The Quebec Court of Appeal upholds the constitutional validity of the class action authorization process

June 20, 2005

A great deal has been written about the significant changes to the Quebec class action regime brought about by the last reform of the Code of Civil Procedure of Québec (C.C.P.) that took effect on January 1, 2003. The new version of Article 1002 C.C.P. reads as follows:

"1002. A member cannot institute a class action except with the prior authorization of the court, obtained on a motion.

The motion states the facts giving rise thereto, indicates the nature of the recourses for which authorization is applied for, and describes the group on behalf of which the member intends to act. It is accompanied with a notice of at least 10 days of the date of presentation and is served on the person against whom the applicant intends to exercise the class action; the motion may only be contested orally and the judge may allow relevant evidence to be submitted."

Hence, in Quebec, it is no longer necessary to file an affidavit in support of a motion for authorization to institute a class action. Therefore, the applicants are no longer examined out of court on affidavit. Further, such a motion can no longer be contested in writing, although the judge can allow "relevant evidence" to be submitted.

This amendment restricts the rights of the defence to such an extent that some have asserted that new Article 1002 C.C.P. would be unconstitutional. In a unanimous judgment rendered on April 29, 2005, in Pharmascience Inc. v. Options Consommateurs et Piro1, the Quebec Court of Appeal upheld the constitutionality of Articles 1002 and 1003 C.C.P., the cornerstones of Quebec's class action regime.

In this matter, Pharmascience Inc. and several other defendant pharmaceutical companies (the "Defendants") were sued for having allegedly implemented a system of rebates or other advantages in favour of pharmacists. This system would have led to an increase in the users' mandatory financial contributions to their drug insurance plans.

As a preliminary argument, the Defendants contended, among other things, that Article 1002 C.C.P. infringed the fundamental right to a hearing before an independent and impartial tribunal, a right protected by Section 23 of the Charter of Human Rights and Freedoms2 (the "Charter"). According to the Defendants, under Section 23 of the Charter, a plaintiff must prove the facts that underlie the exercise of his or her rights against a defendant before the defendant can prepare his or her own defence. Thus, the removal of the need for an affidavit in support of a motion to authorize the institution of a class action means that the court hearing the matter will decide whether or not the motion meets the requirements of Article 1003 C.C.P. without the applicant having to prove the facts forming the basis of his or her claims and without the defendant being able to examine the applicant on discovery. According to the Defendants, any authorization allowed in connection with any such limited proof would breach Section 23 of the Charter and, consequently, would be illegal. Since Article 1003 C.C.P. is the only legislative base on which the institution of a class action can be authorized, the entire Quebec authorization regime was ipso facto challenged, hence, the importance of the Court of Appeal's decision in this matter.

In a unanimous ruling, the reasons for which were penned by Justice Paul-Arthur Gendreau, the Court of Appeal dismissed the Defendants' arguments.

The Court opined that the Defendants confused the nature and the intent of the motion to authorize the class action and the ruling disposing thereof with the class action itself, instituted after the authorization stage. In fact, according to the Court of Appeal, the motion to authorize would only be the [translation] "screening and verification mechanism" intended to ascertain if the conditions under Article 1003 C.C.P. are met.3

Only once authorization has been granted, can the court rule on the very merits of the action and apply all the rules of practice and evidence provided by law.

Thus, according to the Court, the authorization would not consider the defendant's rights and obligations (as the action has not yet been formed) but only the granting of a judicial mandate to a person entitling him or her to represent a group, to the extent the alleged facts seem, at face value, to justify the claimed right. In other words, Article 1002 C.C.P. does not deny the defendant any substantive right but, to the contrary, affords him or her additional protection against vexatious proceedings by requiring, unlike the customary rule, prior judicial authorization.

Judge Gendreau states that at the authorization stage, the applicant only has to show that the alleged facts seem to justify the conclusions that are sought, that is, a criterion comparable to that of the colour of right applicable in interlocutory injunction matters. At this stage, the judge must, therefore, ensure that there is a serious colour of right in light of the alleged facts which must be found as established.

This does not mean that the defendant cannot assert any grounds. In fact, the Court points out that the defendant, without being able to compel an inquiry into the merits of the litigation, is not barred from [translation] "of course, submitting an oral but, undoubtedly, real, vigorous and unreserved contestation". Nothing prevents the defendant from requiring the presentation of evidence inasmuch as he or she can demonstrate its relevance to the judge hearing the motion.

Lastly, the Court is of the opinion that Section 23 of the Charter by no means entitles the defendant to an examination on discovery at the authorization stage [translation] "which is not the trial and does not form part thereof".

Pharmascience Inc. requested permission from the Supreme Court of Canada to appeal this decision and its decision should be known whithin the next few months. However, on June 22, 2005, the Court of Appeal dismissed a Motion to Stay the proceedings in first instance.

Comments

The debate raised by the Pharmascience matter illustrates the distress felt by companies that are sued in Quebec in class action matters. In fact, the Quebec rules for the authorization of a class action used to be the most favourable in North America even before the 2003 reform. Now, the reform seems to have further emphasized the gap existing between the Quebec system and the other jurisdictions where class action exists.

We believe that the "screening mechanism" embodied by the motion to authorize a class action seriously risks to become a real sieve if defendants are not given the opportunity to adequately defend themselves during the authorization stage. The Court of Appeal did reaffirm however has just stated that this stage cannot be disregarded and that the oral contestation of this motion to authorize must, nonetheless, remain "real, vigorous and unreserved". One can only hope that the Superior Court will apply this teaching and will adopt a broad and liberal interpretation of Article 1002 where it is a question of authorizing relevant evidence at the authorization motion stage.

Though the Court of Appeal deems the current system to be constitutional, we cannot, however, overlook the fact that it gives rise to considerable uncertainty with regard to the scope of the argument and the evidence that might be adduced during the hearing on a motion to authorize. In fact, the Superior Court seems vested with vast discretionary power in this respect but it is only at the hearing that the parties to the proceedings will really know what evidence will be authorized. This is likely to lead to some surprises and foster some uncertainty for all the parties involved in a class action dispute.

Whether constitutional or not, the authorization system implemented by the 2003 reform seems to have important gaps and leave much room for judicial discretion, without specific guidelines having been defined by law in order to provide some guidelines as to how courts should exercise this discretion and thus allow litigants to know what to expect with regard to this process. In this respect, some legislative or judicial action would be desirable to more clearly define the authorization process.

FOOTNOTES

[1]  No. 500-09-014659-049, Judges Robert, Gendreau and Rochon

[2]  R.S.Q., c. C-12

[3]  Article 1003 lists the following four conditions:

"1003. The court authorizes the bringing of the class action and ascribes the status of representative to the member it designates if of opinion that:

(a) the recourses of the members raise identical, similar or related questions of law or fact;

(b) the facts alleged seem to justify the conclusions sought;

(c) the composition of the group makes the application of article 59 or 67 difficult or impracticable; and

(d) the member to whom the court intends to ascribe the status of representative is in a position to represent the members adequately."

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