Desjardins Financial Services Firm Inc. and Desjardins Global Asset Management Inc. v. Asselin

2020 SCC 30 | Supreme Court of Canada | October 30, 2020

Docket: 37898

Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ.

Reasons for Judgment (paras. 1 to 159): Kasirer J. (Wagner C.J. and Abella, Karakatsanis, Brown and Martin JJ. concurring)

Reasons Dissenting in Part (paras. 160 to 304): Côté J. (Moldaver and Rowe JJ. concurring)

Indexed as: Desjardins Financial Services Firm Inc. v. Asselin

On appeal from the Court of Appeal for Quebec

Headnote

Civil procedure — Class action — Authorization to institute class action — Conditions for authorizing action — Motion for authorization to institute class action in contractual liability for breach of duty to inform and in extracontractual liability for breach of duties of competence and management against financial institutions with respect to term savings investments — Superior Court dismissing motion — Court of Appeal setting aside judgment and authorizing class action — Whether Court of Appeal was justified in intervening in Superior Court's decision — Code of Civil Procedure, CQLR, c. C‑25, art. 1003.

A is a member of a caisse populaire in the Desjardins Group. Between March 2005 and June 2007, he purchased two types of investments from his caisse populaire, Perspectives Plus Term Savings ("PP") and Alternative Term Savings ("ALT"), by entering into deposit agreements. The investments essentially involved capital that was guaranteed at maturity and corresponded to the original value of the deposit, and a potential return that was variable. It is alleged that the investments were purchased as a result of representations made by a financial planner and mutual fund representative who was a subordinate or mandatary of Desjardins Financial Services Firm Inc. ("Firm"), which is part of the Desjardins Group and which specializes in financial services. Both the financial planner and various documents promoting the investments allegedly represented them as being safe and as providing an attractive return, despite the fact that they involved a specific risk that affected their return potential. It is alleged that the investments were designed and managed by Desjardins Global Asset Management Inc. ("Management"), which is also part of the Desjardins Group and which specializes in asset management.

In March 2009, A received a letter informing him that he would obtain no return on his PP and ALT investments up to the time they matured. In February 2010, A received an investment statement indicating that his investments had in fact yielded a return of 0 percent for 2009. In September 2011, A filed a motion in the Quebec Superior Court seeking authorization to institute a class action against Firm and Management. He argued that Firm was contractually liable to the members of the class action group for breaching its duty to inform. He claimed that Firm had not adequately informed him and the other members of the group of the risks associated with the investments, alleging both direct and indirect fault. He argued that Management was extracontractually liable to the group's members for breaching its duties of competence with regard to design and management. He alleged that Management had used risky investment strategies, including strategies involving investments in asset‑backed commercial paper ("ABCP"), that had resulted in a loss of all the assets allocated to the return.

The Superior Court dismissed the motion for authorization to institute a class action against Firm and Management. The authorization judge found that A had not shown that his proposed action in contractual liability against Firm and in extracontractual liability against Management had a good colour of right as required by art. 1003(b) of the former Code of Civil Procedure of Quebec ("former C.C.P."). The judge also found that there were no common questions as required by the condition set out in art. 1003(a) of the former C.C.P., though she neglected to deal with that condition in relation to the action against Management. The Court of Appeal allowed A's appeal and authorized the class action against Firm and Management.

Held (Moldaver, Côté and Rowe JJ. dissenting in part): The appeal should be allowed in part.

Per Wagner C.J. and Abella, Karakatsanis, Brown, Martin and Kasirer JJ.: The Court of Appeal was correct to authorize the class action proposed by A both against Firm and against Management. The authorization judge erred in analyzing certain aspects of the conditions set out in subparas. (a) and (b) of art. 1003 of the former C.C.P. (which correspond to subparas. (1) and (2) of art. 575 of the new Code of Civil Procedure). However, the appeal should be allowed in part for the sole purpose of varying paras. 8 and 9 of the Court of Appeal's judgment in order to clarify the scope of the claim for punitive damages.

The Court of Appeal adhered perfectly to the analytical framework established in Infineon Technologies AG v. Option consommateurs, 2013 SCC 59, [2013] 3 S.C.R. 600, Vivendi Canada Inc. v. Dell'Aniello, 2014 SCC 1, [2014] 1 S.C.R. 3, and L'Oratoire Saint‑Joseph du Mont‑Royal v. J.J., 2019 SCC 35, [2019] 2 S.C.R. 831, even though the last of these cases was decided after the judgment under appeal. The threshold for authorizing a class action in Quebec is a low one. Once the four conditions set out in art. 1003 of the former C.C.P. are met, the judge must authorize the action; the judge has no residual discretion to deny authorization on the pretext that a class action is not the most appropriate vehicle. Questions of law may be resolved by an authorization judge if the outcome of the proposed action depends on the judge's doing so, but this choice is generally a discretionary one. This reflects the purpose of the authorization stage of the class action: the judge's role is to filter out frivolous claims, and nothing more. In analyzing a motion, an authorization judge must avoid adopting a rigid approach and must read the wording of the motion to discover the full message it conveys, including the necessarily implied message. Finally, there is no requirement in Quebec that the common questions predominate over the individual ones. On the contrary, a single common question is enough if it advances the litigation in a not insignificant manner. It is not necessary that the common question be determinative of the outcome of the case.

Here, the allegations are sufficient to establish an arguable case against Firm in accordance with the condition set out in art. 1003(b) of the former C.C.P. It is in principle not appropriate at the authorization stage for the court to make any determination as to the merits in law of the conclusions in light of the facts being alleged. The proposed syllogism is neither frivolous nor clearly unfounded in law. The allegations are precise enough to be assumed to be true, and there is a sufficient basis for them in the evidence adduced.

A's syllogism is based on a breach by Firm of its duty to inform. In his motion, A explains right in the summary that he is alleging that Firm and Management breached and violated the obligations and duties of information, competence and management. Firm allegedly failed to inform adequately the group's members of the risky transactions conducted using the amounts the members had entrusted to it. With regard to injury, A explains the loss of a return resulting from risky investment strategies; with regard to causation, he states that he would never have agreed to invest in the PP and ALT investments if Firm had adequately informed him of the risks associated with them. The faults are described with sufficient precision, and the information missing for the entire group relates, among other things, to the level of risk involved in the investments, their volatility and the way they worked, including the leverage used.

It can be understood from these allegations that the proposed action is based not on a breach of the deposit agreements, but rather on a generalized and systematic breach of the duty to inform. A alleges that Firm systematically breached this duty by not adequately informing all of its representatives of the risks and characteristics of the investments (the direct fault). According to the facts alleged in the motion, the representatives, having received false, misleading or incomplete information, then failed to provide adequate information to the group's members (the indirect fault). Firm's alleged dual fault, and the basis for the action, is a generalized and systematic breach of its general duty to inform. This dual fault refers, in other words, to two sides of the same coin: Firm's breach of its duty to inform the group's members directly itself, and to inform them indirectly through its representatives.

A person who provides financial services is indeed subject to a duty to inform, and failure to comply with that duty may give rise to civil liability, for which the principal or mandator of the financial adviser at fault must answer. The group's members were linked to Firm by a contract for services within the meaning of art. 2098 of the Civil Code of Québec or, if the services were not paid for directly, a similar sui generis contract. Grounded in the general obligation of good faith (arts. 6, 7 and 1375 of the Civil Code of Québec), the duty to inform relates to all contracts and, in principle, applies to all contracting parties. There is a distinction between the duty to provide advice and the duty to inform. The obligation to inform is an obligation to reveal to another facts that the latter, in order to adjust his or her conduct, may legitimately expect to receive. The obligation to provide advice is an obligation to provide counsel to another in the furtherance of the latter's interest. The duty to inform is less onerous and less individualized than the obligation to provide advice.

In Bank of Montreal v. Bail Ltée, 1992 71 (SCC), [1992] 2 S.C.R. 554, the Court observed that the scope of the obligation to inform is assessed on the basis of the following criteria: (1) knowledge of the information, whether actual or presumed, by the party which owes the obligation to inform; (2) the fact that the information in question is of decisive importance; (3) the fact that it is impossible for the party to whom the duty to inform is owed to inform itself, or that the creditor is legitimately relying on the debtor of the obligation. In the case at bar, Firm knows or is presumed to know the characteristics of the investments it recommends. A alleges that he would never have agreed to invest in the PP and ALT investments if he had been adequately informed of the risks associated with them and that it was impossible for him to inform himself of Management's investment strategies.

The motion does not allege a positive misrepresentation; it alleges an omission corresponding to a breach of the duty to inform, which, unlike the duty to provide advice, is an obligation of result. Mere proof by the creditor that the result was not achieved is sufficient to give rise to a presumption that the debtor is liable. At the authorization stage, the applicant bears the burden of demonstrating that the proposed legal syllogism is arguable, not the burden of proving each element of the syllogism on the usual civil balance of probabilities standard. In this context, the evidence adduced by A in support of allegations that must be assumed to be true is more than sufficient. The action can be authorized without proof on a balance of probabilities that A was not given the information. A filed many documents to support allegations concerning Firm's failure to disclose, to all clients, the risks associated with the methods used to manage the investments. It is argued that the choice made by Firm and its representatives to rely on the documents is evidence of the breach of the contractual duty to inform alleged in support of Firm's indirect contractual liability. A's pre-hearing examination is also relevant evidence with respect to the non-performance of an obligation to do something, such as an absence of advice or information. The breach amounts to a negative, which is inherently difficult to establish persuasively, but which can be proved simply by testimony.

The common questions condition set out in art. 1003(a) of the former C.C.P. is also met with respect to the proposed action against Firm. At the authorization stage, the decisions of the Quebec courts and of the Court require a flexible approach to the common interest that must exist among the group's members. As a result, even where circumstances vary from one group member to another, a class action can be authorized if some of the questions are common. The fact that the situations of all members of the group are not perfectly identical does not mean that the group does not exist or is not uniform. In Quebec, a single common question is sufficient as long as it advances the litigation in a not insignificant manner. The class action in this case concerns a contractual breach of the duty to inform that grounds both Firm's direct liability and its indirect liability. In both cases, the alleged omissions are systematic in nature and do not depend on each client's individual characteristics. The systematic nature of these omissions in both cases makes it possible to identify common questions in the proposed action against Firm under art. 1003(a).

The motion filed by A indicates that the group's members were systematically misinformed. By giving its representatives documents that were misleading or incomplete, Firm misinformed them and did not give them the means to adequately inform the group's members. The information provided to the members was therefore necessarily wrong or insufficient, if not false, deceptive or misleading. The systematic nature of Firm's breach is thus clearly alleged and must be assumed to be true. Moreover, the information in question was objective information that Firm never gave the representatives or the members concerning the risky nature of the investments.

