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PARTIES - Class or representative actions - Certification - Common interests and issues

Friday, October 30, 2020 @ 2:48 PM  

Appeal by Desjardins Financial Services Firm (Firm) and Desjardins Global Asset Management (Management) from a judgment of the Quebec Court of Appeal that authorized the class action proposed by the respondent Asselin. Asselin was a member of a caisse populaire that was part of the Desjardins Group. He had been advised by Blanchette, a financial planner employed by the Firm. He invested in two investment vehicles, by entering into deposit agreements, and was subsequently informed they would yield no return. He alleged he would not have agreed to invest in the investments if he had been adequately informed of the risks associated with them. Firm had described the investments as safe and intended for a risk-averse investor. Asselin sought to authorize a class action on the basis that the Firm had breached its duty to inform by its systemic failure to give its representatives sufficient instructions concerning the fact that there were risks associated with the investments at issue and the systematic failure by the Firm’s representatives to disclose those risks to the group’s members. Asselin alleged that Management had breached its obligations and duties with regard to the design of the investment vehicles and by managing the invested funds incompetently. He sought punitive damages for Management’s investment in Asset-Backed Commercial Paper (ABCP). A Sanction Order made as part of the restructuring of the ABCP market included a release. The motion judge dismissed Asselin’s motion for authorization to institute a class action against the appellants. The Court of Appeal authorized the class action in its entirety. The appellants conceded the motion judge made several errors, including denying the existence of a contractual relationship between Firm and the group’s members and in excluding the possibility of a cause of action against Management as the designer of the investments at issue.

HELD: Appeal allowed in part. In light of the appellants’ concessions, the Court of Appeal was correct to intervene despite the deference generally owed to authorization judges. The allegations were sufficiently precise, in accordance with the applicable standard, and were supported by some evidence. Asselin’s proposed cause of action was neither frivolous nor clearly unfounded. The motion judge conflated the duty to provide advice and the duty to inform. The Court of Appeal understood that there was a contractual relationship between Firm and Asselin and that the class action against Firm was based in part on a breach of the duty to inform imposed by the contract. The evidence adduced by Asselin in support of the allegations was more than sufficient. The Court of Appeal correctly held that a generalized and systematic breach of the duty to inform raised common questions. The question of whether Firm misinformed its representatives, with the result that there was a generalized and systematic failure to inform the investor clients, was a question common to all members of the group. Answering that question would advance the litigation in a not insignificant manner and did not depend on each client’s individual characteristics. The common question that addressed punitive damages against Management was qualified to specify punitive damages could be sought solely in relation to ABCP claims excluded from the release in the Sanction Order.

Desjardins Financial Services Firm Inc. v. Asselin, [2020] S.C.J. No. 30, Supreme Court of Canada, R. Wagner C.J. and R.S. Abella, M.J. Moldaver, A. Karakatsanis, S. Côté, R. Brown, M. Rowe, S.L. Martin and N. Kasirer JJ., October 30, 2020. Digest No. TLD-October262020011-SCC