Canada: Update on Securities Class Actions in Quebec – Secondary Market Liability

Last Updated: August 17 2010
Article by Michael Bantey and Patrick Kergin

Copyright 2010, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Class Actions/Securities Regulation, August 2010

On July 26, 2010, a motion was filed seeking authorization to institute a class action against a reporting issuer before the Superior Court of Quebec based on the secondary market liability provisions of the Securities Act (Quebec) (QSA). This is one of the first such class action proceedings in Quebec, following the amendment of the QSA in November 2007 to create secondary market liability for misrepresentations in disclosure documents and for failure to provide timely disclosure of material changes. Please see our November 2007 Blakes Bulletin: New Securities Class Action Exposure in Quebec: Secondary Market Liability Amendments to the Securities Act (Quebec) for a discussion of the QSA secondary market liability provisions.

Theratechnologies Inc. is a Quebec-incorporated company with headquarters in Montréal and shares listed on the Toronto Stock Exchange. The plaintiff, a former shareholder of Theratechnologies, claims that Theratechnologies failed to disclose a "material change" in connection with its lead product, tesamorelin. In particular, the plaintiff alleges that Theratechnologies failed to disclose concerns raised by the United States Food and Drug Administration (FDA) with respect to possible secondary effects associated with the use of the product, for which marketing approval had been sought from the FDA. The material change is alleged to have occurred on May 25, 2010, when the FDA allegedly published on its website the materials necessary for a review meeting to take place between the company and the FDA as part of the new drug approval process. The plaintiff further alleges that there was heavy trading of the company's shares following the publication of the FDA materials and that, judging by the reaction of the market, the information constituted a material change. On May 27, 2010, after the markets closed, the company announced the positive outcome of the review meeting with the FDA, and it is alleged that the market price of the shares recovered on the next trading day.

As permitted by the QSA, the proceeding has been instituted not only against the reporting issuer but against its president and chief executive officer, as well as its chairman.

The class which the plaintiff seeks to represent comprises all individual and all corporate shareholders of Theratechnologies with less than 50 employees who held shares of the company on May 21, 2010 and who disposed of such shares on May 25 and May 26, 2010. Pursuant to the Code of Civil Procedure (Quebec), companies may not be members in a class action unless they employ less than 50 people. This effectively excludes large enterprises from forming part of the plaintiff class, including public companies which are often the target of class actions. Damages sought include: (i) the amount of the loss of the value of the company's shares between May 21, 2010 and May 25 or 26, 2010; (ii) brokerage fees incurred in connection with the sale of the shares; and (iii) loss of profit based on the increase in value of the shares between May 21, 2010 and May 28, 2010.

Like any class action, an action based on secondary market liability under the QSA requires that the prior authorization of the court be obtained – that is, that the class action be certified – before it may proceed.

The 2007 amendments to the QSA relieve aggrieved shareholders from having to demonstrate reliance on the issuer's compliance with its timely disclosure obligations. Likewise, the law puts the burden of proof on the potential defendants to prove that the drop in market price was unrelated to the failure to make a timely disclosure.

Quebec is generally considered to have a low threshold for a class action to be certified. Furthermore, for the purposes of certifying the class in order to allow the action to proceed, the facts alleged in the motion for certification are deemed to be true. There are, nonetheless, other avenues by which the defendants may challenge the plaintiff's motion. It is important to note that none of the facts alleged in the motion have been proven and that no judgment has been rendered in connection with this matter.

Despite a number of important built-in safeguards contained in the QSA and other Canadian provincial securities legislation with respect to secondary market liability – including the need for court authorization for the commencement and settlement of the action, the availability of a due diligence defence, a safe harbour for forward-looking statements as well as caps on liability – class actions are frequently settled before the case is adjudicated or even certified.

This lawsuit comes on the heels of the proposed C$23‑million settlement of a securities class action taken against Gildan Activewear, instituted in 2008, in which misleading statements about earnings guidance were alleged.

Companies will be watching the outcome of the Theratechnologies lawsuit carefully given its possible precedential value regarding disclosure practices and liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
30 Oct 2019, Other, Toronto, Canada

The materials on the Blakes Business Class website are provided for informational purposes only. Accessing this information does not create a lawyer-client relationship.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions