A New Look at Interlocutory Injunctions

December 11, 2018

The year 2018 has been an important one for case law regarding injunctions: the Supreme Court of Canada and the Court of Appeal of Quebec each rendered decisions that redefined certain parameters for the issuing of a interlocutory injunction.

R. v. Canadian Broadcasting Corp.

On February 9, 2018, the Supreme Court of Canada rendered a unanimous decision in R. v. Canadian Broadcasting Corp.¹ The most significant aspect of this decision is that the Court redefines the serious issue to be tried criterion when it comes to a mandatory interlocutory injunction, which is an injunction that orders the defendant to do something, as opposed to a prohibitive injunction, which orders the defendant to refrain from doing something.

An accused was found guilty of first degree murder of a minor, following which the Canadian Broadcasting Corporation (“CBC”) published information on its website that revealed the identity of the victim. A ban prohibiting the publishing, broadcasting, or transmission in any way of any information that could identify the victim was ordered under section 486.4(2.2) of the Criminal Code, at the Crown’s request. CBC refused to remove the information from its website, and the Crown filed an application to have CBC declared guilty of criminal contempt and to obtain an interlocutory injunction ordering the removal of the information from CBC’s website. The first judge dismissed the Crown’s application, concluding that it had not met its burden with regard to the criteria for obtaining a mandatory interlocutory injunction. The Court of Appeal allowed the appeal and granted the injunction.

The Supreme Court explains that, when it comes to mandatory interlocutory injunctions, the applicant must demonstrate more than the serious issue to be tried, as established by the decision RJR—MacDonald Inc. v. Canada (Attorney General).² The threshold to be applied is a “strong prima facie case,” which requires the applicant to establish “[...] a strong likelihood on the law and the evidence presented that, at trial, the applicant will be ultimately successful in proving the allegations set out in the originating notice”.³ The two other criteria for issuing an interlocutory injunction (irreparable harm and balance of convenience) remain the same.

The Court specifies that the modified test only applies to mandatory interlocutory injunctions, explaining that an interlocutory injunction framed in prohibitive language may nevertheless require the defendant to take positive action. For example, ordering that CBC stop transmitting the information that established the identity of the victim would require positive action on the part of CBC, that is, to take measures to remove the information from its website. The Court emphasizes the importance of looking past the form and the wording used, in order to determine the real essence of the order sought.

Pointing out the discretionary nature of the decision to issue an interlocutory injunction and the duty of deference with regard to intervention on the part of appeal courts, the Court allows the appeal and restores the decision of the chambers judge, concluding that the Crown had not demonstrated a strong prima facie case of criminal contempt. In fact, since section 486.4(2.2) of the Criminal Code could be reasonably interpreted as only prohibiting publications transmitted after the publication ban, the Crown could not establish that it had a strong likelihood to succeed at trial.

Groupe CRH Canada inc. c. Beauregard

On June 21, 2018, the Court of Appeal rendered a decision in Groupe CRH Canada inc. c. Beauregard,⁴ which will surely often be cited, since it redefines the relationship that exists between the three criteria for the issuance of an interlocutory injunction.

The respondents, waterfront residents near Chemin de la Butte-aux-Renards (the “Road”), commenced legal proceedings to seek an interlocutory and permanent injunction and damages to stop truck traffic on the Road. The Road was the only access road that enables trucks to obtain supplies from the stone quarry operated by the appellant CRH Canada Group Inc. (“CRH”), and from manufacturing facilities for products related to asphalting, which belonged to the appellant Bau-Val Inc. (“Bau-Val”). The impleaded party, KPH Turcot, was awarded the design-build contract for the Turcot project and would receive its supplies from the CRH quarry, which led to increased traffic on the Road since the spring of 2016. The Superior Court issued an interlocutory injunction prohibiting the operation of trucks in the evenings and at night (from 5:30 p.m. to 6:29 a.m.), limiting the operation of trucks on weekends to three Saturdays per year, and restricting the operation of trucks during the day. Among the grounds of appeal raised, the appellants claimed that the chambers judge did not consider the balance of convenience after having concluded that the respondents met the prima facie case criterion.

First, the Court clarifies the fact that there is no true distinction to make between determining if there is a serious issue to be tried and a prima facie case: it is essentially sufficient for the application to be neither frivolous nor vexatious. It should be noted that the Court does not refer to the decision R. v. Canadian Broadcasting Corp. decision rendered a few months earlier, which redefined this criterion for mandatory interlocutory injunctions. This could probably be explained by the fact that the Court of Appeal had before it an application to issue a prohibitive interlocutory injunction for which it must have been of the opinion that the new criterion established by the Supreme Court of Canada did not apply.

With regard to the second criterion, the Court recalls the wording used in article 511 of the Code of Civil Procedure, which codifies interlocutory injunctions: prejudice must be serious or irreparable, which means to that an injunction can be issued even if the prejudice can be compensated monetarily, if and so long as the prejudice is “serious.”

The most significant aspect of this decision is the analysis carried out by the Court with regard to the balance of convenience criterion. The Court comes to the firm conclusion that a judge who has before him an application for interlocutory injunction must analyze the balance of convenience criterion, even if the applicant demonstrates a strong prima facie case. This conclusion seems to contradict a number of precedents, including the landmark case of James Bay Development Corporation v. Chief Robert Kanatewat,⁵ which was to the effect that the balance of convenience should not be analyzed if the applicant demonstrates a strong prima facie case.

