The SCC Monitor (19/05/2015)
The Supreme Court of Canada has released a number of significant decisions since our last update that are of interest to Canadian businesses and professions, addressing the level of evidence required of a material change to support a securities class action in Quebec, damages for wrongful conviction, and requirements for expert evidence.
First, the Court released a unanimous decision in Theratechnologies inc., v. 121851 Canada inc., 2015 SCC 18, allowing an appeal from the Québec Court of Appeal. This decision held that the authorization requirement for actions for damages under the Québec Securities Act requires more than a mere possibility of success. The Court agreed with both lower courts that the reasonable possibility of success requirement in the Act imposes a higher standard than the general threshold for the authorizing of class actions under the Québec Code of Civil Procedure but disagreed with the lower courts’ findings that the requirement was met in this case. The SCC ruled on whether a material change had occurred, whereas the lower courts had decided that this question should be left for the merits stage. Read our post on the Supreme Court decision here.
Shareholders of Theratechnologies inc. (Thera), a pharmaceutical research and development company, sought authorization to bring a class action for damages under the Act, alleging that Thera breached its statutory disclosure obligations by failing to disclose its dealings with the United States Food and Drug Administration (FDA) relating to the approval of a new drug application. 121851 sought the court’s authorization under the Act to pursue a class action proceeding for damages, claiming that information disclosed about the increased risk of diabetes amounted to a material change in Thera’s business, operations or capital, requiring disclosure under s. 73 of the Act.
At issue in the appeal was whether there was a “reasonable possibility” of success within the meaning of the Act. The Court found that a reasonable possibility of success requires the claimant to offer a plausible analysis of the applicable legislative provisions, and some credible evidence to support the claim. The Court also found that Thera did not breach its obligation under s. 73 of the Securities Act to provide timely disclosure of material changes to investors as 121851 failed to point to any evidence that could qualify as a material change in Thera’s business, operations or capital as described under the Act. Accordingly, there was no reasonable possibility that 121851’s action under the Securities Act could succeed. The Court commented on the expected knowledge of a reasonable investor and concluded that such an investor should have known that the questions raised by the FDA were not material.
The Court also released its decision in Henry v. British Columbia (Attorney General), 2015 SCC 24. The Court was unanimous in holding that section 24(1) of the Canadian Charter of Rights of Freedoms permits courts to award damages against the Crown for prosecutorial misconduct absent proof of malice. However, there was an interesting split decision about the proper scope of prosecutorial liability, with the majority calling for a slightly more narrow net. The majority of the Court found that a claimant must convince the Court on a balance of probabilities that the he or she suffered a legally cognizable harm as a result of the Crown intentionally withholding information when the Crown knew or ought reasonably to have known that the withheld information was material to the accused’s defence and that failing to disclose the information would likely impact an accused’s ability to make a full answer and defence. As part of the required test, a claimant would also have to establish that withholding the information was a breach of his or her Charter rights.
In White Burgess Langille Inman v. Abbot and Haliburton Co., 2015 SCC 23, on appeal from the Nova Scotia Court of Appeal, the Court considered when trial judges, in the exercise of their role as a gatekeeper, should exclude a proposed expert for lack of required independence and impartiality. A unanimous Supreme Court, in considering both the importance and special dangers posed by expert evidence, reaffirmed that independence and impartiality was one of the basic standards for admissibility of expert evidence and that expert witnesses have a special duty to the court to provide fair, objective and non-partisan assistance. The Court set out a two-step inquiry to determine the admissibility of expert opinion and found that an expert’s lack of independence and impartiality should be considered at both stages. The Court reaffirmed the R v. Mohan threshold admissibility test at the first step. At the second stage, the Court held that a cost-benefit analysis should be conducted by the trial judge to determine that the expert evidence is sufficiently beneficial to the judicial process despite the potential harm.
The Court emphasized that “A proposed expert witness who is unable or unwilling to comply with this duty [of independence and impartiality] is not qualified to give expert opinion evidence and should not be permitted to do so.” However, exclusion at the threshold stage of the inquiry should occur only in very clear cases and less fundamental concerns about the expert’s impartiality and independence should not lead to exclusion, but should be weighed as part of a cost-benefit analysis at the second stage of the admissibility inquiry.
class action Securities Act Supreme Court of Canada