The position taken in the motion is not based on the individual liability of a financial adviser to a particular client, which would depend on evidence of each client's profile to establish whether the investment was in fact appropriate. The alleged fault is a breach of a general obligation to inform that affected each member, not a breach of an individualized obligation to properly advise a client. Although the duty to inform varies with the context, there are circumstances in which all creditors were deprived of information as a result of a systematic omission. In this case, A specifically alleges the existence of such circumstances, in which an informational imbalance and Firm's control of the information are common to all the members. Indeed, A alleges that the group's members could not have known the information that Firm had about how the investments worked even with all due diligence. A class action based on a brokerage firm's liability for the conduct of its representatives is therefore possible if the issue is whether the information provided by the firm to its representatives and to the group's members was insufficient, with the result that a general duty to inform was breached. To conclude otherwise would deprive the class action of part of its role of helping people who, for economic and other reasons, face barriers in asserting their rights. The Court of Appeal was accordingly justified in intervening. It appears that the authorization judge considered the common questions condition from the perspective of an action based on the duty to provide individualized advice tailored to each client's risk tolerance even though that was not the basis for A's action.

It is conceded that it can be argued that Management is liable as the designer of the investments. On the issue of whether the case against Management is an arguable one, the syllogism proposed by A is neither circular nor untenable. A does not merely say in his allegations that Management's practices were risky because the investments did not generate a return; he makes concrete allegations against Management. These allegations are sufficiently precise. As for the impact of the 2008 financial crisis on the causal link between Management's alleged extracontractual faults and the loss for which A is seeking compensation, this is an issue that goes to the merits of the case.

A is claiming punitive damages from Management pursuant to ss. 6 and 49 of the Charter of human rights and freedoms for unlawful and intentional interference with his right to the peaceful possession of his property. For the purposes of that claim, he alleges that a significant portion of the money market investments in the PP and ALT investments consisted of ABCP. Management submits that any claim relating to ABCP has been extinguished as a result of the Sanction Order made by the Ontario Superior Court of Justice as part of the restructuring of the ABCP market carried out under the Companies' Creditors Arrangement Act ("CCAA"). The motion judge found that the claim based on ABCP was, on its face, barred, but she did not refer to the distinction between "Affected ABCP" and "Unaffected Claims" as dealt with in the Third Amended Plan of Compromise and Arrangement that was the subject of the Sanction Order.

The Court of Appeal correctly found that the motion judge could not decide whether the claim was barred at the authorization stage. It is true that a court may decide a pure question of law at the authorization stage if the outcome of the proposed class action depends on its doing so, but the question of whether the ABCP concerned is part of the Affected ABCP covered by the release and listed in its Schedule "A" is not a pure question of law. It is not the application of the Order that is being contested but rather its scope, which can be argued later. The scope of the Affected ABCP and the unaffected ABCP under the Order is an issue that could, if necessary, be referred to the Ontario Superior Court of Justice. Caution must be exercised at the authorization stage, and any doubt should weigh in favour of the continuation of the proceedings. Deferring this matter will not result in Management losing any rights given that the action must proceed on the merits on the claim for compensatory damages. Though difficult, a claim for punitive damages based on unlawful and intentional interference under s. 6 of the Charter of human rights and freedoms in relation to the ABCP not covered by the release remains arguable in this context. However, it must be specified that any payment to each member of the group of an amount in punitive damages may be sought solely in relation to Unaffected Claims within the meaning of art. 1 of the Third Amended Plan of Compromise and Arrangement dated January 12, 2009.

Per Moldaver, Côté and Rowe JJ. (dissenting in part): The appeal should be allowed in part. Authorization of the proposed class action against Firm should be denied, and authorization of the proposed class action against Management should be granted, but only in relation to the claim for compensatory damages.

The objectives of facilitating access to justice, modifying harmful behaviour and conserving judicial resources that underlie the class action can be attained only if a rigorous procedure is followed for the authorization of such an action. The class action is a cumbersome procedural vehicle that represents a huge undertaking for all of the participants, including the courts. Authorization is meant to be more than a mere formality. Its purpose is to protect the interests of all those involved in the class action — not only the interests of the representative and the absent members, but also those of the defendants and even of the administration of justice. The authorization stage is what confers full legitimacy on the class action.

Even though the court plays a more active role in the context of a class action, it may not take on the role of party or counsel and reorient the action as presented by the applicant however it likes. The court's role is not to read between the lines in order to guess the basis for the action whose authorization is being sought, or for the legal syllogism, where no specific allegations are made in relation to a key element of the cause of action. The court hearing the motion for authorization can supplement the allegations using the evidence in the record and can draw inferences and presumptions from them. However, the court is not required to assume the applicant's legal allegations to be true; it may decide a pure question of law at the authorization stage if the outcome of the proposed class action depends on its doing so. When a judge decides a question of law on which the outcome of a class action depends at the authorization stage, this furthers the objectives of predictability of the law and judicial economy that underlie the system of administration of justice. The judge's role at the authorization stage is to screen out frivolous or untenable actions, but also to verify that all the conditions of art. 1003 of the former C.C.P. are met. A motion that does not meet all the conditions is not for that reason alone frivolous. Because the court must assume that the alleged facts are true, the allegations must be clear and complete, not vague, general or imprecise. Defects of form can be excused, but substantive defects cannot be. The allegations must be read carefully in order to determine whether the legal syllogism they propose is an arguable one.

At the authorization stage, judges have considerable leeway in assessing whether the conditions set out in art. 1003 of the former C.C.P. are met. If a judge is of the opinion that each condition is met, he or she must authorize the action and has no discretion to decline to do so. An appellate court's power of intervention is limited, and it must defer to the judge's assessment of the conditions. The applicable standard for appellate intervention is that of palpable and overriding error.

In this case, the motion judge did not err in stating that Firm could not be contractually liable on the basis of the deposit agreements for the PP and ALT investments because the parties to those agreements were the clients and their respective caisses populaires. The contract that could give rise to Firm's contractual liability is instead the one that it entered into with clients through its representatives, which was a contract for services whose sole object was the giving of advice. While the giving of advice was the core prestation under the contract, this did not preclude a duty to inform from existing as well. The judge also analyzed the action against Firm as it had been presented, that is, from the standpoint of Firm's contractual liability for a breach of the duty to inform. This was analyzed in relation to a contractual basis for the action arising from the mandator-mandatary relationship between Firm's representatives and the clients. The judge's assessment of the authorization conditions was entitled to deference on appeal absent a palpable and overriding error.

The common questions requirement set out in art. 1003(a) of the former C.C.P. is not met with respect to the proposed action against Firm. The liability of financial advisers for a breach of the duty to inform and the duty to provide advice is not well suited to a class action because of the highly individual nature of the relationship between a client and an adviser in the context of a contract for investment services. In such a case, the liability analysis would have to be repeated for each individual claim. The case law is consistent in this regard: there can be no common questions in such circumstances. However, if an applicant can show that the breach was systematic in nature, the common questions condition will not be an impediment to authorizing the action. A, on the other hand, has neither alleged nor shown any kind of systematic breach of the advisers' duty to inform that might be imputed to Firm. By his own admission, he has no idea whether other clients were in the same situation as him. It is therefore the absence of a systematic breach that is fatal to A's action, not the fact that the action concerns financial advisers.

The duty to inform is more general than the duty to provide advice owed by Firm's representatives; the duty to inform is, however, a variable obligation shaped by the circumstances of each case, as was affirmed in Bail. This is especially true in cases where the duty to inform is an accessory to a main prestation whose object is the giving of advice. In this case, the obligation to inform arose in the broader context of the provision of a financial adviser's services, which varies in accordance with several factors, including the length of the relationship and the client's goals and level of expertise. The obligation of advisers or dealers to know their clients shapes their relationship with them; it is clear that the clients' specific circumstances are of significant importance. It is therefore not surprising that A does not know whether there are other members in the same situation as him. His situation cannot be extrapolated to the other members of the proposed group. Accordingly, even though a court should not focus on each member's specific characteristics at the authorization stage of the class action, the fact remains that in this case the elements of fault, causation and injury raised by A on behalf of the group are highly variable. Given the need for such a contextual analysis, there can therefore be no commonality to the question of whether the duty to inform was breached unless it is shown that the breach occurred systematically. The individualized analysis required by the action precludes the possibility of proceeding on a collective basis. A systematic duplication of fact-finding and legal analysis will be required for each relationship between a financial adviser and a client, which means that the proposed question cannot advance the litigation in a not insignificant manner.

In the case of the proposed action against Management, the Court of Appeal's intervention was warranted only in part. The Court of Appeal properly authorized the action against Management except in relation to the claim for punitive damages. On this point, the authorization judge was correct to consider the release with respect to ABCP found in the Sanction Order, and the scope of that release, in concluding that the claim against Management for punitive damages in relation to ABCP did not establish an arguable case.

The defences available to a defendant are generally considered at the trial on the merits. However, a court may decide a pure question of law at the authorization stage if the outcome of the proposed class action depends on its doing so. This principle also extends to the interpretation of a release included in a sanction order made by the Ontario Superior Court of Justice, which has full force and effect in Quebec under s. 16 of the CCAA.

The outcome of the part of the proposed action that concerns punitive damages in relation to ABCP depends on how the terms of the release are interpreted. Where evidence is necessary to determine the applicability of a release found in a sanction order, this question should be decided at the trial on the merits. Conversely, where such evidence is not necessary, as in this case, it would be neither logical nor desirable, from the standpoint of judicial economy and of proportionality of proceedings, to defer making a decision on this question of law when the court has an opportunity to decide it at the authorization stage. This is especially true for releases resulting from a compromise or arrangement sanctioned by a court under the CCAA. These releases advance one of the CCAA's important objectives, which is to favour restructuring by preventing the risk of litigation. Under ss. 16 and 17 of the CCAA, it is imperative that Quebec courts give effect to CCAA orders regardless of the jurisdiction where the proceedings took place.

In this case, the release presents two impediments that are fatal to A's claim for punitive damages based on ABCP. The first impediment arises from the limited cause of action authorized for an Excepted Claim: the claim must be based on express fraudulent misrepresentations made to the potential plaintiff by an authorized representative of the potential defendant. However, A's claim for punitive damages is based not on a misrepresentation, but rather on Management's fault, which lies in flawed design and management contrary to its obligations and duties to act prudently and diligently and to adhere to sound and prudent management practices. The motion does not allege a cause of action covered by the definition of an Excepted Claim.

The second impediment to the claim for punitive damages relates to the strict time limit for asserting a claim. The nine-week time limit began to run on the date of delivery of notice by the Monitor, which was essentially the date on which the Sanction Order was made, namely June 5, 2008. A's motion for authorization to institute a class action was served on September 16, 2011. His claim for punitive damages based on Management's use of an investment strategy that included ABCP was therefore filed out of time. The release stands in the way of A's legal syllogism with regard to Management's fault, and the claim based on ABCP must be dismissed because it does not have the colour of right required by art. 1003(b) of the former C.C.P.