[14] At the interlocutory injunction stage these rights are apparently either (a) clear, or (b) doubtful, or (c) non-existent:

(a) If it appears clear, at the interlocutory stage, that the Petitioners have the rights which they invoke then the interlocutory injunction should be granted if considered necessary in accordance with the provisions of the second paragraph of Article 752 C.P.

(b) However, if at this stage the existence of the rights invoked by the Petitioners appears doubtful then the Court should consider the balance of convenience and inconvenience in deciding whether an interlocutory injunction should be granted.

(c) Finally if it appears, at the interlocutory stage, that the rights claimed are non-existent then the interlocutory injunction should be refused.

The Court indicates that even if there were a violation of an objective legislative standard of public order, the criterion of the balance of convenience must still be analyzed and could be used as an argument against the application of the standard. It is clear that this change made by the Court is a major one: henceforth, the applicant is never exempt from demonstrating that the balance of convenience criterion is in the his favour, even if said applicant demonstrates a strong prima facie case.

The Court provides two cases in which judges may discontinue their analyses of the prima facie case criterion: [our translation] “(a) when the applicant does not meet the preliminary condition of the "prima facie case" or the "serious issue to be tried", such that the application may be denied for this reason; and (b) when the case is based on a pure question of law” (para. 77).

Finally, the Court briefly mentions that, in Quebec, it is possible for judges to discontinue their analyses based on the prima facie case criterion for cases in which the interlocutory injunction is aimed at enforcing contractual obligations. The Court does not elaborate more on this obiter, which can be applied in Quebec, where specific performance is the default remedy for not performing a contractual obligation, and not an exception, as it is in common law.

On the basis of its analysis of the balance of convenience, the Court partially allows CRH’s appeal, quashing the injunction which limited the operation of trucks during the day on weekdays. With regard to Bau-Val, as the first judge acknowledged that the traffic generated was minimal, the injunction was quashed.

Conclusion

Litigants parties must be familiar with these two decisions that redefine the criteria required for issuing an interlocutory injunction.

2018 SCC 5
1994 CanLII 117 (SCC). The Court’s reasons were delivered by the Honourable Justice Brown.
para. 17
2018 QCCA 1063 (CanLII)
[1975] C.A. 166

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Despina Mandilaras
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August 9, 2024

The elected domicile appearing in the Québec Enterprise Register cannot provide a basis for the Superior Court’s territorial jurisdiction within the meaning of article 41(3) of the Code of Civil Proce

