Notable case law developments in 2022
1- The Court of Appeal dismisses the first data loss class action on its merits in Lamoureux c. Organisme canadien de réglementation du commerce des valeurs mobilières
On May 13, 2022, a judgment from the Court of Appeal dismissed Mr. Lamoureux’s appeal seeking compensation for harm suffered in connection with the loss of a laptop containing sensitive information collected as part of the defendant’s business.
This case is significant since it is the first time such an issue is decided on its merits in Canada. It is of particular importance in light of the increasingly frequent cases involving data loss and data breaches, and might be a potential blueprint for defence strategy is such cases.
The Court of Appeal confirmed that a causal connection must be established between the data loss and the attempted identity theft alleged by the class members. Through a conclusive expert report, the defendant successfully established that the identity theft attempts were made using information that was not in the defendant’s possession, and that there could thus be no causal link between the identity theft and the loss of the computer.
Moreover, the class members failed to prove that they had suffered trouble and inconvenience beyond the normal nuisances inherent to social life. This Court of Appeal judgment applies the Supreme Court’s decision in Mustapha and confirms that a similar standard exists in Québec.
On March 30, 2023, the Supreme Court dismissed the application for leave to appeal.
2- The Court of Appeal clarifies the presumption of prejudice in consumer law
On May 6, 2022, in Fortin c. Mazda Canada inc., the Court of Appeal confirmed that the presumption of prejudice does not exempt the plaintiff from proving a real financial impact when seeking compensatory damages under consumer law.
This judgment provides long-awaited clarification on the application of the “absolute presumption of prejudice” established by Time and reiterated in Imperial. This presumption of prejudice opens the door to relief under section 272 CPA without requiring the courts to grant it. It therefore does not exempt a plaintiff seeking relief under section 272 (c) CPA from proving damages in order to obtain compensation.
Specifically, a plaintiff seeking to have their obligations reduced must prove the quantum of the reduction sought. The plaintiff must therefore prove the existence of a real financial impact, such as a decrease in the value of the property in question.
This decision clarifies the conditions for applying section 272 CPA, the presumption of prejudice in consumer law, and the burden to be met for price reduction claims under this regime. The Court of Appeal confirmed that despite the absolute presumption of prejudice, real financial impact must be proven in order to determine the appropriate price reduction.
On March 16, 2023, the Supreme Court dismissed the application for leave to appeal.
3- Class actions and private international law: The Court of Appeal clamps down
The Court of Appeal ruled on two class actions involving private international law, dismissing both on jurisdictional grounds.
In Otsuka Pharmaceutical Company Limited c. Pohoresky, the plaintiff brought an action against various entities for failing to disclose the side effects of an atypical antipsychotic. None of the defendants had a connection to Québec and the plaintiffs were Ontario residents. The Superior Court had authorized the class action under the doctrine of forum of necessity codified by article 3136 CCQ.
The Court of Appeal reversed the authorization and allowed the defendants’ declinatory exception. While it recognized that requiring a party to institute proceedings abroad could be unreasonable under the principle of proportionality in certain duly proven circumstances, the Court of Appeal nonetheless confirmed that article 3136 CCQ. only applies in exceptional cases since its primary purpose is to prevent miscarriages of justice. Therefore, neither the proportionality considerations under the new art. 491, para. 2 CCP nor the societal function of class action proceedings allow Québec courts to hear actions with minimal connection to the province without sufficient evidence justifying this approach.
In Chandler c. Volkswagen Aktiengesellschaft, the Court of Appeal clarified how article 3148(3) CCQ applies to securities. It confirmed that territorial jurisdiction can be contested after an action has been authorized, and limited the application of section 5 of the Securities Act, which defines the notion of “distribution” to securities issued in Québec. Furthermore, the onus is on the plaintiff to prove a real and substantial connection for all class members. Several causes of action cannot be combined in the hopes of engaging the jurisdiction of Québec courts. Lastly, since the contract was entered into by an agent abroad and the documents relevant to the dispute had been neither published nor prepared in Québec, the Court of Appeal granted the defendant’s declinatory exception.