Insofar as it is argued that Management is liable as the designer and manager of the products, the action can be authorized in relation to compensatory damages. By referring to the effects of the 2008 financial crisis in declining to authorize this part of the action, the authorization judge decided the merits of the action. However, this aspect of the action is not devoid of foundation. This was an error that warranted the Court of Appeal's intervention.

Cases Cited

By Kasirer J.

Applied: L'Oratoire Saint-Joseph du Mont-Royal v. J.J., 2019 SCC 35, [2019] 2 S.C.R. 831; Infineon Technologies AG v. Option consommateurs, 2013 SCC 59, [2013] 3 S.C.R. 600; Vivendi Canada Inc. v. Dell'Aniello, 2014 SCC 1, [2014] 1 S.C.R. 3; Bank of Montreal v. Bail Ltée, 1992 71 (SCC), [1992] 2 S.C.R. 554;

Referred to: Bank of Montreal v. Marcotte, 2014 SCC 55, [2014] 2 S.C.R. 725; Theratechnologies inc. v. 121851 Canada inc., 2015 SCC 18, [2015] 2 S.C.R. 106; Transport TFI 6 v. Espar inc., 2017 QCCS 6311; Beauchamp v. Procureure générale du Québec, 2017 QCCS 5184; Bramante v. Restaurants McDonald's du Canada limitée, 2018 QCCS 4852; Imperial Tobacco Canada ltée v. Conseil québécois sur le tabac et la santé, 2019 QCCA 358, 55 C.C.L.T. (4th) 1; Laflamme v. Prudentiel-Bache Commodities Canada Ltd., 2000 SCC 26, [2000] 1 S.C.R. 638; Souscripteurs du Lloyd's v. Alimentation Denis & Mario Guillemette inc., 2012 QCCA 1376; Guilbert v. Vacances sans Frontières Ltée, 1991 2869 (QC CA), [1991] R.D.J. 513; AIC Limited v. Fischer, 2013 SCC 69, [2013] 3 S.C.R. 949; Bisaillon v. Concordia University, 2006 SCC 19, [2006] 1 S.C.R. 666; Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158; Western Canadian Shopping Centers Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534; Fisher v. Richardson GMP Ltd., 2019 ABQB 450, 95 Alta. L.R. (6th) 172; Louisméus v. Compagnie d'assurance-vie Manufacturers (Financière Manuvie), 2017 QCCS 3614; Brunelle v. Banque Toronto Dominion, 2009 QCCS 4605; Paré v. Desjardins Sécurité financière, 2007 QCCS 4566; Farber v. N.N. Life Insurance Co. of Canada, [2002] AZ-50123096; Comité syndical national de retraite Bâtirente inc. v. Société financière Manuvie, 2011 QCCS 3446; Chandler v. Volkswagen Aktiengesellschaft, 2018 QCCS 2270; Dupuis v. Desjardins Sécurité financière, compagnie d'assurance-vie, 2015 QCCS 5828; London Life Insurance Company v. Long, 2016 QCCA 1434; ATB Financial v. Metcalfe & Mansfield Alternative Investments II Corp. (2008), 2008 27820 (ON SC), 43 C.B.R. (5th) 269, aff'd 2008 ONCA 587, 92 O.R. (3d) 513; Desjardins Sécurité financière, compagnie d'assurance-vie v. Dupuis, 2018 QCCA 1136; Hy Bloom inc. v. Banque Nationale du Canada, 2010 QCCS 737, [2010] R.J.Q. 912.

By Côté J. (dissenting in part)

ATB Financial v. Metcalfe & Mansfield Alternative Investments II Corp. (2008), 2008 27820 (ON SC), 43 C.B.R. (5th) 269, aff'd 2008 ONCA 587, 92 O.R. (3d) 513; Infineon Technologies AG v. Option consommateurs, 2013 SCC 59, [2013] 3 S.C.R. 600; Vivendi Canada Inc. v. Dell'Aniello, 2014 SCC 1, [2014] 1 S.C.R. 3; Theratechnologies inc. v. 121851 Canada inc., 2015 SCC 18, [2015] 2 S.C.R. 106; L'Oratoire Saint-Joseph du Mont-Royal v. J.J., 2019 SCC 35, [2019] 2 S.C.R. 831; Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158; Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534; Bank of Montreal v. Marcotte, 2014 SCC 55, [2014] 2 S.C.R. 725; Sibiga v. Fido Solutions inc., 2016 QCCA 1299; Charles v. Boiron Canada inc., 2016 QCCA 1716; Société québécoise de gestion collective des droits de reproduction (Copibec) v. Université Laval, 2017 QCCA 199; Whirlpool Canada v. Gaudette, 2018 QCCA 1206; Martin v. Société Telus Communications, 2010 QCCA 2376; Pharmascience Inc. v. Option Consommateurs, 2005 QCCA 437, [2005] R.J.Q. 1367; Union des consommateurs v. Bell Canada, 2012 QCCA 1287, [2012] R.J.Q. 1243; Labelle v. Agence de développement des réseaux locaux de services de santé et de services sociaux — région de Montréal, 2011 QCCA 334; Toure v. Brault & Martineau inc., 2014 QCCA 1577; Harmegnies v. Toyota Canada inc., 2008 QCCA 380; Regroupement des citoyens contre la pollution v. Alex Couture inc., 2007 QCCA 565, [2007] R.J.Q. 859; Fortier v. Meubles Léon Ltée, 2014 QCCA 195; Option Consommateurs v. Bell Mobilité, 2008 QCCA 2201; Trudel v. Banque Toronto-Dominion, 2007 QCCA 413; Groupe d'action d'investisseurs dans Biosyntech v. Tsang, 2016 QCCA 1923; Lambert v. Whirlpool Canada, l.p., 2015 QCCA 433; Benabu v. Vidéotron, 2018 QCCS 2207, aff'd 2019 QCCA 2174; Seigneur v. Netflix International, 2018 QCCS 4629, aff'd 2019 QCCA 1671; Raleigh v. Maibec inc., 2016 QCCS 2533; McCracken v. Canadian National Railway Co., 2012 ONCA 445, 111 O.R. (3d) 745; Federal Express Canada Corporation v. Farias, 2019 QCCA 1954; Sofio v. Organisme canadien de réglementation du commerce des valeurs mobilières (OCRCVM), 2015 QCCA 1820; Belmamoun v. Brossard (Ville), 2017 QCCA 102, 68 M.P.L.R. (5th) 46; Durand v. Attorney General of Quebec, 2018 QCCS 2817; Komolafe v. Canada (Citizenship and Immigration), 2013 FC 431, 16 Imm. L.R. (4th) 267; A v. Frères du Sacré-Coeur, 2017 QCCS 5394; Bank of Montreal v. Bail Ltée, 1992 71 (SCC), [1992] 2 S.C.R. 554; Laflamme v. Prudential-Bache Commodities Canada Ltd., 2000 SCC 26, [2000] 1 S.C.R. 638; Richter & Associés inc. v. Merrill Lynch Canada inc., 2007 QCCA 124, [2007] R.J.Q. 238; Louisméus v. Compagnie d'assurance-vie Manufacturers (Financière Manuvie), 2017 QCCS 3614; Brunelle v. Banque Toronto Dominion, 2009 QCCS 4605; Rosso v. Autorité des marchés financiers, 2006 QCCS 5271, [2007] R.J.Q. 61; Paré v. Desjardins Sécurité financière, 2007 QCCS 4566; Farber v. N.N. Life Insurance Co. of Canada, [2002] AZ-50123096; Rozon v. Les Courageuses, 2020 QCCA 5; Rumley v. British Columbia, 2001 SCC 69, [2001] 3 S.C.R. 184; Lallier v. Volkswagen Canada inc., 2007 QCCA 920, [2007] R.J.Q. 1490; TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 S.C.R. 144; Nortel Networks Corp., Re, 2010 ONSC 1708, 63 C.B.R. (5th) 44; Holley v. Northern Trust Co. Canada, 2014 ONSC 889, 10 C.B.R. (6th) 1, aff'd on other grounds, 2014 ONCA 719, 18 C.B.R. (6th) 162; Sam Lévy & Associés Inc. v. Azco Mining Inc., 2001 SCC 92, [2001] 3 S.C.R. 978; In re Mount Royal Lumber & Flooring Co. (1926), 1927 842 (QC CS), 8 C.B.R. 240; Canadian Red Cross Society (Re) (1998), 1998 6284 (BC SC), 165 D.L.R. (4th) 365; Hy Bloom inc. v. Banque Nationale du Canada, 2010 QCCS 737, [2010] R.J.Q. 912; Mull v. National Bank of Canada, 2011 ONCA 488.

Statutes and Regulations Cited

• Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3.
• Charter of Human Rights and Freedoms, CQLR, c. C-12, ss. 6, 49.
• Civil Code of Québec, arts. 6, 7, 1375, 1458, 2098, 2803.
• Code of Civil Procedure, CQLR, c. C-25, arts. 4.2, 999(d), 1003.
• Code of Civil Procedure, CQLR, c. C-25.01, arts. 18, 575, 577, 578.
• Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, ss. 16, 17.
• Securities Act, CQLR, c. V-1.1.

Authors Cited

Baudouin, Jean-Louis, et Pierre-Gabriel Jobin. Les obligations, 7e éd., par Pierre-Gabriel Jobin et Nathalie Vézina. Cowansville, Que.: Yvon Blais, 2013.

Baudouin, Jean-Louis, Patrice Deslauriers et Benoît Moore. La responsabilité civile, vol. 2, Responsabilité professionnelle, 8e éd. Cowansville, Que.: Yvon Blais, 2014.

Boucher, Bernard. Faillite et insolvabilité: Une perspective québécoise de la jurisprudence canadienne, vol. II. Toronto: Thomson Reuters, 2019.

Carbonnier, Jean. Droit civil, vol. II. Paris: Quadrige/PUF, 2004.

Carhart Jeffrey, and Jay Hoffman. "Canada's Asset Backed Commercial Paper Restructuring: 2007-2009" (2010), 25 B.F.L.R. 35.

Crête, Raymonde, et Cinthia Duclos. "Le portrait des prestataires de services de placement", dans Raymonde Crête et autres, dir., Courtiers et conseillers financiers. Encadrement des services de placement. Cowansville, Que.: Yvon Blais, 2011, 45.

Crête, Raymonde, et Cinthia Duclos. "Les sanctions civiles en cas de manquements professionnels dans les services de placement", dans Raymonde Crête et autres, dir., Courtiers et conseillers financiers. Encadrement des services de placement. Cowansville, Que.: Yvon Blais, 2011, 361.