Introduction On July 11, 2024, the Court of Appeal1 rendered a decision that, for the first time, addresses the question of whether the elected domicile appearing in the Québec Enterprise Register (the “REQ”), established under the Act respecting the legal publicity of enterprises,2 can provide a basis for the Superior Court’s territorial jurisdiction within the meaning of article 41(3) of the Code of Civil Procedure.3 Upholding the decision rendered by the Superior Court,4 the Court of Appeal answered that it cannot. The Facts On April 25, 2023, Promark Electronics Inc. and Electrical Components International Inc. (collectively, “Promark”) filed a claim for damages against Bombardier Recreational Products Inc. (“BRP”) in the judicial district of Montréal, alleging that a letter of agreement had been terminated and related purchase orders cancelled. On June 22, 2023, BRP raised a declinatory exception asking the court to issue an order transferring the case to the judicial district of Bedford, where its head office is located. Promark argued that filing its claim in the judicial district of Montréal was warranted because of BRP’s elected domicile indicated in the REQ, which corresponded to the office of its counsel located in Montréal. On September 5, 2023, the Honourable Tiziana Di Donato, J.S.C. (the “Judge”) allowed BRP’s declinatory exception and issued an order referring the case to the judicial district of Bedford. On November 10, 2023, the Honourable Stephen W. Hamilton, J.C.A., granted leave to appeal the Judge’s decision, indicating that the courts have never settled the question of whether the domicile elected under section 33 ALPE is sufficient to make paragraph 3 of article 41 of the C.C.P. apply. He added that it appeared to him that the lower courts had rendered contradictory judgments in this regard.5 The Trial Judgement The Judge began by pointing out that, generally, for a purely personal action, the judicial district of the defendant’s domicile is the natural forum (article 41(1) C.C.P.) and that, in the case of a corporation, the domicile would be that of its head office. The Judge further clarified this principle by explaining that, where more than one judicial district has jurisdiction, the plaintiff may institute its proceedings before another court having territorial jurisdiction (article 42 C.C.P.), provided that it establishes that it is entitled to make such an election. In support of its contestation to the declinatory exception, Promark argued that it was entitled to institute the proceedings in the judicial district of Montréal because BRP had elected its domicile under the ALPE, and that, consequently, that district constituted an “elected domicile” under article 41(3) C.C.P., which reads as follows: So far as public order permits, the court of the defendant’s elected domicile, or the court designated by an agreement between the parties other than a contract adhesion, also has territorial jurisdiction. [Our emphasis] To render her decision, the Judge determined that article 41(3) C.C.Q. should be interpreted using modern rules of statutory interpretation, adding in particular that it is useful to refer to prior provisions of a law to ascertain the legislature’s intent. The Judge thus revisited the legislative history of article 41 C.C.P., affirming that it essentially restates the prior law, in particular article 68 of the former Code of Civil Procedure, CQLR c. C-25, which provided in paragraph 1, subparagraph 1 that “. . . a purely personal action may be instituted: (1) [b]efore the court of the defendant’s real domicile or, in the cases contemplated by article 83 of the Civil Code, before that of his elected domicile.” Although paragraph 3 of article 41 C.C.P. no longer specifically refers to article 83 of the Civil Code of Québec (the “C.C.Q.”)6 the Judge, following an interpretive analysis, found that said article still applies to determine whether a party has elected domicile, and stressed the fact that the election of domicile must be express and unequivocal. The Judge added that election of domicile is the exception and must be interpreted restrictively. As for the scope of an election of domicile under the ALPE, the Judge pointed out that subsection 33(1) ALPE indicates that a business may elect domicile and appoint a person to “receive documents for the purposes of this Act.” Article 98(5) ALPE also indicates that the domicile elected by a business under the ALPE is intended to inform third parties of the address where the business wishes to receive documents “for the purposes of this Act.” The Judge was thus of the opinion that sections 33(1) and 98(5) ALPE, as drafted, cannot have the scope that Promark seeks to ascribe to them, as they are clear and they do not need to be interpreted. In the case of an election of domicile under the ALPE, the purpose of the election is to provide an address where documents can be sent to the business, unless there is specific evidence to the contrary. For these reasons, the Judge allowed the declinatory exception and referred the case to the judicial district of Bedford. The Judgement on Appeal From the outset, the Court of Appeal confirmed that the Judge did not commit a reviewable error: (1) the domicile elected for purposes of attributing territorial jurisdiction under article 41 (3) C.C.P. is the domicile designated by the parties for the execution of their agreement within the meaning of article 83 C.C.Q., and (2) the domicile elected under the ALPE is elected for the purposes of applying the ALPE (para. 23). The Court of Appeal is of the opinion that the Judge’s decision is consistent with what the legislature had prescribed in article 68 of the former Code of Civil Procedure and upholds stability in the law, which is particularly important in matters of jurisdiction. After analyzing the parliamentary debates surrounding the enactment of article 41 C.C.P. and the Commentaires de la ministre de la justice, the Court indicated that there is a presumption of the survival of the existing legal rule and that, contrary to what the appellants claimed, the wording of article 41 C.C.P. and articles 33 and 98 ALPE do not give the courts territorial jurisdiction other than that of the defendant’s domicile. The removal of the reference to article 83 C.C.Q. in article 41 C.C.P. does not constitute a clear indication of the legislature’s intent to set aside the requirements of article 83 C.C.Q., under which, for the purposes of determining territorial jurisdiction, the parties must establish the elected domicile in their agreement. On that basis, the Court of Appeal dismissed the appeal without costs and confirmed the Judge’s reasoning that territorial jurisdiction of the courts under article 41(3) C.C.P. is established based on the election of domicile made under article 83 C.C.Q., and not on the election of domicile made by a corporation under the ALPE, whereby a business elects a domicile for the purposes of the application of that law. Conclusion This case serves as a reminder that the C.C.Q. establishes the general law in our province. It is therefore important to refer to it when interpreting other laws enacted by the Quebec legislature. Because the legislature is “deemed to know its legislative fabric as well as the existing law,”7 the Court cannot interpret a given law—such as the ALPE—in a way that would amend a substantive statutory provision of general application—in this case, the C.C.Q.—where there is no clearly expressed intention to that effect. Promark Electronics Inc. c. Bombardier Recreational Products Inc., 2024 QCCA 906 CQLR, c. P-44.1 (the “ALPE”) CQLR, c. C-25.01 (the “C.C.P.”) Promark Electronics Inc. c. Bombardier Recreational Products Inc., 2023 QCCS 3405 Promark Electronics Inc. c. Bombardier Recreational Products Inc., 2023 QCCA 1427, para. 8 83. “The parties to a juridical act may, in writing, elect domicile with a view to the execution of the act or the exercise of the rights arising from it. Election of domicile is not presumed.” Promark Electronics Inc. c. Bombardier Recreational Products Inc., 2024 QCCA 906, para. 24

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July 26, 2024

A tenderer’s failure to comply with the preliminary complaint process as part of a municipality’s public call for tenders leads to a fin de non-recevoir

