Serge Létourneau

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

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

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

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

The appellant entrusted the management of a large sum of money to the respondent securities dealer, who mismanaged the portfolio by making speculative investments on margin contrary to the appellant's retirement objectives.

The trial judge found the respondents entirely liable for the resulting losses.

The Court of Appeal reduced the damages, finding that the appellant had taken control of the account and failed to mitigate its damages by not closing it earlier.

The Supreme Court of Canada allowed the appeal, restoring the trial judge's finding that the mandate remained discretionary and that the appellant, lacking financial expertise, acted reasonably in not intervening earlier.

Damages were awarded for the full period of mismanagement.