Fabre-Magnan, Muriel. De l'obligation d'information dans les contrats: Essai d'une théorie. Paris: Librairie Générale de Droit et de Jurisprudence, 1992.

Grammond, Sébastien, Anne-Françoise Debruche and Yan Campagnolo. Quebec Contract Law, 2nd ed. Montréal: Wilson & Lafleur, 2016.

Lafond, Pierre-Claude. Le recours collectif, le rôle du juge et sa conception de la justice: impact et évolution. Cowansville, Que.: Yvon Blais, 2006.

L'Heureux, Nicole, et Marc Lacoursière. Droit bancaire, 5e éd. Montréal: Yvon Blais, 2017.

Lluelles, Didier, et Benoît Moore. Droit des obligations, 3e éd. Montréal: Thémis, 2018.

Pearce, Lauren. "Catch and Release: Class Actions and Solvent Third Parties Under the CCAA" (2016), 11 Can. Class Action Rev. 171.

Piché, Catherine. L'action collective: ses succès et ses défis. Montréal: Thémis, 2019.

Piché, Catherine. "Tout ce qu'on ne vous a jamais dit sur l'étape d'autorisation dans l'action collective" (2018), 77 R. du B. 525.

Private Law Dictionary and Bilingual Lexicons: Obligations. Cowansville, Que.: Yvon Blais, 2003"obligation to advise""obligation to inform".

Québec. Ministère de la Justice. Commentaires de la ministre de la Justice: Code de procédure civile, chapitre C-25.01. Montréal: SOQUIJ, 2015.

Rousseau, Stéphane. "L'obligation du courtier de connaître son client en droit canadien des valeurs mobilières" (2008), 2 R.D.B.F. 11.

Terré, François, Philippe Simler et Yves Lequette. Droit civil: Les obligations, 11e éd. Paris: Dalloz, 2013.

Appeal

APPEAL from a judgment of the Quebec Court of Appeal (Bich, St-Pierre and Gagnon JJ.A.), 2017 QCCA 1673, setting aside a decision of Dallaire J., 2016 QCCS 839. Appeal allowed in part, Moldaver, Côté and Rowe JJ. dissenting in part.

Solicitors for the appellants: McCarthy Tétrault, Montréal.

Solicitors for the respondent: Trudel Johnston & Lespérance, Montréal; LLB Avocats, Québec; Paquette Gadler, Montréal.

Reasons for Judgment

Kasirer J. (Wagner C.J. and Abella, Karakatsanis, Brown and Martin JJ. concurring):

I. Introduction

[ 1 ] With the greatest respect for the contrary view, I agree with the Court of Appeal's decision to authorize the class action proposed by the respondent, both against Desjardins Financial Services Firm Inc. ("Firm") and against Desjardins Global Asset Management Inc. ("Management"). In my respectful opinion, the Superior Court judge erred in dismissing the Re-amended and particularized motion (2) for authorization to institute a class action and to obtain the status of representative, reproduced in A.R., vol. II, at pp. 104-62 ("motion"), against the appellants. Except for one matter, I agree with the better part of the Court of Appeal's analysis.

[ 2 ] It is true, as the jurisprudence of this Court has made plain, that a judgment dismissing a class action is entitled to deference on appeal, particularly because of the discretionary nature of the decisions of authorization judges. In this case, however — and this is conceded by the appellants in several respects — the Superior Court judge erred in analyzing certain aspects of the conditions set out in subparas. (a) and (b) of art. 1003 of the former Code of Civil Procedure, CQLR, c. C-25 ("former C.C.P.") (which correspond to subparas. (1) and (2) of art. 575 of the new Code of Civil Procedure, CQLR, c. C-25.01 ("new C.C.P.")). Like the Court of Appeal, I am respectfully of the view that these errors in many respects undermine the deference that must ordinarily be shown by an appellate court.

[ 3 ] I am also of the opinion that some of these errors, including that of disregarding the contractual relationship between Firm and the group's members, are overriding because they strike at the very heart of the judge's decision not to authorize the class action. As the Court of Appeal stated, the respondent's position was not well circumscribed before the Superior Court. In fact, the action against Firm is based on allegations that a common omission, made by all of its representatives, gave rise to liability for this appellant because of the duty to inform that was inherent in its contractual relationship with the respondent and the other members of the group. The alleged fault is therefore a systematic breach of the duty owed by Firm, acting through its employees or mandataries, to inform the group's members of the risks associated with the investments at issue — an omission that was identical and generalized across the group. Having declined to find that there was a contract, the judge did not identify this omission by Firm, which, according to the motion, is a source of contractual liability for Firm under art. 1458 of the Civil Code of Québec ("C.C.Q.").

[ 4 ] First of all, the "direct" contractual liability alleged against Firm is based on its own fault. It is argued that Firm is at fault for giving insufficient instructions to all of its representatives. It is also alleged that Firm's representatives, having received false, misleading or incomplete information, failed in turn to provide adequate information to the respondent and the other members of the group, thereby causing them loss. According to the position the respondent wishes to argue on the merits, this generalized omission gave rise to "indirect" contractual liability for Firm as a mandator or employer.

[ 5 ] Despite various concessions made at the hearing in this Court, the appellants argue — incorrectly, in my view — that the action against Firm must be characterized as a [translation] "class action based on the representations made individually by hundreds of financial advisers" (A.F., at para. 17). I disagree: the motion alleges that all of the representatives failed in the same way to discharge their contractual duty to inform each member of the group of the risks associated with the proposed investment, thereby making the appellant Firm indirectly liable for an identical fault committed systematically by all its representatives.

[ 6 ] The appeal should therefore be allowed only in part, for the sole purpose of varying paras. 8 and 9 of the Court of Appeal's judgment in order to clarify the scope of the claim for punitive damages. In my view, any payment to each member of the group of an amount in punitive damages may be sought solely in relation to Unaffected Claims within the meaning of art. 1 of the Third Amended Plan of Compromise and Arrangement dated January 12, 2009.

II. Legal Framework

[ 7 ] The four conditions set out in art. 1003 of the former C.C.P. (identical, or nearly so, to those in art. 575 of the new C.C.P.) must be met for a class action to be authorized:

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 it difficult or impractical to apply the rules for mandatary of persons or for consolidation of proceedings;

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

[ 8 ] The applicable legal principles governing the authorization of class actions have been set out clearly in Oratoire, Infineon and Vivendi. To summarize:

a) The threshold for authorizing a class action is a low one. Once the four conditions are met, the judge must authorize the action. The authorization judge has no residual discretion.

b) Questions of law may be resolved by an authorization judge if the outcome of the proposed action depends on the judge's doing so.

c) This reflects the purpose of the authorization stage: the judge's role is to filter out frivolous claims, and nothing more.

d) In analyzing a motion, an authorization judge must avoid adopting a rigid approach and must read the wording of the motion to discover the full message it conveys.

e) There is no requirement in Quebec that the common questions predominate over the individual ones; a single common question is enough if it advances the litigation in a not insignificant manner.

III. Firm

A. Does the Motion Propose an Arguable Legal Syllogism? (Article 1003(b) C.C.P.)

[ 9 ] I am satisfied that the allegations are sufficient to establish an arguable case against Firm.

[ 10 ] In Bank of Montreal v. Bail Ltée, 1992 71 (SCC), [1992] 2 S.C.R. 554, the Court observed that the scope of the obligation to inform is assessed on the basis of the following criteria: (1) knowledge of the information, whether actual or presumed, by the party which owes the obligation to inform; (2) the fact that the information in question is of decisive importance; (3) the fact that it is impossible for the party to whom the duty to inform is owed to inform itself, or that the creditor is legitimately relying on the debtor of the obligation.

[ 11 ] The group's members were linked to Firm by a contract for services within the meaning of art. 2098 of the Civil Code of Québec. The duty to inform is grounded in the general obligation of good faith (arts. 6, 7 and 1375 of the Civil Code of Québec) and relates to all contracts.

[ 12 ] The motion does not allege a positive misrepresentation; it alleges an omission corresponding to a breach of the duty to inform, which, unlike the duty to provide advice, is an obligation of result. Mere proof by the creditor that the result was not achieved is sufficient to give rise to a presumption that the debtor is liable.

B. Common Questions (Article 1003(a) C.C.P.)

[ 13 ] Three principal points need to be made:

a) the proposed action is based on a breach of the duty to inform, not the duty to provide advice;

b) the duty to inform may be general in scope; and

c) a class action for such a breach based on the adviser-client relationship is not impossible.

(1) The Action Is Based on a Breach of the Duty to Inform

[ 89 ] The appellants' arguments in this Court are focused on the following proposition: unless a direct fault by Firm or the systematic nature of the misrepresentations conveyed by its advisers is [translation] "supported or demonstrated", as their counsel put it at the hearing, a class action cannot be authorized on the basis of the investor-adviser relationship, because that relationship involves too many individual issues. The appellants submit that the Court of Appeal, in authorizing the class action, disregarded unanimous case law to the effect that the claims made by the respondent and the other members necessarily vary with each investor's specific context and individual risk tolerance (in accordance with the "know your client" concept). They argue that a class action against a brokerage firm for a breach of the duty to provide advice is impossible in such circumstances.

[ 90 ] Once it is understood that the basis for the proposed action against Firm is a breach of the general duty to inform (and not the duty to provide advice), it becomes clear that there are common questions that meet the condition of art. 1003(a) of the former C.C.P. What is common to all the members is the generalized and systematic failure to disclose information concerning the risk associated with the investments. The appellants' arguments regarding the individualized duty to provide advice are therefore not relevant. Like the motion judge, the appellants are basing their reasoning on an incorrect understanding of the position taken in the motion.