Introduction On June 14, 2024, the Superior Court of Québec issued a decision1 interpreting section 938.1.2.2 of the Municipal Code of Québec, which came into force in 2019. This provision gives a person interested in participating in the awarding process the opportunity to file a preliminary complaint about a requirement in the tender documents that they believe does not ensure the honest and fair treatment of tenderers. To our knowledge, this is the first time a court has considered the impact on a claim for damages for loss of profits2 when an unsuccessful tenderer fails to comply with this relatively new provision The Superior Court concluded that a tenderer’s failure to submit a complaint in a timely manner should be considered as [translation] “a form of fin de non-recevoir, or at the very least, a break in the chain of causation between the alleged fault and the damages claimed” (paragraph 40). Facts The dispute at hand pitted Transport Martin Forget Inc. (“Transport Forget”) against the Municipality of Saint-Alexis (the “Municipality”). On May 6, 2019, the Municipality issued a call for tenders for a snow clearing and salting contract. Transport Forget submitted the lowest bid, which was $150,000 below that of the winning tenderer. Transport Forget was excluded from the call for tenders given its failure to comply with the tender specifications requiring it to provide a Régie du bâtiment du Québec (“RBQ”) licence number, together with an attestation that its licence was in good standing. Further to the Municipality’s refusal to award the contract to Transport Forget, it claimed $300,000 in damages for alleged loss of profits. Transport Forget believed that its tender was compliant, that the RBQ licence requirement imposed by the Municipality was frivolous and unreasonable, that the Municipality failed to uphold the principle of equal treatment of tenderers and that the complaint process provided for in section 938.1.2.2 of the Municipal Code of Québec did not deprive it of its rights. As for the Municipality, it considered the irregularity in Transport Forget’s tender to be major and Transport Forget’s failure to comply with the complaint process concerning this requirement—both reasonable and in the public interest—was fatal to its legal action. The evidence showed that the RBQ licence number provided in Transport Forget’s tender was invalid and that Transport Forget deliberately chose not to renew said licence before submitting its tender, as it was unsure as to whether it would win the bidding process and wished to avoid needlessly paying the $1,000 annual fee required for the licence renewal. Applicable principles In order to determine the outcome of this dispute, the Court analyzed the case based on the decision in Tapitec,3 a landmark ruling in tendering matters. It reiterated the Court’s view that the decisive factor in determining whether an irregularity is minor or major is the equal treatment of tenderers. It also pointed out that municipalities can set out conditions aimed at limiting the number of tenderers, provided that this is done for an important and legitimate purpose. As for section 938.1.2.2 of the Municipal Code of Québec, the Court viewed it as a mechanism for monitoring all contracts awarded by public bodies which is designed to establish a process to ensure compliance with the principles of integrity needed to protect the public interest. According to the Court, the legislator’s intention is also to protect small municipalities such as the one in question (with a population of approximately 1,500) from potential legal action following the opening of tenders by ensuring that issues concerning the principle of equal treatment of tenderers are resolved prior to the tendering process. Tenderers that fail to comply with this requirement will not be entitled to claim damages for loss of profits, as in this case, except where there has been fraud or blatant bad faith, as in cases of collusion. The purpose of the provision in question is to prevent a tenderer that is aware of the requirements set out in the tender documents from contesting such requirements after the fact. Decision The Court found that the requirement to hold an RBQ licence number was a condition intended to limit the number of tenderers, which the Municipality was entitled to do. Although the Court recognized that there is no correlation between being able to perform snow clearing operations and holding an RBQ licence, it accepted the evidence that this condition was an appropriate and quick way for the Municipality to ascertain the credibility and organizational skills of tenderers, which was a important and legitimate objective. The Court therefore concluded that this requirement of the tender specifications was neither frivolous nor arbitrary. The Court considered the irregularity in Transport Forget’s tender to be major. Although the obligation to hold a valid RBQ licence is neither a requirement of public policy nor a substantive requirement, it is intended precisely to proscribe the lack of seriousness shown by Transport Forget when it opted not to pay the renewal fees for its RBQ licence before submitting its tender. The Municipality exercised its administrative discretion in a reasonable manner and ensured that all tenderers were treated equally. The Court found that the Municipality was right to reject Transport Forget’s tender. Although the Court dismissed the claim, it did nevertheless consider section 938.1.2.2 of the Municipal Code of Québec. In the Court’s view, Transport Forget could have lodged a preliminary complaint about the validity of the condition imposed by the Municipality to hold an RBQ licence. Doing so would have given the Municipality the opportunity to amend its call for tenders before the opening of tenders. Transport Forget’s failure to do this rendered its claim for damages inadmissible. Commentary Tenderers for public calls for tenders issued by a municipality must be aware of section 938.1.2.2 of the Municipal Code of Québec4 and understand how to apply it in a timely manner. As demonstrated by the Superior Court’s interpretation of this section in the judgment in question, an unsuccessful tenderer that has not complied with the complaint process set out in said section and who intends to sue for damages for an alleged loss of profits could have their claim turned down on grounds of a fin de non-recevoir. Transport Martin Forget Inc. c. Municipalité de Saint-Alexis, 2024 QCCS 2208 We came across the decision in Sintra inc. c. Municipalité de Noyan, 2019 QCCS 4293 (CanLII), which also deals with this provision, but in the context of an application for an interim injunction from the lowest tenderer attempting to prevent the awarding of the contract to a third party: the Court dismissed the claim, in particular because the tenderer had not lodged a complaint about the process provided for the awarding of the contract, in accordance with section 938.1.2.2 of the Municipal Code of Québec, and concluded that the prima facie case requirement had not been met. Tapitec c. Ville de Blainville 2017 QCCA 317 We would also like to draw your attention to section 573.3.1.4 of the Cities and Towns Act, which is identical to section 938.1.2.2 of the Municipal Code of Québec. We have not found any decisions interpreting this section, so we urge tenderers to be cautious and comply with the complaint process applicable to calls for tenders issued by cities and towns, to avoid having their claim turned down on grounds of a fin de non-recevoir.

