who purchased on those exchanges. So, a national or even global plaintiff class. In Québec, that gives defendants good arguments to challenge jurisdiction or at least reduce the scope of the class to only Québec residents.

That's in addition to the possibility of suspending the Québec proceedings while the case proceeds elsewhere in a more appropriate jurisdiction. It all means close coordination with defense counsel in the other jurisdictions where class actions were filed. Torys is uniquely positioned in this regard thanks to our single team of litigators working across jurisdictions, which avoids duplication of efforts and also means that we can efficiently coordinate the evidence that goes into each court. And speaking of evidence, in Québec, Sylvie, you had an important win regarding the right of defendants to put in evidence, right?

Sylvie Rodrigue (01:44): Correct. It was an important case for the defense bar in this area. Québec has much more restrictive rules than other provinces regarding what evidence defendants may adduce to contest authorization of a class action. Nothing can be done as of right, of course, without the Court's authorization. But the Securities Act provisions that require leave to bring a secondary market misrepresentation claim do not impose any such restrictions.

It is now clear, after our victory in the Laurentian Bank case, that defendants may file evidence as of right to contest such an application. However, unfortunately, it does not mean that defendants have carte blanche like in the other provinces. Québec courts have very large case management powers and can limit the extent of the evidence based on proportionality. The courts here are generally more restrictive than courts in other provinces about what evidence defendants can bring.

For example, the Court of Appeal recently held that the court should not weigh the probative value of competing expert reports at the authorization stage, even under the Securities Act leave test. They still need to look at the expert evidence, of course, to make sure it supports authorization and granting leave, but it's not a battle of experts like at trial.

Chris, you've been dealing with a case that combines both statutory claims and a civil liability claim. Why do you think plaintiffs persist in pleading both causes of action?

Christopher Richter (03:07): Well, it's a good question. The presumption of reliance available to plaintiffs under the statutory claim is a big advantage on the merits compared to article 1457 of the Civil Code, which is the civil liability claim. There have been a couple of cases recently in which the courts refused to authorize the civil liability claim because reliance was not properly pleaded.

If all plaintiffs need to do is add a few sentences to allege that they purchased the securities and suffered loss as a result of the specific false declarations, then this may be a temporary setback for the plaintiff’s bar. Some plaintiffs have actually been trying to make more specific allegations in their applications in order to circumvent these decisions.

Strategically, it's in their interest to continue pleading civil liability because those claims are not subject to the requirement for leave, like the statutory secondary market cause of action, even though they still need to pass the test of article 575 of the Code of Civil Procedure, which is a low bar, so plaintiffs may be hoping they will at least be left with the civil liability claim if they don't get leave under the Securities Act. They’ll at least be left with that for leverage—although the difficulty of bringing such a case to trial really makes you wonder whether it's worth it.

Sylvie Rodrigue (04:16): It certainly shows how persistent the plaintiff bar is. After a slowdown in the number of claims filed in that area, lately the numbers seem to be going up, and we should continue to see some legal developments in 2025. We'll see what happens. Thank you for joining us today.