Reliance Must Be Specifically Pleaded To Assert A Civil Liability Claim In Securities Class Action: Québec Court Of Appeal

• Jurisdiction: Canada
• Law Firm: Torys LLP
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Class Actions, Trials & Appeals & Compensation, Securities
• Author: Ms Sylvie Rodrigue, John Fabello and Marie-ÈVe Gingras
• Published date: 02 February 2023

The Québec Court of Appeal authorized¹ in part the institution of a secondary market misrepresentation class action against Barrick Gold Corporation based on the Québec Securities Act (QSA), finding that the plaintiff proved a reasonable possibility of success regarding one of the three types of alleged misrepresentations pleaded. However, it dismissed authorization regarding the civil liability claim under the Civil Code of Québec (CCQ) on the basis that the plaintiff failed to plead reliance. It also dismissed authorization regarding the statutory primary market misrepresentation claim.

This decision confirms that the legal framework applicable to the QSA's secondary market leave test is higher than and different from the Code of Civil Procedure (CCP) class action authorization test, and that defendants do not need the Court's authorization to adduce evidence to contest the Securities Act's leave test. It also reiterates that the legal principles applicable to misrepresentation claims under the QSA are different from those governing civil liability claims under the CCQ.

What you need to know

• Under the QSA leave test, both parties can adduce evidence without the Court's prior authorization. However, the Court should not conduct a full analysis of the evidence, as this stage must not be treated as a mini-trial.
• The QSA screening mechanism has two steps. First, the judge must determine whether the plaintiff offers a plausible analysis of the legislative provisions and sufficient evidence to support their claims. In the affirmative, the judge must then consider whether the defendant's analysis and evidence counters the plaintiff's submissions.
• It is the plaintiff who has the burden to meet the QSA reasonable possibility of success threshold. The defendant is not required to adduce evidence to demonstrate that the plaintiff's claim has no reasonable possibility of success.
• Reliance is an essential element of securities misrepresentations claims based on the CCQ and must be specifically pleaded.

Background

The class plaintiff alleged that Barrick made three types of material misrepresentations concerning compliance with environmental requirements of the Pascua-Lama mining project, namely regarding its (i) water management system, (ii) glacier protection measures, and (iii) water quality monitoring system. The plaintiff further alleges that those misrepresentations were subsequently publicly corrected, causing a significant decrease in Barrick's share price...