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March 13, 2024

An insurer ordered to pay damages – The Court of Appeal intervenes

On February 12, 2024, the Court of Appeal of Quebec handed down its decision in Société d’assurance Beneva inc. c. Bordeleau,1 dealing in particular with the burden of proof incumbent on an insurer when it denies coverage on the basis of an insured’s intentional fault, and an award of damages against an insurer for breach of its duty of good faith. The facts This decision was rendered further to a dispute between Société d’assurance Beneva inc. (hereinafter the “Insurer") and some of its insureds, including Mr. Michel Bordeleau, the owner of a multi-storey rental building that was damaged by fire. He lived in one of the units with his parents. According to the uncontested expert evidence presented, the fire originated in one of the storage spaces in the basement of the building, which was assigned to a lessee couple. Access to the basement and all storage spaces was locked. The cause of the fire was deemed to be intentional, given the traces of accelerant found in the area of the fire’s origin. The instigator or instigators were not identified. On November 21, 2016, 60 days after the fire, the Insurer denied coverage because of the intentional nature of the fire, which it attributed to its insured, Mr. Bordeleau. A few months later, on March 22, 2017, it reached an agreement with Mr. Bordeleau’s hypothecary creditor. The subrogation release provides for the Insurer’s payment of the balance of the hypothecary debt of $149,720.99, and subrogation to the creditor’s rights up to the amount paid. Mr. Bordeleau, in his belief that he had been harmed by the Insurer’s decision, instituted legal proceedings to recover the insurance benefit to which he claimed to be entitled, while also claiming damages. The Insurer filed a cross-application for recovery of the balance paid to the hypothecary creditor. The trial The trial judge, relying on the evidence, concluded that although the fire was intentional in nature, the Insurer had not discharged its burden of establishing the insured’s involvement in the fire. Taking this conclusion into account, she then proceeded to analyze the plaintiffs’ claim and to weigh the damages in light of the evidence and the limits of the insurance policy. In particular, she ruled in favour of Mr. Bordeleau’s claim for damages for the building, the amount of which was admitted. In addition, she ordered the Insurer to pay $15,000.00 in damages for nuisance and inconvenience caused by its conduct, which she considered faulty. This conclusion was based on the Insurer’s duty to act in good faith, to consider the facts and act on their basis, and to conduct a full investigation, duty which the Insurer had breached by failing to sufficiently follow-up on leads that could have identified who was responsible for the fire. In order to deny coverage, clear and compelling evidence of the insured’s involvement, going beyond mere suspicion, was necessary. Given the sometimes implausible and sometimes contradictory testimonies of the people met during the investigation, there was no such evidence. In other words, the claims adjuster had jumped to conclusions. In light of her conclusions, the trial judge dismissed the Insurer’s cross-application, which she deemed to be unfounded, without giving further reasons. The appeal The Court of Appeal first refrained from intervening in light of the Superior Court’s conclusions regarding the failure to demonstrate Mr. Bordeleau’s involvement in the fire. It did however intervene on the damages awarded for nuisance and inconvenience suffered by the insureds, and pointed out the following: [40] [translation] Firstly, apart from the strict mathematical calculation of the amounts payable, and perhaps other technical aspects not requiring the exercise of judgment, the processing of a claim is an obligation of means, not one of result. The fact that a court found at the end of a trial held many years after the incident that an insurer should have covered in the first place obviously does not mean that the insurer necessarily committed a fault other than its refusal to pay, making it civilly liable, let alone that it acted in bad faith. [41] In this case, there was nothing in the evidence to support a finding of fault or breach of the duty of good faith. [42] On the contrary, there is enough evidence to conclude that the investigation by the appellant and its experts, which led to the denial of coverage, was not botched. . . . In the opinion of the Court of Appeal, the evidence showed that the Insurer’s investigation had been done in a conscientious manner, in particular because it had transferred the claim file to a special investigative unit, mandated a fire origin and cause expert and external investigators, and interviewed many witnesses who could have provided information on the circumstances of the incident. Moreover, it had no allegations that the Insurer had failed to consider exculpatory evidence against its insured. In this context, although it took several years for the insured to obtain his due, with all the inconveniences of going through proceedings, the Insurer’s conduct could not be considered offending or revealing of bad faith. No damages could be awarded. Lastly, the Court of Appeal took a closer look at the question of the Insurer’s subrogation to the hypothecary creditor’s rights, which was little discussed in the judgment under appeal. Reiterating the fundamental principle in property and casualty insurance that the indemnification of an insured cannot result in enrichment, the Court of Appeal concluded that dismissing the Insurer’s cross-application would have such an effect. In addition to receiving an insurance benefit for the damages sustained, Mr. Bordeleau would also have had seen his hypothecary debt discharged. This would have given him a clear advantage. In this case, the benefit paid to the hypothecary creditor needed to be deducted from the damages claimed by the insured. The trial judge’s finding were thus revised accordingly. Conclusion Despite the clear principles addressed in this case, the Court of Appeal’s analysis points to practical difficulties that insureds and insurers can encounter when dealing with similar claims. It points to the coexistence of two factors that can be difficult to balance: First, the burden of proof where coverage is denied on the basis of the insured's intentional fault, and second, the insurer’s obligation of means in processing the associated claim. The dismissal of a coverage defence does not in itself warrant awarding damages. Société d’assurance Beneva inc. c. Bordeleau, 2024 QCCA 171