4- Air transportation: Fee disclosure class action against Air Canada dismissed
On November 10, 2022, in Union des consommateurs c. Air Canada, Justice Karen M. Rogers dismissed a class action brought against Air Canada on behalf of consumers who had purchased a plane ticket on the company’s website at a price that was allegedly higher than the one advertised. At the first step of the ticket purchase process, the website did not specify the taxes and other fees included in the final price. The plaintiff sought reimbursement of the illegally charged fees and punitive damages totalling $10 million.
Although the Court held, mainly on the basis of the Court of Appeal’s conclusions at the authorization stage, that Air Canada had breached section 224 (c) CPA, it came to the opposite conclusion on the issue of harm, finding that the class members had not suffered harm in connection with this prohibited practice. Air Canada was allowed to charge the disputed fees since they had been set out in the contract and these fees complied with applicable regulations. Although the fact that these fees were only displayed at the second step of the purchase process was problematic, it did not necessarily give rise to damage.
The Court also refused to grant punitive damages, holding that Air Canada had behaved without ignorance, carelessness or serious negligence with respect to its obligations or to consumers’ rights. The company took concrete measures to ensure that consumers using its website were not knowingly misled and that they understood that the rate shown at the first step was not the price that would be charged at the final purchase step. Furthermore, at the time, Air Canada was facing legislative and regulatory changes at both the federal and provincial levels that created a degree of uncertainty, including from a constitutional standpoint.
This case is particularly relevant since it clarifies the application of both the presumption of prejudice and section 224 (c) CPA, which has recently been the subject of several proposed class actions. It also settled a debate on whether the general impression test enshrined in Time should be applied to the provisions of Title II of the CPA, preferring an objective test for section 224 (c) CPA, as suggested in the 2014 Court of Appeal judgment authorizing the class action.
An application for leave to appeal was filed on December 29, 2022, which makes this a case to follow in 2023.
5- Class action settlements: Surge in remedial actions
Under the Code of Civil Procedure, a judge approving a class action settlement may “order reparation appropriate to the circumstances instead of a monetary award.”1 However, it does not define “reparation.” The courts are therefore left to determine how this concept—which is sometimes confused with a remaining balance—is to be used.
While a settlement can include both a reparation and a remaining balance, the proportion of the claim amount allocated to the reparation must be determined first. Furthermore, the reparation must be closely connected to the class action’s basis and purpose. If an amount is allocated to a reparation, a plan or protocol must be in place to use those funds to the class members’ benefit. That is what distinguishes a reparation from a remaining balance, which may be remitted to a third person without guarantees on how it will be used, but is subject to a potentially significant withholding by the Fonds d’aide aux actions collectives.
Increasingly, settlements are providing for a reparation. Below are four recent examples.
- Génier c. Zinc électrolytique du Canada ltée: In this class action involving the release of a potentially hazardous chemical into the atmosphere, $500,000 of the total settlement amount went to a non-profit organization dedicated to biodiversity and environmental protection.
- Godin c. Aréna des Canadiens inc.: A donation of $10,000 was made to an immigrant rights organization. This donation was part of a settlement that included an indemnity paid to the class members, who sought monetary compensation related to overtime hours.
- Association québécoise de lutte contre la pollution atmosphérique c. Groupe Volkswagen du Canada inc.: A $6.7 million contribution was made to the Fonds pour dommages à l’environnement. This settlement ended a class action for punitive damages authorized on behalf of all Québec residents alleging that the defendants had concealed the actual emissions of the vehicles they sold.
- Leung c. DoorDash Technologies Canada Inc.: All class members were credited $1.50 to their accounts toward a future order on the defendants’ website. The class action alleged that fees were added after consumers had placed an order.
From a practical perspective, reparation offers several benefits. It can be whatever the parties decide and varies according to the specifics of each class action. The courts can also supervise its implementation and intervene as needed. It is noteworthy that a reparation is not subject to applicable withholdings under the Regulation respecting the percentage withheld by the Fonds d’aide aux actions collectives. This makes it possible to allocate a greater proportion of the settlement amount to the members of the original class action. However, the Fonds d’aide is extremely vigilant on this issue and will not hesitate to contest the reparation if it does not find a sufficiently direct connection to the subject matter of the class action.
BLG bulletins and other publications
Lamoureux c. Organisme canadien de réglementation du commerce des valeurs mobilières (OCRCVM), 2022 QCCA 685: Court of Appeal confirms dismissal of the first privacy class action on the merits. Read BLG’s case comment.