[ 92 ] As discussed above, Mr. Asselin's proposed action is based on an alleged breach by Firm of its duty to inform. The motion is clear in this regard:

[translation]

Faults

Breaches of the duty to inform

107. The PP and ALT Investments were represented and described to the Group's members as being safe and intended for a risk-averse investor, as will be shown more fully at the hearing;

107.1 Moreover, the representatives of Desjardins Financial Services were not given sufficient instructions regarding the characteristics and risks of the PP and ALT Investments and were not therefore in a position to evaluate their advantages and disadvantages;

107.1.1 In this regard, the documents describing the PP and ALT Investments . . . gave no explanation, or a very incomplete explanation, of the leverage used to obtain the return on the PP and ALT Investments;

107.1.2 Those documents merely provided an incomplete description of the PP and ALT Investments and presented the advantages of these investments without describing the risks associated with the PP and ALT Investments;

107.2 The information provided by the representatives of Desjardins Financial Services to the Group's members was therefore necessarily wrong or insufficient, if not false, deceptive or misleading;

108. In reality, the amounts allocated to the return on the PP Investment and the ALT Investment were invested in hedge funds with a leverage ratio of five (5) to one (1), as can be seen from the article by Jean Gagnon entitled "Pourquoi certains produits à capital garanti de Desjardins ne rapporteront rien", Exhibit R-14;

108.1 What is more, the hedge funds in which those amounts were invested were themselves leveraged, which multiplied the risk of the PP and ALT Investments;

109. The use of these strategies resulted in a loss of one hundred percent (100%) of the assets of the PP and ALT Investments allocated to the return, whereas the hedge fund market had losses of only thirteen percent (13%) as of September 30, 2008;

110. At no time, however, did the respondent . . . Desjardins Financial Services disclose to the Group's members the risks associated with the liquidity issues and the financial leverage, despite the fact that it was aware or could not have been unaware of those risks;

111. The Group's members were not in a position and could not have known, even with all due diligence, that the respondent . . . Desjardins Asset Management was using significant leverage that might eliminate any possibility of obtaining a return at maturity and that in fact caused the loss, in the fall of 2008, of the portion of the original deposit allocated to the return;

112. Furthermore, the respondent . . . Desjardins Financial Services made false and misleading representations to the Group's members . . . regarding the correlation with the stock markets;

113. Contrary to what the respondent . . . Desjardins Financial Services claimed, the PP and ALT Investments were profoundly affected by stock market fluctuations;

114. The respondent . . . Desjardins Financial Services failed to provide adequate information to the Group's members and breached the informational obligations and duties it owes by law;

115. The faults of the respondent . . . Desjardins Financial Services concerning the obligations related to the disclosure of information occurred in a context in which the PP and ALT Investments were intended for a varied clientele including individuals with little knowledge of financial concepts; [Emphasis added; emphasis in original deleted.]

(A.R., vol. II, at pp. 147-49)

[ 93 ] The motion indicates that the group's members were systematically misinformed. By giving its representatives documents that were misleading and incomplete, Firm misinformed them and did not give them the means to adequately inform the group's members. The motion alleges that the information provided to the members was therefore necessarily wrong or insufficient, if not false, deceptive or misleading.

[ 94 ] The systematic nature of Firm's breach is therefore clearly alleged. There is no question of reading something into the motion that is not there or of "reorienting" the respondent's cause of action; it is enough to note, and to assume the truth of, Mr. Asselin's allegation that Firm's representatives were not given sufficient instructions regarding the products' characteristics and, as a result, were unable in turn to inform the group's members.

[ 95 ] It is also important to note that the information in question here was objective information that Firm never gave the representatives or the members concerning, among other things, the leverage used to obtain the return and the risky nature of the investments (paras. 107.1.1 and 107.2). Mr. Asselin is not alleging that certain representatives gave the members personalized and subjective advice that was not in keeping with their individual risk tolerance. He is alleging that information that was essential to all the members was never given to the representatives and therefore could not be passed on to the members.

[ 96 ] That being the case, Mr. Asselin identifies common questions relating, again, to Firm's duty to inform. The common questions are specifically formulated by reference to the duty to inform, not the duty to provide advice:

[translation]

A) Identical, Similar or Related Questions of Fact and Law That Link Each Member of the Group to the Respondents and That the Applicant Intends to Have Decided Through the Class Action

138. Conformity of the financial product. Did the PP and ALT Investments conform with the financial products that Desjardins Trust, Desjardins Financial Services and Desjardins Asset Management designed and/or offered to the Group's members?

139. Duty to inform. Did Desjardins Trust and Desjardins Financial Services owe the members of the Registered Group, in the case of Desjardins Trust, and the members of the Principal Group, in the case of Desjardins Financial Services, a duty under the Deposit Insurance Act, the Act respecting the distribution of financial products and services, the Civil Code of Québec and/or the applicable rules and/or practices to provide them with information with respect to the offering, design and management of the PP and ALT Investments?

140. If so, did Desjardins Trust and Desjardins Financial Services breach this duty by failing to clearly inform the members of the Registered Group, in the case of Desjardins Trust, and the members of the Principal Group, in the case of Desjardins Financial Services, that the PP and ALT Investments would include investment strategies that might eliminate, before maturity, any possibility of a return? [Emphasis deleted.]

(A.R., vol. II, at pp. 152-53)

[ 97 ] Despite being poorly worded at times, as the Court of Appeal noted, the motion is clear in identifying the breach of a duty to inform as the basis for Firm's contractual liability. Nowhere in the motion is there any mention of a breach of an individualized duty to provide advice.

[ 98 ] It is therefore surprising that the appellants' primary argument is that the duty to provide advice is too individualized to form the basis for a class action. It is true that a case based on the duty to provide advice and the responsibility to "be well informed" as to one's client may be ill suited to a class action — but that is not the question. The position taken in the motion is not based on the individual liability of a financial adviser to a particular client, which would depend, on a case-by-case basis, on evidence of the client's profile to establish whether the investment was in fact appropriate. As counsel for the respondent clearly explained before the Court of Appeal, [translation] "[t]hat is not the basis for the action at all":

The judge, in closing, the motion judge also said that a class action should not be authorized because, basically, what the applicants were asserting was the liability of an adviser to a client. It would be necessary to establish — as in the case of a management mandate between a client and a manager — it would be necessary to establish each client's profile in order to determine whether in fact the product was appropriate for the client. It is absolutely not the case, it was never argued, we even told the Court — it mentions this in its judgment — that we were not pursuing a relationship based on the professional liability of a dealer or financial adviser to a client. That is not the basis for the action at all; the basis for the action, the principal and essential legal syllogism put forward for this action, is that a product was represented as having particular characteristics even though it did not have those characteristics and, as a result, a product was sold, misrepresentations were made, a product was sold as being safe, including the return portion, even though it was being managed in a highly speculative manner through leverage, the use of leverage, in this case a ratio of one to five (1:5), five (5) to one (1), and even in the case of the hedge funds, twenty (20) to one (1). [Emphasis added.]

(A.R., vol. XIII, at pp. 29-30)

[ 99 ] The basis for the action is the duty to inform: it is alleged that the information provided by Firm was systematically truncated, incomplete or misleading.

(2) The Duty to Inform May Be General in Scope

[ 100 ] I emphasize the appellants' misunderstanding of the basis for the proposed action because the scope of the duty to inform and the scope of the duty to provide advice do not vary in the same way with each client's specific context.

[ 101 ] The duty to provide advice owed by Firm's representatives was indeed an individualized one, as the appellants contend and as my colleague notes as well. They rely on cases dealing with the individualization of the duty to provide advice, which I see no need to discuss, as that is not the basis for the action. Suffice it to say that the duty of financial advisers to provide advice requires [translation] "consideration of the client's particular situation, goals and expectations" and that it "therefore requires a subjective assessment in order to tailor the advice to the client's specific situation" (Crête and Duclos, at pp. 394-95 (footnotes omitted)).

[ 104 ] This duty to inform is, in many respects, less individualized and therefore more likely to give rise to common questions than the duty to provide advice. The duty to provide advice [translation] "is subjective in nature and requires a great deal of skill as well as knowledge of the other contracting party's needs" (Lluelles and Moore, at No. 2002). The duty to inform, on the other hand"is quite easy to fulfil, as it simply involves transferring, during the course of the contract, information that is important to the other contracting party" (No. 2002). Unlike the duty to provide advice, which depends on each client's idiosyncrasies, the duty to inform is therefore "above all largely dependent on the status of the parties" (No. 2006 (footnote omitted)).

[ 105 ] Here, the alleged fault is a breach of a general obligation to inform that affected each member, not a breach of an individualized obligation to properly advise a client. What Mr. Asselin alleges is that Firm and its representatives systematically failed to provide essential and objective information regarding the characteristics of the investments. It is therefore clear that the alleged breach of Firm's duty to inform is necessarily a common question, regardless of each client's specific characteristics.

[ 106 ] But what about the fact that the scope of the duty to inform varies with the context? As we have seen, the scope of the duty depends on "[1] knowledge of the information, whether actual or presumed, by the party which owes the obligation to inform; [2] the fact that the information in question is of decisive importance; [3] the fact that it is impossible for the party to whom the duty to inform is owed to inform itself, or that the creditor is legitimately relying on the debtor of the obligation". The scope of the duty to inform is therefore assessed in light of the needs and knowledge of the creditor of the duty. This does not mean that there cannot be circumstances in which all of the creditors were deprived of information as a result of a systematic omission. Mr. Asselin is specifically alleging the existence of such circumstances, in which an [translation] "informational imbalance" (Jobin and Vézina, at No. 313) and Firm's control of the information are common to all the members.

[ 107 ] In scholarly commentary, it is noted that the scope of the creditor's duty to inform itself depends on whether it is possible for the creditor [translation] "to know or have access to the information" (Jobin and Vézina, at No. 314; see also, e.g., S. Grammond, A.-F. Debruche and Y. Campagnolo, Quebec Contract Law (2nd ed. 2016), at para. 327). As Professor Fabre-Magnan observes, the same limit is found in French law where [translation] "the creditor legitimately has no knowledge of the information" (Fabre-Magnan (1992), at Nos. 254 et seq.; see also J. Carbonnier, Droit civil (2004), vol. II, at No. 998). It is true that this lack of knowledge or impossibility, even in the context of the obligation to inform, can be assessed concretely in light of the individual capabilities of the person who claims to be owed the information. However, the case for a class action here is based on the idea that all of the investors were in this situation of impossibility because of the breaches committed by Firm in disseminating information about the risks to its own mandataries and employees.

[ 108 ] Indeed, as alleged in the motion, the group's members could not have known the information that Firm had about how the investments worked"even with all due diligence". Accordingly, the fact that the duty to inform does not extend to what the creditor already knows or is presumed to know has no impact on Mr. Asselin's position. In any event, if Firm wishes to show that, despite its silence, some clients already knew or should have known the characteristics of the investments, this goes to the defence that this appellant can raise at the trial on the merits. At this stage of the proceedings, the alleged facts must be assumed to be true, and Mr. Asselin is clearly alleging that it was impossible for clients to find out the relevant information so that they could know the characteristics of the investments. The questions raised with respect to Firm's alleged breach are therefore common to all the clients, regardless of their level of financial education.

[ 109 ] Moreover, the appellants' argument that expertise and risk tolerance are specific to each client is immaterial given that Mr. Asselin is alleging a general failure to disclose information that was owed to all members and was of decisive importance to all members. This was what counsel for Mr. Asselin explained before the Court of Appeal:

[translation] So it is simply the equivalent of saying, here are a hundred (100) people or a thousand (1,000) people who ordered a car, I don't know, a Buick, and received a scooter. So there is no need to look at why the people wanted, the applicants or the members wanted a car, what they were going to do with the car, whether it was really a car that was suitable for them; there's no need to do that.