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March 11, 2024

Class actions to watch in 2024

Quebec is a fertile ground for class actions, with over 550 active cases and between 50 to 100 applications for authorization filed each year. While 2023 marked the fifth anniversary of the “new” class action division: what is there to watch in 2024? Read on to find out. Opioids and the State: Sanis Health v. British Columbia Can a state be a plaintiff to a class action? Can it be the plaintiff to a class action in another state? Can it be a class member in another state? In 2018, British Columbia adopted the Opioid Damages and Health Care Costs Recovery Act1 [ORA] allowing the government to institute class action proceedings regarding “opioid-related wrongs.” This was modelled after an earlier legislation targeting “tobacco-related wrongs,”2 the constitutionality of which had been upheld by the Supreme Court.3 The ORA, however, allowed not only British Columbia to institute such proceedings, but also, provided it had commenced such an action, to bring it forward “on behalf of a class consisting of one or more of the governments of Canada and the provinces or territories of Canada.”4 The constitutionality of this provision was challenged, without success in the first instance5 and on appeal.6 Though the Court of Appeal upheld the validity of the provision, it did characterize it as “a bold step, if not an experiment, in bringing government-led class litigation as close as possible to truly “national” proceedings in Canada’s federal structure.”7 This boldness snowballed: Similar laws have been adopted throughout Canada.8 Unsurprisingly, the Supreme Court of Canada has granted leave.9 A hearing should be scheduled in 2024. Relatedly, in Quebec, the parties are awaiting judgment on an application for authorization to institute a class action against several pharmaceutical companies10 relating to the manufacturing, marketing, distribution and sale of opioids. In this case, the plaintiff is seeking to represent all persons in Quebec who suffer, or has suffered, from opioid use disorder following the use of prescription opioids since 1996. It is now settled law that one person may sue several defendants in a single action regarding an allegedly common practice even if that person does not have a direct cause of action against each defendant, provided that the proposed representative is otherwise able to adequately represent the members who do.11 It remains to be seen whether the representative plaintiff put forward in this case will be able to fulfill his role against approximately 20 companies having marketed more than 150 different products over more than 25 years. Jurisdiction over foreign defendants Are allegations sufficient to establish the jurisdiction of Quebec authorities over foreign defendants that are distinct from their Quebec subsidiaries?12 And if so, how should the geographical limits of the putative class members be defined? In the Bourgeois case, the proposed representative, a Quebec resident, is seeking authorization to institute a class action against several companies that develop and market video games with a “loot box” mechanism, which he claims constitutes a form of illegal gaming. Putative class members are not limited to Quebec residents such as himself. Moreover, many of the respondents are foreign companies, and some have no establishment in Quebec. Some of these foreign entities filed a declinatory exception, which the court dismissed. An appeal was filed, which includes arguments that the dismissal of the declinatory exception unduly broadened the definition of “establishment” within the meaning of article 3148 C.C.Q. Will the Court of Appeal give guidelines for determining whether such an issue should be addressed at the authorization stage? We should know soon as the Court of Appeal is expected to render judgment on this matter within the coming months. The appeal was heard on February 2, 2024. In 2023, the Quebec Court of Appeal had closed the door on the use of the guiding principles of procedure to broaden the scope of its jurisdiction.13 Earlier in the year, the British Columbia Court of Appeal had ruled that it had no jurisdiction over a class action relating to misrepresentations made outside its territory for lack of a “real and substantial connection”,14 and the Ontario Superior Court had followed suit.15 Clearly, class action law and private international law continue to cross paths, if not swords. More than 10 years later16 The majority of class actions are settled before they reach the merits. The same cannot be said for the case involving the Lac-Mégantic tragedy, in which the Court of Appeal is slated to hear the case on liability of certain defendant this year. On July 6, 2013, at 1:14 a.m., downtown Lac-Mégantic was set ablaze after a tank car train derailed. Images of the derailment were broadcast around the world. A class action ensued, filed on July 15, 2013. Authorized on June 8, 2015,17 it was joined with two civil suits, one instituted by the Attorney General of Québec [translation] “for all of the damages suffered by the Quebec State as a result of the tragedy,” estimated at over $231,000,000, and the other by a group of insurers.18 These proceedings were also split in order to first address the liability of the defendants Montreal, Maine & Atlantic [MMA] and Canadian Pacific [CP].19 On December 14, 2022, after a 63-day trial, spanning nine months, the Superior Court did not hold CP liable for the derailment, finding only MMA liable.20 Appeals were filed by both sides in January 2023, suspending the continuation of the trial for the remainder of the case.21 As the appeal materials were filed in the fall of 2023, there should be a hearing in 2024. Class counsel or representative’s counsel?22 Are the lawyers of the representative also those of the class? A trial judgment suggests that they should be considered so if it is in the interest of the class. The Court of Appeal will be ruling on this issue. The Court of Appeal may be called on to rule on this recurrent point of contention between lawyers who act mainly for the plaintiffs and those who act mainly for the defendants: does class counsel have a direct relationship with the members of the