Yves Brunette v. Legault Joly Thiffault, s.e.n.c.r.l., et al.

Supreme Court of Canada No. 37566: Leave granted 16 Nov 2017

The Supreme Court of Canada granted leave to appeal in a case from Québec today concerning whether solicitors and accountants may be held directly liable to a shareholder for damage allegedly sustained when the advice turns out to be wrong and damage results.

Fiducie Maynard was the sole shareholder of a conglomeration of companies operating under the name of Groupe Melior. Melior operated a series of for-profit nursing homes in Quebec. It obtained advice about structuring its activities in order to minimise its tax liability. For reasons not clear in the papers thus far, the advice appears to have been wrong and the Province assessed the firms for a large amount money which, the plaintiff claims, ultimately resulted in the enterprise going bankrupt.

Fiducie Maynard lost its entire investment in the enterprise, and sued in the Québec courts seeking more than $400 million in damages representing the loss of the real estate portfolio.

Following, Prudential Assurance Co. v. Newman industries Ltd. (No. 2), [1982] 1 All. E.R. 354, the Québec courts rejected Maynard’s appeal on the grounds that « [w]hen the shareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the company. »

The Supreme Court granted leave to consider :


1. « Whether there is categorical rule in Quebec civil law to effect that shareholder may not sue party for loss in value of shareholder’s shares as result of breach of contract by that party in relation to corporation.” This might be too narrow a grant, because, in rejecting the claim, the Court of Appeal did not limit the holding to Quebec law. On the contrary, the Court declared that the rule was the same in both common law and civil law. (« Il s’agit d’ailleurs d’une règle qui s’applique tant en common law qu’en droit québécois. ») In fact, it never cited a single CCQ provision on this point. All the cases cited were either English or Canadian common law cases.


1. “Whether an action may be dismissed at the preliminary exception stage, without any substantive analysis of causation, solely because injury suffered is considered prima facie indirect.” Here, the SCC seems to be curious about the distinction between “direct” and “indirect” damage caused to a shareholder by those who contract with a company. The Québec courts agreed that there might be situations where breach of duty to a company might also be actionable by an individual shareholder, as where, for example, the contractor might have had simultaneous duties to both. The question, therefore, is whether this issue can be resolved at the pleadings stage. The SCC seems to want to enquire into how far a plaintiff ought to be permitted to go to show a direct injury is involved.


The SCC’s description of the case implies that it is mainly a Québec case, but the primary précédents relied upon by the Québec courts are all common law cases, including Foss v. Harbottle, (1843) 67 ER 189, (1843), Prudential Assurance Co. v. Newman industries Ltd. (No. 2), [1982] 1 All. E.R. 354, and Ernst & Young, [1997] 2 R.C.S. 165.

One might suggest, therefore, that the case is of much wider interest, since the Québec courts seem to contend that there is no difference between the common and civil law on this point. If that’s true, then whatever comes out of Brunette will certainly impact the development of the common law on the question of when a shareholder can claim damages for breaches of duty owed to the company, as well as the liability of tax professionals for malpractise.





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Matthew P Harrington
Professeur
Faculté de droit
Université de Montréal
3101 chemin de la Tour
Montréal, Québec H3T 1J7
514.343.6105
www.commonlaw.umontreal.ca
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