Jul 23rd, 2020
Dec 2nd, 2020
By Laurent Debrun
Asselin, a member of a Caisse populaire part of the Desjardins Group, purchased two types of investments from his Caisse between 2005 and 2007. The investments involved capital that was guaranteed at maturity, based on the original value of the initial deposit, and a potential return that was variable. Asselin made these investments as a result of representations made by a financial planner employed by Desjardins Financial Services Inc. (the "Firm"). The investments were then managed by Desjardins Global Asset Management Inc. ("Management"). Management had designed the investment vehicle.
The Supreme Court of Canada held that the authorization stage of a class action in Quebec must remain summary, without exception. What must be avoided are complex proceedings as well as excessive volumes of evidence that are not required to analyze the underlying legal syllogism, which is the sole burden of the applicant. The authorization judge must not adopt a rigid or literal approach in evaluating the application for authorization. This would result in the judge stepping into the realm of the merits and imposing on the applicant a burden well beyond the requirements set by article 575 of the Code of Civil Procedure (C.C.P.).
The authorization judge must be satisfied that there is an identical, similar or related question likely to advance the group's claim, a condition more flexible than the one at the certifications tage in common law provinces. It is not the judge's role to weigh the common questions against the individual ones. This is fully in line with the generous and flexible approach established recently by the Supreme Court in the trilogy of cases dealing with authorization: Infineon, Vivendi and Oratoire (trilogy). These cases represent the current state of the law and the Supreme Court has no intention of changing that.
In Quebec, the threshold for authorizing a class action is a low one. Once the four conditions set out in article 575 C.C.P. are met, the authorization judge must authorize the class action. The judge has no residual discretion allowing him to deny authorization on the pretext that, despite the fact that the four conditions are met, the class action would not be the most appropriate vehicle.
Asselin decides that at the authorization stage, the burden on the group's representative is simply to establish the existence of an "arguable case" in light of the facts as alleged and applicable law. The purpose of the authorization stage is to filter claims that are frivolous or clearly unfounded in fact or in law. At this stage, it is not up to the authorization judge to make any determination as to the merits in law of the conclusions in light of the facts. In Asselin, the legal syllogism rests on the alleged breach of this important positive duty to inform, which, unlike the duty to provide advice, is an obligation of result. The absence of a result is sufficient to give rise to the presumption of the Firm's liability.
At the time of the authorization, the applicant bears the burden of establishing that the proposed legal syllogism is arguable. He does not bear the burden of having to prove each element of the syllogism on the balance of probabilities.
In Quebec, the applicant is not required to show that his claim has a sufficient basis in fact. At the authorization stage, under the state of the law in Quebec, the authorization requires a flexible approach to the common interest uniting the members of the group. Even if the circumstances vary from one member of the class to another, the class action can be authorized if some questions are common. In contrast to the state of law in the rest of Canada, in Quebec, a single common question may be sufficient to advance the litigation even if several individual questions are present.
However, if an important question of law appears when evaluating the four conditions set out in article 575 C.C.P., the authorization judge may settle the question if the outcome of the action depends on it. The purpose of the authorization stage of a class action is to filter out frivolous claims at their face value. There are no requirements in Quebec that the common questions predominate over the individual ones. A single common question is enough if it advances the litigation in a non-negligible manner and is not determinative of the outcome of the litigation.
Asselin's action is based on the contractual liability of the Firm which breached its obligation to inform, rendering it liable for the damages sustained by the members of the group. As for Management, it breached its obligation and duty of competence owed to the same members with respect to the design and management of the investment vehicles. The existence of a contractual relationship between the members of the group and the Firm was recognized before the Supreme Court (although the trial judge denied its existence). If the authorization judge commits such an error in appreciating the syllogism proposed by the group's representative, a Court of Appeal can intervene notwithstanding the discretionary power of the authorization judge.
Once the factual allegations relating to the alleged fault are identified, they must be assumed to be true at the authorization stage. The alleged fault relates to a characterized breach of the Firm's duty to inform as regards the characteristics of the investments. The representatives of the Firm, having received false or incomplete information, they then misled or deceived the members of the group, which constitutes a fault under civil law. Asselin specifically alleged that the Firm did not disclose to the members of the group the risks associated with the liquidity issues and the financial leverage for the investments. The members could not know that Management was using risky and undisclosed investment strategies.
In this case, the Firm alleged that each member had a special relationship with the financial planner who they were dealing with and, as such, there could not have been a single bases for the alleged fault. The Supreme Court noted a breach of the duty to inform and not a breach of the duty to provide advice, which is alleged. This generalized and systematic omission to disclose information as to the risks associated with investments applied to all the members and was sufficient to allow the action to proceed.
In fact, The Firm tried to argue before the Supreme Court that it was impossible to institute a class action against a brokerage firm for breach by its representatives of their duty to inform. The Supreme Court rejected this, stating that a class action based on a brokerage firm's liability as a result of its representatives’ omissions and faults is possible, albeit rare, provided that the issue is the insufficient information given by the firm to its representatives and, in turn, to the members of the group, leading to a breach of the general duty to inform.
 Such a determination does not decide the merits of the case and is not binding on the trial judge; it only allows the class action to be authorized.
 See for instance the November 25, 2020 decision of the honourable Sylvain Lussier in Charbonneau v. Location Clairview Inc. (500-06-000996-195) which dismissed the application for authorization to institute a class action because none of the 4 criteria of article 575 C.C.P. were present, even applying the generous and flexible approach outlined by the Supreme Court of Canada in Asselin.