class, or is their legal relationship thereto contingent on the relationship they have with the representative? Labour law in Canada’s major junior hockey leagues gives the case its backdrop. Around 2020, the parties to three certified class actions, one in Alberta, one in Ontario and one in Quebec,23 agreed to a settlement that included a release. The scope of said release was the stumbling block—the three courts involved refused to approve the transaction and sent the parties back to the drawing board.24 A new release under the same agreement was drawn up in 2023. It was signed by the two representatives of the Quebec class, Lukas Walter and Thomas Gobeil, on May 9 and June 5, 2023. A date was then set for approval. In a surprising turn of events, on June 14, 2023, Walter and Gobeil informed their lawyers that they no longer agreed to the amended transaction, and notices of revocation of mandate were sent out a few days before the scheduled hearing date. Class counsel, claiming the need to safeguard the interests of the class members, asked the Court to reject the notices of revocation.25 The text of article 576 C.C.P. is unequivocal: the court appoints the representative. It is also clear from case law that it is the representative plaintiff who mandates counsel, not the reverse.26 Because the representative plaintiff is entitled to the counsel of his or her choice, like any other litigant, Walter and Gobeil were in principle entitled to revoke the mandates of their lawyers, even though said lawyers had been involved from the outset of the case. The matter complexifies when one considers the interests of the class members, as the trial judge writes: [translation] “Who will act in the case and whom will they be representing?”27 Possibly to assuage both sides, she acknowledged the revocation of mandate, but confirmed that the lawyers would continue to represent the class, stating that they [translation] “must uphold their duty to represent the class and present the terms of the settlement agreement as amended for approval.”28 In other words, she considered that class counsel had a direct relationship with the class. Needless to say, the case was appealed. The hearing on leave to appeal took place on February 29, 2024. Price higher than advertised: where’s the harm? What burden is imposed on plaintiffs who wish to institute proceedings under section 224(c) of the Consumer Protection Act, prohibiting the practice of hidden charges or drip pricing? A trial judgment states that the mere finding of a prohibited practice is not sufficient to prove actual harm. For the first time in reported case law, the Court of Appeal will consider a judgment on the merits dealing with the application of article 224(c) of the Consumer Protection Act. In this case, Union des consommateurs claims that Air Canada, during the first stage of an online ticket purchase process, failed to indicate the amount of taxes, fees, charges and surcharges included in the final price charged, thereby violating applicable legislation. Union des consommateurs is seeking a reduction in the price paid by members of the class corresponding to the sum of the charges, as well as punitive damages of $10 million. The Superior Court found that Air Canada had indeed advertised a price lower than that ultimately charged to class members. This finding of fault, however, did not relieve the plaintiff of the burden of proving actual harm. Because Air Canada demonstrated that there were clearly visible warnings that the advertised prices did not include all of the fees charged, the Court concluded that the prohibited practice was not likely to influence the formation of the contract.29 Since no harm has been demonstrated, no compensatory damages were awarded. As for punitive damages, the evidence did not show that Air Canada had engaged in “conduct […] which display[ed] ignorance, carelessness or serious negligence”. Moreover, Air Canada had ceased engaging in the contentious practice before the class action was authorized. The appeal was lodged on December 28, 2022, and should be heard this year. The upcoming decision will have a significant impact on a number of ongoing class actions under section 224(c) CPA. The decision will certainly shed some interesting light on the required proof of actual harm and the impact of the prohibited practice on consumers’ purchasing decisions. Devaluation of taxi licenses Will the Superior Court find that by adopting the Act respecting remunerated passenger transportation by automobile,30 the Quebec government expropriated taxi owners without paying fair and reasonable compensation? From April 1 to 24, 2024, the Superior Court will hear a class action on the revenue decline in the taxi industry attributed to the arrival of Uber, an online transportation platform having transformed the urban travel landscape by connecting users with independent drivers via a mobile app. The class action was authorized in 2018.31 The representative, who holds a taxi license, represents a group of taxi drivers and owners. He alleges that his loss of income and the depreciation in the value of his permits were caused by the legislator’s authorization of Uber’s business activities. He argues that the exemption provided to Uber by the law relative to taxi permit fees and the non-regulation of fares for its drivers have enabled Uber to charge far lower fares than those that regulated taxi operators charge. In this case, it will be interesting to see whether the Superior Court will apply the foundations of expropriation law to the class, which establish that no expropriation can take place without compensation for property rights. Member participation and class counsel’s fee to impose conditions relating to class counsel’s fees Can the Court make the full payment of the plaintiff’s lawyer fees contingent on achieving a certain level of participation of members of the class, even though it has already held that the fees agreed to in the settlement agreement were reasonable? Following the authorization of a class action on the false or misleading use of the word “champagne” by an airline that rather served a sparkling wine,32 the parties agreed to a settlement awarding the class members a 7% discount on their next purchase to be made