(A.R., vol. XIII, at pp. 30-31)

[ 110 ] I note that my colleague is critical of the motion for not alleging "that a systematic fault was committed by Firm's representatives, which, in [her] opinion, is essential for a common question to be found to exist" (para. 256). As we have seen, however, para. 107.2 of the motion states that "[t]he information provided by the representatives of Desjardins Financial Services to the Group's members was . . . necessarily wrong or insufficient, if not false, deceptive or misleading". This, in my respectful view, is an adequate allegation of fault on the part of the representatives.

[ 111 ] I will also say, since the appellants reproach Mr. Asselin for not offering any concrete criticisms of his financial adviser at the time, that it is not a question of pointing the finger at a financial adviser who is alleged to have been particularly incompetent. On the contrary, the argument is that by failing to properly train its representatives, Firm doomed all of them to commit the same fault.

[ 112 ] It is therefore not the Court of Appeal that rewrote the respondent's motion by divining a fault committed by the financial advisers, including Ms. Blanchette. In my view, it is rather the appellants that are reorienting the cause of action by regarding the action as being based on the poor individualized advice allegedly given by Ms. Blanchette. Indeed, this misreading of the motion is what grounds their argument that the respondent has not made any specific allegations or raised any common questions. In my opinion, the respondent's action is based, as I have already said, on a generalized and systematic failure by Firm to provide information. Firm is alleged to have breached its duty to all members of the group by failing to provide representatives and clients with essential and objective information about the products being recommended.

[ 113 ] With respect, I therefore cannot agree with my colleague that Firm's alleged breach here requires too individualized an analysis to be the subject of a class action. The alleged faults do not depend on the identity of either the client or the adviser.

(3) A Class Action for a Breach of the Duty to Inform Based on the Adviser-Client Relationship Is Not Impossible

[ 114 ] At the hearing, in answer to a question by one of my colleagues, the appellants tried to persuade this Court that a class action against a brokerage firm for breaches by its representatives is impossible.

[ 115 ] I disagree with the appellants' argument that this type of case is never well suited to a class action. In light of the social function of the class action, it would be highly imprudent for this Court to declare, as the appellants would like, that any class action of this kind against a brokerage firm is impossible or that an action based on a representative's alleged fault is necessarily an individual action.

[ 116 ] This Court has clearly explained, in decisions that are consistent on this point, that the twin goals of access to justice and victim compensation will be achieved by interpreting the authorization conditions broadly (see Oratoire, at para. 8; Marcotte, at para. 43; Infineon, at para. 60). The categorical interpretation proposed by the appellants would, in a context like the one here, deprive the class action of part of its role of helping people who, for economic and other reasons, face barriers in asserting their rights (Oratoire, at para. 8; AIC Limited v. Fischer, 2013 SCC 69, [2013] 3 S.C.R. 949, at paras. 24 and 27; Bisaillon v. Concordia University, 2006 SCC 19, [2006] 1 S.C.R. 666, at para. 16). This concern is particularly relevant in actions based on financial investments, since the fact that the amounts in issue are modest when considered individually often means that "traditional litigation provides no economically feasible way to recover the investors' claimed losses" (Fischer, at para. 57; see Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, at para. 15; Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534, at para. 28).

[ 120 ] The judgment cited by the appellants therefore supports the proposition that is the opposite of theirs: a class action based on a brokerage firm's liability for the conduct of its representatives is possible, though such actions would be quite rare, as long as the issue is whether the information provided by the brokerage firm (here, Firm) to its representatives and to the group's members was insufficient, with the result that a general duty to inform was breached.

[ 125 ] In addition, the case before this Court is very similar to Dupuis v. Desjardins Sécurité financière, compagnie d'assurance-vie, 2015 QCCS 5828 (in which authorization to institute a class action was granted). As in the instant case, when the action was considered from the perspective of the failure by the company selling the investments to disclose relevant information, common questions were identified despite the specific characteristics of each member of the group (see paras. 47-53). In fact, the authorization judge, in his decision (at para. 91), identified common questions that are virtually identical to the ones proposed by Mr. Asselin in this case.

[ 126 ] I therefore see no reason to accede to the appellants' request that any class action against a brokerage firm for the conduct of its representatives be declared impossible despite the fact that it was Firm's systematic failure to provide information to its representatives that gave rise to their faults. With respect, it also seems to me that, although my colleague states that she is not "concluding that a claim for a financial adviser's breach of the duty to inform can never be the subject of a class action" (para. 256), this would indeed be the consequence of her reasons. It is alleged here that all of the representatives systematically failed to provide information to the group's members because they did not have that information themselves. If this argument is not sufficient to find that the appeal raises a common question, I have difficulty imagining what allegation could be sufficient.

[ 127 ] To close the door to the proposed class action in such a categorical fashion would undermine the role of the class action as a procedural mechanism for fostering social justice in this setting.

(4) Conclusion Concerning the Condition of Article 1003(a) of the Former C.C.P.

[ 128 ] The proposed class action against Firm concerns, as we have seen, a contractual breach of its duty to inform that grounds both its direct liability, for its failure to provide information to its representatives, and its indirect liability, for the incomplete information provided by the representatives to the group's members. In both cases, the alleged omissions are systematic in nature. They do not depend on each client's individual characteristics.

[ 129 ] The systematic nature of these omissions in both cases makes it possible to identify common questions in the proposed action against Firm under art. 1003(a) of the former C.C.P. The following common questions were correctly identified by the Court of Appeal (para. 8):

[translation]

1. Conformity of the financial product. Did the PP and ALT Investments conform with the financial products that [Firm] and [Management] designed and/or offered to the group's members?

2. Duty to inform. Did [Firm] owe the group's members a duty under the Deposit Insurance Act, the Act respecting the distribution of financial products and services, the Civil Code of Québec, any other statute and/or the applicable rules and/or practices to provide them with information with respect to the nature, characteristics, offering and management of the PP and ALT Investments?

3. If so, did [Firm] breach this duty by failing to clearly inform the group's members that the PP and ALT Investments would include investment strategies that might eliminate, before maturity, any possibility of a return?

[ 130 ] In my respectful view, the motion judge's reasons show that she considered the common questions condition from the perspective of an action based on the duty to provide individualized advice tailored to each client's risk tolerance, even though that was not the basis for Mr. Asselin's action (paras. 208-9).

[ 132 ] With great respect, it seems to me that the respondent is correct to say that the authorization judge — by looking at whether the documents contained representations, and not omissions, that were necessarily known and that inevitably had an impact on everyone — imposed a burden of demonstration that went beyond showing an arguable case. The systematic conduct that the judge reproached Mr. Asselin for not having "demonstrated" is alleged throughout the motion, which is more than sufficient.

[ 133 ] The motion may be unwieldy at times, and its coherence no doubt suffered by reason of the multiples amendments made to it. In my view, however, the basis for this liability giving rise to common questions is adequately alleged. In these circumstances, the Court of Appeal was justified in intervening, and the common questions condition is met for the proposed action against Firm.

IV. Management

[ 134 ] In this Court, the appellants make several concessions with regard to Management's situation. They reiterate that the authorization judge erred with respect to the condition set out in art. 1003(a) of the former C.C.P. As the Court of Appeal noted, [translation] "the judgment completely overlooks the portion of the action that concerns [Management]" (para. 147). Yet this portion of the action undoubtedly raises common questions, as the appellants acknowledge. They also concede, as they did before the Court of Appeal, that it can be argued that Management is liable as the designer of the investments, contrary to what the motion judge found.

A. Circularity of the Reasoning

[ 136 ] The first ground of appeal has to do with whether the case against Management is an arguable one. According to the appellants, the syllogism proposed by the respondent is circular in nature and untenable. They submit that there is nothing to suggest that the absence of a return was due to the risky strategies used by Management; this allegation, in the context of the 2008 financial crisis, is mere speculation and cannot suffice for the purposes of art. 1003 of the former C.C.P.

[ 137 ] This argument is without merit.

[ 138 ] Contrary to what the appellants contend, Mr. Asselin is not merely saying that Management's practices were risky because the investments did not generate a return; he is making concrete allegations against Management. The motion speaks for itself in this regard:

[translation]

108. In reality, the amounts allocated to the return on the PP Investment and the ALT Investment were invested in hedge funds with a leverage ratio of five (5) to one (1), as can be seen from the article by Jean Gagnon entitled "Pourquoi certains produits à capital garanti de Desjardins ne rapporteront rien", Exhibit R-14;

108.1 What is more, the hedge funds in which those amounts were invested were themselves leveraged, which multiplied the risk of the PP and ALT Investments;

123. Furthermore, a significant portion of the money market investments in the PP Investment and the ALT Investment consisted of Asset-backed Commercial Paper ("ABCP");

124. As of August 2007, however, ABCP became a risky and illiquid asset that could no longer play the role ascribed to it in the PP and ALT Investments, as can be seen from, among other things, the Desjardins Group's annual reports for 2007 (pp. 25-27 and 113-15), 2008 (pp. 34-40 and 133-37), 2009 (pp. 170-74) and 2010 (pp. 142-46), Exhibit R-17, jointly, as well as the Desjardins Group's quarterly reports from September 2007 to September 2008, Exhibit R-13, jointly;

125. Despite the foregoing, the respondents not only retained ABCP in the PP Investment and the ALT Investment after August 2007, but also made new issues of those Investments until September 2008, as can be seen from, among other things, reports R-17 and R-13;

126. This management decision, which was injurious to the Group's members, stands in contrast to the fact that, during the same period, the respondents replaced the ABCP held by their institutional clients with secure, liquid deposit notes, as can be seen from, among other things, reports R-17 and R-13;

127. The respondents Desjardins Trust and Desjardins Asset Management ceased in the fall of 2008 to manage the amounts that had been entrusted to them for the purpose of obtaining a return at maturity for the Group's members; [Emphasis added; emphasis in original deleted; p. 151.]

Like the Court of Appeal and my colleague, I am of the opinion that these allegations are sufficiently precise.

[ 139 ] It seems to me that, through their argument that the allegations are circular, the appellants are attempting to revive the defence, which was accepted by the motion judge but rejected on appeal, that the real cause of the respondent's loss was the 2008 financial crisis, not Management's incompetence.

[ 140 ] The issue of what impact the financial crisis had on the causal link between Management's alleged extracontractual faults and the loss for which the respondent is seeking compensation is one that goes to the merits of the case. The Court of Appeal, properly relying on London Life Insurance Company v. Long, 2016 QCCA 1434, at paras. 104 and 108, emphasized that the difficult issue — disputed in this case — of how the crisis may have affected the return on an investment could not be decided at the authorization stage without encroaching on the role of the trial judge (see, e.g., Oratoire, at para. 41). There is no reviewable error in that conclusion.

B. Release With Respect to ABCP

[ 141 ] The second ground of appeal concerns Management's alleged faults in relation to ABCP, for which Mr. Asselin is claiming punitive damages.

