Quebec: A more limited debate in class actions

April 17, 2007
In decisions handed down in recent weeks by the Quebec Superior Court, that province's courts have demonstrated that they are prepared to set limits on the issues that need to be argued in class action proceedings at the authorization stage and during the hearing on the merits. There are several reasons for this change in direction. Firstly, the Court of Appeal decision in Bouchard vs. Agropur Coopérative encouraged Superior Court judges to be more demanding of petitioners with respect to the demonstration of the existence of a legal relationship. In addition, in the context of class action cases, the courts have also made reference to article 4.2 C.C.P. That article, which was added to the Code of Civil Procedure as part of the legislative reform of 2002, requires parties to ensure that the proceedings they choose are proportionate to the nature and ultimate purpose of the action and to the complexity of the dispute. Basing themselves on this proportionality principle as well as on the goal of the sound administration of justice, judges hearing class actions have become more demanding and have indicated that they will, as early as possible, dispose of claims and arguments that they consider to be unfounded. Furthermore, the case management process by which the coordinating judge now appoints a Superior Court judge to manage the class action from beginning to end, has had a real impact on the attitude of judges hearing these cases. In effect, the courts prefer to deal with the issues in dispute as early as possible, since they will have to decide them sooner or later. The following recent decisions of the Superior Court are good examples of this new trend in class actions.

Hurtubise vs. Banque Nationale du Canada et al., S.C. 500-06-000237-046, January 23, 2007, Marie-Christine Laberge, J.S.C.

On January 23, 2007, the Honourable Marie-Christine Laberge, J. of the Quebec Superior Court disallowed certain amendments proposed by the petitioner that would have added allegations of infringement of the Consumer Protection Act (CPA) to its motion for authorization to bring a class action. The action targeted eight financial institutions and attacked the method of calculating the penalty imposed when a loan secured by a hypothec (the Quebec equivalent of a mortgage) is repaid in advance.

The Court held firstly that the amendment could be contested either as an exception to dismiss, or when leave to amend was applied for, or during the hearing on the motion for authorization. The Court held that, in the interests of the sound administration of justice and in light of the fact that the same judge hears both preliminary exceptions and the motion for authorization, there was no point to waiting until the decision on the motion before disposing of the contestation of the amendment. On the contestation of the amendment, the Court held that some of the amendments proposed by the petitioner served no purpose and were contrary to the interests of justice. The Court analyzed section 6(c) CPA (not in force), which provides that the CPA does not apply to loans secured by hypothec (mortgages), and section 350 CPA, which provides that the government may make regulations respecting exemptions from the CPA. In the Court's view, the government used this power to enact sections 21 and 22 of the Regulation respecting the application of the Consumer Protection Act, which, among other things, provide that contracts secured by hypothec are exempt from the application of section 91 CPA. The Court held that there was no inconsistency between this exemption and section 6(c) CPA, and that section 91 CPA does not apply to hypothecary loans. Accordingly, the Court disallowed the amendments relating to the CPA adding that article 4.2 C.C.P. justified disposing immediately of an issue that would be neither useful nor wise to maintain.

In this case, following the decision in Bouchard vs. Agropur Coopérative, motions to dismiss were brought by seven of the eight respondents, founded on the absence of a legal relationship (since the petitioner only had a hypothec with one of the respondent financial institutions). A few days before the motions were heard, however, the petitioner decided to abandon his action against those financial institutions which had not entered into any hypothecary loans with him (the petitioner's oral motion to abandon the action was allowed by the Honourable Laberge, J. on March 2, 2007).

Richer vs. Banque Canadienne Impériale de Commerce et al, S.C. 500-06-000239-042, January 22, 2007, Christiane Alary, J.S.C.

On January 22, 2007, the Honourable Christiane Alary, J. of the Quebec Superior Court allowed motions to dismiss filed by 28 of 32 respondents and dismissed the motion for authorization to bring a class action against them by petitioner Judes Julien Richer. The action sought compensation for any person residing in Quebec who owned a purportedly unseizable registered retirement savings plan (RRSP) subscribed with one of the respondents, including in particular, any person whose RRSP had been seized.

The respondents argued that the petitioner did not have a sufficient legal interest to take proceedings against them as there was no legal relationship between the respondents and the petitioner. It appeared from the very allegations of the motion that the petitioner had never done business with the respondents or taken out an RRSP with them or been the victim of misrepresentations or a professional error by them. Accordingly, as the petitioner was not alleging any contractual or extracontractual fault by the respondents against him, he had no legal relationship with any of the respondents other than with certain institutions affiliated with the National Bank.

As a preliminary matter, the Court held that it was not premature to raise the absence of sufficient interest of the petitioner prior to the hearing on the motion for authorization, and that the issue could appropriately be raised in a motion to dismiss. The Court was of the opinion that when the inadmissibility of the motion is based on lis pendens [parallel pending proceedings], res judicata, incapacity, absence of standing or absence of interest of the parties or another clearly well-founded legal argument, it is in the interests of justice that the ground for inadmissibility be disposed of at a preliminary stage, before the hearing of the motion for authorization.

The Court then examined the substantive argument submitted by the respondents, namely the absence of interest of the petitioner to institute a legal action against them. Article 55 C.C.P. and the case law require that any person who brings an action at law must have an interest that is direct and personal. Basing itself on the recent Court of Appeal decision in Bouchard vs. Agropur Coopérative, the Court reiterated that a class action is only a procedural vehicle, the use of which does not modify or create substantive rights for the parties, and that the existence of an interest by the petitioner vis-à-vis each of the respondents is an essential requirement to bringing an action, even in class actions. Since the petitioner alleged only that he did business with one or more institutions affiliated with the National Bank, the absence of interest of the petitioner vis-à-vis other respondents made the litigation submitted to the Tribunal moot, at least with respect to them.

The Court was, therefore, of the opinion that authorizing a class action against parties with respect to whom the petitioner could not show a sufficient interest would be contrary to article 55 C.C.P. and to the directions of the Court of Appeal in Bouchard vs. Agropur Coopérative. Accordingly, the respondents' motions to dismiss were allowed.

These two decisions illustrate that in order to better define and limit the issues in class actions, the courts are increasingly streamlining the hearing on authorization as well as the hearing on the merits by dealing as early as possible with preliminary and incidental matters raised by the parties, such as the absence of a legal relationship and proposed amendments.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.

Stay in Touch with Knowledge Hub