Bruce W. Johnston

This decision concerns three motions to approve class counsel fees in the context of insolvency proceedings under the Companies' Creditors Arrangement Act involving three major tobacco companies.

The court approved the Quebec Class Action Plaintiffs' counsel fee request of approximately $901 million (representing 22% of the $4.119 billion allocated to the Quebec class members), the Knight Class Counsel fee request of $5 million plus disbursements, and the Tobacco Producers' counsel fee request of $3.75 million.

The court found that the fees were fair and reasonable given the exceptional risks assumed, the unprecedented outcome achieved, and the unique circumstances of the case.

A $50 million reserve was established from the Quebec counsel fees to protect against any pro-rata reduction in class member compensation due to actual take-up rates or other factors.

The appellants, financial services entities within the Desjardins Group, appealed the Quebec Court of Appeal's decision authorizing a class action brought by an investor in capital-guaranteed term savings products that ultimately yielded no return at maturity.

The majority held that the Superior Court erred in analyzing the conditions for authorization under article 1003 of the former Code of Civil Procedure, and affirmed the Court of Appeal's authorization of the class action against both the financial services firm (on a theory of systematic breach of the duty to inform) and the asset management company (on a theory of extracontractual breach of duties of competence and management).

The majority further specified that any punitive damages claim in relation to asset-backed commercial paper must be limited to Unaffected Claims as defined in the Third Amended Plan of Compromise and Arrangement sanctioned under the Companies' Creditors Arrangement Act.

Three justices dissented in part, concluding that authorization against the financial services firm should be denied for failure to establish common questions, while agreeing that the action against the asset management company should be authorized solely with respect to compensatory damages.