[ 142 ] The respondent argues that the appellant Management interfered unlawfully and intentionally with his right to the peaceful possession of his property, thereby justifying a claim for punitive damages pursuant to ss. 6 and 49 of the Charter of Human Rights and Freedoms, CQLR, c. C-12. The motion for authorization alleges, at para. 123, that "a significant portion of the money market investments in the PP Investment and the ALT Investment consisted of Asset-backed Commercial Paper ('ABCP')". The following is stated at para. 126.1:

[translation] Since the respondents knew that the ABCP market was precarious and illiquid, their decision to continue issuing the PP Investment and the ALT Investment after August 2007 and to retain ABCP in the PP and ALT Investments issued before August 2007 had the effect of imposing on the Group's members a loss that the respondents Desjardins Trust (with regard to the members of the Registered Group only) and Desjardin Asset Management would otherwise have had to assume personally, which amounts to unlawful and intentional interference with the right of the Group's members to the peaceful enjoyment and free disposition of their property, and which justifies an award of punitive damages;

(A.R., vol. II, at p. 150)

[ 143 ] The appellants submit that this aspect of the claim is not arguable and that the Court of Appeal made an overriding error in setting aside the motion judge's decision on this point. According to the appellants, any claim relating to ABCP has been extinguished as a result of the Sanction Order made as part of the restructuring of the ABCP market carried out under the CCAA (see ATB Financial Inc. v. Metcalfe & Mansfield Alternative Investments II Corp. (2008), 2008 27820 (ON SC), 43 C.B.R. (5th) 269 (Ont. S.C.), decision accompanying the Sanction Order, June 5, 2008, and the Third Amended Plan of Compromise and Arrangement, January 12, 2009, aff'd 2008 ONCA 587, 92 O.R. (3d) 513). In light of the release and injunction included in the Sanction Order, the aspect of the respondent's cause of action that is based on ABCP is not arguable under art. 1003(b) of the former C.C.P.

[ 148 ] First, the parties agree that this aspect of the litigation relates only to the claim for punitive damages; the motion for authorization brought against Management with respect to compensatory damages can therefore proceed, subject, of course, to the other conditions set out in art. 1003 of the former C.C.P.

[ 149 ] In addition, the respondent acknowledges that the release on which the appellants rely is in effect and enforceable in Quebec (transcript, at p. 76). His counsel stated at the hearing that [translation] "there is no dispute that the release is fully applicable, but it is impossible at this time to know what its scope might be" (p. 81). Counsel conceded that his client's claim pertains only to Unaffected Claims as defined in the release (pp. 78-82).

[ 150 ] It can be understood from his position that the respondent is waiving any claim for punitive damages for Affected ABCP and limiting himself to the ABCP not covered by the release. In light of this clarification of what is being claimed for the purposes of the class action, the Affected ABCP can, it seems to me, be excluded at once, even though a defence that involves the weighing of evidence should ordinarily be dealt with at trial: Oratoire, at paras. 41-42.

[ 152 ] The motion judge found that [translation] "the claim based on ABCP is, on its face, barred" (para. 187). To make that finding, she relied in particular on the Sanction Order made by Campbell J. and cited certain provisions of the Third Amended Plan of Compromise and Arrangement. However, she did not refer to the distinction between Affected ABCP and Unaffected Claims as dealt with in the Third Amended Plan of Compromise and Arrangement.

[ 153 ] The Court of Appeal intervened after taking note of the respondent's argument that this issue went to the merits of the case, and also because of its own view that the argument made by the appellants required evidence (para. 138). I agree on these two points and, with respect, I am of the opinion that the motion judge could not decide whether the claim was barred at the authorization stage.

[ 154 ] It is true, as I have noted, that a court "may . . . decide a pure question of law at the authorization stage if the outcome of the proposed class action depends on its doing so" (Oratoire, at para. 55 (emphasis in original)). But the question of whether the ABCP concerned is part of the Affected ABCP covered by the release and listed in its Schedule "A" is not a pure question of law. Deciding it would require, at a minimum, a list of the ABCP included in the investments at issue.

[ 155 ] In this case, it is not the application of the Order that is being contested but rather its scope, which can be argued later, just like the scope of the judicial admission made at the motion hearing. The scope of the Affected ABCP and the unaffected ABCP is an issue that could, if necessary, be referred to the Ontario Superior Court of Justice (see art. 11.12 of the Third Amended Plan of Compromise and Arrangement). As in Hy Bloom inc. v. Banque Nationale du Canada, 2010 QCCS 737, [2010] R.J.Q. 912, at para. 102, and Dupuis (C.A.), at paras. 18-20, potential claims relating to ABCP that are not extinguished by the release can be heard. That being the case, the parties' dispute formally concerns, at this point in time, not the interpretation of the Order, but simply its implementation.

[ 156 ] Caution must therefore be exercised at this stage, and any doubt should weigh in favour of the continuation of the proceedings, especially since deferring this matter will not result in the appellants losing any rights given that the action against Management must proceed on the merits on the claim for compensatory damages. That being said, counsel for the respondent acknowledges that the claim for punitive damages is by no means certain to be successful, although it must be recognized that, though difficult, a claim based on unlawful and intentional interference under s. 6 of the Charter in relation to the ABCP not covered by the release remains arguable in this context.

[ 157 ] This is the explanation for the qualifying words that, in my respectful view, should be added to paras. 8 and 9 of the Court of Appeal's judgment in this appeal: for common question 8(c) and for the conclusion dealing with punitive damages, I would specify that the payment to each member of the group of an amount [translation] "in punitive damages" may be sought "solely in relation to Unaffected Claims within the meaning of art. 1 of the Third Amended Plan of Compromise and Arrangement sanctioned by order of the Ontario Superior Court of Justice dated January 12, 2009".

V. Conclusion

[ 158 ] I would allow the appeal in part, but solely for the purpose of varying paras. 8 and 9 of the Court of Appeal's judgment so that they read as follows:

[translation]

[8] IDENTIFIES as follows the principal questions of fact and of law to be dealt with collectively:

8. Damages. Based on the answers to the previous questions, are Desjardins Financial Services Firm Inc. and Desjardins Global Asset Management Inc. liable:

c) to pay each member of the group one thousand dollars ($1,000) in punitive damages solely in relation to Unaffected Claims within the meaning of article 1 of the Third Amended Plan of Compromise and Arrangement sanctioned by order of the Ontario Superior Court of Justice dated January 12, 2009, subject to adjustment, with interest at the legal rate and the additional indemnity from the date of the judgment to be rendered?

[9] IDENTIFIES as follows the principal conclusions sought on the merits in the class action, it being understood that whether the awards set out below are in solidum depends on the answer, if any, given by the Superior Court to the final portion of question 6, as defined at paragraph [8] above:

ORDER each of the respondents to pay each member of the group one thousand dollars ($1,000) in punitive damages solely in relation to Unaffected Claims within the meaning of article 1 of the Third Amended Plan of Compromise and Arrangement sanctioned by order of the Ontario Superior Court of Justice dated January 12, 2009, subject to adjustment, with interest at the legal rate and the additional indemnity from the date of the judgment to be rendered, and ORDER the collective recovery of these amounts.

[ 159 ] I would award costs to Mr. Asselin throughout.

Reasons Dissenting in Part

Côté J. (Moldaver and Rowe JJ. concurring):

I. Overview

[ 160 ] This appeal raises issues related to the authorization of class actions in Quebec. Much continues to be written on this subject by both judges and authors. Although the principles that are to guide a court at the authorization stage are well known, applying them remains difficult and at times unpredictable.

[ 161 ] The case concerns capital-guaranteed investments that, it is alleged, though represented to be safe, were in reality risky investments that were also managed in a risky manner. The investments in question ultimately yielded no return at maturity, although the investors did recover their capital. The respondent, disappointed at having obtained no return on his investment, filed a Re-amended and particularized motion (2) for authorization to institute a class action and to obtain the status of representative, reproduced in A.R., vol. II, at pp. 104-62 ("motion").[^1] The Superior Court declined to authorize the action (2016 QCCS 839). The Court of Appeal set aside that decision and authorized the action (2017 QCCA 1673).

II. The Parties

[ 162 ] The respondent, Ronald Asselin, is a long-time member of a caisse populaire that is part of the Desjardins Group and that offers various financial services. The appellants in this case — Desjardins Financial Services Firm Inc. ("Firm") and Desjardins Global Asset Management Inc. ("Management") — are part of the Desjardins Group. At first, Desjardins Trust Inc. was also a party in the proceeding, but the respondent discontinued his suit against it in the Superior Court.

[ 163 ] The appellant Firm is a financial services firm that works in the areas of mutual fund brokerage and financial planning. In his motion, the respondent alleges that Firm is responsible for the mutual fund representatives and financial planners working in the caisses populaires of the Desjardins Group, including the representatives who offered the investments at issue to the members of the group covered by the proposed class action.

[ 164 ] The appellant Management is a portfolio company that works in asset management. It offers various services relating to investments, portfolio management, and financial and asset allocation strategies. The respondent alleges that Management designed the investments at issue in this proceeding and was responsible for managing them.

III. The Investments

[ 165 ] This case concerns two types of investments: Perspectives Plus Term Savings ("PP") and Alternative Term Savings ("ALT"). Mutual fund representatives and financial planners offered these savings vehicles in the network of caisses populaires of the Desjardins Group. What was appealing about the PP and ALT investments can be described briefly: their capital was guaranteed at maturity, and they offered a potential return that was variable, although it could be nil. Clients purchased these investments by entering into deposit agreements with the caisse populaire where they did business. Each deposit agreement therefore created a contractual relationship between the client and his or her caisse populaire, which was the issuer of the investment, but did not create a contractual relationship between the client and either Firm or Management.

[ 166 ] In his motion, the respondent describes as follows how the investments worked. A portion of the invested capital was guaranteed by a zero-coupon bond whose value at maturity was equal to the value of the original deposit, such that the capital was guaranteed. The amounts allocated to the return were equal to the residual value of the original deposit following the purchase of the zero-coupon bond, and that value was invested in money market funds and used to guarantee trades in financial derivatives selected on a monthly basis. At maturity, the value of the investment was thus equal to the original deposit (which was guaranteed) plus any return obtained.

IV. Facts of the Case

[ 167 ] The respondent alleges that on March 4, 2005, Denise Blanchette, a financial planner and mutual fund representative, recommended that he purchase PP and ALT investments. On June 14, 2005, allegedly on the basis of those recommendations, the respondent entered into a deposit agreement with the Caisse populaire de Sherbrooke-Est and deposited amounts in a first PP investment with a term of seven years. In January 2006, the respondent received his annual investment statement issued by the Caisse populaire de Sherbrooke-Est, which indicated that his investment had yielded a return of 2.3 percent for 2005. In January 2007, he received a second annual investment statement, again issued by the Caisse populaire de Sherbrooke-Est, which showed a return of 6.9 percent for 2006.

