Dionne c. HEXO Corp.: When Proof is in the Pudding

Background

In Dionne c. HEXO Corp., the Quebec Court of Appeal continued a growing trend in which Canadian courts appear increasingly willing to dismiss unmeritorious class proceedings early on, despite the low evidentiary threshold at authorization and certification.

Decision in HEXO Corp.

The plaintiff commenced statutory and civil primary and secondary misrepresentation claims alleging that HEXO Corp. (“HEXO”), a cannabis producer, misled the market in two respects: (i) by representing, in virtue of a purchase agreement with the Société des alcools du Québec (“SAQ”), that it was guaranteed a certain amount of revenue; and (ii) by representing that its Niagara cannabis facility was fully licensed.

The Superior Court dismissed the plaintiff’s application to authorize. The Quebec Court of Appeal denied the appeal of that decision.

Alleged misrepresentation #1

HEXO agreed to sell 20,000 kg of products to the SAQ's future subsidiary, Société  Québécoise du Cannabis (“SQDC”), in the first year of the contract, with a take-or-pay clause requiring payment even if less product was delivered. HEXO supplied less product but did not enforce the clause. The plaintiff claimed HEXO misled the market by suggesting it was guaranteed a certain amount of revenue from the commitment.

The Quebec Court of Appeal disagreed, noting from the evidence that HEXO disclosed that SQDC had a cancellation right, and the cannabis industry is volatile. The Court further explained that stating a contract guarantees a certain revenue is not the same as guaranteeing that revenue will actually be collected – circumstances could arise which cause parties to prioritize their long-term relationship over the enforcement of short-term contractual rights, which was likely the case here. This finding is consistent with long established principles that the failure to meet a projection or forecast alone is not sufficient to ground a misrepresentation claim.

Alleged misrepresentation #2

HEXO acquired Newstrike Brands Ltd. (“Newstrike”), which included Newstrike’s licensed Niagara facility. HEXO later discovered that part of the Niagara facility, Block B, was not adequately licensed.

The majority of the Court of Appeal held that the plaintiff’s expert report lacked “sufficient credible evidence” that the licensing of Block B was material to HEXO’s business and operations, which was essential for any misrepresentation finding. The majority also held that, in considering the issue of materiality, the motion judge was entitled to weigh the plaintiff’s expert report alongside all the elements of the defendant’s evidence “to explain, interpret, or place the omitted information in a broader factual setting”, could use common sense, and could draw logical inferences.^[1]

Although he reached a different outcome, J.A. Bachand agreed with the application of these principles, stating, “it bears recalling that, contrary to what the appellant suggests, motion judges not only can, but must engage in some weighing of the evidence at the authorization stage.”^[2] Based on the evidence however, J.A. Bachand concluded, contrary to the majority, that there was enough evidence to suggest a “reasonable possibility” of the plaintiff establishing its claim.

Evidentiary Weighing on the Rise in Canada

The Quebec Court of Appeal's decision in HEXO Corp. builds on its recent decision in Graaf c. SNC-Lavalin Group Inc. (2024), where the dismissal of authorization was upheld due to significant methodological and credibility concerns in the expert evidence adduced by the plaintiff.^[3]

Conversely, the decision moves away from the ruling in Nseir v. Barrick Gold Corporation (2022), where the Quebec Court of Appeal overturned the a motion judge’s refusal of a securities class action leave due to lack of evidence and weighing of conflicting evidence, which is a matter for trial.

HEXO Corp. is among an increasing number of decisions in Canada denying authorization or certification due to the plaintiff’s failure to adduce adequate evidence. For instance, in Lilleyman v. Bumble Bee Foods LLC (2024), the Ontario Court of Appeal upheld a decision which found there was an insufficient evidentiary foundation for the plaintiff’s claims, despite acknowledging the evidentiary standard was “minimal”.^[4]

Similarly, the Saskatchewan Court of Appeal in Tress v. FCA US LLC (2024) refused to hear the appeal of the denial of certification where the plaintiff failed to provide any evidence of compensable harm or loss to the proposed class.^[5]

In British Columbia, cases like Bosco v. Mentor Worldwide LLC (2024) and Williams v. Audible (2023) demonstrate that inadequate evidence will lead to the denial of certification. In Bosco, the Court identified a number of flaws in the plaintiff’s evidence, including submitting opinion evidence where the expert purported to go beyond their expertise.^[6] In Williams, the B.C. Court of Appeal further refused to grant an adjournment to allow the plaintiff to remedy an expert report that no longer aligned with its theory of the case.^[7]

This trend, however, is not without exceptions. Courts seem more willing to find the low threshold for an evidentiary burden is met in developing areas of the law, such as those involving cryptocurrency asset trading platforms. In Lochan v Binance Holdings Limited (2025), the Ontario Court of Appeal recently accepted that the “some basis in fact” standard was met where platform users sought securities law remedies for trading losses,^[8] even though the defendant tendered evidence that it did not trade with users.

Takeaways

Courts across Canada appear to be increasingly scrutinizing the sufficiency of the evidence put forward by plaintiffs at the authorization and certification stage, including in securities class actions. While the results are not always consistent, even at an early stage, a defendant should strongly consider challenging the credibility, admissibility, the qualifications of experts and the need for such expertise. Particularly in cases involving the issue of materiality, which is a mixed question of fact and law, there may be more opportunity to draw on contextual evidence surrounding the plaintiff’s claim to successfully challenge cases that lack merit.

If this body of law develops, plaintiffs’ lawyers may be increasingly emboldened to seek pre-certification discovery from the defendant or from third parties. In contrast to the U.S., however, pre-certification discovery in Canada is limited and generally requires leave of the court.^[9] To date, such requests have rarely been granted.

^[1] Dionne c. Hexo Corp., 2025 QCCA 462, at para. 66.

^[2] Dionne c. Hexo Corp., 2025 QCCA 462, at para. 16.

^[3] Graaf c. SNC-Lavalin Group Inc., 2024 QCCA 303, leave to appeal to SCC denied, September 26, 2024, no. 41256.

^[4] Lilleyman v. Bumble Bee Foods LLC, 2024 ONCA 606, at para. 72, leave to appeal to SCC denied, March 27, 2025, no. 41489.

^[5] Tress v. FCA US LLC, 2024 SKCA 31.

^[6] Bosco v Mentor Worldwide LLC, 2024 BCSC 1931.

^[7] Williams v. Audible Inc., 2023 BCCA 475

^[8] Lochan v. Binance Holdings Limited, 2025 ONCA 221.

^[9] For instance: Abbotsford (City) v. Mostertman, 2022 BCCA 448; Mentor Worldwide LLC v. Bosco, 2023 BCCA 127.