Fortin c. Mazda Canada inc., 2022 QCCA 635:Court of Appeal confirms that proof of real financial impact is required, notwithstanding presumption of prejudice. Read BLG’s case comment.
Pollués de Montréal-Trudeau c. Aéroports de Montréal (ADM), 2022 QCCA 1646: The Court of Appeal upholds the dismissal of an environmental class action at the authorization stage. Read BLG’s case comment.
Chandler c. Volkswagen Aktiengesellschaft, 2022 QCCA 272: Securities and class actions: the Court of Appeal clarifies jurisdictional criteria in private international law. Read BLG’s case comment.
Bernard c. Collège Charles-Lemoyne de Longueuil, 2022 QCCS 555: The Superior Court confirmed the validity of communicating with class members during the opt-out period, although rules govern this communication. Read BLG’s case comment.
Four class action lawsuits won before the Québec Court of Appeal by BLG in 2021-2022: BLG’s Class Actions team proved successful before the Court of Appeal in 2022, with landmark judgments in consumer, privacy, insurance and securities law. Read our roundup article.
Outlook for 2023
1- Artificial intelligence: Coming soon to a court near you?
In recent months, chatbots and generative artificial intelligence (AI) applications have caused an international stir as their potential uses multiply and become more generally accessible. Inevitably, legal issues are beginning to emerge. Intellectual property class action proceedings are already under way in the United States. They concern potential infringements when it comes to works of art and to the lines of code used to train AI, both of which may be protected by licences or copyright. These cases could challenge the way artificial intelligence systems are trained and raise evidentiary, data management, confidentiality and other questions. In short, if AI is the future, we can expect it to be the subject of litigation just like any other new technology.
2- Video games: From your screen to the courtroom?
The video game industry continues to grow. By 2030, it is expected to be worth US$500 billion. This growth is underpinned by new game models, such as free-to-play and loot box systems, which, for a variety of reasons, are increasingly the subject of litigation. Epic Games, the publisher of Fortnite, is the defendant in a class action that addresses the game’s addictive nature and raises interesting questions about parental responsibility. Meanwhile, the loot box reward system, which is found in certain games and gives players a chance of obtaining a random selection of benefits, is the subject of several class action lawsuits across Canada. These cases will have important ramifications for the industry and should be followed with interest.
3- Communication with class members and opt-outs: Court of Appeal to rule on Bernard
While Canada’s common law courts have often ruled on communications with class members, a Québec precedent is yet to be set. The issue arose in Bernard,2 and the Court of Appeal will have the opportunity to rule and, if needed, provide guidelines for communicating with class members during opt-out periods.
4- Prevalence of sexual abuse and assault class actions
The year 2022 saw an increase in the number of sexual assault class actions over the previous year, a trend that appears to be holding for 2023. To date these class actions have primarily been filed against educational institutions, religious communities and government entities. However, the class action filed against Robert G. Miller as an individual warrants close attention.3 Will a lack of common issues, which led to the dismissal of the class action against Gilbert Rozon a few years ago, be at the centre of this new dispute?
5- Lac-Mégantic: Trial court finds CP not liable
In the widely covered Lac-Mégantic case, Canadian Pacific Railway (CP) was successful in having the action against it dismissed.4 Three classes of claimants (the Attorney General of Québec, the plaintiffs in a class action suit and a group of insurance companies) sued CP for damages resulting from the Montreal, Maine & Atlantic Railway train derailment in Lac-Mégantic on July 6, 2013. On December 14, 2022, Justice Martin Bureau rejected the three actions after a nine-month trial. In a 262-page judgment, he found that CP had no legal responsibility in the derailment. A notice of appeal was filed on January 13, 2023, which makes this a case to watch in 2023.
For any questions about the topics covered in this review or to learn more about how BLG can advise you, please contact one of the partners on our Montréal office’s Class Actions team.
1 Art. 595, para. 2 CCP.
2 Bernard c. Collège Charles-Lemoyne de Longueuil, 2022 QCCS 555.
3 S.N. c. Robert Gerald Miller et Future Electronics Inc., 500-06-001225-230.
4 Ouellet c. Compagnie de chemin de fer Canadien Pacifique, 2022 QCCS 4643.