[ 168 ] The 2006 statement was accompanied by a letter from the Caisse populaire de Sherbrooke-Est signed by Ms. Blanchette. The letter stated that the guaranteed investments were [translation] "an excellent investment vehicle, both for the protection of your capital and for the attractive returns you can obtain from them" (A.R., vol. XI, at p. 14 (emphasis deleted)). The respondent alleges that, later in 2007, he received a document from the Desjardins Group that promoted the PP and ALT investments. It should be noted that the document expressly stated that [translation] "[t]he returns presented are not a guarantee of future performance" (A.R., vol. X, at p. 101).

VIII. Analysis

A. Objectives of the Class Action

[ 201 ] The class action serves multiple objectives, including access to justice, behaviour modification and judicial economy (Hollick, at para. 15; Western Canadian Shopping Centres, at para. 29).

[ 202 ] The objectives of facilitating access to justice, modifying harmful behaviour and conserving judicial resources that underlie the class action can be attained only if a rigorous procedure is followed for the authorization of such an action. The class action is a cumbersome procedural vehicle that represents a huge undertaking for all of the participants, including the courts. Authorization is meant to be more than a mere formality. Its purpose is to protect the interests of all those involved in the class action — not only the interests of the representative and the absent members, but also those of the defendants and even of the administration of justice. The authorization stage is what confers full legitimacy on the class action.

B. Authorization Stage of the Class Action

[ 203 ] The authorization stage acts as a filter for weeding out frivolous or untenable actions (Vivendi, at para. 37).

[ 204 ] Even though the court plays a more active role in the context of a class action, it may not take on the role of party or counsel and reorient the action as presented by the applicant however it likes. The court's role is not to read between the lines in order to guess the basis for the action whose authorization is being sought, or for the legal syllogism, where no specific allegations are made in relation to a key element of the cause of action.

C. Role of the Judge at the Authorization Stage

[ 210 ] The court hearing the motion for authorization can supplement the allegations using the evidence in the record and can draw inferences and presumptions from them. However, the court is not required to assume the applicant's legal allegations to be true; it may decide a pure question of law at the authorization stage if the outcome of the proposed class action depends on its doing so.

[ 211 ] When a judge decides a question of law on which the outcome of a class action depends at the authorization stage, this furthers the objectives of predictability of the law and judicial economy that underlie the system of administration of justice. The judge's role at the authorization stage is to screen out frivolous or untenable actions, but also to verify that all the conditions of art. 1003 of the former C.C.P. are met. A motion that does not meet all the conditions is not for that reason alone frivolous. Because the court must assume that the alleged facts are true, the allegations must be clear and complete, not vague, general or imprecise. Defects of form can be excused, but substantive defects cannot be. The allegations must be read carefully in order to determine whether the legal syllogism they propose is an arguable one.

D. Standard for Appellate Intervention

[ 223 ] At the authorization stage, judges have considerable leeway in assessing whether the conditions set out in art. 1003 of the former C.C.P. are met. If a judge is of the opinion that each condition is met, he or she must authorize the action and has no discretion to decline to do so. An appellate court's power of intervention is limited, and it must defer to the judge's assessment of the conditions. The applicable standard for appellate intervention is that of palpable and overriding error.

IX. Application

A. The Proposed Action Against Firm

(1) Intervention of the Court of Appeal

[ 233 ] In this case, the motion judge did not err in stating that Firm could not be contractually liable on the basis of the deposit agreements for the PP and ALT investments because the parties to those agreements were the clients and their respective caisses populaires. The contract that could give rise to Firm's contractual liability is instead the one that it entered into with clients through its representatives, which was a contract for services whose sole object was the giving of advice. While the giving of advice was the core prestation under the contract, this did not preclude a duty to inform from existing as well.

(2) Common Questions Requirement (Article 1003(a) C.C.P.)

[ 238 ] The common questions requirement set out in art. 1003(a) of the former C.C.P. is not met with respect to the proposed action against Firm.

[ 241 ] Even if it is assumed for the purposes of discussing the condition of art. 1003(a) C.C.P. that the respondent has an arguable case against Firm, I am of the view that the action cannot be authorized because of the absence of common questions. Determining whether Firm committed the fault it is alleged to have committed, namely a breach of its duty to provide information concerning the safety of the PP and ALT investments, requires a contextual analysis involving a number of factors, including the nature of the relationship between the financial adviser and the client, the information provided by the financial adviser, each individual's investor profile, age and experience, each investor's understanding of the risks associated with the investments, and each investor's level of sophistication and risk tolerance — all factors that essentially highlight the fact that the duty to inform is an individual and not a common one unless it is shown that the duty was systematically breached.

[ 247 ] The duty to inform is more general than the duty to provide advice owed by Firm's representatives; the duty to inform is, however, a variable obligation shaped by the circumstances of each case, as was affirmed in Bail. This is especially true in cases where the duty to inform is an accessory to a main prestation whose object is the giving of advice. In this case, the obligation to inform arose in the broader context of the provision of a financial adviser's services, which varies in accordance with several factors, including the length of the relationship and the client's goals and level of expertise. The obligation of advisers or dealers to know their clients shapes their relationship with them; it is clear that the clients' specific circumstances are of significant importance. It is therefore not surprising that A does not know whether there are other members in the same situation as him.

[ 256 ] I am therefore not concluding that a claim for a financial adviser's breach of the duty to inform can never be the subject of a class action. The individualized analysis required by the action precludes the possibility of proceeding on a collective basis. A systematic duplication of fact-finding and legal analysis will be required for each relationship between a financial adviser and a client, which means that the proposed question cannot advance the litigation in a not insignificant manner.

B. The Proposed Action Against Management

(2) Punitive Damages

[ 262 ] On this point, the authorization judge was correct to consider the release with respect to ABCP found in the Sanction Order, and the scope of that release, in concluding that the claim against Management for punitive damages in relation to ABCP did not establish an arguable case.

[ 263 ] The defences available to a defendant are generally considered at the trial on the merits. However, a court may decide a pure question of law at the authorization stage if the outcome of the proposed class action depends on its doing so. This principle also extends to the interpretation of a release included in a sanction order made by the Ontario Superior Court of Justice, which has full force and effect in Quebec under s. 16 of the CCAA.

[ 296 ] Even if other parts of the motion are considered, the respondent is not arguing that any "authorized representative" of Management acted with fraudulent intent. This fact alone means that there is no legal syllogism in respect of which authorization could be granted, as it is the representative who must have the fraudulent intent. Campbell J. himself was aware of the possibility that the release would "preclude recovery in circumstances where senior bank officers who had the requisite fraudulent intent directed sales persons to make statements that the sales persons reasonably believed but that the senior officers knew to be false" (Metcalfe & Mansfield (S.C.), at para. 119).

[ 297 ] The second impediment to the claim for punitive damages relates to the strict time limit for asserting a claim. The nine-week time limit began to run on the date of delivery of notice by the Monitor, which was essentially the date on which the Sanction Order was made, namely June 5, 2008 (J. Carhart and J. Hoffman"Canada's Asset Backed Commercial Paper Restructuring: 2007-2009" (2010), 25 B.F.L.R. 35, at p. 56). Mr. Asselin's motion for authorization to institute a class action was served on September 16, 2011. His claim for punitive damages based on Management's use of an investment strategy that included ABCP was therefore filed out of time.

[ 298 ] Courts with jurisdiction under the CCAA have "[t]he ability to conclusively cap liability and close the door on future litigation" (Pearce, at p. 193). This is the case here. To permit claims to be considered regardless of the previous decisions and the release would operate as a manifest unfairness to all the other participants that incurred losses (Mull, at para. 2). Allowing the claim relating to ABCP to proceed would amount to reopening a debate on the release in the Quebec Superior Court, which [translation] "would short-circuit the economy of the judicial system" (Hy Bloom inc., at para. 84).

[ 299 ] In conclusion, the release stands in the way of the respondent's legal syllogism with regard to Management's fault, and the claim based on ABCP must be dismissed. It is clear from the allegations, the terms of the release and the respondent's admission that the claim for punitive damages based on ABCP does not have the colour of right required by art. 1003(b) C.C.P.

(3) Compensatory Damages

[ 300 ] Insofar as it is argued that Management is liable as the designer and manager of the products, I agree with the Court of Appeal that the action can be authorized in relation to the compensatory damages sought by the respondent against Management.

[ 301 ] The respondent alleges that Management breached its duty of competence and management by taking risks that were contrary to its legal and contractual obligations (A.R., vol. II, at p. 63, para. 120). Among other things, he alleges that Management liquidated the amounts allocated to the return on the PP and ALT investments in order to honour the capital guarantee, which, he says, shows the scale of the risk associated with the investments. Thus, in addition to the use of ABCP, the investment strategies included the use of a leverage ratio of five to one, which, according to the respondent, was in violation of Management's obligations because it put the capital at risk and forced the liquidation of the amounts allocated to the return (para. 122.1). The respondent submits that all of this was contrary to Management's obligation to act prudently and diligently and that it resulted in a loss of 100 percent of the assets allocated to the return (para. 127).

[ 302 ] The authorization judge declined to authorize this part of the action, in particular because she found that the losses in question were attributable to the market collapse during the crisis of 2008 and that, as a result, the action did not have the colour of right required by art. 1003(b) C.C.P. I agree with the Court of Appeal that this was an error that warranted its intervention. By referring to the effects of the 2008 financial crisis, the authorization judge decided the merits of the action. Thus, even though one may find tenuous this aspect of the action, it is not devoid of foundation. The allegations are sufficiently precise for this aspect of the action against Management to be authorized.

[ 303 ] I would therefore answer the second question at issue partly in the negative, as I am of the view that the Court of Appeal properly authorized the action against Management except in relation to the claim for punitive damages.

X. Disposition

[ 304 ] I would allow the appeal in part. I would decline to authorize the action against Firm, and I would authorize the action against Management, but only in relation to the claim for compensatory damages.

Appeal allowed in part, Moldaver, Côté and Rowe JJ. dissenting in part.

Solicitors for the appellants: McCarthy Tétrault, Montréal.

Solicitors for the respondent: Trudel Johnston & Lespérance, Montréal; LLB Avocats, Québec; Paquette Gadler, Montréal.

[^1]: Since the enactment of the new Code of Civil Procedure, CQLR, c. C-25.01 ("new C.C.P."), the expression used is now instead an "application for authorization to institute a class action". Because the proceedings in this case were filed under the former Code of Civil Procedure, CQLR, c. C-25 ("C.C.P."), I will refer throughout these reasons to the "motion for authorization to institute a class action".