within the next three years, without any restrictions. The settlement also provided for the payment of $1,500,000 to the class counsel, the reimbursement of expert fees and an envelope of up to $20,000 to maximize the settlement’s visibility on social media, without affecting the 7% compensation offered to members. The judgment approving the settlement authorizes the immediate payment of $751,450 to class counsel but makes payment of the balance conditional on achieving a participation rate of 50% of members, or 469,398 claims.33 The plaintiff applied for and obtained leave to appeal the decision.34 He also applied for the revocation, rectification and clarification of the judgment, in particular on the grounds that, under article 593 C.C.P., final payment of professional fees cannot be made conditional on achieving a recovery rate, and that the 50% rate is excessive. Only the second ground of the application was allowed, and the 50% participation rate was reduced to 10%, or 93,880 claims.35 The plaintiff has appealed this second decision. The judgment granting him leave to do so has been joined to the two appeals,36 and the factums are slated to be submitted in 2024. A number of decisions have already suggested that there needs to be a correlation between the professional fees of class counsel and participation of members in the benefits negotiated for them.37 The Court of Appeal’s upcoming ruling is certain to have significant implications on future settlements, and it will provide an interesting perspective on the discretionary power of trial judges to impose conditions relating to plaintiffs’ lawyers’ fees. Greenwashing: can a class action help the environment? Will the Superior Court authorize a class action on a misrepresentation that certain bags are recyclable?38 Does consumer law provide an entry for asking the courts to address environmental concerns? In recent years, many businesses have adopted environmental, social and governance practices (better known by the acronym ESG), often specifically performance criteria in these areas. However, some observers question the sincerity of these actions and sometimes consider them to be public relations schemes rather than genuine efforts on the part of businesses to reduce their environmental footprint or improve their social impact. This context will make it interesting to follow the progress of a class action on misleading representations concerning bags, which a number of superstores present as “recyclable,” when in fact they are only reusable as they are discarded by recycling plants in Quebec. If this class action is authorized, it could pave the way for further similar actions. Businesses that have adopted ESG practices and have made their commitment public should pay attention to the outcome of this case. SBC 2018, c 35. Tobacco Damages and Health Care Costs Recovery Act, SBC 2000, c. 30. British Columbia v. Imperial Tobacco Ltd, 2005 SCC 49. Sandoz Canada Inc. v. British Columbia, 2023 BCCA 306, para. 2. British Columbia v. Apotex Inc., 2022 BCSC 2147. Sandoz Canada Inc. v. British Columbia, 2023 BCCA 306. Sandoz Canada Inc. v. British Columbia, 2023 BCCA 306, para. 3. Québec being the last one with the Opioid-related Damages and Health Care Costs Recovery Act, SQ 2023, c 25, having been assented to and having come into force on November 2, 2023. Sanis Health Inc. v. British Columbia, SCC 40864 (November 9, 2023). Of the initial thirty-four defendants, a certain number agreed to settle out of court. Lavery, de Billy represents one of these defendants. Bank of Montreal v. Marcotte, 2014 SCC 55, para. 43. Bourgeois c. Electronics Arts Inc., 2023 QCCS 1011, leave to appeal granted: Electronics Arts Inc. c. Bourgeois, 2023 QCCA 826, only judge. Otsuka Pharmaceutical Company Limited c. Pohoresky, 2022 QCCA 1230, leave to appeal denied: SCC 40452 (May 25, 2023). Hershey Company v. Leaf, 2023 BCCA 264. Gebien v. Apotex Inc., 2023 ONSC 6792. Lavery, de Billy represented one of the defendants between 2013 and 2016. Ouellet c. Rail World inc., 2015 QCCS 2002, amended by Ouellet c. Canadian Pacific Railway Company, 2016 QCCS 5087. Ouellet c. Compagnie de chemin de fer Canadien Pacifique, 2017 QCCS 5674. Two other civil cases were suspended in the wake of these three cases, one by the same judgment, the other by 9020-1468 Québec inc. c. Canadian Pacific Railway Company, 2019 QCCS 366. Ouellet c. Compagnie de chemin de fer Canadien Pacifique, 2017 QCCS 5674. Ouellet c. Compagnie de chemin de fer Canadien Pacifique, 2022 QCCS 4643. Since June 30, 2023 article 211 C.C.P. prohibits the immediate appeal of a judgment rendered in a split proceeding that does not terminate the proceeding; there was therefore no reason to consider the consequences of possible asymmetry in res judicata in the case of a judgment that only partially puts an end to such a proceeding. Walter c. Quebec Major Junior Hockey League Inc., 2023 QCCS 3655. Walter v. Western Hockey league, 2017 ABQB 382; Berg v. Canadian Hockey League, 2017 ONSC 2608 and Walter c. Quebec Major Junior Hockey League Inc., 2019 QCCS 2334. Walter c. Western Hockey League, 2020 ABQB 631; Berg v. Canadian Hockey League, 2020 ONSC 6389 and Walter c. Ligue de hockey junior majeur du Québec Inc. 2020 QCCS 3724. Walter c. Quebec Major Junior Hockey League Inc., 2023 QCCS 3655, para. 13. Deraspe c. Zinc électrolytique du Canada ltée, 2018 QCCA 256, paras. 38 et s. Walter c. Quebec Major Junior Hockey League Inc., 2023 QCCS 3655, para. 23. Walter c. Quebec Major Junior Hockey League Inc., 2023 QCCS 3655, para. 24. Union des consommateurs c. Air Canada, 2022 QCCS 4254, para. 113, quoting to Richard v. Time Inc., 2012 SCC 8, para. 125. Act respecting remunerated passenger transportation by automobile, CQLR c. T-11.2. Metellus c. Procureure générale du Québec, 2018 QCCS 4626. Macduff c. Vacances Sunwing inc., 2018 QCCS 1510. MacDuff c. Vacances Sunwing inc., 2023 QCCS 343. MacDuff c. Vacances Sunwing inc.,2023 QCCA 476, only judge. MacDuff c. Vacances Sunwing inc., 2023 QCCS 4125. MacDuff c. Vacances Sunwing inc., 2024 QCCA 61, only judge. E.g., Daunais c. Honda Canada inc., 2022 QCCS 2485, paras. 132–133. Cohen c. Dollarama et al., SC 500-06-001200-225.

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