2019 QCCA 641, 2019 QCCA 641

Volkswagen Aktiengesellschaft c. Chandler 2019 QCCA 641 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-028185-197 (500-06-000838-173) MINUTES OF THE HEARING DATE: April 8, 2019 THE HONOURABLE NICHOLAS KASIRER, J.A. PETITIONER COUNSEL VOLKSWAGEN AKTIENGESELLSCHAFT Mtre STÉPHANE PITRE (Borden Ladner Gervais s.e.n.c.r.l., s.r.l.) RESPONDENT COUNSEL LAWRENCE CHANDLER Mtre Shawn FAGUY (Faguy & Cie, avocats inc.) DESCRIPTION: Application for leave to appeal from a judgment rendered in the course of the proceeding on February 18, 2019 by the Honourable Chantal Châtelain of the Superior Court, District of Montreal. Clerk: Alya Elisio Courtroom: RC.18

HEARING 9:30 Commencement of the hearing. 9:31 Submissions by Mtre Stéphane Pitre. 9:47 Submissions by Mtre Shawn Faguy. 10:00 Reply by Mtre Pitre. 10:10 Sur-reply by Mtre Faguy. 10: 13 Judgment will be rendered this afternoon. Counsel will receive it by email. Conclusion of hearing.

Alya Elisio Clerk BY THE JUDGE JUDGMENT [ 1 ] Volkswagen Aktiengesellschaft (“VW”) seeks leave to appeal from a judgment of the Superior Court, District of Montreal (the Honourable Chantal Châtelain), rendered in the course of proceedings on February 8, 2019, in which the judge dismissed VW’s application to specify the class definition brought pursuant to articles 579 and 588 C.C.P . [ 2 ] The motions judge was called on to specify the meaning of “securities”, as identified in the class description in the judgment authorizing the class action.

VW argued before the motions judge that notice of authorization of the class action need not be given to holders of debt instruments because in all the materials relating to the class action, the respondent Chandler had only referred to four categories of securities, all equity shares, i.e. ordinary and preferred shares and ordinary and preferred ADR receipts. [ 3 ] The motions judge rejected VM’s request to limit “securities” to these four categories of equity shares because, in her view, the term as used at authorization, in keeping with its ordinary legal meaning, could extend to debt instruments. *** [ 4 ] The applicant says the judge was mistaken.

While VW acknowledges that the term “securities”, as used in the relevant legislation, generally includes both debt and equity instruments, it argues that the respondent used it in a narrower sense and cannot, at this stage, expand the meaning of the term as beyond the four categories of equity instruments referred to in his motion for authorization. [ 5 ] VW contends that if the term “securities” were to be read, as the motions judge suggests, to include debt instruments, the effect of the judgment would be to “bypass the mandatory authorization process for debt instruments that were never pleaded in the Respondent’s authorization motion” (para. 25 of the application for leave). [ 6 ] As the judgment was rendered during the course of class action proceedings, leave is sought pursuant to

article 31 C.C.P . or, if the judgment is characterized as a case management measure, pursuant to

article 32 C.C.P . *** [ 7 ] Leave is denied. Granting leave would be contrary to the interests of justice (art. 9 C.C.P .), as that criterion is relevant to applications for leave under both articles 31 and 32 C.C.P . [ 8 ] VW is not wrong to say that, at least to an outsider, the manner in which the term “securities” is spoken to in the re-amended motion for authorization of a class action is less than clear. Mr. Chandler’s re-amended motion for authorization contains a definition

section but the term “securities” is not defined. [1] Paragraph 24 of the re-amended motion alludes to securities by reference to their “form”, giving only four examples: 24. VW issued securities in the form of ordinary securities, preferred securities, (…) ordinary ADRs and preferred ADRs, respectively under the tickers (…) “VOW”, “VOW3”, (…), “VLKAY’ and “VLKPY”. [ 9 ] Even at the notice stage, Mr. Chandler appears to have been unclear as to the ambit of “securities”. In the draft notice that his

counsel filed with the judge after authorization, the description of class members set forth in Appendix “A” includes five categories of securities in what seems to be a limitative list.

This list does include “VW AG Mandatory Convertible Notes” but refers to no other debt instruments. [ 10 ] Importantly, however, the motions judge focussed on the definition of the class as authorized which speaks only to “securities”, without reference to their “form”. [ 11 ] The motions judge observed that the “it was never discussed nor contemplated at the authorization hearing that the group should be limited to investors who had acquired a specific form of securities”.

She explained further, with multiple references to authorization judgment, that the class as authorized encompassed all investors who had acquired VW securities at the relevant time, “notwithstanding the nature or the form of the securities”. [ 12 ] Not only did VW fail to argue that that notion of securities as used by Mr. Chandler excluded debt instruments at the authorization hearing but, wrote the judge, VW also did not raise the matter when it sought leave to appeal to this Court from the authorization judgment. [ 13 ] The judgment authorizing the class action ( Chandler v.

Volkswagen Aktiengesellschaft , 2018 QCCS 2270 ) was decided by the same judge. In that judgment, Châtelain, J. used the term “securities” in a sense that was not limited to the four types of equity shares in question (see, e.g ., paras [58], and especially [105]). She interpreted the motion for authorization as referring to four categories of equity shares by way of example and not by way of a limitative list. There are other references in the authorization judgment that confirm this view. [2] [ 14 ] While she does not discuss Mr.

Chandler’s draft notice, the motions judge plainly did not see it as controlling in that, at paragraph [20], she ordered that notice to class members conform to the video definition of “securities”. [ 15 ] In the circumstances, and mindful that the motions judge has had the advantage of monitoring the description of the class through the proceedings to date, it strikes me as plain that if this appeal were to advance to the merits, the Court would decide that her understanding of “securities”, which includes debt instruments, should govern. [ 16 ] In addition, it may be recalled that VW had sought to appeal the authorization judgment, but leave to appeal was denied ( 2018 QCCA 1347 , per Schrager, J.A., in chambers). [ 17 ] In this post-authorization judgment for which leave is sought, Châtelain, J. saw VW’s late effort to exclude holders of debt instruments from the class of holders of securities as an indirect way of contesting the class action as authorized. [ 18 ] Relying on Apple Canada inc. v.

Charbonneau , 2018 QCCA 2089 and Société des lotteries du Québec (Loto-Québec) v. Brochu , 2007 QCCA 1382 , Châtelain, J. wrote: [17] […] If the class definition is now specified to exclude debt instruments, class members who legitimately believed that they were included in the class would now be excluded without being heard.

That would be unfair and contrary to law, in addition to being inconsistent with the proper administration of justice, as it gives rise to a second class action being required in relation to essentially the same matter . [ 19 ] I agree with Châtelain, J. on this point. [ 20 ] If leave to appeal were granted, I surmise that the Court would dismiss the appeal as an unfounded attack on the authorization judgment and on the judgment of Schrager, J.A. which dismissed leave to appeal from that judgment.

For this further reason, an appeal of the present judgment strikes me as destined to fail. [ 21 ] As a general rule, it is contrary to the interests of justice to grant leave for an appeal that has no reasonable prospect of success. Assuming without deciding that VW meets the other requirements for leave, I therefore decline to do so here. [ 22 ] As I final note, I observe that Châtelain, J. did not award costs to Mr. Chandler.

His counsel did not insist on costs before me and I exercise my discretion not to award legal costs on this motion. [ 23 ] FOR THE FOREGOING REASONS , the undersigned: [ 24 ] DISMISSES the application for leave to appeal, without legal costs. NICHOLAS KASIRER, J.A.