On January 30, 2025, the Quebec Court of Appeal rendered its first ever decision addressing the exemption of business practices and contracts regarding transactions governed by the Québec Derivatives Act or Securities Act from the application of the Consumer Protection Act (the CPA)[1], set out at section 6(a).

The Proposed Class Action

In March 2021, Mr. Salko filed an Application for authorization to institute a class action against several Canadian full service and discount investment brokerage firms seeking the reimbursement of foreign currency conversion fees charged when clients trade securities of companies listed on foreign stock exchanges in a foreign currency, along with punitive damages.

Mr. Salko alleged a failure to properly disclose these foreign currency conversion fees in breach of:

  • the duty to act in good faith set out in the Québec Civil Code

and

  • section 12 of the CPA, which provides that “no costs may be claimed from a consumer unless the amount thereof is precisely indicated in the contract”.

The Authorization Judgment

On September 9, 2022, the Honourable Justice Christian Immer granted the authorization to institute a class action but only against the discount investment brokerage firms[2] and only for alleged breaches of the Civil Code.

He denied authorization to institute a class action against both full service and discount investment brokerage firms for alleged breaches of section 12 of the CPA, having found that the conversion of currency at issue occurs in the context of a trade in securities, which is a “transaction governed by the Securities Act” and that the agreement between the brokerage firm and its client which sets out the foreign currency conversion fees is a “contract regarding a transaction governed by the Securities Act”, such that the exemption from the application of the CPA set out at section 6(a) thereof applies.

In support of his conclusion, Justice Immer referred to the objectives stated by the Québec legislator when adopting the CPA and in particular, the exemption at section 6, which included avoiding duplication with the regime already set out in the securities legislation and regulations. While the agreement between the brokerage firm and its client which sets out the foreign currency conversion fees must not comply with the CPA, Justice Immer indicated that it must however comply with the applicable requirements set out in the regulations adopted under the Securities Act.

Justice Immer dismissed Salko’s argument that the currency conversion was a separate transaction from the trade in securities as without the trade in a security listed on a foreign exchange, there would be no currency conversion.

Unanimous Decision of the Court of Appeal Confirming the Authorization Judgment

The Court of Appeal held that Justice Immer had committed no error in law by applying the exemption set out at section 6(a) of the CPA to the class action proposed by Salko.

In addition to confirming that the objective of section 6 CPA was to avoid duplication with the securities regime already in place and that there would be no currency conversion without the trade in a foreign security, the Court also cited excerpts of the comments made by Minister Lise Payette in 1978, when introducing section 6, that it served to completely exclude activities relating to securities from the application of the CPA.

The Court of Appeal also confirmed that an authorization judge can decide a question of law at the authorization stage even if answering that question of law does not resolve the proposed class action in its entirety. Said differently, an authorization judge should analyze separately each and every cause of action put forward in a proposed class action and should not authorize those which are frivolous or unfounded in law.

Takeaways

  • The exemption set out at section 6 CPA which applies to contracts (and business practices) regarding a transaction governed by the Securities Act can serve to defeat authorization of a class action
  • The courts will not artificially divorce a fee set out in a investment brokerage agreement from a trade in securities covered by the same agreement
  • Fees set out in investment brokerage agreements must not comply with the CPA but instead with the separate regime set out by securities legislation and regulation and the general civil law regime

[1] The authors represented BMO InvestorLine and BMO Nesbitt Burns against which the Application for authorization to institute a class action was dismissed. This unanimous decision (https://courdappelduquebec.ca/jugements/jugement?tx_news_pi1%5Baction%5D=detail&tx_news_pi1%5Bcontroller%5D=News&tx_news_pi1%5Bnews%5D=416&cHash=7c9a08bb7ff4f7014b94fad0c196d1ac) is now final, the delay to seek leave to appeal to the Supreme Court of Canada having expired.

[2] Except BMO InvestorLine, since it was the only defendant discount broker to disclose a maximum fee in its agreement.